Highly Compensated Individuals and Impact on Support Payments

When attorneys use the term highly compensated individuals in a divorce or maintenance calculation, we are referring to individuals with substantial salaries, variable compensation plans, commission, bonus income, or income producing assets that puts total earnings above a threshold level created by the Colorado legislatures.  Currently the threshold for total gross earnings for a family is $320,000 annually. This does include both spouses’ earnings.

Issues in calculating fair and reasonable spousal support arise when a large percentage of a spouse’s compensation is tied to an employee, company, or team performance and is earned based on a variable compensation plan, commission, or bonus. It is my opinion that any spouse whose earnings rely substantially on non-guaranteed income should not consider a flat rate of spousal support or maintenance unless proper terms are included within the award of support.  

Compensation consideration for variable compensation

Courts struggle with the decision to include or exclude bonuses, commissions, and variable compensation as income in a spousal support or maintenance calculation.  The balance is between a spouse’s need for support versus the other spouse’s ability to pay the support.  A court will balance various factors in determining if such income should be included in the maintenance calculation. This can include consistency in receiving the compensation and how the compensation is defined, such as if it is based on employee, company, or team performance.

If compensation is speculative and inconsistent, a court may not include it as income.  If on the other hand it is found to be consistent and reliable, it may consider it as income. Once the question of if the compensation should be considered income, the next analysis is how it should be included in a spousal support or maintenance award.

If your earnings are dependent on significant variable compensation, bonus, or commissions, we recommend reviewing any support order with one of our attorneys well versed in this area of law. The goal for maintenance or spouse support is to be fair and reasonable based on the needs of the receiving spouse and the ability of the payor spouse to pay and should not be considered entitlement or awarded as a matter of right.