The current military retirement system is basically what is known as a "defined retirement system". Today, the cost of the military retirement system exceeds 111 billion dollars annually. The trial court ordered that Ms. Howell would receive 50% of her husband’s military retired pay. This revision was enacted as a response to the suggestion given by Representative Steve Russell back in April 2016. Third, for those service members who achieve 12 years of service on or after January 1, 2018, the Blended Retirement System requires that the active duty service member be paid not less than 2.5 times their monthly base pay (and the Reserve/National Guard service member receive not less than 0.5 times the monthly base pay of an active duty service member of equivalent rank and years of service). As a result of these and other criticisms, many members of Congress considered the old retirement program too costly and antiquated. An overview of the big changes for the military retirement system for active duty and retiring servicemembers that went into effect on January 1, 2019. Congress estimated that those with more than 12 years of service by January 1, 2018 are strongly vested in the old retirement system and should not be disturbed. a 40% disability rating applied to a retired base pay of $2,000.00 would be $800.00). The law (NDAA 17) which is now referred to as the “frozen benefit rule”, is thought to benefit military personnel significantly when going through a divorce. He then began receiving approximately $250.00 in VA disability compensation, and in order to do so, waived $250.00 of his military retired pay. Regardless of "legal residence," if a court determined that California is their home, not just a residence of convenience (i.e., due to military stationing), the court could assume jurisdiction over the member's retirement pay, regardless of consent. Pension sharing rules of the Armed Forces Pension schemes and Reserve Forces Pension schemes. VA disability benefits are calculated under the same disability percentages as military disability retired pay (a VA disability scale). The new military pension division rule is a “rewrite” of the terms for military pension division found in the Uniformed Services Former Spouses' Protection Act, or USFSPA (10 U.S.C. Now, if the service member would receive regular retired pay of a greater amount, the service member will receive the greater amount; however, the amount of disability retired pay will not be subject to income tax. For permanent disabilities incurred during and a result of military service, retirees may waive all or part of their military retired pay in two primary ways—through receipt of a military disability retired pay under Title 10 of the U.S. Code or through receipt of Veterans Disability benefits under Title 38 of the U.S. Code. Social Security benefits, even if earned during the marriage, are not a divisible asset at divorce. Divorce. The law remains the same regardless of the settlements between the husband and the wife as it has no exceptions. If a service member contributes above 3%, the Government will contribute $0.50 towards every dollar the service member contributes above 3%, up to 5%. It is estimated that only 17% of all enlisted service members and only 49% of all officers serve long enough to qualify for retirement. The Uniformed Services Former Spouse Protection Act: Allows state courts to divide disposable military retired pay between the service member and spouse. Veterans Administration (VA) disability benefits are paid by the Department of Veterans Affairs to service members who may be less severely disabled than those eligible for military disability retired pay or whose service related disabilities emerged after retirement. The TSP becomes the service member’s property after two years of service. The 10/10 Rule. Under the plan, there are three distinct categories of service members: Those in the first category (> 12 years of service on December 31, 2017) will remain under the old retirement system, without exception. See the Division of Social Security Benefits in a Divorce article for a discussion of the relevant law. If there is a 10-10 overlap, then DFAS sends out two checks … We are currently in the phase in period. And, when read in conjunction with Mansell v. Mansell, the Parties also cannot agree to an indemnification clause. Allows former spouses to receive a portion of retired pay directly from the government in some circumstances. The rewrite requires that the military retired pay to be divided will be that attributable to the rank and years of service of the military member at the time of the parties' divorce. 30, 2018 Dividing Military Pensions 495 military retirements in all states based on a hypothetical retire-ment on the date of divorce, using the service member’s “High-3” pay and years of service as of that date. All 50 states treat military pension as marital or community property. Is the Former Spouse Entitled to a Portion of the Military Spouse's Pension? Military disability retired pay is paid by the Department of Defense to service members who are disabled and have at least twenty years of creditable service for retirement or who are rated as at least 30% disabled. This applies to all divorces or legal separations after December 23, 2016. Based on this new ruling from the U.S. Supreme Court, courts cannot order a service member to indemnify a former spouse in the event that he or she waives military retired pay for VA disability compensation. RIP Indemnification. The trial court approved and ordered Mr. Howell to pay her directly, and the Arizona Supreme Court upheld. It cannot be based on the total value of his pension at the time that he retires with a higher rank and more time-in-service pay. So, using the same example above, the new rule would limit the share of retirement benefits the non-military