781.708.4445

wmlevine@levinedisputeresolution.com

Divorce Mediation Blog

Divorce Agreements: Where Have All the COLA’s Gone? Part 1

Wednesday, March 20, 2013

Until the mid-1980’s cost of living adjustments (COLA) provisions were a staple of Massachusetts alimony and child support settlements. People agreed on a beginning sum or sums for periodic support; they hoped to stay out of court for future modification actions; and COLA’s were a tool to encourage that result. It was clear that the Court could not impose a COLA, but the parties did so quite commonly, by agreement.

Most COLA’s provided that one or another Consumer Price Index (CPI) of the U.S. Department of Labor would be reviewed every year for increases over the prior year, or cumulatively, over a “base year”. Generally, if the payor’s earnings’ increase kept pace with or exceeded corresponding increases in the CPI, support would be raised by the percentage increase in the CPI. Otherwise, support would usually increase by that percentage, if any, by which the obligor’s pay increased over the same period.

For few unlucky support payers, the COLA did not compare his (it almost always was “his”) income to the CPI, and he became a guarantor of inflation, simply passing along a percentage increase equal to that in the CPI. Some of these payors became the horrified victims of the rampant inflation of the late 70’s and early 80’s (remember “stagflation”?). Forgetting to pass along mandatory COLA’s, or otherwise with head firmly planted in sand, led to staggering arrearages (read many tens of $1,000’s of dollars at times), and resulting contempt judgments.

Then, COLA’s died.

Ever since, support recipients with deals for flat sum payments have, for the most part, absorbed the risks of inflation on their cash flow, knowing that their only recourse is a new lawsuit, called a modification action, the cost of which would almost certainly outrun and financial gains attained. Yet, despite the flattening of inflation (about 2-2.5% per year since the 90’s), it is hardly non-existent for people with bills to pay. Consider that inflation at “only” 2.5% per year over 10 years works a 25% reduction in purchasing power, and the challenge is evident.

With the issue arising recently in recent divorce mediations at our firm, we ask the question: is it time to reconsider COLA’s?



Get e-mail notifications of new blog posts! Enter email address below.:



Delivered by FeedBurner

other articles


recent posts


tags

Cohabitation alimony separation alimony orders divorce and family law mediators divorce process Massachusetts divorce mediators divorce agreement resolve disputes divorce arbitrator Matrimonial Arbitration The Seven Sins of Alimony divorce mediations Major League Baseball Arbitration Act Reforming Alimony in the Commonwealth MLB labor agreement pre-ARA alimony mediations divorce mediator Chouteau Levine high-risk methodology family mediation IRC §2704 Alimony Reform Act divorce litigation family law arbitrators family law mediation SJC mediation annulment disputes Massachusetts divorce lawyers mediator divorce and family law Family Law Arbitration facilitated negotiations arbitrator how baseball arbitration works Massachusetts alimony lawyer divorce mediators DOMA Baseball family support alimony reform legislation Massachusetts mediators Uniform Arbitration Act General term alimony support orders child support special master Massachusetts alimony and child support arbitration Levine Dispute Resolutions conciliation divorce arbitration Same Sex Marriage alimony law med/arb divorce lawyers lawyers traditional negotiations litigation Divorce family law rehabilitative alimony family and probate law disputes dispute resolution LDRC Obamacare Child Support Guidelines health insurance med-arb alimony statute Self-adjusting alimony orders divorce judgment Defense of Marriage Act medical benefits self-adjusting alimony Massachusetts lawyers Levine Dispute Resolution Center arbitrators lawyer-attended mediation Boston health coverage Baseball Arbitration private dispute resolution Divorce Agreements Levine Dispute Resolution COLA divorced family law arbitrator fraud Levine Dispute Resolution Center LLC Massachusetts Alimony Reform Act Baseball Players divorce arbitrators divorce mediation Massachusetts Lawyers Weekly