Vested employer-provided health-insurance premiums are an asset

The Indiana Supreme Court held that employer-provided health-insurance benefits constitute an asset once they have vested in a party to the marriage, and addressed for the first time the possible methods of valuing these benefits in marriage dissolution. This conclusion led one justice to dissent because it disrupts existing dissolution property division law.

Anne Bingley wanted the premiums paid by Charles Bingley’s former employer to a health-insurance company as part of his pension plan to be considered property subject to division in their divorce. The trial court held the benefits didn’t constitute a marital asset, which the Indiana Court of Appeals affirmed.

Four of the justices reversed, holding that employer-provided health-insurance benefits do constitute an asset once they have vested in a party to the marriage. They found Charles’ health-insurance benefits constitute an intangible asset, and whether a right to a present or future benefit constitutes an asset that should be included in marital property depends mainly on whether it has vested at the time of the dissolution. Navistar, from which he retired, was paying his premiums at the time the marriage ended and he had the present right to enjoy the benefits.

Chief Justice Randall T. Shepard noted the illiquidity of his benefits is relevant to the value a court may assign to an asset but not to whether benefits constitute an asset in the first place.

In Anne M. Bingley v. Charles B. Bingley, No. 02S03-1002-CV-122, the justices described three possible methods for valuing these health-insurance benefits, but noted other methods may be more appropriate in other circumstances.

The justices were unable to find any court opinions in which two of the methods were used: a trial court valuing health-insurance benefits by considering the cost of obtaining comparable alternative benefits, or by considering the cost of providing medical services covered by health insurance.

The final method – valuing the benefits by considering the premium subsidy from the employer, has been assumed to be the appropriate method by some academics and practitioners, noted the chief justice.

Then the question arises as to how to divide the assets between the parties. There is a rebuttable presumption that an equal division is just and reasonable but a party may rebut that presumption.

The majority remanded for the valuation of the benefits and reconsideration of the division of assets.

Justice Brent Dickson dissented because he believed the majority opinion “expands the division of marital property contrary to statute, intrudes upon the legislature’s public policy prerogatives, and significantly and harmfully disrupts Indiana marriage dissolution law and practice.”

“One extremely troubling application of today’s ruling is its impact in dissolution cases involving Hoosiers with retirement medical benefits from their United States military service,” he wrote. Usually, a non-military spouse will almost always lose this benefit when divorcing, but under today’s holding, the military retiree’s health benefits would be considered divisible marital property and would warrant a sizeable valuation because of the potentially lengthy time the military retiree would be eligible for the lifetime benefit.

This would likely preclude a divorcing military retiree from retaining any other marital property and require post-dissolution periodic property settlement payments made to the former spouse, something Justice Dickson doubts the legislature intended.

“Today’s holding also introduces other substantial challenges to the valuation and equitable distribution of marital property as parties and courts attempt to apply this new standard to the wide variety of non-pension, assured future benefit packages that are becoming more commonplace with many employers. For example, Hewlett-Packard (HP) provides discounts to its retirees, allowing them to purchase HP products ranging from laptops to printer ink cartridges at a reduced price,” he wrote. “Assigning a present value to such vested benefits will be a formidable if not impossible task.”