In re Marriage of Kelm
In In re Marriage of Kelm, 912 P.2d 545 (Colo. 1996), the Colorado court explained its reasoning for the distinction between immediate offsets and deferred distribution.
Referencing prior precedent established in In re Marriage of Hunt, 909 P.2d 525 (Colo 1995), the Kelm court stated that precedent had "held that if the pension is distributed upon dissolution under the net present value method, post-dissolution enhancements in essence are treated as separate property.
This dichotomous treatment serves to compensate the nonemployee spouse for the delayed distribution and also the risks associated with the delay." Kelm, 912 P.2d at 550.
As the Hunt court simply stated, "If the non-employee spouse must bear the risks attendant to waiting, then the nonemployee should share in increased benefits that accrue during the delay." 909 P.2d at 536.
The Hunt court further reasoned:
We recognize that in certain cases post-dissolution increases in a pension should be treated as separate property. However, a pension qualifies for separate property treatment of post-dissolution increases only if the trial court can award the pension under the net present value theory at the time of dissolution. If the value of the pension cannot be divided at the time of dissolution but must be divided when it is received or could be received, then post-dissolution increases are marital property . . . . Id. at 539.
Where the present value/immediate offset method is utilized, "the nonemployee spouse exchanges future contingent post-dissolution enhancements for the benefits of immediate distribution. At the same time, the employee spouse reaps the benefit of potential enhancements that occur post-dissolution." Id.
The court reasoned as follows with regard to utilization of the deferred distribution method:
If, however, the circumstances do not warrant immediate distribution because there are insufficient assets in the estate to permit offset, or the present value of the future benefit is too difficult to ascertain, the trial court may find it necessary to utilize either the deferred distribution or the reserve jurisdiction method. See, e.g., In re Marriage of Gallo, 752 P.2d at 55; In re Marriage of Nelson, 746 P.2d 1346, 1349 (Colo.1987).
Use of either of these methods increases the risks to the nonemployee spouse and entails differing levels of continued interaction between the parties and with the court. In consideration of the increased risks and the continued "economic partnership" between the parties under either of the delayed methods of distribution, post-dissolution enhancements always must be treated as marital property if distribution is delayed. Id. at 540.