Perhaps the most complicated item to adjudicate in any military divorce case is how to allocate Military Retirement Benefits. First, you need to determine all of the retirement benefits that you as the service-member, or your service-member spouse, participate(d) in / or are eligible for. All branches of the armed services participate in a unified retirement system. In addition to the military pension (a defined benefit plan), military personnel may also participate in the Thrift Savings Plan (TSP) – and don’t forget about Reservist retirement, Medical Care, Commissary Privileges, Education Benefits - and even the Survivor Benefit Plan (SBP) – all of which are discussed on this website. Finally, if a retirement is pending, don’t forget to think about Accrued Leave!
If your spouse is approaching 20 years of service, but hasn’t reached the 20-year mark yet, you definitely want to consult with an attorney before filing a divorce action. You could lose many benefits that you would otherwise be entitled to if you become divorced shortly before your spouse reaches 20-years of service. Be very careful if your spouse is active duty and you have been married 18 or 19 years of this active duty service. As you most likely already know, retirement for enlisted personnel, warrant officers, and commissioned officers is earned after twenty years of active duty service. To compute the amount of retired pay, first you must determine when the service-member came on active duty. If this date was sometime between 1980 and 1986, the “High-3” formula is used to compute retired pay (10 U.S.C. §1407(a), 1409(b) (2)). Without going into the specifics of the formula1, the retired pay is based on the average of the last 36 months pay before retirement.
1 - which is incidentally, 2.5 percent x years of service x average of highest 36 months of basic pay
Redux Retirement and the Career Status Bonus
If you or your service-member spouse commenced active duty after August 1, 1986, then there are two options for retirement: either 1) the “High-3” formula discussed above, or 2) what is commonly referred to as REDUX2. If REDUX is chosen, you should most certainly consult with an attorney - because what REDUX means is that a mid-career bonus of $30,000 was paid between the service-member’s 14.5 and 15 years of service with a promise by the service-member to remain on active duty until 20 years. This is known as the Career Status Bonus - and it affects the retired pay because monthly retired pay under REDUX is calculated at 40 percent of the average of the highest three years of basic pay after twenty years of creditable service. The reduction that produces this 40 percent multiplier is computed by subtracting one percent for each full year that the service-member’s total creditable service is less than 30 years. Service-members then receive 3.5 percent increases (to the 40 percent multiplier) per year for each additional year served up to the 30 years of active service.
So, for example, under REDUX, a service-member retiring at 24 years of service gets a 54 percent multiplier. Someone who served on active duty for 30 years would get a 75 percent multiplier. To make matters even more complicated - once the service-member reaches the age of 62, the Department of Defense recalculates a REDUX retiree’s benefit and the service-member then receives equal monthly pension payments as a High-3 earner would. Without getting overly complicated - if your soon-to-be ex is a Reservist or National Guardsmen, you need to know that as a member of the Reserves, he or she also has a retirement system. As a Reservist, the retirement is different and a Reservist will not be eligible for retirement until 60 years of age. What you need most to remember - is how many “points” are involved in this service and when the service-member entered military service. We are not going to go into the specifics of the Reservist formulas (there are 2), but the Reservist is entitled to retirement after 20 years of creditable service and attaining a sufficient amount of points. Before the era of placing service-records on-line, the National Guard and the Reserves mailed annual points statements each year to every Reservist. This is information that is readily ascertainable, and in most instances, can be accessed on-line. If your soon-to-be ex (or an attorney) tells you they can’t ascertain how many points the Reservist spouse has acquired, then you know they are not being forthcoming.
2 - 37 U.S.C.S. § 322(a)(2)
The Ten Year Myth: Confusing Pension Entitlements with Direct Pay
One of the most callous lawyer tricks attempted by an opposing counsel was a letter sent to a service-member's wife stating, “As you know, the government will not pay you any part of your husband's retirement pension because you have not been married to him for 10 years.” The letter was a purposeful misinformation effort to make the wife believe that what her husband had been saying to her for years was true, that she “was not entitled” to any of his retirement pay. Here are the facts: state law determines what, if any, portion of your spouse’s retirement pension you are entitled to receive, whether you have been married for 5 years or for 30 of his/her military career. You have a right to ask for your marital share of your spouse’s military pension. Here is where the 10-year rule applies - the government has a rule that it does not have to pay you directly your marital share of the pension unless you have been married to your spouse for more than 10 years of his or her military career. Thus, if you were married for 8 years during a military career and the court awards you your marital share of your spouse’s retirement, the payment will come from your spouse, not directly from the government. You certainly can seek a voluntary allotment, or, even better, a voluntary irrecoverable allotment from your spouse but you don't have the right to direct pay unless you pass the 10-year marriage threshold of military marriage.
So, now that you are getting a handle on how to determine how much income your spouse will receive upon retirement, you must then turn to the Uniformed Services Former Spouses’ Protection Act (“USFSPA”). This Act was passed by Congress and is codified at 10 U.S.C. §1408. It is the governing document that allows a state court to divide military retired pay incident to a divorce AND it leaves a lot open for the state to decide. Unfortunately, nowhere in this Act does it give the courts a clear understanding of how to divide the pay. The state court can order the direct pay of a pension award through the Defense Finance and Accounting Service (DFAS) when there is ten years’ overlap between the marriage and creditable military service (10 U.S.C. §1408(d)(2)). However, such direct payments may not exceed 50% of the service-member’s disposable retired pay.
The good news beyond all of this, is that Virginia law pretty much governs the rest of pension divisions. The best practice is to agree on the division of the pension in the Separation Agreement (if possible) and follow up with a Military Pension Division Order or Administrative Domestic Relations Order (ADRO). But always remember that there are other issues to consider when agreeing to a division of assets. Therefore, it is extremely important to gather all relevant information for your attorney before entering into negotiations. You do not want to leave out assets such as the Survivor Benefit Plan and the Thrift Savings Plan. These topics are addressed at the links on the left-hand side of the web-page…but before you read about those, a few other cautionary words are in order. If your service-member spouse is going to be receiving Military Disability Retired Pay or VA Disability Benefits, be sure to alert your attorney about this. Informing your attorney is very important because Military Disability Retired Pay is excluded under USFSPA and VA Disability Benefits are not subject to property division under USFSPA. And, in some instances, the service-member can elect to receive disability benefits by waiving the same amount of retired pay - which yields a net increase in pay because the VA portion of monthly compensation is tax-free. Also, if your soon-to-be ex already resides in a state other than Virginia, make sure you alert your attorney to his or her out-of-state residency because litigating a military pension division outside of the person’s domicile (without consent) can be a particularly thorny issue. It may cause part of your case to be dismissed.
Reminder:the issue of military retirement benefits is complicated and make sure you have a highly qualified advisor review your situation. Also, many attorneys utilize a formula to begin negotiating military pensions. Make sure you ask your attorney about this.