Attorney Guide Dividing Military Reserve Retirement Pay

Introduction

Divorce is a path some people have to live with, and under these situations, it is beneficial to pursue equity. When dividing the marriage asset of military retirement pay due to divorce, the issues are superbly different than any other type of retirement. This web page describes military Reserve (or National Guard) specific issues. If you are not concerned about Reserve military retirements, another web page describing Dual Coverture calculations is applicable to dividing Reserve and Activity Duty retirements.

If you are a legal client going through a divorce, download "Attorney Instructions - Division of Reserve Military Retirement" from the references below and file the document with your court system as a legal attestation. Or, as a minimum, read the document, cull information you want, and then file your document with your court system. The idea is that you must get this information in front of your judge - first to help him/her, secondly, you want this in the court records in case of an appeal.

If you are a lawyer, then this web page, it's sister page referenced above, and the reference links at the bottom of both pages, are a gold mine. Forget the confusion; these pages explain what you need to know, with proper legal and citation "hooks" to customize the information for your case.

For military member earning a Reserve retirement (not an Active Duty retirement), duty points are used in the place of calendar time in the coverture fraction because any period of calendar time may include many duty days down to none at all. Like Active Duty, the coverture needs a second fraction based on rank.

Discussions about military retirement typically center around the the amount of military payments to be received each month by the non-military ex-spouse. However, a military retirement asset is the multiplication of the amount each month multiplied by which months payment is received. Up until 2008, this distinction has not mattered because all military payments were tangled together and comingled together, portioned out with coverture fractions.

As of January 2008, a HUGE change occured in Federal Law. For a Reserve military retirement, there are now 2 distinct and quantifiable different military retirements that have to be individually assessed to be a marital asset or not. Retirement pay earned after the Reserve military member turns 60 is the retirement courts are familiar with and have dealt with for years. For a Reservist, the 2008 law gives a new retirement before age 60. This retirement, by Federal Law can be earned ONLY after January 28, 2008. The DoD Congressional report says it clearly in a way consistent with every state law:

"[Giving ex-spouse a portion of post-marriage benefit] of military retired pay is inconsistent with the treatment of other marital assets in divorce proceedings—only those assets that exist at the time of divorce or separation are subject to division. Assets that are earned after a divorce are the sole property of the party who earned them."

The new law has big implications on how the military retirement division order should be written if any portion of the marriage was before January 28, 2008.

Discussion

Regardless of when a military Reserve member enters retired status, 10 USC 12371(a) authorizes payments at and after military member age 60. However, as of January 2008, 10 USC 12731 authorizes a Reservist to receive payments before age 60 by working duty days after January 28th, 2008. An Air Force news release explains this new law. Title 10 USC Section 12731(f), describes this new, separate, and distinct, marital asset to be divided.

With the prior traditional military retirement, there is a commingling of effect of duty years such that years are treated equally and prorated for division based on a count of how many military years were also married years—this is the “coverture fraction” most attorneys are familiar with.

It’s important to note 10 USC 12731(f)(2)(A) clearly and quantifiably defines the receipt of retirement pay before age 60 as dependent only on military duty done January 28th, 2008 and after. Because of the hard date in the sand, there is no commingling and the new retirement benefit is properly divided as a separate asset. If a marriage ends before January 28th, the ex-spouse in no way contributes to the retirement points accumulated after January 28th, which are the only points authorizing pay before age 60.

Arguments Against

One may argue in some Talmudic way that the military member is inappropriately “re-using” marital points to calculate the before-age-60 benefit without sharing, or that additional benefit is "based on" the marital portion of the benefit, and therefore the ex-spouse should get “a cut” of the benefit. However, there are problems with these thoughts:

Most simply, "re-using points" argument is no different than an argument that an ex-spouse is "re-using" job skills gained during the marriage, so any later job they get is divisible. This is blatantly untenable because it would work with mirror symmetry to both spouses, and never allow lives to separate.

