For military officers and their spouses, military pensions are often one of the most significant financial issues involved in getting a divorce. Under the Uniformed Services Former Spouses’ Protection Act (USFSPA), state courts have the authority to divide military pensions in a divorce; and, if you or your spouse earned all or a portion of a military pension during your marriage, there is a good chance that at least a portion of the pension will be included in the division of your community property.
How Is a Military Pension Currently Divided in a Divorce?
When you divide a pension in a military divorce, you can handle it two different ways:
1. Treat the Pension as an Indivisible Asset.
The first option is to treat the pension as an indivisible asset, which results in the service member retaining the full pension while for his or her spouse takes a share of the couple’s remaining community property that is roughly equivalent in value to the value of the pension. While this option still presents a number of challenges (including placing an appropriate value on the future anticipated payments from the pension), it can in some circumstances be the simplest option for all parties involved.
Here’s an example of how that might work: The spouses are in agreement that the service member will retain full rights in his or her pension, so the question becomes, “What does the other spouse get in exchange?” Let’s say the pension is valued at $200,000, and let’s say that the couple’s primary residence is worth $400,000 and subject to a $200,000 mortgage. In this scenario, the parties may agree that the non-service member spouse will get to keep the family home (and assume full responsibility for the mortgage), while the service member keeps his or her pension in its entirety. If this is agreeable for both parties, it will be a relatively straight-forward resolution that avoids the potential issues associated with dividing pension payments down the line.
2. Divide the Pension Income.
The second option is to divide the pension income once the military service member retires. Under the USFSPA, this division is done “if, as and when” pension payments are made. This means that the non-service member spouse is entitled to a share of the pension based not upon the service member’s rank and years of service at the time of the divorce, but rather at the time of retirement.
Here’s an example of how that might work: Both spouses are committed to the pension, and they agree to divide it equally in their divorce. The military service member is a Staff Sergeant with 10 years of service at the time of the divorce, and retires ten years later as a Major. In this scenario, the non-service member spouse would be entitled to half of the actual pension payments based upon the service member’s rank and years of service at retirement (i.e. a Major with 20 years of service), not at the time of the divorce. This may soon change.
Senate and House Considering Bills to Change Military Pensions in Divorce
The U.S. House and Senate are currently considering alternate versions of a bill that would drastically change the way that military pensions are divided in a divorce. Under both versions, the non-military spouse’s share of pension income would no longer be based upon the service member’s rank and years of service at the time of retirement. Rather, the spouse’s share would be determined at the time of divorce. The Senate version provides for an adjustment based upon the current rank pay rate at the time of retirement, differentiating it from the version currently pending in the House.
If either version of the bill is passed, the change could have a substantial impact on how military families address pension income in their divorce. Say, for example, a couple gets divorced while a spouse on active-duty has two years of service. If he or she retires 33 years later, under the proposed bill the non-service member spouse would only be entitled to a share of the pension at the two-year payment level, not the 35-year payment level that would apply under the current law.
We will continue to monitor these important bills in Congress for further developments.
Richard M. Renkin | Divorce Attorney Serving Military Officers in North County, CA
The Law Office of Renkin & Associates provides experienced divorce representation for military officers in North County, California. If you are preparing for a military divorce or have questions about what a divorce would mean for your military retirement benefits, we encourage you to contact us for a confidential consultation. To schedule an appointment with attorney Richard M. Renkin, please call (888) 837-3564 or contact us online today.