It is not unusual to use a three or five year average of someones income when calculating alimony and/or child support if their income fluctuates. Why does income fluctuate? Sometimes people earn commissions based upon sales which vary from year to year. Sometimes the economy or other reasons dictate how much of a bonus they get. Some times deferred compensation, when it vests and/or is cashed in, yields more in some years than in others. There are many reasons why income can fluctuate. As such, both the case law and child support guidelines advise that we should use an average when calculating support.
That said, is this always fair? What do you do in cases where it is clear that the prior income wont be repeated? That was the issue in the case of Harwelik v. Harwelik, an unreported Appellate Division opinion decided on December 19, 2011. In this case, the husband’s average income was about $300,000. However, this included both short term bonuses that he was able to defer and long term bonuses that had a 3 year vesting period. In July 2006, when the husband’s employer, Verizon, sold most of its international assets, his title was downgraded from director to manager. As a result of the change, he was no longer eligible to receive long-term bonuses, although the bonuses previously
granted would still vest and be fully payable. In addition, as a manager, plaintiff could no longer defer the short-term bonuses he received after 2006. When excluding this deferred compensation from the average income, it was substantially less. That said, the trial court used the $300,000 average.
In a confusing opinion, the Appellate Division affirmed the use of an average but reversed the use of the $300,000 number because it included the deferred compensation that the husband no longer had, through no fault of his own.