Post-Retirement Cost-of-Living Adjustments Definition: A post-retirement cost-of-living adjustment is a small incremental increase made to a retiree’s benefit on or after the date of retirement.

General Discussion: Cost-of-living adjustments, if available, are typically given to retirees on an annual basis, and are often dictated by the CPI or the specific provisions of the pension plan. This increase in benefits should not be confused with an increase in benefits due to continued employment or increases in salary in the form of a raise provided while still employed. These increases are granted after retirement in an attempt to ensure that retirees’ benefits will remain in line with the inflationary swings of the economy.

Classification: There seems to be a general consensus that cost-of-living adjustments should be considered marital property to the same extent that the pension itself is marital. The argument for inclusion of any COLA in the marital estate provides that any increase in the marital portion of the retirement benefit that is not a direct result of the efforts of the employee after the divorce would be considered marital property. Since cost-of-living increases are granted in the same amount and at the same time to all retirees under a given plan, it is easy to determine that such increase does not relate to the job performance or efforts of the employee.

Valuation: The variability of the cost-of-living adjustment is not sufficient to eliminate present valuation of such increases. Most authorities support discounting the current value of the cost-of-living increases to reflect any uncertainty and avoid potential unfairness. Most courts have ruled that future cost-of-living increases should be included when calculating the present value of a pension that will be subject to such increases.

Distribution: Cost-of-living adjustments can be included in an immediate offset when the COLA is included in the present value of the pension. Further, award of a portion of such COLA increase can be included in a deferred distribution by incorporating the appropriate language in a domestic relations order.

State Case Law

The following is a summary of case laws we have come across in our research of this topic. If nothing is listed under a particular state it is because we have not found any pertinent cases relative to this topic. If you know of a case that relates to this topic, and do not find it listed here, please e-mail us the citation so that we can include it in this section.
E-mail: [email protected]

ALABAMA

ALASKA

ARIZONA

Koelsch v. Koelsch, 713 P.2d 1234 (1986)
Postdivorce increases in the value of the pension would be separate property.

Cooper v. Cooper, 167 Ariz. 42, 808 P.2d 1234 (Ct. App. 1990)
Postdivorce cost-of-living increases to be shared by both parties.

ARKANSAS

Brown v. Brown, 38 Ark. App. 99, 828 S.W.2d 601 (1992)
Postmarital cost-of-living increases in marital retirement benefits are marital property.

CALIFORNIA

In re Schofield, 62 Cal. App. 4th 131 (1998)
Post divorce cost-of-living increases to be shared by both parties.

COLORADO

In re Kelm, 878 P.2d 34 (Colo. Ct. App. 1994)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

CONNECTICUT

DELAWARE

Jerry L.C. v. Lucille H.C., 448 A.2d 223 (Del. 1982)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

DISTRICT OF COLUMBIA

FLORIDA

Salazar v. Salazar, 583 So.2d 797 (Fla. Dist. Ct. App. 1991)
Postdivorce increases in the value of the pension would be separate property.

GEORGIA

HAWAII

Stouffer v. Stouffer, 10 Haw. App. 267, 867 P.2d 226 (1994)
Wife’s share of postdivorce appreciation is compensation for fact that she will not receive her award until the husband retires.

IDAHO

Shill v. Shill, 765 P.2d 140 (Idaho 1988)
Postdivorce increases in the value of the pension would be separate property

ILLINOIS

In re Marriage of Whiting, _ Ill. App. 3d 534 N.E.2d 468 (1989)
Under deferred distribution approach, cost of living adjustments should be included in calculating accrued and unpaid retirement benefits that pensionholder owes spouse.

INDIANA

Tirmenstein v. Tirmenstein, 539 N.E.2d 990 (Ind. Ct. App. 1989)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

IOWA

In re Marriage of Oler, 451 N.W.2d 9 (Iowa App. 1989)
In re Fuchser, 477 N.W.2d 864 (Iowa Ct. App. 1991)

All postdivorce increases in the value of the pension would be separate property.

KANSAS

KENTUCKY

Ratcliff, 586 S. W. 2d 292 (1979)
Postdivorce increases in the value of the pension would be separate property.

