Question: During the past 14 months, my husband and I have been through negotiation and mediation to attempt to resolve the financial portions of our marital dispute, but to no avail. Child support for our two children is easy because it is set by the child support guidelines, but alimony and division of assets have been difficult. Even our lawyers, who have been very supportive of trying to keep us out of court, are throwing up their hands.

My husband is a CPA who works for a small company as its chief financial officer. In addition to his wages ($7,500 monthly), he is provided with a pension and has the ability to contribute to a 401(k) that is matched by his employer. I work for a medical practice, earn $3,000 per month, and am provided with health coverage, but no other benefits. I have an IRA to which I have been contributing since we were married.

While we have agreed to divide the marital part of his pension, his 401 (k), and my IRA, the questions remaining involve the amount of alimony he will pay me to allow me to make ends meet. My husband claims that the amount he contributes to his 401 (k) -- $1,000 monthly -- should come off the top before the amount of his income is considered to set alimony. At the same time, he is complaining that I am showing as an expense my contribution to my IRA based on our prior standard of living.

It does not see fair for him to be able to contribute to his retirement accounts and for me not to, but is this worth going to court over?

Answer: Although the precise answer to your question would best be answered based on the law of the state in which you reside, our research tells that, generally speaking, voluntary contributions to deferred compensation plans -- like 401(k)’s -- should not reduce the amount of disposable income considered to be available for making alimony payments.

While the court can and should consider your and your husband’s practice and custom of making contributions to savings and retirement plans as a factor in determining your standard of living, if the amounts paid into these savings and retirement accounts is excluded from your husband’s disposable income, it would, in effect, allow him to reduce the amount he should be paying to you as alimony. On the other hand, by showing an expense equal to the amount you are contributing to your IRA, you are, in effect, seeking an additional amount of alimony to cover your contribution.

There is no one fixed standard or mathematical formula or crystal ball that a litigant can use to make this determination as most state laws do not distinguish between gross and net incomes.

Bottom line: Both the amount and sources of earned and unearned income to be considered in establishing support and alimony are in the judge’s discretion.

That said, there are other issues here that deserve mentioning: First, your husband can put much more into his 401(k) than you can contribute to your IRA (in 2005, $4,000 or, if you are over age 50, $4,500). Second, the contributions made by your husband’s employer to his 401(k) will not reduce his maximum contributions that will depend on his employer’s specific plan and caps established by federal law. We suggest that you secure the above information so you can make an informed decision.

SoloFact: We found an informative chart that will give you the basic rules of employee benefit contributions. It was prepared by Carolyn Calhoun, a benefits attorney in Washington, D.C., and we have been given permission to share it with you. Go to http://benefitsattorney.com/modules.php?name=415.
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