Kapp v. Kapp, 2d Dist. Clark No. 2018-CA-133, 2019-Ohio-133 (October 4, 2019).

Issue: Did the trial court err by dividing the defined contribution plan at issue using a coverture fraction and ruling the alternate payee could not collect her share until participant retires?

Decision:  In this case, the Second District Court of Appeals determined the trial court did err in its division of the Husband’s 401(k), a defined contribution plan.  Prior to the hearing before the trial court, the parties stipulated that the marital portion of the 401(k) plan was $11,849.75.  However, the trial court mistakenly believed this amount was the value of the entire account.  The trial court ordered the $11,849.75 to be divided using a coverture fraction (with the numerator being the Husband’s number of months of service in the plan during the marriage and the denominator being the Husband’s total months of service in the plan at retirement).  The trial court further ordered that the plan assets were not to be divided until Husband either retired or otherwise started payment from the plan.

As the Second District Court of Appeals noted, this type of division using a coverture fraction and waiting until the time of retirement to value the benefits is common in defined benefit plans—not defined contributions plans.  This type of division is not appropriate for a defined contribution plan, which has an easily determined value and the value of the marital portion will only increase after divorce due to market forces (whereas the marital portion of a defined benefit plan will increase with a higher average wage earned in subsequent years of service).  Accordingly, the Second District held the trial court abused its discretion in its division of the 401(k).  It continued by stating the reasonable division in this matter was to immediately divide the $11,849.75 in half and award Wife gains/losses on her share from the date of assignment until her amount was segregated.

Discussion:  It is important to remember that dividing retirement plans at divorce can be complicated.  It should not be taken for granted that anyone in the room understands the plan(s) at issue during a divorce.  As such, you, as the attorney in the case, must know the plan(s) at issue and be able to explain them to everyone involved, even the court.

How we can help:  We have decades of experience in this area.  We can help you to understand the plan(s), make exhibits for trial, and/or offer expert testimony at the hearing.  Please feel free to give us a call.  We pride ourselves on having friendly, available experts that are ready to help you protect your client’s interests with respect to the retirement benefits.