If you have any questions about divorce in Connecticut, please contact Joseph Maya at 203-221-3100 or by email at JMaya@mayalaw.com.
Earlier this year, the Connecticut Superior Court addressed an issue that can frequently arise in the context of alimony payments where there is later an employment separation or some form of severance payment. The case, Ayres-Leaders v. Ayres, 2018 Conn. Super. LEXIS 489, was decided in the Connecticut Superior Court (Litchfield) on February 28, 2018.
The parties’ marriage had been dissolved in a 2010 judgment providing that the defendant (husband) “shall pay periodic alimony to the [plaintiff] Wife…which shall be calculated to be an amount which equals thirty percent of the Husband’s gross income minus twenty percent of the Wife’s gross income…”
In prior decisions in the same case, the court had previously decided once each in favor of the plaintiff and defendant as to two other post-judgment issues pertaining to the definition of “gross income” under the cited alimony provision.
In the first decision, the court ruled that the defendant’s short-term incentive payment constitutes a ‘performance-based bonus’ that is a component of ‘gross income’ under the judgment.” Under its remedial powers, the court “ordered that past and future STI payments be included in the calculation of spousal support paid by the defendant to the plaintiff.”
If you have any questions about divorce in Connecticut, please contact Joseph Maya at 203-221-3100 or by email at JMaya@mayalaw.com.
In the second ruling, the court sided with the defendant former husband. It decided that stock awarded to the defendant “is excluded from the calculation of his gross income for purposes of the alimony formula.” As to this issue, the court decided “only whether the agreement excludes all stock or only sign on stock from the definition of gross income and found that ‘sign on’ applies only to stock options and that ‘stock which may be awarded to either party, regardless of when it was awarded, is excluded from the definition of gross income.”
The February 2018 ruling in the case then addressed a third issue related to alimony: whether Long Term Incentive Plan proceeds received by the defendant should be treated identically to Short Term Incentive Plan (STI) proceeds (i.e., since they are ‘bonuses based upon the longer employment of the Defendant” or, rather, the distributions made to the plaintiff under the LTIP “are, in fact stock”).
The Superior Court first discussed the nature of RSUs and PSUs:
The plaintiff believes that the RSUs and PSUs, as part of a long-term incentive program, should be included in the alimony calculation as performance-based bonuses. The PSUs are cashed out, so they are not stock. The LTIs are not characterized as sign-on stock. She conceded, however, that if the PSUs are actually stock units, they would not be included in the alimony calculation.
The court also addressed the alimony formula in the dissolution decree:
“Each party’s gross income for the purpose of this calculation shall be the party’s gross income from their base pay and any performance-based bonuses received. Income shall not include moving expenses, any car allowance, sign-on stock options or stock which may be awarded to either party.”
The court determined that RSUs and PSUs fall under the definition of “performance-based bonuses” and were therefore part of the alimony calculation. (“They are not the type of stock excluded from the alimony calculation…The characterization of LTIs as “golden-handcuffs” does not change this construction of the dissolution agreement.”) The court also concluded that the defendant’s severance payment was “part of the alimony calculation inclusion for base pay and performance-based bonuses.”
If you have any questions about divorce in Connecticut, please contact Joseph Maya at 203-221-3100 or by email at JMaya@mayalaw.com.