A Primer on Dividing a Military Pension
Benefit payments to retiring military persons can be substantial
additions to a marital estate. However, acquiring them for the divorcing
nonmilitary spouse can be an intricate, illogical process loaded with
traps or the unwary practitioner.
By David B. Halling & Wendy Drefahl
he Uniformed Services Former Spouse's
Protection Act (FSPA) and the Survivor Benefit Plan (SBP) protect a
divorcing spouse who wishes to obtain a portion of a military member's
retired pay and survivor benefits.1 The FSPA
authorizes state courts to divide military retired pay and provides the
rules for doing that. The SBP protects the former spouse's award against
the event of the service member's death. Since retired pay terminates on
the service member's death,2 the SBP is the
only means of continuing payments from the military to a former
spouse.
A military reservist is entitled to retired
pay (a pension) when he or she is at least 60 years old and has
performed 20 years of military service.3 In
the interest of dividing marital property, the military will make
payments directly to a former spouse provided that at least 10 years of
the parties' marriage overlap with the member's military service.4 (These limitations do not apply to division of
retired pay for purposes of alimony [maintenance] or child
support.5 ) If the parties were married for
less than 10 years during which the member was in service, a portion of
the member's retired pay is still considered divisible marital property.
However, given the "10-year-rule" described above, the court must
require the member to pay the former spouse directly, as the military
will not.
The usual vehicle for dividing retirement pay, the Qualified Domestic
Relations Order (QDRO), is not available to divide military retired pay.
The QDRO is a creature of the Employee's Retirement Income Security Act
(ERISA), from which military retired pay is exempt.6
The court must have jurisdiction over the military spouse in order to
divide the retired pay; presence in the state on military assignment
does not equal jurisdiction. Unless residence other than that due to
military assignment, domicile, or consent are proper, the state court
has no jurisdiction to divide the retired pay.7
In cases where the military person was married before, it is
necessary to ascertain what the military person's "disposable retired
pay" will be. In the event of an earlier marriage, the first spouse may
have been awarded a portion of the member's retired pay. If that was
effectuated, that award reduces the money available to the second spouse
because deductions for retired pay (no matter how many spouses) may not
exceed 50 percent of the service member's disposable retired pay.8 Conversely, there is no way a member can protect
against loss of up to 50 percent of retired pay because the same code
section makes that amount available to one or more former spouses.
Wisconsin law is clear that military retired pay must be considered
in division of marital property upon divorce.9
Retired Pay
A spouse is entitled to receive up to 50 percent of the member's
"disposable retired pay."10 Disposable
retired pay is gross pay less certain deductions.11 These deductions can include payments to an
earlier spouse. It is important to know what the deductions in fact are,
particularly if this is a second or third marriage. If the divorce
judgment just divides the "disposable retired pay" and the existence of
payments to a former spouse or other deductions hasn't been ascertained,
the divorcing spouse may get substantially less than what was expected.
Regardless of the 50 percent maximum that the military is allowed to pay
any combination of former spouses, a second or third spouse
theoretically still is entitled to what the family court awards. Any
amounts in excess of what the military will pay to that spouse must be
paid directly to the spouse by the member. Under this circumstance, the
parties may not be able to sever ties. Often an agreement to buy out or
offset the former spouse's interest is reached.
There is a further problem with disposable retired pay. United States
Code section 1408(2)(C) requires that (state) court orders must provide
for payment expressed in dollars or as a percentage of the total
disposable retired pay. If the state court order to divide retired pay
provides the former spouse with an award expressed as an exact dollar
amount per month, that spouse will not receive any cost of living
increases, which historically are applied each year to retirees'
benefits. A percentage award will include any cost of living increases
that are applied to the member's retired pay.
Until a member attains 20 years of service, he or she does not have
an "accrued" retirement benefit. Logically, if the parties are divorced
prior to the member's attaining 20 years of service, an order cannot
award a former spouse a percentage of the member's retired pay that had
"accrued as of the date of divorce." A former spouse can only be awarded
a portion of the member's total disposable retired pay.
If the military member is not retired, it is very difficult to
predict what his or her disposable retired pay will be at retirement. An
active duty member's retired pay is calculated on years and months of
creditable service and base pay at retirement. A reservist's retired pay
is calculated on the number of points earned during the career, a
certain multiplier factor, and the base pay tables in effect when the
reservist turns 60.