Poe, 711 S.W. 2d 849 (1986)
Under deferred distribution approach cost of living adjustments should be included in calculating accrued and unpaid retirement benefits that pensionholder owes spouse.

LOUISIANA

MAINE

Bliss v. Bliss, 583 A.2d 208 (Me. 1990)
Postmarital cost-of-living increases in marital retirement benefits are not marital property.

MARYLAND

Bangs v. Bangs, 59 Md. App. 350, 475 A.2d 1214 (1984)
Postdivorce salary increases are marital property.

MASSACHUSETTS

Peterson v. Peterson, 30 Mass. App. Ct. 932, 568 N.E.2d 649 (1991)
Postdivorce increases in the value of the pension would be separate property.

MICHIGAN

Kilbride v. Kilbride, 172 Mich. App. 421, 432 NW.2d 324 (1988)
All postdivorce increases in the value of the pension would be separate property.

MINNESOTA

Petschel v. Petschel, 406 N.W.2d 604 (Minn. Ct. App. 1987)
The court rejected the frozen benefit approach, called the "fixed-dollar method" in this case, noting its unfairness especially in excluding postretirement cost-of-living increases. However, the court noted that the wife should not benefit from the husband’s future salary increases that are attributable exclusively to his own efforts, such as increases resulting from promotions. At retirement, the pensioner may present evidence showing what part of the post-dissolution salary increases are attributable solely to his own efforts, such as increments resulting from promotions. These amounts may be excluded from division. Cost of living adjustments should be shared where deferred method of distribution is used.

DuBois, 335 N.W.2d at 506 (Minn. 1983)
Actuarial calculations regarding the present value of a retirement pension should include cost of living adjustments.

MISSISSIPPI

MISSOURI

Lynch v. Lynch, 665 S.W.2d 20 (Mo. Ct. App. 1983)
Postdivorce salary increases are partly the result of marital efforts, therefore, the marital estate is entitled to a share of those increases.

MONTANA

Rolfe v. Rolfe, 766 P.2d 223 (Mont. 1988)
Postdivorce increases in the value of the pension would be separate property.

NEBRASKA

NEVADA

Fondi v. Fondi, 106 Nev. 856, 802 P.2d 1264 (1990)
It would be an error to hold that all postdivorce increases are automatically separate property.

Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989)
Postdivorce increases are divisible unless owning spouse shows that they resulted from his or her extraordinary postdivorce efforts.

NEW HAMPSHIRE

NEW JERSEY

Moore v. Moore, 114 N.J. 147, 553 A.2d 20 (1989)
Postmarital cost-of-living increases in marital retirement benefits are marital property.

NEW MEXICO

Madrid v. Madrid, 101 N.M. 504, 684 P.2d 1169 (Ct. App. 1984)
Postdivorce increases in the value of the pension would be separate property.

Franklin v. Franklin, 116 N.M. 11, 859 P.2d 479 (Ct. App. 1993)
Postdivorce increases are divisible unless owning spouse shows that they resulted from his or her extraordinary postdivorce efforts.

NEW YORK

Majauskas v. Majauskas, 61 N.Y.2d 481, 463 N.E.2d 15, 474 N.Y.S.2d 699 (1984)
Postdivorce salary increases are partly the result of marital efforts, therefore, the marital estate is entitled to a share of those increases.

Glasberg v. Glasberg, 162 A.D.2d 586, 556 N.Y.S.2d 772 (1990)
Postmarital cost-of-living increases in marital retirement benefits are marital property.

NORTH CAROLINA

Bishop v. Bishop, 113 N.C. App. 725, 440 S.E.2d 591 (1994)
Increases in retirement benefits traceable to postdivorce active efforts are entirely separate property.

NORTH DAKOTA

Lentz v. Lentz, 353 N.W.2d 742 (N.D. 1984)
Postdivorce salary increases are partly the result of marital efforts, therefore, the marital estate is entitled to a share of those increases. Cost of living adjustments should be shared where deferred method of distribution is used.

Bullock v. Bullock, 354 N.W.2d 904 (N.D. 1984)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

OHIO

Hamilton, Butler App. No. CA 95-11-198 (1996)
Should include COLA in the marital estate.

