New Rule Designed to Be More Fair to Servicemembers
Dividing pension benefits in any divorce can provoke tension and bitterness. It is a painful subject with servicemembers and spouses at odds over who gets what. Of course, some couples can come to an amicable agreement on dividing retirement benefits, but more often the division is a hotly contested issue.
Many people mistakenly believe that the spouse must be married to the servicemember or retired veteran for 10 years to be awarded pension benefits. That is not true. A state court can award a portion of the military pension to the spouse even if the marriage lasted less than a year. All 50 states treat military pensions as marital or community property. In order for a state divorce court to divide a military pension, jurisdictional requirements must first be met. The court must have personal jurisdiction over the servicemember or veteran based on that state being the servicemember’s state of residence (not where the service member is stationed). The servicemember or veteran can also grant the court jurisdiction by his or her agreement.
The Uniform Services Former Spouses Protection Act is the overarching federal statute that directs the states to treat military pensions as property rather than income and governs the terms and conditions for dividing retirement pay in divorce. Until 2017, the state courts were permitted under the Act to split the pension 50-50, based on its value at the retirement of the servicemember. The method used often created an undue burden on servicemembers and veterans. For example: let’s suppose you are a servicemember with an O-3 rank with 10 years of service. You married a few weeks after entering the service. Now, you and your spouse are divorcing. Under the old rule, the divorce court could award your spouse 50% of your pension, and base the dollar amount your spouse will receive, not on your current rank, but on the rank you will be at retirement. Let’s assume you remain in the military and retire after 20 years with a rank of O-5. The spouse you divorced 10 years ago would now collect 50% of the retirement benefits you earned as an O-5 with 20 years of service. That award was irrevocable. Even if you remarry and stay with spouse number two for the next 30 years, the first spouse still got half of your full military pension.
In 2017, the rules for calculation changed. Under the 2017 Rule, the pension division in divorce is based on the servicemember’s rank and time in service at the date of the divorce, plus any cost of living adjustment. Using the previous example, the new rule would allow the spouse to be awarded 50% of the pension for an O-3 with 10 years of service (with COLA adjustment). It cannot be based on the total value of your retirement as an O-5 at 20 years. The new rule is not retroactive. It applies only to those divorce decrees becoming final after the Act was enacted.
Payment Rules and Other Spousal Benefits
The Defense Finance and Accounting Service is the agency responsible for paying military retirement benefits, and it has strict rules for making direct payment of retirement benefits to former spouses. Unless the divorced couple were married during at least 10 years of the member’s service time, the DFAS will not directly pay retirement benefits to the spouse. For example: John and Judy were married for 12 years, but John was in the military for only 8 years of the time they were married. At their divorce, Judy was awarded a percentage of John’s retirement. The DFAS will not pay Judy directly when John collects his retirement benefits. Judy will need to find an avenue to collect her share through state court. On the other hand, Sandy and Paul were also married for 12 years at the time of their divorce. Sandy was in the military for 11 years of their marriage. Upon Sandy’s retirement, the DFAS will directly pay Paul his awarded share of Sandy’s retirement. The length of time married is based on state law and calculated from the date of the marriage to the date the court enters an order dividing marital property.
In addition to a share of the servicemember’s pension, the former spouse may be entitled to receive certain military benefits so long as the spouse meets required criteria. These benefits are statutory and are not subject to negotiation in the divorce. If the former spouse was married to the servicemember for at least 20 years of his or her military service prior to the divorce, the spouse is entitled to lifetime military benefits including commissary, medical benefits, and military exchanges. If there is less than 20 but at least 15 years of overlap between the marriage and the military service of the member, the former spouse is entitled to one year of medical benefits only. Medical benefits are available only if the former spouse is not covered by an employer health plan, and those benefits terminate upon remarriage.