In re Marriage of Kelm – Divorce – Division of Marital Property
In re Marriage of Kelm, 912 P.2d 545 (Colo. 1996).
NATURE OF THE CASE: This case involved a dispute over the apportionment of retirement benefits and pension plans in the context of a division of marital property on divorce.
FACTS: The Kelms were married for 26 years prior to the dissolution of their marriage in 1992. Mr. Kelm worked in the civil service for the Army and had a vested interest in the Civil Service Retirement System (CSRS) retirement plan at the time of dissolution of the marriage. Ms. Kelm was employed part time as a librarian and participated in the Public Employees Retirement Association (PERA) plan for Colorado public employees. Both parties held vested but unmatured interests in their respective pension plans. The parties did not dispute that their vested but unmatured interests in these pensions were marital property. The trial court awarded 19/30 of one half (i.e. 31.7%) of H’s pension benefits to W and reserved jurisdiction for early retirement or in the event that H was laid off. The trial court then awarded W all of the PERA benefits and ordered H to maintain W as a beneficiary of the retirement funds.
H appealed. The appeals court sustained the ruling of the trial court except for the award to W of the entire lump sum credit under H’s retirement plan if he were to die prior to retirement. The court held that W was only entitled to receive a lump sum distribution of the pre-dissolution contributions.
ISSUE: Are post-dissolution increases in pension benefits characterized as marital property?
RULE OF LAW: Yes. Post-dissolution increases in pension benefits are characterized as marital property.
HOLDING AND DECISION: H argues that the time formula permits W to share in his separate property, i.e. the increased pension benefits resulting from his post-dissolution efforts, and benefits calculated on his post-dissolution earnings. H claims that W is only eligible to receive a portion of the pension benefits amassed as of the date of the dissolution decree. However, we have explicitly approved the use of the time formula which not only compensates the non employee spouse for the delay, but also considers post-dissolution pension enhancements due to employee advances as having been built upon efforts undertaken during the marriage years.
We agree that the trial court applied the time formula correctly. However, we disagree with the trial court in setting the denominator of the coverture fraction at thirty and reserving jurisdiction if certain contingencies arose. If H decides to work from more than 30 years that denominator should reflect that increased period of employment. W’s share of the pension under the coverture fraction should decrease in proportion to H’s continued efforts in order to properly apportion the increased benefit. Conversely if H should work less than 30 years the denominator should reflect that change. Furthermore CSRS benefits do in fact increase after 30 years as H may increase his benefits according to any salary increases he obtains after the 30 year mark.
We also find that the trial court erred in its determination of W’s PERA benefits. The present value of W’s PERA account is not based solely on her contributions as of the date of dissolution because the PERA account is not a pure defined contribution plan. The present value of W’s PERA account must be determined by applying a series of actuarial and investment assumptions according to W’s life expectancy and likely retirement age. The trial court failed to properly offset the amount from the marital estate under the net present value method.
We reject H’s contention that the trial court is precluded from applying different methods in distributing each of the parties’ pensions. The methods the trial court uses in effecting equitable distribution lies within its sound discretion. We also hold however that the trial court abused its discretion in requiring H to designate W as the 100% beneficiary under the CSRS plan in the event of his death. W’s percentage share of the death benefits should be equal to her share in the pension benefits.
DISPOSITION: Affirmed in part and reversed in part.