What Are Military Pensions?
A military pension is a retirement benefit provided to military service members. Like other kinds of retirement pay, military pensions are a form of deferred compensation. However, unlike most civilian pensions that allow employees to borrow from their retirement plans or cash out early, military pensions are an all-or-nothing benefit. Service members can’t receive payment of any pension benefit until they’ve served for at least 20 years, or if serving in the Reserves or National Guard, have acquired the necessary “points.” Once service members complete their terms, or acquire enough points, they’re entitled to their full pension.
Is the Former Spouse Entitled to a Portion of the Military Spouse’s Pension?
Yes. The Uniformed Services Former Spouse Protection Act (USFSPA) permits state courts to apply the family law principles of their particular state when deciding how to divide military pensions in divorce. Click here for the full text of the USFSPA. Under the USFSPA, state divorce courts can award a military pension to the service member or divide it between the spouses. If the pension is awarded entirely to the service member, courts may compensate the spouse for his or her share of the military pension from other marital assets.
How Does the Former Spouse Receive a Share of the Military Pension?
Ask about the pension
If you’re the spouse of a service member and you’re considering a divorce, you need to understand that you should address the military pension during the divorce proceeding – not once it’s over. This is true even if retirement seems like a long way off. Ultimately, if you want to receive some portion of your spouse’s retired pay, you should get a court order that divides the military pension.
If you forget to address the military pension during the divorce, or fail to get the appropriate court order, it may not be possible to divide the pension once the divorce is final. If this has happened to you, there may still be a remedy available such as a motion to divide omitted assets. However, these motions can be costly and complicated. Be sure to contact an attorney if you find yourself in this situation.
So, what should you do now? Ask your spouse about the pension and its value. Get as much information as you can. Figure out, as early as possible, how to collect your fair share of retired pay. If the military spouse isn’t willing to share information, you’ll need to hire an attorney who can help you get started.
Find the right court
In order to get divorced or obtain an order dividing a pension, you’ll need to go to the “right” court: a court that has jurisdiction (authority) to hear your case. Finding the right court in a military divorce case can be difficult because military families tend to move frequently.
There are two ways to deal with this potentially tricky issue. First, ask the service member spouse to agree that a specific court has jurisdiction over your divorce, including the authority to divide the military pension. Many spouses will agree to avoid an expensive legal battle over which court to use.
If your spouse won’t agree, you’ll need to contact an attorney. The rules used to determine whether a court has jurisdiction are complicated and require an attorney’s assistance.
Obtain a court order dividing the pension
Once you’re in the right court, you should request an order dividing the military pension. There are two ways to get a court order. First, you and your spouse can enter into a written agreement about how to divide the pension. If this happens, you or your attorney will need to convert the agreement into a proposed order and submit it to the court for approval. If you and your spouse can’t agree, you’ll have to go to trial and let the court decide how the pension will be divided.
A common method of division is to award the former spouse a percentage of the pension. Another permissible method, though less common, is to award the former spouse a specific dollar amount from the pension.
A third option, which avoids dividing the pension, involves the non-military spouse’s agreement to receive cash or other assets in exchange for his or her share of the military pension. If you’re considering an exchange of cash or other assets so that the service member can keep the entire pension, you’ll probably want to figure out its present value; this is not something most people can do on their own. You should consider hiring a pension appraiser or CPA with experience valuing military pensions. Using military mortality tables and other presumptions to estimate what the member is likely to receive over his or her lifetime, the appraiser or CPA can figure out present value.
Request direct pay
Once you have the court’s order dividing the pension, you (or your attorney) should send a copy of it directly to the Defense Finance and Accounting Service (DFAS) – the government body responsible for paying retirement benefits. This will put the DFAS on notice of your right to collect some portion of the military pension.
As the former spouse, you may be entitled to receive the court-ordered pension payments directly from DFAS if all of the following requirements are met:
- the divorce judgment and any separate order dividing the military pension are both final (meaning the time to file an appeal has expired)
- the service member is retired or in the process of retiring, and
- the 10/10 rule has been met; this rule requires that the service member has served at least 10 years in the military, and the parties were married for 10 years during the member’s military service.
There are specific procedures to follow in order to receive pension pay directly from the DFAS. Click here for more information.
The USFSPA also limits the total amount DFAS can pay pursuant to court orders. For example, if DFAS receives one court order (yours), DFAS can’t pay you more than 50% of the member’s disposable retired pay. If DFAS receives more than one court order (e.g., yours and a second order for the support of a child from another relationship), DFAS can’t distribute more than 65% of the member’s disposable retired pay on the combined orders. When the DFAS receives multiple orders, it pays them on a first-come, first-served basis.
If you aren’t eligible for direct pay because, for example, you weren’t married to the service member for at least 10 years during the member’s service, or because you’re entitled to more than 50% of the member’s disposable retired pay, you’ll have to collect the debt from an alternative source like the service member’s assets or income (e.g., if the service member has a savings account or has taken on a civilian job.)
If you don’t qualify for direct pay, consider asking for cash or assets in exchange for your share of the military pension. Make sure this agreement becomes part of any settlement and/or court order regarding the distribution of property in your divorce. In this situation, you’ll likely need an attorney’s assistance.
Determine disposable retired pay
If you’re divorcing a service member, you’ll probably want to know how much retired pay you’ll receive. You’ll need to figure out the total “disposable retired pay.” This is the amount remaining after the following specific items are deducted from the pension:
- amounts for debts owed to the United States, such as advanced pay
- amounts forfeited by/fines assessed against the service member such as those resulting from a court martial in which the member is disciplined for misconduct
- amounts waived by the service member to receive an enhanced civil service retirement benefit (i.e., if the member subsequently becomes a civilian employee of the federal government)
- amounts waived by the service member in exchange for the receipt of disability pay, and
- amounts deducted to fund the cost of a survivor benefit plan.
Take careful note of the service member’s ability to exchange retirement for disability pay. Before service members can receive tax-free disability pay, they must agree to give-up a similar amount (sometimes dollar-for-dollar) of retirement pay. Disability pay cannot be divided as part of a divorce. So, when a service member gives up retirement pay in exchange for disability pay, the amount of retirement pay both spouses will receive is reduced.
If the service member gives up retirement pay for disability pay after the divorce, the ex-spouse may be in for a big surprise when he or she finds out how much the retirement pay has been reduced. If this has happened in your case, you should contact an attorney with experience in military divorces to learn about potential remedies.
Complex rules apply to survivor benefit plans. You should consult a lawyer with experience in military divorces for more information about this as well.
For more information on military retirement benefits including retirement, disability and survivor benefit plans take a look at the DFAS home page here.