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Kentucky Court of Appeals Holds Wife Entitled to Cost of Living Adjustments to Pension Awarded After the Divorce

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In a recent written opinion, a Kentucky Court of Appeals panel has held that a wife is entitled to cost of living adjustments made after entry of a divorce to a retirement account that was split in the divorce. The case, titled Brown v. Brown, involved a couple, Lisa and Richard, married in June of 1984, with a final decree of divorce entered in October of 2002, with certain financial issues pending. Nearly two years later, in July of 2004, the court entered an order stating that “the marital portion” of Richard’s civil and military retirement accounts were to be divided between Lisa and Richard equally. Nearly ten years after that order was entered, in June of 2013, Lisa filed a motion for a court order consistent with the July 2004 order, requesting her equal portion of Richard’s civil retirement account, including the cost of living adjustments (or “COLAs”) Richard received after October of 2002. While Richard didn’t object to paying Lisa half of the marital portion of his civil retirement account, he stated that Lisa had no right to any of the COLAs earned after the parties divorced. The circuit court granted Lisa’s motion, determining that, since the retirement account was divided according to a percentage share, that Lisa was entitled to include a calculation of her percentage that included COLAs.

Richard appealed this decision, but the Court of Appeals agreed with Lisa. The court determined that the lower court that issued the July 2004 order had divided the retirement account using what’s called a “deferred distribution” method. This means that Lisa’s share of Richard’s retirement account was calculated as a percentage of the whole payout value of the marital portion of the pension account, and not a fixed sum of money. The court found that, If Lisa did not receive the COLAs in her percentage share of the retirement account, she’d actually be getting a smaller share of the account than she was entitled to under the July 2004 order. The COLA simply preserves that same 50% share that Lisa was awarded from devaluation caused by inflation. The court quoted a U.S. Supreme Court case to support the result, writing that COLAs “do not increase the amount of the payments in real dollars but rather simply assure that inflation does not decrease the value of the payment.” The court quoted another case which stated that the COLA was simply “part of the calculation of the current annuity.” Since the adjustments are not “earned” or based on merit or achievement by the federal employee, awarding them as part of a prior division of the pension in question isn’t akin to awarding Lisa a raise earned by Richard after the divorce, or a new benefit. It is all part of the same percentage she was originally awarded.

The division of assets following a divorce can be complex and stressful. It is crucial to choose an attorney for your Kentucky divorce whom you can trust to represent your interests zealously and knowledgeably, while also treating you with compassion. Contact the law firm of John Ruby and Associates for a consultation on your Kentucky family law case by calling 502-895-2626.