The following is a re-post of a letter sent to members of the Family Law Listserve by Col. Mark E. Sullivan, author of the “Military Divorce Handbook.”
It outlines a major change in a federal law that will impact property division in every divorce cause involving a member of the military.
On December 23, 2016, the President signed the National Defense Authorization Act for Fiscal Year 2017. Hidden away in the Act is a little known provision that applies to division of military retired pay when the military member is still serving.
In an unprecedented seizure of power from the states in the way pensions are divided, Congress rewrote the Uniformed Services Former Spouses’ Protection Act (10 U.S.C. 1408) to require that the pension to be divided in such cases is the member’s retired pay as if he or she had retired on the date of the court order dividing the pension as property.
“Tasking a snapshot” of the retirement benefit is the rule in about half a dozen states; the remaining jurisdictions divide all pensions – military, state, federal, and civilian – through use of the “Time Rule”.
What Is The “Time Rule”?
The Time Rule means that the final retired pay of the employee, at the time pension payments begin, is used, and the spouse or former spouse receives presumptive 50 percent share times the “marital fraction”, which is time of pension service during the marriage divided by total time of creditable pension service.
While the new law makes no change to the 50 percent share, and it doesn’t alter the marital fraction, it does require that only the “frozen benefit” may be divided (when the servicemember is still serving as of the date of the court order).
Important Points About The “Frozen Benefit Rule”
- There is no “grace period” for the states to adjust to this change; the Act’s provisions are effective immediately. It is my opinion that – since there was no specific “effective date” cited in the statute – it will apply to all orders entered on or after 12/23/16.
- There is no exception for consent of the parties. Irrespective of whether the parties have agreed on a different solution, the new definition of “disposal retired pay” will apply when the order for pension division is entered during military service (active-duty, National Guard, or Reserves).
- When both parties have retirement benefits earned during the marriage, there will obviously be a disconnect between the division of the two pensions. One will be divided using an artificial, truncated benefit under the Frozen Benefit Rule, while the non-military pension will, in most states, still be divided using the Time Rule (the actual pension payment the non-military spouse receives).
- The regulations have yet to be written. When they have been drafted and vetted, the rules will be posted in the Department of Defense Financial Management (DoDFMR). Nobody is saying a word at DFAS on how the rules will be drafted.
- This “hypothetical clause” (as it is called by DFAS, the Defense Finance and Accounting Service) is the most difficult to prepare of the four acceptable military pension clauses which are accepted by the retired pay centers. The current regulation requires, for those who entered military service after September 1980, that the court order contains very detailed information about the servicemember; this includes the “retired pay base” calculated according to the “High Three”: the average of the highest three years of continuous compensation before the specified division date. At present, counsel must provide this information to the court. It remains to be seen whether DFAS will alter its course and utilize its computer to set the “High Three” in all future Frozen Benefit Rule cases, or whether the data will have to be retrieved by counsel, calculated and set out in the court order submitted to the retired pay center, as is required at present.
- There will be an increase in the frozen benefit from the time of the court order awarding it till the actual retirement of the military member (tracking COLAs which are awarded regarding military retired pay during that interim period).
Yes, that’s right- take a couple of Excedrin and join the rest of us!
To help guide our colleagues and friends through this minefield, I am writing a SILENT PARTNER info-letter on how to prepare orders for the division of military retired pay under the “new regime”, what to say in them, what to avoid saying, when to submit the orders (to the court, to the retired pay center), what evidence would be needed to establish the facts, and how to help the nonmilitary spouse in attaining a measure of equity and fairness in “Time Rule” states (that is, states which divide the member’s FINAL retired pay – not his/her Frozen Benefit at the time of the order).
I will have the info-letter ready in the next week. As soon as it’s completed, I will provide a link to the report, which will be posted to the website of the Military Committee, ABA Family Law Section.