MILITARY DIVORCE GUIDE

Division of Military Retirement

Introduction to Military Pensions in a Divorce

A servicemember's military pension is often the most valuable asset in a Colorado divorce, legal separation or annulment. Since it is an asset, states can divide military retirements just like any other marital asset, so each spouse should know how Colorado divorce courts handle the division of military pensions, VA Disability, and issues concerning the Survivor Benefit Plan (SBP).

The Myth about Dividing Military Pensions

First, to dispel the myth, all states, including Colorado, have the authority to divide a servicemember's military retirement, regardless of the length of the marriage (overseas courts cannot divide military retirements). In 1982, Congress enacted the Uniformed Services Former Spouses' Protection Act (USFSPA) which permits, but does not require, state courts to divide military retirement upon divorce, legal separation or annulment. 10 U.S. Code §1408.

Nowhere is the Colorado divorce court's authority to divide military retirement limited by the length of marriage. Many people, including some family law attorneys, believe that military retirement is only divisible if the marriage lasted at least 10 years.

What the USFSPA actually states is that the Defense Finance and Accounting Service (DFAS) will pay directly the former spouse's share of the military retirement if there were at least 10 years of marriage overlapping 10 years of creditable military service (the 10/10 rule).

State courts divide military retirement for couples with fewer than 10 years of marriage all the time - it simply means that the servicemember actually has to cut the check to pay the civilian spouse, rather than DFAS making the payments.

Types of Military Retirement

Military retirement comes in three "flavors" depending upon when the servicemember entered active duty. In all cases, a minimum of 20 years creditable service is needed to retire. Note that retirement is calculated using base pay only, and not allowances such as BAH or BAS.

1. High-3. (Most common - applies if entered service from 9/8/1980 onwards). Similar to the Final Pay system, except the 2.5% multiplier is applied against the average basic pay for the highest 36 months of the servicemember's career (generally will be the final three years, unless the servicemember has been reduced in grade administratively or at a court-martial). A COLA is given annually, based upon the Consumer Price Index.

2. Final Pay. (Prior system - applies if entered service before 9/8/1980). Each year of military service is worth 2.5% towards the retirement multiplier up to a maximum of 75%. A servicemember retiring at 20 years receives 50% (20 years x 2.5%) of his/her final basic pay. A COLA is given annually, based upon the Consumer Price Index.

3. REDUX. (Entered service from 8/1/1986 onwards, if the servicemember elected to receive the Career Status Bonus). Each year of the first 20 is worth 2% towards the retirement multiplier, and each year after 20 is worth 3.5%. The multiplier is then applied against the average basic pay for the highest 36 months. Thus, a servicemember retiring at 20 years receives only 40% (20 years x 2%), but it increases to 75% at 30 years (40%, plus 10 years x 3.5%). A COLA is given annually, but it is 1% below the Consumer Price Index (with a recalculation at age 62). This complicated mess is the least favorable of the three types of military retirement.

Military Thrift Savings Plan (TSP)

The FY 2001 National Defense Authorization Act allows servicemembers to contribute up to 7% of their basic pay to a Thrift Saving Plan (TSP), but with no matching funds from the federal government. In a nutshell, it is similar to a private sector 401(k) plan in that taxes are deferred on the contributions and appreciation until disbursement.

Contributions to a TSP do not affect the right to receive "standard" military retirement. And the divorce judge must sign a Qualified Domestic Relations Order to divide the TSP, which is separate and distinct from the division of military retirement in Colorado.

Disposable Retired Pay

The disposable retired pay a state divorce court can divide is the total retired pay minus:

1. Amounts owed to the government for previous overpayments,

2. Forfeitures adjudged by a court-martial,

3. Pay waived to receive VA disability payments, and

4. SBP premiums.

Bonuses or Benefits in Lieu of Retirement

The most common benefit in lieu of retirement when a servicemember receives VA disability, and must waive some of the military retirement to receive those payments. See VA Disability for more information.

The military has a variety of methods to separate servicemembers from active duty before retirement which may result in separation pay or other benefits in lieu of retirement. Should this occur, the Colorado divorce court may award the former spouse a portion of the benefit or bonus received in lieu of retirement.

The FY2000 National Defense Authorization Act introduced the Career Status Bonus. Formerly, servicemembers who entered active duty after 8/1/1986 were forced into the relatively unfavorable REDUX system. Now, those same servicemembers will fall under High-3, but can elect to receive a $30,000 lump sum Career Status Bonus at 15 years, and thereby opt for the REDUX retirement system. This election obviously has consequences for the civilian former spouse, as it reduces the value of his/her portion of the military retirement.

Domestic Violence

Pursuant to 10 U.S. Code §1408(h), a spouse may receive a portion of the servicemember's retired pay if the servicemember was (1) eligible for retirement, and (2) discharged at a court-martial or administratively for spousal abuse, including domestic violence or sexual assault. See Former Spouse Military Benefits for more information.