Practice pointer. Consider determining the marital
share of total retired pay by using a fraction. The numerator
appropriately would be the years of service (or points for reservists)
at the time of the divorce (or during the marriage). This numerator
amount must be expressed as an exact number, and supplied in the order,
as the military will not calculate it. The denominator can be expressed
as the total number of years of service (or points for reservists) that
the member completes or attains at retirement. Although at the time of
the divorce this denominator, which is based on total service (or
points), may not be known, the military will supply it upon the member's
retirement. This fraction would represent the "marital share" of the
member's total retired pay. For example, if the former spouse is
entitled to half of said marital share, the fraction should be further
multiplied by 50 percent. In effect this method gives the former spouse
a floating percentage of future retired pay that is proportionate to the
marital period. Since this method ultimately results in a percentage,
any cost of living increases that the member enjoys also can apply to
the former spouse's benefit, if specified in the order. This fractional
method may be the only method available to protect the nonmilitary
spouse from the effects of inflation and obtain the highest benefit
which otherwise would be lost if the fixed dollar amount option is
elected, not to mention the inability to share in cost of living
increases. Remember, the court may not order a member to retire at a
certain time just to bring certainty to the equation.12
Application for direct payment of retired pay to former spouses may
be made on form DD-2293 and mailed to the military's Defense Finance and
Accounting Service.13 Forms can be obtained
from the same location, the Internet Web
site, or any military base.
SSB and VSI
The military has formed a "Selective Early Retirement Board" to deal
specifically with "downsizing." For those who have not yet served 20
years in the military, the reduction or downsizing is being accomplished
by early separation bonuses, or lump-sum buyouts of their unmatured
retirement benefits. If a member elects to take advantage of a "special
separation bonus" (SSB) or a "voluntary separation incentive" (VSI),
either in lieu of or in addition to retired pay, the military will not
pay a former spouse his or her proportionate share unless the state
court order so specifies.
Disability
When a member of the military becomes disabled, retired pay is
reduced by the amount of disability pay. The net effect to the member is
that he or she receives the same amount of money bottom line that would
have been received had there been no disability. However, the military
will not divide disability pay and since it operates to reduce retired
pay to the member, the money available for property division purposes
for the nonmember divorcing spouse is reduced by the amount of the
disability pay.
Under federal law, a veteran's disability pay or disability allowance
is not divisible for property division purposes. A veteran's disability
pay is a federally provided replacement for earning capacity lost by
reason of injury sustained while in military service. Therefore, such
disability allowance is to be considered a part of a spouse's earned
income and not an asset of the marital estate to be divided between
divorcing parties.14 Not only are military
disability benefits not divisible for property division purposes, they
also cannot be made a basis for an off-setting or compensatory award to
the spouse - this cannot be done directly or indirectly by state court
order or by state legislation.15
Practice pointer. Since disability pay may be
considered only as earned income and not as an asset to be divided
between divorcing parties, where appropriate that earned income still is
available for consideration of maintenance and/or child support.
Soldiers' and Sailors' Civil Relief Act of 1940
Every order that directs the military to pay a former spouse must
indicate that the rights of the member under the Soldiers' and Sailors'
Civil Relief Act of 194016 have been
observed. Reference to this Act indicates that the member is aware of
the division of retired pay and either consented to the division of
benefits as a result of the divorce proceeding, or was represented by
counsel.
Merging Military Credit into Other Retirement Plans
In some circumstances, such as for federal employees, members may
forfeit their military service credit and apply the service credit
toward other retirement programs. For most members, this is an unlikely
choice due to the number of years of service credits and the loss of
value in the military benefit. However, in the interest of avoiding
potential actions of spite toward a former spouse, it is important to
provide for this contingency. A state court order should specify that if
the member takes any steps to merge the military pension with another
retirement plan of any kind, that retirement plan should be directed to
honor the state court order to the extent of the former spouse's
interest in the military retirement, and to the extent that the military
retirement is used as a basis of payments or benefits under such other
retirement plan.
Survivor Benefit Plan (SBP)
Military retired pay is payable to a former spouse only if and when
it is paid to the member. This means that if the member dies, all
retired pay will cease to be paid to the member and the former spouse.
