Dividing Military Retired Pay Incident to Divorce

In 1982, Congress passed the Uniform Services Former Spouse Protection Act (USFSPA). The USFSPA allows state courts to divide military retired pay incident to divorce or legal separation pursuant to state law.

The USFSPA grants state courts authority to divide military pensions incident to divorce as long as certain conditions are met. The first condition that must be met is that the state court must have subject matter jurisdiction to divide a service member’s pension, as defined by the USFSPA at 10 USCS § 1408(c)(4). In order to have jurisdiction to divide the military pension, the court must have jurisdiction by reason of one of the following: (1) the service member resides in the state, other than because of military assignment; (2) the service member is domiciled in the state; or (3) the service member consents to the state’s jurisdiction.1 This jurisdictional requirement is often more stringent than a state’s long arm jurisdiction.

The USFSPA will also allow for the former spouse to receive his or her portion of the military retired pay directly from the respective federal pay center. The Defense Finance and Accounting Service (DFAS) is the pay center and will make direct payments for the Army, Air Force, Navy, Marine Corps, and their respective reserve components. The Coast Guard pay center provides for direct payments for the Coast Guard, Uniform Public Health Service Commissioned Corps, and the National Oceanic and Atmospheric Administration (NOAA).

DFAS or the Coast Guard pay center will only make direct payments to the former spouse if the “10/10 rule” is satisfied. The “10/10 rule” requires that be 10 years of marriage overlapping 10 years of military service in order for the former spouse to receive direct payment. Many attorneys, and even service members, believe that the 10/10 rule means that if they were not married to their spouse for 10 years overlapping 10 years of service, then the spouse has no interest whatsoever in the service member’s military pension. However, that is not the case. The USFSPA allows the court to divide a pension in a marriage with less than 10 years of service overlap if state law applies, but the payments shall not be made directly to the former spouse by DFAS. Instead, the military spouse would have to pay the non-military spouse directly.

The USFSPA limits the amount of the member’s retired pay which can be paid to a former spouse to 50% of the member’s disposable retired pay for division of property. If there is a garnishment order for child support or alimony in addition to a division of property, the amount paid directly to the former spouse may be up to 65% (50% for division of property and 15% for child support and/or alimony).

There are several ways to divide a military pension:

1. The flat dollar amount – this is still an acceptable method of division. The parties can agree, or the court can order, that the former spouse will receive a flat dollar amount each month from the service member’s military retired pay. However, if the award is stated as a flat dollar amount, then the former spouse will not receive the cost of living adjustments. Depending upon the age of the parties and their life expectancy, this can have enormous consequences. A flat dollar amount can often do a great disservice to a former spouse, leaving hundreds of thousands of cost of living adjustment dollars in the retiree’s pocket.

2. The flat percentage if the service member is retired – this is still an acceptable method of division. The parties can also agree, or the court can order, that the former spouse will receive a flat percentage of the service member’s military retired pay. A flat percentage works when the service member is already retired and the parties or the court can ascertain how much of the military service was during the marriage. A flat percentage division might read: “The former spouse is awarded 50% of the service member’s disposable retired pay.”

3. The Hypothetical Division – also now referred to as the Frozen Benefit Rule. A hypothetical award is an award figured as if the member had retired on the date of separation or divorce. This calculation does not give the former spouse the benefit of any of the member’s future pay increases due to promotions or increased service time after the divorce. The former spouse is then awarded a percentage (very often ½) of the marital portion of the hypothetical award. Steps:

a. Determine retired pay base. For members entering service after September 8, 1980, the retired pay base is the average of the member’s highest 36 months of basic pay as of the time of the divorce.

b. Multiply the retired pay base by the retired pay multiplier. The retired pay multiplier is 2.5% multiplied by the years of creditable service (or 2.0% for those who have elected to participate in the new BRS). This yields the service member’s hypothetical retired pay.

c. When the service member then actually retires the former spouse’s award is converted from a percentage of the hypothetical retired pay to a percentage of the service member’s actual disposable retired pay. This is done by taking the ratio of hypothetical retired pay to actual retired pay, adjusted for COLA, and multiplying by the percentage of hypothetical retired pay.

A hypothetical award, in COL Smith’s situation, might read:

Mrs. Smith shall receive fifty percent (50%) of COL Smith’s military retired pay as if COL Smith had retired with a retired pay base of $10,877.70 with 26 years of service on (date of divorce).

The examples above illustrated clauses for dividing military pension where the service member has an active duty retirement. To divide a reserve component pension, the concepts are the same except that we look at reserve component retirements in terms of retirement points instead of months of service.

If COL Smith is still serving as a reservist, a hypothetical division of COL Smith’s reserve retirement might read:

Mrs. Smith is awarded 50% of the disposable military retired pay COL Smith would have received had the member become eligible to receive military retired pay with a retired pay base of $10,877.70 and with 4,000 Reserve retirement points on (date of divorce).

Prior to the passage of the National Defense Authorization Act (NDAA) for 2017, state courts had discretion on which of the above methods to use to divide a military pension. However, the NDAA for 2017, which was signed into law on December 23, 2016, requires the use of a hypothetical division to divide a military pension of a service member who is still serving. This applies to all divorces or legal separations after December 23, 2016.

For all divorces occurring after December 23, 2016 and where the service member is still serving, the MPDO must include the service member’s “high 36” and years of creditable service (or points for a reserve component) at the time of the divorce. Further, the pay centers require that the court order dividing the military retired pay include the service members “high-36” and months (or points) of creditable service at the time of the divorce.