Shown v. Shown, Teacher's Retirement Exclusion Where Other Spouse Has SEP IRA

Shown v. Shown, ___S.W.3d__ (Ky. 2007)

PUBLISHED: REVERSING
PANEL: SCOTT PRESIDING; MINTON, NOBLE AND SCHRODER CONCURRING; CUNNINGHAM CONCURRING IN RESULT ONLY; ABRAMSON NOT SITTING
COUNTY: OHIO
DATE RENDERED: 9/20/2007

Ex-Wife appealed to SC from CA opinion that affirmed TC’s order providing that Ex-Husband’s Kentucky Teacher's Retirement Account would be fully excluded from classification and division of the parties’ marital property pursuant to KRS 161.700(2). Ex-Wife argued to SC that both TC and CA erred in failing to give effect to the provisions set forth in KRS 403.190(4).

At time of trial, Ex-Husband had approximately $81,410 in his KTRS account while Ex-Wife had approximately $1,896 in her Fidelity Simplified Employee Pension (SEP-IRA). Ex-Husband argued to TC that his KTRS account was exempt from classification and division as marital property under KRS 161.700(2), while Ex-Wife argued her SEP-IRA qualified as a retirement account and therefore KRS 403.190(4) overrode KRS 161.700(2) and operated to limit the amount of the KTRS funds that Ex-Husband could claim as exempt. CA affirmed TC’s opinion, holding that KRS 403.190(4) and KRS 161 .700(2) were in conflict, and thus, pursuant to principles of statutory construction, the exemption provisions set forth in KRS 161.700(2) would control over the provisions set forth in KRS 403.190(4). CA held that, alternatively, KRS 403.190(4) is inapplicable unless both spouses have an account that qualifies as a "retirement-benefit" as is defined in KRS 403.190(4), and held that Ex-Wife’s SEP-IRA was not such a "retirement benefit" as defined in that statute.

SC found no conflict between the two statutes. SC held that KRS 161.700(2) specifically exempted the KTRS retirement benefits accumulated by Ex-Husband during the marriage from being classified and divided upon divorce, but that the language set forth in KRS 403.190(4) clearly anticipates statutes such as KRS 161.700(2) and thus, by the plain language of the statute, KRS 403.190(4) is meant to be read in conjunction, not in conflict with, KRS 161.700(2). Furthermore, SC held that any retirement plan that is covered by ERISA is subject to the application of KRS 403.190(4), and as Ex-Wife’s SEP IRA was an employer funded plan covered by ERISA, KRS 403.190(4) applied to the classification and divisibility of the parties’ retirement accounts.
Digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates.