Loyal readers of the Insider will recall the Oregon Supreme Court decision in Kunze, which reaffirmed Oregon’s treatment of pre-marital assets, inherited assets, and the presumption that both spouses contributed equally to the acquisition of marital assets and property.
On August 11, 2004, the Oregon Court of Appeals released one of the first real applications of the Kunze analysis. In Owens-Koenig and Koenig, the parties disputed the trial court’s valuation and division of their retirement accounts and pensions. Specifically, the Court of Appeals ruled that:
(1) A retirement account including its appreciation received by one spouse in a prior divorce via Qualified Domestic Relations Order should be considered a separate asset if it was not commingled with joint funds, neither party made contributions to the account, and if the spouse did not make recognized non-economic contributions during the marriage.
(2) Pensions are traditionally characterized as “defined benefit plans,” meaning that their value is based on a specific monthly dollar amount expected upon retirement. These are different from “defined contribution plans” such as a 401(k), in which the value is determined by the employee’s contributions.
(3) For defined benefit plans, the common method of determining the marital portion is through the “time rule,” which allocates a percentage of the plan earned during the marriage. For defined contribution plans, the common method is subtraction (the divorce value less the value at the time the parties married).
(4) In comparison to the approach taken with respect to item (1), the Court of Appeals ruled that the appreciation on the parties’ Individual Retirement Accounts should be shared equally since the accounts were partially funded during the marriage.
In summary, this case provides insight on legal interpretation and application of the law in a divorce, specifically when dealing with assets that may be separate and distinguished from those acquired through the joint efforts of the two parties.