When deciding whether or not to get divorced in a military relationship, it is crucial for each spouse to understand the complexities associated with the retirement system in the military. Knowing which accounts each party is entitled to, as well as the proper way to value the funds and draft the decree are major undertakings that can significantly affect your case.
First, clients should understand the tricky jurisdictional requirements of courts when it comes to dividing up military retirement. Before filing for divorce, one of the parties must have been a resident in Alabama for at least six months – not merely stationed there. If you want to get divorced in Alabama, you will need to change your residency in order to qualify. That means changing your driver’s license, vehicle registration, and the like to prove actual residency, rather than merely being stationed in the state.
Types Of Retirement
There are different plans that might be at issue in a divorce between a military couple.
The Thrift Savings Plan is a savings plan for federal employees, including military personnel. It is similar to a 401(k) in that it is a defined contribution plan, and the income received from a TSP account depends entirely on how much money is put into the account combined with the earnings on investments. The TSP is an optional program that you must sign up for – it is not an automatic retirement plan. Unlike many private employment programs, the military does not match any pay that you invest, so all the money in the TSP is entirely yours.
The pension is an automatic retirement plan that starts the day you retire from the military, no matter your age. As long as you have served 20 years, you can start receiving your pay, which means some are eligible to get retirement at the age of 37. The pension grows with a cost of living adjustment each year. There are various kinds of systems within the pension, dependent upon when you entered the service. Generally speaking, the pension you are most likely to have is either the High 36retirement system or the Career Status Bonus/REDUX (CSB) system.
The system is slightly different for National Guard and Reserve members who have had 20 years of qualifying service. At 60, they are eligible to receive retired pay, unlike the pension above, where military service members can receive it much earlier. However, some members will be able to withdraw their benefits earlier if they were deployed for war or a national emergency after 2008.
The survivor benefits plan is a voluntary program that provides a monthly income to survivors of military retirees when the retiree dies and retired pay stops. The member’s retired pay is reduced by a certain amount, which essentially buys a monthly annuity for that member’s survivor. So, if a former spouse was a beneficiary under the survivor benefits plan (or SBP) before divorcing, that spouse can be reinstated if both parties agree in a statement and the court orders that the former spouse can be reinstated.
This is available to divorce parties who may not want to share more retirement, but still want to ensure their former spouse is taken care of in their twilight years, something to consider for long-term marriages, or silver divorces. The former spouse’s election to grant these benefits must be made within one year of the divorce decree, and there is a specific procedure that must be followed in order to get the benefits. The Department Defense Finance and Accounting Service must receive a completed DD Form 2656-10 from a former spouse or their attorney, along with a copy of the pertinent court order or agreement referring to the SBP coverage. This must be served on the central office located in Kentucky.
The Uniformed Services Former Spouses’ Protection Act
Military couples get the benefit of some guidelines when it comes to dividing up retirement benefits in the form of the Uniformed Services Former Spouses’ Protection Act (USFSPA). Under this statute, states are permitted to treat military retirement pay (the pension) as property, rather than income. The cap on payouts to a spouse is 50% of the service member’s disposable retired pay.
The agency responsible for paying these benefits is the Defense Finance and Accounting Service, and they have strict rules regarding making direct payment of retirement benefits to former spouses that must be taken into consideration upon a divorce. The DFAS requires the couple to have been married for at least 10 years during the member’s time of service, otherwise, the DFAS will not pay any retirement benefits directly to the spouse.
This means that, unless this qualification is met, the payment is largely unenforceable. For example, if the couple had been married for 15 years, but the military spouse (Dave) was only enlisted for 8 years of that marriage, the DFAS will not pay the other spouse (Dana) directly once Dave has begun collecting his benefits. Dana will need to collect her share using the state courts. So, for example, Dana will need to get a court order which orders Dave to directly pay Dana her share of the retirement accounts.
In order to get retirement under the USFSPA, a certified copy of the final decree must be presented, along with a completed DD Form 2293. All forms mentioned within this article can be acquired here.
The spouse may also be able to receive other military benefits on top of their share of the pension. These benefits are automatic, provided the former spouse fulfills a few criteria. If the former spouse has been married to the military member for at least 20 years while they were in the military, then the spouse is entitled to lifetime military benefits, including commissary and medical benefits.
If they were married less than 20 years, but there are at least 15 years of overlap between the marriage and military service, then the former spouse can receive one year of medical benefits, only if they are not covered by an employer’s health plan, and the benefits will terminate upon remarriage.
Division Of Military Retirement In Alabama
The TSP is divided up similarly to a 401k or other defined contribution plan in a divorce. If contributions to the account occurred during the marriage, then that portion would be eligible for division during divorce. If the service member was in the military and earning money for his or her TSP prior to marriage, then a portion of that fund would be deemed ‘separate,’ and therefore, for purposes of valuation, it is crucial to obtain the balance as of the day before marriage (or as close thereto) to accurately gauge what the separate property of that military member is.