The non-marital spouse already has a proper cut. The additional value of points (payments before age 60) earned by the military member after the marriage in no way decreases the value of each duty point to the ex-spouse and therefore should not be encumbered. 5 USC 8332(c)(4) is an example of how ex-spouse interests are already protected by Federal Law: if the point value is decreased, then the ex-spouse may invade the additional or dual-use value to the extent required to make their original point value whole. This specific statute deals with the case when post-marriage enhancement to each retirement point is obtained by an ex-Reserve Federal civilian employee, instead of enhancing the point value by doing more military work after the marriage. However, it is well established that the idea that enhanced point value belongs entirely to the military member except in the case where it decreases ex-spouse payments.

Once the benefit is earned or authorized, exactly how it is calculated is a private benefit or entitlement matter between the military member and employer, in so much as it does not affect the marriage asset retirement in any way. There is no decrease to the ex-spouse benefit. Additional value or dual-use value of each retirement point is added solely by the work of one person after the marriage. Therefore, the added benefit associated with the added value belongs to only that person. So, by this test, the second retirement would also belong only to the military member because only the military member participated in creating the dual-use, or increasing the point value.

The enhanced value of the aggregate retirement asset is created by earning more pay dates, not changing how much is paid on each pay date. All prior USFSPA law and case precedence is about determining how much is paid on each date. According to Federal statute, this enhanced value is quantifiable separate and distinct retirement benefit. The ex-spouse contributed nothing toward the extra days, which create additional pay dates, not additional pay amount. Retirement payments before military member age 60 are not marital assets, so a divorce court has no authority to divide them.

Non-military ex-spouses have claimed that any military work after a marriage is "based on" military work done during the marriage, and therefore should be susceptible to division. This is kind of like saying a person's 50th year of life is based on the fact that they completed the 40th year of life. If this logic is allowed in the court, the entire rest of a person's life would be divisible as marriage asset. A proper analogy would be that a new employer 1 year after a marriage may hire someone based on military training received during the marriage, but this in no way authorizes an ex-spouse to a portion of the new job benefits as asset division. Thus, there is no "based on" argument available for the before-60 benefit. To be clear: the extra retirement pay dates requires no prior rank, no prior seniority, no prior duty. It is a totally separate program that unfortunately goes under the same name of “military retirement”, even though it is quantifiable separable and independent. Simply because it’s called the same colloquial name, courts often confuse the issue and by not separately allocating this retirement benefit, error as badly as if they lumped all “IRAs” or all “401(k)s” or all “pensions” together just because they have the same name.

Putting all the numbers and dates aside, this is a question of whether an ex-spouse should have a portion of every good thing that happens to a military member after the marriage, or whether a best-effort attempt is to be made to divide an asset earned prior to the divorce that are impossible to disburse until later in life. To attempt to give the ex-spouse a portion of every good thing after the divorce dishonors the very concept of divorce. If this were allowed, should the courts also try to divide a portion of the bad military experiences after marriage – deployments, absence from family, inability to spend time with children, possible loss of life? Both sides are forced to bear the burden of delayed payment by the military retirement rules, and both are compensated in the form of COLA through the intervening years that raises the dollar amount of payments.

Practical Implementation

For those members who have earned or may in the future earn this retirement enhancement by earning points after 1/28/08, a decision must be made as to whether payments before age 60 are a divisible asset or an un-divisible asset. The answer to this question would depend on the period of marriage, divided into 3 possibilities:

1.    If the marriage was entirely before 1/28/08, then the before age-60 retirement payments were earned only after the marriage, so the benefit would be retained 100% by the military member. The traditional formula for the division is fine (use the Dual Coverture or Hypothetical Method as described later in this document). However, the division order must specify that no division occurs until member age-60. Caution: If the division order is silent on this issue, all retirement payments will be incorrectly divided by DFAS, so the order must state that payment division will begin only upon the military member reaching age 60.

