One’s military retired pay can be valued, with the spouse’s 1/2 share of the marital portion offset, or it can be divided by a court order where the spouse shares in the monthly retired pay. The retired pay is paid for life but often valued incorrectly by some as the retirement ages are different and the calculation of the monthly retired pay is different. Both ReservistNational Guard and Full-Time Active Members are required to accrue 20 years of service, known as cliff vesting. Most states view pensions as marital assets regardless of vesting but there are other considerations to be made. This is where a court order division might come in versus a value and offset approach.
A court order instructs the retirement plan to pay the non-participant spouse their payments directly. The Military Retirement Pay, similar to the federal government and the railroad, does not accept or recognize Qualified Domestic Relations Orders (QDROs) to divide retirement benefits and in the case of the military, retired pay.
Military Retired Pay Orders, in conjunction with the various domestic relations laws of each state, have significant inconsistencies as compared to a QDRO, which is typically used in dividing private sector retirement plans. Unfortunately, these QDRO-like orders offer nothing short of a pile of red tape.
Voit Econometrics Group, Inc. has been preparing Military Orders for 30 years and are nationally recognized for preparing such Orders. The Orders we prepare for attorneys are drafted in accordance with the domestic relations laws of the state where the divorce is occurring, the parties’ settlement agreement or judgment, and in accordance with the National Defense Authorization Act.
The military bases the retirement benefit on the member’s years of service, rank and pay grade when applicable, and is multiplied by 2.5%.
Full-time active military personnel can receive retirement benefits after 20 years of service, at any age. Meanwhile, Reservists and the National Guard must wait until they are 60 years old to start receiving benefits (monthly benefits), and must also have 20 years of service to be fully vested.
The military has a 20-year cliff vesting schedule. In other words, should the member leave the military before 20 years of service, they won’t receive any benefits. There are exceptions to this rule, such as if the military closes a base. Another exception would be due to downsizing, the military may offer an early out, for example, with only 15 years of service.
For those states that determine the marital portion as of a specific date, e.g. date of filing for divorce, date of separation, or date of divorce, a calculation of the retired pay must be performed to determine the retired pay accrued as those dates. This requires experience in the calculation and requires a strong math background. If anyone other than Voit Econometrics Group, Inc. is to value or divide military retired pay, it is incumbent to question the expertise of the individual that is assigned to value the retired pay or di ide it by a court order.
The division of military benefits is governed under the Uniformed Services Former Spouses’ Protection Act (USFSPA). While the Act is a method of enforcement of federal law, the question of divisibility is a state law issue.
The Act provides several benefits to former spouses, including direct payment of retirement benefits to a former spouse of a retiree, only if:
The amount of the award does not exceed 50% of the Member's disposable retired pay as marital property (65% fo child support and/or alimony).
The length of marriage and years of creditable service over-lap for at least a 10-year period.
The court has jurisdiction over the Participant/Member, as the court cannot treat military retired pay as property without it.
The 10-10 rule does not negate a spouse’s entitlement to a share of the retired pay as marital property, only for direct payments to a spouse, and again when divided as a marital asset, the years of marriage must overlap with 10 wars of service. The 10/10 rule does not apply to support obligations.
There are many important points to consider when one or both spouses in a divorce have military retirement benefits. First, for a non-member spouse to be eligible for survivor benefits, under the Survivor Benefit Plan (SBP), the Defense Finance and Accounting Service (DFAS) has to receive the Military Order (MO) within one year after the divorce and/or an application for survivor benefits (SBP form).
There can only be one beneficiary/surviving spouse to the military retired pay, and the cost of a survivor benefit cannot be deducted from the former spouse’s share. Adjustments to the amount awarded may be needed to account for the cost of the survivor benefit.
In other words, if an attorney fails to submit the MO within a year after the divorce, that non-member spouse will lose their eligibility for the Surviving Spouse Benefits. Also, the DFAS will not accept the MO if the court stamp, or seal, is more than 90 days old. The court stamp refers to the certified copy stamp of both the final judgment for divorce and the Order dividing military retired pay. It does not mean that the spouse has 90 days to qualify for survivor benefits or retired pay. If the MO isn't completed, or received, by the DFAS within the 90 days of the divorce, a copy of the divorce decree with a more recent stamp will be needed.
The military considers Variable Separation pay to be severance, and not retirement pay. This is why, similar to disability benefits, it would not be divisible unless the court in your jurisdiction determines it is marital property.
The Uniform Services Former Spouses’ Protection Act (USFSPA) does not apply to Variable Separation Pay, but only to retired pay.
The same applies to Special Separation Bonuses (SSB) though both VSI and SSB are being phased out and do not appear often in divorces.
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