spouse can collect to 50 percent of the service member’s pension as a Captain with four years of service. If you’re not happy in your first 30 days, we’ll refund you. The U.S. Supreme Court deemed military retirement pay couldn’t be divided as community property by state divorce courts in 1981 because current federal laws at that time constrained the handling of military retired pay as joint property. Also, as a cliff vesting plan, the service member must serve a full 20 years to receive any retirement. With this new law in place, the military pension division will be done in a uniform manner requiring all the states to abandon their earlier rules applicable to the matter of marital division of the military pension. Thus, if the service member receives a higher rank in the future, it will only be discounted as per the marital fraction (in ninety percent of the states) which takes into account the benefit that resulted from the years of marriage. Of course, such a waiver also can reduce the former spouse’s portion of the retired pay. Mr. Howell retired from the Air Force in 1992, shortly after the divorce. Service members waive a portion of their military retired pay in order to receive VA disability compensation. In Howell v. Howell, the parties were divorced in Arizona in 1991. Understanding how they are split up and the rules that apply in various circumstances are important pieces of information that will allow you to move forward with a higher degree of confidence and knowledge at a time when you most need it. Social Security Benefits. former spouse of a military member or retiree could not be awarded any share of that member’s/retiree’s retirement pay as a part of a divorce property settlement in a community property state2, because then-current federal law did not authorize the treatment of military retired You’re taking the ste... PracticePanther is the best law practice management software out there. For all divorces occurring after December 23, 2016 and where the service member is still serving, the MPDO must include the service member’s “high 36” and years of creditable service (or points for a reserve component) at the time of the divorce. The Uniformed Services Former Spouse Protection Act (USFSPA) permits state courts to apply the family law principles of their particular state when deciding how to divide military pensions in divorce. Prior to May 2017, states were divided in their responses to this situation. The 10/10 Rule And Military Pensions In cases of dividing a military pension in a divorce, the 10/10 rule is a source of much confusion. New federal legislation, a U.S. Supreme Court decision, and the military’s move to a blended retirement system in lieu of the old “20 years or nothing” defined benefit annuity require significant changes in the way that family law attorneys advise clients and draft divorce … changes to the military retirement system, particularly as it pertains to the division of a service member’s military defined benefit annuity in a divorce. An option to receive an immediate partial lump-sum payment against the defined benefit upon retirement. a revision concerning the way in which pension of military personnel is divided in the case of a divorce between the spouses, is thought to benefit military personnel significantly when going through a divorce, the decision to fix the legislation should have been reversed by the Congress as the previous method was deemed to be fairer and just. Win-win. This effectively caps the former spouse’s portion at the current pay grade and years of service the service member has at the time of the divorce. For more information, see the military retirement section of the Military Divorce Guide. A service member who receives $2,000.00 in military retired pay and who is eligible to receive $500.00 VA disability payment shall waive $500.00 of the $2,000.00 retired pay.) This state retains the power to divide the military pension. Therefore, if the service member makes a 5% contribution, the Government will match it (with a 5% maximum contribution). Military Retirement Pension Rules Change The Time Rule that was previously used under the same circumstances will no longer be relevant as the spouse’s share is now determined as being constant or fixed. In this installment of "military divorce myths," we'll look at the belief that "a former spouse's share of military retired pay stops on remarriage." The issue was then brought before the U.S. Supreme Court. Ultimately, in the 2013 NDAA, Congress established the “Military Compensation & Retirement Modernization Commission” to review the current system, consider some of these criticisms, and recommend changes. This is a standard “grandfather” plan established for the sake of equity. The new rules instituted the “frozen benefit rule.” One of the old plan’s major criticisms was that over 80% of all who serve the country—including thousands who actually serve in combat—leave the military without any retirement benefit. Further, the pay centers require that the court order dividing the military retired pay include the service members “high-36” and months (or points) of creditable service at the time of the divorce. Yes. Consequently, critics called the old military retirement system an impediment to attracting competitive recruits; they also pointed out that the mediocre mid-career service members are motivated to remain in service under the old plan. 10 U.S. Code § 1408(d)(2).. Service members that go through a divorce after they have retired do not get the same benefits, and the law is not applicable in their case unless the divorce occurs in the five states that already use the “frozen benefit rule” (Tennessee, Kentucky, Texas, Oklahoma, and Florida). The law that came into effect from December 23rd, 2016, required adjustments to be made to the cases that were yet to be presented before the State. Any