Division of Military Retirement Formula in Colorado

In 1988, the Colorado Supreme Court ruled that military retirements, like other pension plans, are "property" and therefore subject to division upon divorce. Marriage of Gallo, 752 P.2d 47 (Colo. 1988).

Seven years later, the Court refined the formula for the division of military retirement. Marriage of Hunt, 909 P.2d 525 (Colo. 1995). The former spouse is entitled to one-half of the marital portion of the servicemember's disposable disposable retired pay, calculated as one-half of:

Months of marriage overlapping service
-----------------------------------------------------
Total months of military service at retirement

Example: If a couple was married for exactly 12 years (144 months) overlapping creditable military service and the servicemember retired at 20 years (240 months), the marital portion would be 144 / 240, or 60% of the servicemember's disposable retired pay. The former spouse would therefore receive half of that, or 30%, and the servicemember receives the remaining 70% (consisting of the servicemember's 40% separate property share, plus his/her 30% marital share).

Reserve component retired pay is treated in a similar fashion. See Reserve Family Law Issues for more information.

Servicemember Still On Active Duty

If the servicemember is still on active duty at the time of dissolution, under Hunt a Colorado divorce court can:

1. Try to figure out the retirement's net present value, and offset it against other marital assets,

2. Determine the Hunt formula in advance, but defer distribution until retirement, when the denominator can be established (the common method), or

3. Reserve jurisdiction altogether (essentially, wait and see what happens until retirement).

Note that the Hunt formula explicitly authorizes the former spouse to share the benefit of future promotions and COLAs. This was done not only for mathematical simplicity, but to compensate the former spouse for having no control over the date of retirement, or even the size of the marital portion (which decreases the longer the servicemember remains on active duty after dissolution).

Awarding Under 50% of Marital Share

In the companion case to Hunt, a creative servicemember argued that his wife should receive less than half of the marital share of the military retirement since she only provided "lukewarm" support to his career. The Colorado Supreme Court rejected that position on the division of military retirement, and awarded the spouse a full 50% of the marital share, on the grounds that the division of military retirement in Colorado must be made without regard to fault.

So how can a servicemember prevent the court from allocating the former spouse one-half of the marital portion in Colorado? Only through negotiation. Period. Unless the former spouse voluntarily agrees to waive a claim to military retirement, a court in Colorado is required to divide it and award the former spouse 50% of the marital portion.

Application for Share of Military Retirement

If the former spouse satisfies the 10/10 rule, the spouse can apply for direct payment from DFAS of his/her portion from the division of military retirement (if Army, Navy, Air Force or Marines), at:

ATTN: DFAS-CL-GAG
Assistant General Counsel for Garnishment Operations
Defense Finance and Accounting Service - Cleveland Center
PO Box 998002
Cleveland, Ohio 44199-8002

Because military retirement is a federal entitlement, not a qualified pension plan, no Qualified Domestic Relations Order is required - simply send DFAS a DD Form 2293, Application for Former Spouse Payments from Retired Pay, and a certified copy of the court order dividing the retirement. The order should contain the following:

1. An indication that the servicemember's rights under the Servicemembers Civil Relief Act (formerly the SSCRA) were respected,

2. An indication of the Colorado divorce court's jurisdiction over the servicemember (either residence, domicile, or consent to jurisdiction, including not contesting jurisdiction),

3. The marriage date, and an indication that the 10/10 rule has been met, and

4. The percentage share (or dollar amount) awarded to the former spouse.

Note that it may take up to 90 days to receive the first payment. DFAS sends the servicemember notice of the application, and the servicemember then has 30 days to contest payment.

Maximum Payments from DFAS

The maximum portion of a retirement that DFAS will pay a former spouse as part of a property division is 50% of the servicemember's disposable retired pay. This does not prevent a Colorado divorce court from dividing the military retirement and awarding a former spouse more than half. Should a servicemember be in that unlucky situation, he/she will have to make up the difference between what DFAS pays directly and the divorce court's division of military retirement.

In cases where military pay is both awarded to a former spouse as a property division, and subject to garnishment for child support or maintenance, the maximum DFAS will pay the former spouse directly is 65%. But again, should the Colorado divorce court order's encompass this situation, the servicemember would have to make up the difference between the amount DFAS pays out and the amount ordered.

More Information

Survivor Benefit Plan (SBP), in the Military Divorce Guide.

VA Disability, in the Military Divorce Guide.

Military pay and benefits web site, run by the Office of the Secretary of Defense. Includes retirement calculators

DFAS Military Retirement Home Page. Get the information directly from the source.

Thrift Savings Plan web site. Obtain statements, view publications, etc.

Reserve Officers Association article on the nationwide division of military retirement.

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