Layne v. Layne, 83 Ohio App. 559, 615 N.E.2d 332 (1992)
Postmarital cost-of-living increases in marital retirement benefits are marital property.

OKLAHOMA

OREGON

Graham v. Graham, 78 Or. App. 665, 717 P.2d 655 (1986)
Postdivorce increases in the value of the pension would be separate property.

PENNSYLVANIA

Schneeman v. Schneeman, 420 Pa. Super. 65, 615 A.2d 1369 (1992)
Holland v. Holland, 403 Pa. Super. 116, 588 A.2d 58 (1991)
Lowry v. Lowry, 375 Pa. Super. 382, 544 A.2d 972 (1988)

When computing discount rate for use in present value computation, effects of inflation should be included only if pension is subject to actual cost-of-living increases.

Berrington v. Berrington, 534 Pa. 393, 633 A.2d 589 (1993)
Katzenberger v. Katzenberger, 534 Pa. 419, 633 A.2d 602 (1993)

Increases in retirement benefits traceable to postdivorce active efforts are entirely separate property.

Gordon v. Gordon, 436 Pa. Super. 126, 647 A.2d. 530 (1994)
It would be an error to hold that all postdivorce increases are automatically separate property.

Morchhauser v. Morchhauser, 357 Pa. Super. 339, 516 A.2d 10 (1991)
Liciardello v. Liciardello, 391 Pa. Super. 219, 570 A.2d 1062 (1990)

Postdivorce increases are divisible only if the pension was vested at the time of divorce.

Holland v. Holland, 403 Pa. Super. 116, 588 A.2d 58 (1991)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

RHODE ISLAND

SOUTH CAROLINA

SOUTH DAKOTA

Radigan v. Radigan, 465 N.W.2d 483 (S.D. 1989)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

TENNESSEE

TEXAS

May, 716 S.W. 2d 705 (1986)
Ex-spouse should not share in increases in value if parties divorce before retirement.

Berry v. Berry, 647 SW.2d 945 (Tex. 1983)
Postdivorce increases in the value of the pension would be separate property.

Neese v. Neese, 669 S.W.2d 388 (Tex. Ct. App. 1984)
Ex-spouse should get a proportionate share if the employee spouse was retired and receiving benefits when the parties divorced.

Phillips v. Parish, 815 SW.2d 501 (Tex. Ct. App. 1991)
Even in Texas, where the nonemployee spouse’s share is based on the pension at the time of divorce, nonmerit enhancements such as cost-of-living adjustments and increased "bridge" benefits meant to get the employee from retirement to Social Security eligibility can be awarded to the nonemployee spouse despite being earned postdivorce.

UTAH

VERMONT

McDermott, 552 A.2d 786 (Vt. 1988)
Actuarial calculations regarding the present value of a retirement pension should include cost of living adjustments.

VIRGINIA

Banagan v. Banagan, 17 Va. App. 321, 437 S.E.2d 229 (1993)
The trial court erred by arbitrarily basing deferred distribution on pension benefits at age 55; method improperly deprived marital estate of passive appreciation in marital interest after that point.

WASHINGTON

In re Marriage of Bocanegra, 58 Wash. App. 271, 792 P.2d 1263 (1990)
Spouse should get proportionate share of cost-of-living adjustments.

Bulicek v. Bulicek, 59 Wash. App. 630, 800 P.2d 394 (1990)
Postdivorce salary increases are partly the result of marital efforts, therefore the marital estate is entitled to a share of those increases.

WEST VIRGINIA

WISCONSIN

DuBois, 335 N.W. 2d 503 (1983)
Should be included in the marital estate.

Thorpe v. Thorpe, 123 Wis. 2d 424, 367 N.W.2d 233 (Ct. App. 1985)
Spouse should get proportionate share of cost-of-living adjustments.

WYOMING

Return to Special Issues


Direct Expert Line:
1-800-447-0084

Our Pension Analysts
Are Available
9 AM - 5 PM
Monday - Friday EST

Free Phone Consultations

Making QDROs Easy

BBB Online Reliability BBB Accredited Business