amounts received from the VA are not subject to income tax. However, in 1982, Congress changed the law by Still, others may be administratively separated for misconduct or they may be criminally prosecuted by the military and lose all retirement benefits. Click here for the full text of the USFSPA. The 10-10 rule specifies that DFAS will send a check to the former spouse by garnishment of the retiree's pension as property division. These contributions are invested under the direction of the TSP Board in a variety of U.S. Government securities and stock index funds. Similar to the transition from the old Civil Service Retirement System (CSRS) to the Federal Employee Retirement System (FERS) in 1987, there is a phase in period. The new law does not say “courts shall use the hypothetical method of division” rather the law limits the military retired pay subject to property division as “the amount of basic pay payable to the member for the member's pay grade and years of service at the time of the court order.”  Clear as mud, right? Military disability retired pay is calculated as the portion of the service member’s retired base pay equivalent to the service member’s disability rating (e.g. Military retirement funding and other military spending was and continues to be a significant and growing portion of the U.S. annual budget. The new NDAA made major changes to the Uniformed Services Former Spouse Protection Act (USFSPA), which is the federal law enacted in 1982 that allowed states to divide military retired pay as marital property in divorce. Those in the second category (< 12 years of service) have the choice to opt into the new system or remain under the old system. The plan allows for a retiree to receive either 25% or 50% of the annuity in a discounted present value lump-sum payment. Learn how to grow your firm, keep up with industry trends, and find tips to save you time and automate your work. In the year 2017, the National Defense Authorization Act underwent a revision concerning the way in which pension of military personnel is divided in the case of a divorce between the spouses. The U.S. Supreme Court held that, in line with the Court’s decision in Mansell v. Mansell, the Court could not order the service member to indemnify the former spouse for funds that the former spouse loses when the service member waives military retired pay for VA disability compensation. For an active duty service member serving at the time of the divorce, the language for division would read: In order to calculate the service member’s “high-36,” the attorney is going to need to know the service member’s rank, pay entry base date (PEBD - date of entry into military  Others are not promoted and administratively discharged. In short, the former spouse’s share of a military retirement is “frozen” as of the date of dissolution. Vol. In 1981 the United States Supreme Court ruled that state courts could not divide military retired pay as an asset of marriage. Other states have held that the retired service member must indemnify the former spouse for the reduction in the former spouse’s portion of retired pay based on the service member’s waiver. The law, which is not entirely a new introduction to the legal world, is a rewritten form of the Uniformed Services Former Spouses’ Protection Act (USFSPA). If Jill files for divorce in California (where Joe is stationed), the matter is more complicated. 4 The 10-year rule requires that the marriage and military service overlap for at least 10 years in order for the Federal Government In the 2016 NDAA, Congress adopted many of the Commission’s proposals. This particular law is to be employed by all the states across the United States. Finally, few attorneys know that a former spouse may possibly deduct legal fees incurred for work done obtaining a portion of a military pension. After the service member’s first 60 days of service, the Government will automatically begin contributing 1% of the service member’s base pay into this account every month. /content/aba-cms-dotorg/en/groups/family_law/committees/military/military-pension-update-2019, Those serving on (and before) December 31, 2017 with, A mid-service “continuation” bonus, and. While previously, it was thought to be the decision of the State under the USFSPA enacted in 1982, now Congress has come up with a single, “one-size-fits-all” method that will be applicable to all military personnel. Those in the third category may not choose; they will only be eligible for the new retirement system. The High-3 is the retired pay calculated by taking the monthly amount that is the In most cases military divorce rate equate to U.S. civilian divorce rate of approximately 50 percent. When DFAS or the Coast Guard pay center calculate the former spouse’s portion under the frozen benefit rule, the former spouse’s portion is calculated based on the variables provided in the MPDO and then applies only the cost of living adjustments on military retired pay from the divorce until the receipt of military retired pay. This article seeks to assist the family law practitioner with understanding those changes are and how to deal with them. It allows the state courts handling a service member’s divorce to treat the military pension as divisible property. The United States Supreme Court resolved these differences of opinions between the states on VA indemnification clause in the case of Howell v. Howell which came out in May 2017. The Uniformed Services Former Spouses’ Protection Act (USFSPA), Title 10, United States Code, Section 1408, passed in 1981, accomplishes two things. Another change that has impacted military divorce is the new “Frozen Benefit Rule.”  