2.    If the marriage was entirely after 1/28/08, then the before age-60 monthly payments are divided same as after age-60 monthly payments. Correct division will occur by not mentioning this issue at all in the order (DFAS will divide all payments the same).

3.    If the marriage spans 1/28/08, before age-60 monthly payments need to be prorated with coverture fractions as traditionally done with the age-60 and after payments. However, the coverture fractions for the two retirements will be different, so two formula paragraphs must be written for DFAS to use. The formula paragraphs should reflect dual coverture fractions to include corrections for possible future military rank promotions. Here are the formula paragraphs (to be used together) to accomplish a proper division:

For division of retirement pay paid after member age 60, the former spouse is awarded a percentage of the member’s disposable military retired pay, to be computed by multiplying 50% times two fractions, the first numerator of which is [put here the total number of points earned during the marriage], and the first denominator of which is the total number of points during the member’s creditable service, and the second numerator is the base pay of a [put here the military pay chart service time and rank at the time of divorce, such as “17 year Major” or “18 year O-5”] taken from a 2012 military pay table, and the second denominator is the base pay of the member upon retirement, taken from the same military pay table.

For division of retirement pay paid before member age 60, the former spouse is awarded a percentage of the member’s disposable military retirement pay, to be computed by multiplying 50% times a fraction, the numerator of which is [put here the number of points earned during the marriage after 1/28/08], and the denominator of which is the total number of points during the member’s creditable service after 1/28/08, and the second numerator is the base pay of a [put here the military pay chart service time and rank at the time of divorce, such as “17 year Major” or “18 year O-5”] taken from a 2012 military pay table, and the second denominator is the base pay of the member upon retirement, taken from the same military pay table.

The year 2012 in the above formula text can be replaced with whatever year is relevant in your situation (date of separation, trial, finalization, retirement, whatever). Because the ratio of base pay stays pretty much the same throughout the years, it doesn't matter much what year is used.

These two formula paragraphs above reflect the Dual Coverture method considered and sanctioned by a New Jersey Appellate Court in January 2011, and advocated by the DoD report to Congress. The non-military spouse benefit is the same as provided by the DFAS-published Hypothetical Method in their “Instructions to Attorneys” document, while being much simpler. Note the New Jersey Court made a huge factual error, spending 2 pages of their opinion incorrectly claiming the above methods deprive COLA to the non-military member. With the above formula paragraphs, there is no requirement to mention COLA for either person in order to get COLA for both. The two above paragraphs create fractions (such as 0.6583 or whatever), and because these fractions will be applied to the COLA-adjusted base retirement pay for any month of retirement, COLA automatically happens for both people as the base retirement pay goes up each year.

Conclusion

To pursue equity, family law courts must recognize the new Reserve military retirement as a separate and distinct entity. If this issue is not addressed in the original division order, every Reserve military member who earns a "before age 60 benefit" (possible long after the divorce) will be back in court asking the court to address this issue in compliance with the original intent of the division order. This is consistent with DoD's report to congress which says:

Practical legal language to implement proper division are in the document reference below, titled, "Attorney Instructions - Division of Reserve Military Retirement".

Although I am not a lawyer, feel free to contact me if I can help work through your legal situation.

References

Uniformed Services Former Spouses' Protection Act (USFSPA) Attorney Instructions - Dividing Military Retired Pay. April 2001. (DFAS.mil, local copy) (19 pgs, 74kb pdf). This has been updated with a new document titled "Guidance on Division of Military Retired Pay" 2 April 2012( DFAS.mil, local copy).
DoD Report to Committee on Armed Services of the US Senate and House of Representatives, 1998. (Defense.gov, local copy) (84 pgs, 279kb pdf)
Attorney Instructions - Division of Reserve Military Retirement (local copy).
Division of Blog post Dual Coverture is better than DFAS Hypothetical Method, February 2011

This article originally appeared on the Increa.com blog. The shell of this expanded document was created using AbiWord under the Linux Gnome desktop. Content was edited using Kompozer.