Dividing Military Pensions at Divorce

Find out the best way do divide a military pension during divorce.

By , J.D. · UC Berkeley School of Law
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Military pension benefits are part of the property that needs to be divided when you get divorced. Even though the military is a federal employer, the law of the state where you get divorced controls the pension division along with all the other property involved in your divorce. If a service member is already retired when a divorce begins, then calculating and dividing the military pension is relatively easy.

On the other hand, if retirement is still a ways off and you plan to do anything other than divide the pension equally, the process is more complicated. The marital share of the pension will have to be calculated by an actuary or other expert. If you use an actuary, make sure the actuary uses the military's mortality tables and other presumptions when making the calculations. (Your attorney or actuary can buy software designed to help with this.)

Take a Lump Sum or "Wait and See"?

When dividing a military pension, the civilian spouse has the option of waiting to receive a share of the benefits when the service member retires, or accepting a lump sum buyout either for cash or in trade for other marital assets.

Some lawyers think it's usually better for a civilian spouse to take a lump sum at divorce, rather than staying enmeshed in an unpredictable system. In fact, the unpredictability of factors like the service member's survival until retirement, eligibility for retirement, and rank and pay grade at the time of retirement, lead some courts to refuse to make a decision at the time of the divorce. Instead, they enter a so-called "wait and see" order and retain the right to make a decision about the benefits at the time the service member is eligible for retirement or actually retires, whichever comes first. This means ex-spouses can look forward to additional legal fees and engagement with each other at some unknown future date -- not a prospect most divorcing spouses relish.

Another situation in which you might want to take a lump sum instead of waiting for your military spouse to retire is where you don't qualify under the 10/10 rule -- that is, married for at least ten years with the service member having at least ten overlapping years of military service -- to have the military pay your share of the retirement directly to you. If you wait, you'll be relying on your former spouse to pay you your share, and if many years have passed between your divorce and your spouse's retirement, it may be difficult to enforce the order if your spouse fails to live up to its terms.

When Can You Get Your Retirement Share?

If you take a lump sum buyout of your share in your military spouse's retirement, you'll receive that when you settle your divorce. If you don't, you'll be waiting to get your share later -- but what does later mean? Your spouse may continue working for many years after becoming eligible for retirement benefits, while you may want to start receiving your share of those benefits as early as possible. In many states, you'll be able to include a provision in your divorce judgment that says you're entitled to receive your share as soon as your former spouse becomes eligible for retirement. This should be a date you can figure out and include in your judgment.

What Gets Divided?

Federal law provides that state courts may divide only "disposable retired pay" in a divorce. Disposable retired pay means the service member's gross retirement pay, minus any amounts that the government takes back through deductions -- for example, prior overpayments, court-martial fines or forfeitures, or premiums for the Survivor Benefit Plan. It's crucial that any order dividing retirement benefits use the language "disposable retired pay" so that it's clear what's being divided.

Also excluded from disposable retired pay are disability pay benefits. This means that a service member who receives disability benefits as a result of a disability sustained during the marriage may withhold the disability benefit amount from the amount of disposable retired pay that can be divided in the divorce. And a service member whose disability begins after the divorce can elect to take a lump sum disability payout that reduces or eliminates pension payments.

In general, there's not much a spouse can do about this. But recently, a Maryland appellate court held that the ex-wife of a service member who was discharged because of permanent disability was entitled to receive her share of the lump sum that her husband elected to receive instead of his pension. The court said that the payment didn't violate the rule that disability benefits aren't included in pension payments, because the court ordered the husband to pay the wife out of his assets generally, not specifically out of the disability award.

Bankruptcy and Retirement

An award of a share of military retirement is considered a nondischargeable debt, just like support obligations. This means that a military spouse who files for bankruptcy still owes the other spouse a share of the pension.

Career Status Bonus

Some service members opt for the retirement plan called REDUX, which gives the service member the option of taking a midcareer bonus, called a Career Status Bonus (CSB) of $30,000 when the service member reaches 14 � years of service. In exchange, the service member takes a reduction in pension benefits.

The Defense Finance and Accounting Service (DFAS) website unequivocally states that as a bonus, the CSB is not divisible in a divorce action, but such a statement isn't binding on state courts. In fact, many courts will require that a service member compensate a former spouse for any reduction the service member causes in the retirement benefits to which the spouse is entitled.

However, it's possible for a service member to opt for the CSB without a spouse's consent and even without the spouse's knowledge -- especially if the service member's eligibility for the CSB occurs some time after the divorce is final. If you think your spouse has received a CSB, make sure you find out. And make sure that your marital settlement agreement or judgment states that your spouse must inform you -- and compensate you -- if a CSB comes into play.

Adapted from Nolo's Essential Guide to Divorce, by Emily Doskow.

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