Marriage of Kelpe

Filed 5/11/21 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

In re the Marriage of NICOLAS and LISA H045089 KELPE. (Santa Clara County Super. Ct. No. 2012-1-FL-161459)

LISA KELPE,

Appellant,

v.

NICOLAS CHARLES KELPE,

Respondent.

In this dissolution proceeding, we address the characterization of a lump-sum cash payment respondent received from a retirement plan upon leaving his employment with an accounting firm after a marital dissolution. As we will explain, we conclude the payment was not an enhanced community benefit derived from the retirement benefits respondent accrued during the marriage. Rather, the payment was an additional benefit respondent acquired when he became a partner in the firm, which occurred after the parties’ date of separation. We will therefore affirm the trial court’s order characterizing the payment as respondent’s separate property. I. BACKGROUND Lisa and Nicolas Kelpe married in 1997 and separated in 2010. The marriage was dissolved in 2013. Respondent was employed as a senior manager with Ernst & Young LLP throughout the marriage before separation. As a non-partner employee, he accrued benefits under a qualified defined benefit retirement plan and a 401(k) plan. In mid-

2012, Ernst & Young offered him an equity partnership in the firm. As a condition of becoming a partner, respondent made a $150,000 capital contribution to the partnership from his post-separation property. He executed the partnership agreement and became an equity partner effective January 1, 2012. As a partner-owner of the firm, respondent received profit distributions instead of a salary. The partnership agreement offered two deferred compensation retirement plans that were not available to respondent when he was a non-partner employee: the HR-10 Plan and the Top-Hat Plan. Benefits payable under the Top-Hat Plan are based on a formula that factors the average of the three highest fiscal years of partnership earnings and the partner’s total years of service. To vest in the Top-Hat Plan, the partner must be at least 58 years old and meet the “Rule of 75” (minimum age of 50 plus total years of service equals 75) or the “Rule of 65” (minimum age of 50 plus service years as a principal/partner equals 65). Partners who separate from the firm before vesting in the Top-Hat Plan are eligible for a lump sum buyout of their interest in the plan, provided they have either 20 years of total service, or 10 years of service as a partner. Respondent suffered a heart attack in 2014. In October 2015, Ernst & Young requested that he withdraw as a partner, and he resigned from the firm effective December 2015, before vesting in the Top-Hat Plan. Based on 20 years of service with the firm, 13 of which were during the marriage, respondent received under the Top-Hat Plan a single lump-sum payment reflecting “the actuarial equivalent present value of monthly payments that would otherwise be expected to be paid upon retirement, reduced by the monthly accrued benefit to which [he] is entitled under [the defined benefit retirement plan] and Ernst & Young’s H.R. 10 Plan.” The benefit was calculated at $928,243. The trial court ruled that the lump-sum payment was respondent’s separate property. Relying on In re Marriage of Brown (1976) 15 Cal.3d 838 (Brown) and In re Marriage of Frahm (1996) 45 Cal.App.4th 536 (Frahm), the trial court rejected the 2