Simply stated, military retired pay terminates on the death of the
member.17 While it is the FSPA that gives
the nonmilitary spouse the right to a share of the military retired pay,
it is the Survivor Benefit Plan (SBP) that protects the living former
spouse after the member dies. Thus, it is necessary to protect against
the cessation of retired pay benefits to a former spouse by assuring
that the SBP is put in place when dividing the pension.18
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Contact These Military Services
for More Information
Air Force: Dept. of
the Air Force, 12 FTWKA, 1 Washington Circle, Suite 6, Randolph AFB, TX
78150; or the military personnel flight office at any Air Force base
Navy:
Bureau of Naval Personnel, PERS 334C, 2 Navy Annex, Washington, DC
20370-3340
Marine Corps:
Commandant of the Marine Corps (MMSR-G), Code MI-IP-20, Headquarters
U.S. Marine Corps, 2 Navy Annex, Washington, DC 20380-1775
Army: Dept. of
the Army, US Total Army Personnel Command, (TAPC-PDO-IP), 200 Stovall
St., Alexandria, VA 22332-0474, (703) 325-9590
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An active duty member elects SBP coverage upon retiring. The
reservist has two opportunities to elect SBP coverage for a spouse: 1)
when he or she completes 20 years of service; or 2) when he or she
reaches age 60.19 Accordingly, in the case
of a reservist, it is necessary to confirm whether the military member
has named the former spouse as "surviving spouse" under the SBP if his
or her length of service is 20 years or more. (Or if over the 20-year
service level at the time of divorce, the right to convert a portion of
the retired pay if the member is retired.) This is done by writing to
the appropriate branch of service.20 Upon
attaining 20 years of service, a reservist may elect coverage, choose to
defer the election, or waive coverage completely. The latter is an
irrevocable decision that a court order cannot overturn.
If a member previously has named his or her spouse to SBP coverage,
divorce will negate that election. The state court marital settlement
agreement must include the obligation of the military member to change
his or her election from "spouse" to "former spouse." Otherwise, if the
member has not yet made an election, a provision should be included to
require the member to elect such coverage as soon as the opportunity
arises. SBP coverage to the former spouse can be secured as long as the
divorce judgment and the state court order provide for it, and the
military member voluntarily agrees in writing to provide it, or the
former spouse requests to be deemed the beneficiary to the SBP.21 If the member has agreed to the coverage and it
is incorporated into the divorce judgment and the member then
subsequently fails or refuses to make the election to trigger the
coverage, on written request from the former spouse, the military will
consider that the member is "deemed" to have made the election.22
It is extremely important to have any SBP election or election change
made by the member for the former spouse within one year of the date of
divorce. The military has warned that it will not accept any such SBP
election or election change that is made after this one-year period,
regardless of the court order.
Finally, there can be only one beneficiary under the SBP. Therefore,
if a member's first former spouse is awarded the SBP benefit, the
member's second former spouse is not entitled to anything after the
member's death, even if the second former spouse was married to the
member more years than the first former spouse. Factors such as the
length of the marriage, how close the member is to retirement, the
condition of the parties' health, and whether the member has intentions
of remarriage should be considered when negotiating the SBP.
Practice pointer. Life insurance often can be
considered in lieu of SBP protection. This substitute protection can
work well for a member who intends to remarry and desires SBP coverage
for his or her subsequent spouse. For example, if a former spouse was
married to a member for only the first 10 years of his or her military
service, and the member is a long way from being eligible to retire,
that former spouse may wish to negotiate the type of survivor protection
needed. The former spouse's award could be equally protected by life
insurance while keeping the SBP designation open for a potential
subsequent spouse of the member (who may be married to the member for an
even longer time).
If through settlement negotiation, the
military member elects to provide SBP protection for future retired pay,
that agreement must be in writing and become a part of the divorce
judgment or decree. This becomes an enforceable state court
order.24 The judgment or state court order
must be communicated to the military within one year of the date of the
order, and the order or judgment must be certified by the issuing court
within 90 days of its receipt by the military's Defense Finance and Account Service
(DFAS).
Application for SBP election or election change may be made on form
DD-2656-1 and must be received within one year of the date of the
divorce judgment24 by the military's Defense Finance and Account Service
An often overlooked practice pitfall is worth noting. If the parties
are divorcing after the service member has retired and the member
already has elected SBP coverage for the spouse, you must be sure that
the member is ordered to change the SBP election from "spouse" to
"former spouse" coverage. A failure to do that will result in the loss
of coverage for the spouse because he or she has just become a former
spouse.
90-day Delay
If a member is receiving retired pay benefits when the state court
order is served on the Defense Finance
and Account Service, there will be a minimum 90-day delay before
benefits commence to the former spouse. If the member is not yet
receiving retired pay benefits when the state court order is served on
the Defense Finance and Accounting Service, there still will be a
minimum 90-day delay before benefits commence to the former spouse.
Practice pointer. During the delay, the member will
receive the entire amount of his or her retired pay, including the
amount intended for the former spouse. The former spouse will receive
nothing during the delay. It seems both equitable and appropriate to
require the member to reimburse the former spouse for any amounts
received by the member that were intended for the former spouse.
Submitting the State Court Order to the Military
Along with the court certified copy of the state court order, the Defense Finance and Account Service
Center will require a copy of the marriage certificate necessary to
prove 10 years of marriage, a copy of the divorce judgment sealed with
the official court certified seal and dated within 90-days immediately
preceding its service to the Cleveland Center, and a completed and
signed DD Form 2293 (application for former spouse payments from retired
pay). DFAS also will require submission of DD Form 2656-1 (Survivor
Benefit Plan election statement) signed by both parties and witnesses.