Prior to the passage of the National Defense Authorization Act (NDAA) for 2017, state courts had discretion on which of the above methods to use to divide a military pension. marriage must occur during the period of the member's military service. These states have held that the U.S. Supreme Court decision in Mansell v. Mansell prohibits the division of VA disability benefits and therefore any indemnification clause is prohibited by Mansell. Some states held that the trial court cannot order the service member to make direct payments to the former spouse in the event that the service member waives a portion of his or her retired pay for VA disability post divorce. For many years, critics claimed that the old military retirement system was too expensive to maintain. However, as of December 23, 2016 (the date the law was enacted), all states will have to use this new method for dividing a military pension if the divorce was granted after that date and – at the time of divorce – the member was not receiving retired pay. Most leave voluntarily before 20 years. FACT #8: Ten years of marriage and military overlap means garnishment. The rules relating to the division of pensions at divorce are complicated and vary from state to state and retirement system to retirement system. As a general rule, under current law, only 20/20/20 spouses continue to receive military benefits after they divorce. This will be done by dividing the pension based on the years of marriage by the entire length of the service. Because 10 USCS § 1408 (the USFSPA) only allows state courts jurisdiction to equitably divide military retired pay incident to divorce or separation, any waiver of military retired pay for equivalent amounts paid as disability compensation are beyond the state court’s authority to divide incident to divorce or separation. The Time Rule that was previously used under the same circumstances will no longer be relevant as the spouse’s share is now determined as being constant or fixed. The original USFSPA did not provide for any particular division of a servicemember’s military retired pay. Finally, the blended retirement system allows retirees who are entitled to begin receiving retirement to receive an immediate “lump sum” payments against the defined benefit portion of their pension. A spouse is entitled to one year of transitional medical benefits under the 20/20/15 rule, which requires at least twenty years of marriage, at least twenty years of military service, and at least fifteen years of overlap of the marriage and the military service. So, you’ve decided to take your practice solo, congratulations! The 2017 National Defense Authorization Act (NDAA), enacted on December 23, 2016, contains a major change in how states are permitted to divide military retirement. Former spouse proponents have viewed this as a major set back for former spouses, especially coming on the heels of the frozen benefit rule. The other circumstance under which you can get an exemption or partial entitlement would be one in which you were divorced from a servicemember … False. No questions asked! Under the 2017 Rule, dividing a military pension in a divorce is based on the rank and member’s time in the service at the time of the divorce, in addition to a Cost of Living Adjustment. As legislatures are wont to do, the law is not clear. These states have ordered indemnification of the former spouse’s portion of the military retired pay, holding that the service member’s unilateral waiver takes property away from the former spouse without due process. This new blended retirement system includes: First, a TSP account will be established for all new service members and those service members opting into the blended retirement system. Recent changes in military divorce include a new Blended Retirement System and the new "Frozen Benefit Rule.". These changes have been the fodder for much conversation and much confusion. We help you do right by your clients and get you home for dinner on time. The retiree receives the remainder of the annuity each month, and the annuity returns to the full annuity amount upon the retiree’s 67th birthday. This just means that you get a set retirement based on the number of years you are on active duty. Following a dissolution of marriage, a former spouse who has at least 10 years of marriage overlapping 10 years of creditable military service may apply for direct payment of the retirement from the Defense Finance & Accounting Service (DFAS). Those with less than 12 years of service may do better under either system depending upon how much service they have, how much (if any) “continuation pay” they receive (see below), and how much they desire to remain in the military. A state court can divide retired pay in any way it chooses (subject to the laws of that state). Changes to Military Retirement System in 2019 Posted on January 17th, 2019, by Anneshia Miller Grant in Family Law , Military Divorce . Under this new law, the service member’s rank and the number of years spent active are thought to be frozen at the time of divorce. This is commonly referred to as the “frozen benefit rule.”. The 10/10 Rule In addition, for orders dividing retired pay as property to be enforced under the USFSPA, a member and former spouse must have been married to each other for 10 years or more during which the member performed at least 10 years of military service creditable towards retirement eligibility (the 10/10 rule). See State Retirement Systems and Divorce. The ultimate size and timing of such continuation bonuses are left up to the respective service secretaries in order to “shape” the force. On January 29, 2015, the Commission released its final report, recommending an overhaul to the military retirement plan, including establishing an enhanced defined contribution plan. Second, the military’s cliff vesting pension remains intact. Ms. Howell petitioned the trial court in Arizona to enforce the original order and order Mr. Howell to pay her the difference directly. 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