Retirement pay in a pension is easy to calculate once the divorce occurs after the service member retires, because the amount that is vested, or available to be divided, is known. In Alabama, the proper method would be to determine what the community share of that individual’s retirement amount is if the couple was not married for the entirety of their military service.
So, for example, say that someone has served in the military for 6 years before marrying, and then served 14, retired after her 20 years were up, and then divorced. So, to determine what the marital share of that service member’s disposable pay is, you would divide 14 by 20, which equals, which is 70 percent.
That means that the service member’s separate retirement share is 30 percent, and the remainder is up for division during the divorce. The number would be known right away, based on the calculations you have available on the total amount of retirement in the pension fund.
If the divorce occurs before the individual is eligible for retirement, as is often the case, and the spouse wants the share of the retirement to which they’re entitled, it is not possible to know what the number is for the percentage of the year of retirement, because their service is continuing. The formula for the decree is determined by the length of the marriage in terms of months, as compared to the length of military service.
Therefore, it is an unknown, and the decree would say something like “The spouse shall receive x% of the marital share of the service member’s disposable retirement pay expressed in the following fraction: the numerator is 144 months (for 12 years of marriage) divided by the total number of months of the member’s creditable military service.” The Department of Finance then fills in that denominator upon the retirement, at which point, the exact value of the retirement would be known.
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Issues To Be Aware Of When Dividing Up Retirement
In a case called Bratmiller v Bratmiller, the husband appealed a trial court’s decision to award 45% of his military retirement pay to his wife when he would begin receiving it. The couple had been married for 16 years in 2002, and the husband would be eligible to retire in 2006. The husband appealed, arguing that the wife failed to introduce any evidence that established the present value of said benefits.
Alabama law requires the court to apportion the present value of any future or current retirement benefits that the spouse has a vested in. Alabama courts require the party who is seeking the benefit of retirement from the other spouse to propound evidence of the present value of the retirement benefits. In this case, the wife did not submit any evidence, and therefore, the court of appeals reversed and remanded to the trial court to eliminate the award based on the husband’s military retirement.
The TSP is a defined contribution plan, and therefore the holding in Buchanan v. Buchanan is pertinent. 936 So.2d 1084 (Ala.Civ.App.2005), even though the case did not deal with military retirement specifically. In that case, a husband and wife split the husband’s defined contribution plan; however, the decree was silent regarding the market fluctuations that inherently occur within the asset before distribution.
Therefore, the judgment is fundamentally ambiguous, and each spouse assumed a proportionate share of any gains or losses in the asset from between the time of award and its distribution, even if the spouse is awarded a percentage of the value of the asset on a specific date. That is why, if possible, it’s worth considering whether awarding a flat dollar amount is more beneficial to your client. However, doing this is not without risk either.
In Romer v. Romer, the parties agreed that the wife would be receiving $600,000 from her husband’s retirement, with the husband to keep the rest. The parties failed to set out how any gains and losses in the account would be allocated between the parties, and therefore, it was held that the husband alone would bear the risk of any decrease in value because a sum certain was to be awarded to the wife.
The parties should have allocated the risk by expressing the distribution to the wife in terms of a percentage, or by explicitly stating each party would bear a proportionate share of gains and losses up through the date of distribution.
Therefore, before determining how much retirement you request from the court, you and your attorney must first, make an accurate determination as to the present value of the retirement, and then determine whether this value would be better expressed in a percentage or a fixed sum that accounts for gains and losses on the asset.
Another detractor for a fixed sum is that the beneficiary spouse will not be able to enjoy any cost of living adjustments that would otherwise be awarded under a percentage sum.
A quick note about veterans’ disability benefits: whether or not they can be considered in calculations for your family law case depends on what you are calculating. For example, VA military disability benefits cannot be considered when determining alimony or spousal support during a divorce. (See: Goldman v Goldman ). In general, federal law concerning medical disability preempts a state’s community property laws.
However, per Goldman, Alabama can consider someone’s disability benefits when calculating any child support owed under the child support guidelines. Finally, disability benefits are not a divisible portion of a military service member’s retirement package upon divorce, which should be considered when trying to calculate an accurate present-day value.
A couple’s retirement can often be one of the largest assets to be divided upon divorce. Ensuring that the proper valuation is achieved as well as the proper strategy on drafting the actual award are crucial to ensure a party is taken care of upon retirement. A competent attorney will have the resources and knowledge to ensure the property division is fair and equitable, including military retirement. The team at Charlotte Christian Law has the skills required to ensure your comfort and security well into your twilight years. Get in touch with us today.