The completed DD Form 2656-1 should be mailed to the address specified
on the form. In the event the former spouse needs to request to be
deemed the former surviving spouse for SBP coverage, a written request
should be sent in duplicate with one copy accompanying the state court
order and the other being mailed to the address to which DD Form 2656-1
otherwise would be mailed. If additional documentation is required or
requested, DFAS will notify the former spouse.
Remember the Fringes
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| David B. Halling, U.W. 1962, is president of Halling
& Cayo S.C., Milwaukee. Wendy Drefahl is president of WFA
Econometrics Corp., Milwaukee. The authors thank Edwin C. Schillin of
Aurora, Colo., for his contributions to and review of an early draft of
this article. |
A commonly overlooked, but substantial, benefit to a former spouse is
the access to medical, commissary, and base exchange privileges. These
are available in varying degrees, depending upon reserve or active
service, length of service, length of marriage, and length of overlap
between the marriage and service.25 With a
20-year overlap, the former spouse is entitled to full benefits.
Remarriage will result in the irrevocable loss of medical benefits, but
commissary and base exchange privileges may be reinstated if the
remarriage ends. With only a 15-year overlap the privileges are more
limited. Details on these privileges, compiled by the Department of the
Navy, are set forth in the accompanying
sidebar. Further information may be obtained by writing the
individual military services.
Conclusion
The authors have endeavored to give a brief overview of the statutory
concepts, regulations, and research sources applicable to the division
of military retired pay upon divorce. A final caution is needed:
Practitioners should be wary of forms, because there is no substitute
for a careful lawyer's judgment, independently exercised, on a
case-by-case basis.26
Endnotes
1 Though also applicable to present
spouses and children, it also is available to former spouses. 10 U.S.C.
1408 and 1447.
2 10 U.S.C.
1408(d)(4).
3 10 U.S.C.
1331(a). Active duty personnel needn't wait to age 60.
4 10 U.S.C.
1408(d)(1) and (2), and 32
C.F.R. 63.6(a)(2).
5 10 U.S.C.
1408(e)(6), and 32
C.F.R. 63.6(a)(2).
6 29 U.S.C.
1003(b)(1) and 1051.
7 10 U.S.C.
1408(c)(4). Be careful of the difference between residence and
domicile. A residence is where you live now but a domicile also includes
an intention to make it one's fixed and permanent home.
8 10 U.S.C.
1408(e)(1).
9 Cook v. Cook, 208 Wis. 2d 166, 560
N.W.2d 246 (1997).
10 10 U.S.C.
1408(e)(1).
11 10 U.S.C.
1408(a)(4).
12 10 U.S.C.
1408(c)(3).
13 10 U.S.C.
1448(3)(a)(i). Defense Finance and Accounting Service,
DFAS-Cleveland/Code L, P.O. Box 998002, Cleveland, OH 44199-8002.
14 Leighton v. Leighton,
81 Wis. 2d 620, 261 N.W.2d 457 (1978).
15 Pfeil v. Pfeil, 115
Wis. 2d 502, 341 N.W.2d 699 (1983), 38 U.S.C.A. 3101 sub. A.
16 Soldiers' and Sailors' Civil
Relief Act of 1940, 50 U.S.C. App. 501 et seq.
17 Title 10 U.S.C.
1408(d)(4).
18 Title 10 U.S.C.
1447. Also, the wisdom of acquiring private insurance to accomplish
the same goal is not discussed here, but worthy of consideration. To
evaluate the options, one should ascertain the premium for the SBP
(which will reduce the payment to the former spouse) and compare it with
the premium cost for private insurance (annuity).
19 10 U.S.C.
1448(2)(B). A member on active duty may do so only once, that is,
when he or she retires.
20 32
C.F.R. 63.6(5).
21 10 U.S.C.
1408(c)(1) and (c)(3).
22 Title 10 U.S.C.
1450(f)(3)(A).
23 Title 10 U.S.C.
1448(d).
24 32
C.F.R. 63.6(c) and 10 U.S.C.
1450(f)(3)(B). Also see form DD-2293, available from DFAS-Cleveland
Center, P.O. Box 99191, Cleveland, OH 44199-1126. Forms can be obtained
from the same location, the Internet Web
site, or any military base.
25 10 U.S.C.
1072(2).
26 A reference work has been
published recently by the American Bar Association Section of Family
Law: "Military Retirement Benefits in Divorce," by Marshal S. Willick
(1998).
Wisconsin Lawyer
