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Are KTRS Divisible in Divorce?

The law is ever changing with respect to KTRS benefits (Kentucky Teacher Retirement System) accounts in Kentucky.

Pursuant to KRS 161.700 (3) Retirement allowance, disability allowance, accumulated contributions, or any other benefit under the retirement system shall not be classified as marital property pursuant to KRS 403.190(1), except to the extent permitted under KRS 403.190(4). Retirement allowance, disability allowance, accumulated contributions, or any other benefit under the retirement system shall not be considered as an economic circumstance during the division of marital property in an action for dissolution of marriage pursuant to KRS 403.190(1)(d), except to the extent permitted under KRS 403.190(4).
That makes us look closely at KRS 403.190(4), which states: If the retirement benefits of one spouse are excepted from classification as marital property, or not considered as an economic circumstance during the division of marital property, then the retirement benefits of the other spouse shall also be excepted, or not considered, as the case may be. However, the level of exception provided to the spouse with the greater retirement benefit shall not exceed the level of exception provided to the other spouse. Retirement benefits, for the purposes of this subsection shall include retirement or disability allowances, accumulated contributions, or any other benefit of a retirement system or plan regulated by the Employees Retirement Income Security Act of 1974, or of a public retirement system administered by an agency of a state or local government, including deferred compensation plans created pursuant to KRS 18A.230 to 18A.275 or defined contribution or money purchase plans qualified under Section 401(a) of the Internal Revenue Code of 1954, as amended.

All of this is more fully confounded by recent decisions of the Kentucky Court of Appeals in Shown v. Shown, 2013-CA-1523-MR to be published.  This case was previously decided in 233 SW3d 718 (Ky. 2007) by the Kentucky Supreme Court.  In the first case, the Kentucky Supreme Court ruled that KTRS accounts were divisible, but only if both spouses had qualifying retirement benefits. The answer is still unclear.  According to the case law, both statutes 161.700 and 403.190 are still intact and neither has been overturned.  The practical implication is that Shown would have practitioners dividing accounts only IF both parties have retirement. Assume husband has $100,000 KTRS retirement.  If wife has $200,000 401k, then husband would get half of the difference, or $50,000.  This is simple and virtually uncontroverted.  If wife has no retirement, then Wife gets nothing and Husband keeps his KTRS without division pursuant to KRS 161.700.  This appears to be clear.  However, if Wife has $1,000 retirement, the Shown case seems to indicate that $99,000 of Husband's is then divisible.  This is the real question:  Whether Husband's KTRS becomes divisible if, and only if, Wife has a retirement and whether Wife's is less or greater has an impact on divisibility. The Appeals Court seems to indicate that Wife having ANY would subject Husband's KTRS to division, while if Wife has NONE, then Husband's KTRS remains exempt. Stay tuned as this case develops, as it most certainly will return to the Kentucky Supreme Court for further interpretation and will likely lead to changes in KRS 161.700 and 403.190 by the legislature.  Let's hope Mr. Shown decides to hires competent counsel to right this nonsensical ruling. (Mr. Shown represented himself in the most recent appeal.  What's the adage? A litigant who represents himself has a fool for a client.) If you have questions or need legal representation for divorce in Northern Kentucky, call attorney Michael Bouldin at 859-581-6453.  Contact Mike today at [email protected] or 859-581-MIKE.

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