Dividing military retirement in divorce just got more complicated

A new military retirement system came online on January 1, 2018.

Federal law allows state courts to divide military retirement benefits between divorcing spouses as part of the divorce process. Sometimes in a military divorce the division is negotiated between the parties and other times the judge ends up making that decision.

Historically, military retirement benefits have been structured in a defined benefit plan operating similarly to a traditional pension. Monthly payments to the retired service member are calculated according to a formula using years of service (or a point system for Reserve and National Guard members), pay history and a multiplier (2.5 percent). Often, divorcing military spouses would split the monthly payments between them.

The new Blended Retirement System or BRS

On January 1, 2018, however, the Department of Defense, sometimes called the DoD, began a new retirement structure for military service members that continues the defined benefit payments at a lower rate, but also adds three more components:

  • Defined contribution plan: The DoD establishes an account that is like a 401(k) plan into which the service member and the government contribute to based on a level chosen by the service member. Participation is voluntary.
  • Continuation pay: Mid-career, the service member may choose to receive a lump sum payment in exchange for at least three more years of service.
  • Lump-sum payment: When a service member become eligible for monthly pension payments, he or she may choose an option that allows payment of a lump sum equivalent to 25 or 50 percent of the total monthly benefits that would be paid until reaching retirement age under the Social Security Act. During that time, monthly payments would be reduced accordingly and when Social Security retirement age is reached, the military pension payments would return to the normal level.

Eligibility

Three groups of service members have different retirement eligibility:

  • Those with more than 12 years of military service remain in the legacy plan.
  • Those beginning their military service on or later than January 1, 2018, are automatically in the BRS.
  • Anyone with less than 12 years of service who began before 2018 has until December 31, 2018, to decide whether to opt into the new BRS.

Family law issues

The features of the BRS create complicated legal issues that will come up in military divorces, so it is especially important that anyone involved in military divorce or who thinks this change could impact their existing divorce order seek advice from an experienced military divorce attorney. There is little guidance for resolution of these issues, so lawyers handling military divorce will monitor how the issues are being resolved over time.

Examples of new legal issues:

  • If someone opts into the BRS and there is a preexisting divorce order dividing retirement, how will the reduction of the monthly pension payments under the new multiplier be resolved?
  • How will the future optional continuation pay or lump-sum payment be handled? Could the service member be required to commit to these decisions in the divorce or might notice to the ex-spouse at the time of a future decision be required? At that time, what would happen? Would these payments be community property or separate property? Will federal law consider these payments divisible in state court divorce like traditional pension payments?
  • And others

The attorneys at the Law Offices of Catherine A. Schwartz in Riverside, California, represent active, reserve and retired military service persons and nonmilitary spouses in divorce and related family law matters.