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Military Pension Division Discrepancy: Points v. Time
By Rachel Smith
Knowing how to value and calculate the division of military pensions can be a minefield fraught with frustration and confusion. As with the valuation and division of any retirement plan, but even more so with a military pension, it is essential to keep records and do the proper research to understand how a military pension is calculated, as well as the rights and options of each spouse (both the non-servicemember spouse and the servicemember spouse). This article explains the difference in the evaluation, calculation, and division of a military pension when the servicemember spouse is active duty (time), as opposed to a reservist or in the National Guard (points).
Dividing a traditional military pension in a divorce is a specific process. Calculating how much the non-servicemember spouse receives from the military pension can be a time-consuming and meticulous process. Last, but not least, there are particular requirements in order for the non-servicemember spouse to receive direct payments from Defense Finance and Accounting Services (DFAS), which administers finances and payments to servicemembers and veterans.
Military Basics
The United States Armed Forces has has six branches of service: Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force. It is important to be aware that what a servicemember is called depends upon the branch of service in which the servicemember served. For instance, a servicemember in the Army is a soldier; in the Navy is a sailor; in the Air Force is an airman; and in the Marines is a marine. The term “servicemember” is a broad term that applies to all branches of service.
The next distinction is the status of the servicemember in the Uniformed Service: active-duty, reservist, or National Guard. The National Guard is the reserve component of the United States Armed Forces from each state and the territories of Guam, the Virgin Islands, Puerto Rico, and the District of Columbia. As a result, there are fifty-four separate organizations of the National Guard. The National Guard can be deployed or mobilized for federal and domestic missions. An active- duty servicemember serves “full time” in the military, which means that serving in the military is his or her day-to-day job (i.e., he or she reports for duty every day). Reservists and members of the National Guard are “part-time” servicemembers, which means they are required to appear for their military duties only at certain times throughout the year.
Knowing the servicemember’s rank can also be important because it is used to calculate how much the servicemember spouse earned at the time of retirement. The additional distinctions, terms, and acronyms are never-ending and will not be addressed in this article. However, it is important to at least be aware of the most basic terms and distinctions. If the practitioner uses the wrong term, it is possible to insult the servicemember. With only about 1% of the American population serving in the Uniformed Service, few people are familiar with the terms, practices, customs, and rules governing those in uniform. As a civilian, but more importantly, as someone who is in a profession that prides itself on being detail-oriented, the practitioner must know at least the basic details.
What is a Military Pension?
The traditional military pension under the legacy system is one that provides a servicemember with a lifetime pension after he or she has served in the military for a required number of years, usually twenty active-duty years. This is a defined-benefit plan, as opposed to a defined contribution plan such as a 401(K). In other words, a servicemember is not eligible for a pension unless he or she serves the required time. Translation: there is no marital portion for the non-servicemember spouse to be entitled to, and the non-servicemember spouse is not eligible to receive anything from the marital portion of the pension unless the servicemember spouse serves the necessary time of at least twenty active-duty years.
A servicemember who is a reservist/guard is also eligible for a pension. Many servicemembers serve their entire military career as a reservist or in the National Guard. If a reservist/guard serves his or her entire military career as a reservist/guard, the servicemember is eligible for a pension based on a calculation of points, not time/active duty years.
Servicemembers may also save for retirement on their own initiative, in a Thrift Savings Plan (TSP). Federal employees, including military servicemembers, are eligible to save money in TSPs, which are retirement plans similar to 401(K) plans. Since TSPs are not the same as the military pension and can be considered a marital asset, they will not be addressed in this article.
In today’s society in which people are increasingly less likely to stay with one company or remain in one profession for an entire lifetime, it is common to find servicemembers who have a combination of active duty years in the military and reservist/guard time. In those specific situations, calculating whether a servicemember is eligible to receive a pension is based on a combination of calculating time (i.e., active duty years) and points.
Jurisdictional Requirements
Servicemembers Civil Relief Act. Because the military is a federal entity, its servicemembers are stationed across the country and throughout the world in places where they are not legal residents. The Servicemembers Civil Relief Act (SCRA), in pertinent part, ensures that servicemembers receive due process in lawsuits filed in jurisdictions where the servicemember is not physically present. The most significant portion of the SCRA that intersects with the Uniformed Services Former Spouses’ Protection Act (discussed below) is when there is a default judgment against the servicemember. The SCRA dictates that an active-duty servicemember spouse must make an appearance in a legal proceeding in order for the court order to be enforceable against the servicemember. Generally, this is done by the servicemember hiring an attorney.
Uniformed Services Former Spouses’ Protection Act. Congress enacted the Uniformed Services Former Spouses’ Protection Act (USFSPA) in 1982 to allow state courts to treat military pensions as community or marital property and divide them through the state divorce process. Given the mobile nature of the military, the USFSPA requires that certain SCRA provisions be met before a state court exercises jurisdiction to enter an order dividing a military pension.
First, a servicemember can consent to jurisdiction of the state court. Service of court documents is not conclusive as to consent. The servicemember must take affirmative steps showing consent to jurisdiction, such as filing court papers as a pro se litigant or hiring an attorney to represent him or her in the legal proceeding.
Second, a servicemember can be a resident of the state at the time of the divorce proceeding, owing his or her residence to a reason beside the servicemember’s military assignment. For example, a servicemember can be stationed in New Jersey but live in Maryland to be near family. In that circumstance, Maryland can exercise jurisdiction over the servicemember.
Third, jurisdiction is based on the servicemember’s domicile (i.e., his or her state of legal residence). For example, a servicemember may be stationed at Ft. Bragg, North Carolina, but maintain legal residence/ domicile in the state of Pennsylvania. Pennsylvania is the servicemember’s domicile and the divorce case may proceed there.
The 10/10 rule. In order for the non-servicemember spouse to receive direct payments of the military pension from DFAS, the couple must meet the 10/10 rule. The non-servicemember spouse and the servicemember must have been married for at least ten years, during which time the servicemember served at least ten years of service creditable toward the pension. In other words, ten years of marriage must overlap with ten years of creditable service in the military. DFAS cannot make any payments of the military pension to the former spouse unless the 10/10 rule is met.
A judge can make a court order as to the division of a military pension. The parties can also come to an agreement as to how a military pension will be divided. Regardless of any court order or agreement between the parties as to how the military pension is divided, DFAS will not enforce any order unless the 10/10 rule is met. In situations where DFAS cannot make payments to the non-servicemember spouse, the servicemember may need to make direct payments to the non-servicemember spouse (now former spouse). If the parties do not meet the 10/10 rule, another method for the servicemember spouse to pay the former spouse is through a spousal support order in the divorce decree.
A statement that the 10/10 requirement has been met must be in the court order for DFAS to process the direct payment to the former spouse. For example, the court order might recite, “The parties were married for ten years while the member performed twenty years of military service creditable for retirement purposes.”
How to Calculate a Military Pension
The two most basic methods in calculating a military pension are based on time served (i.e., active-duty years) or points earned (used when a servicemember is not active-duty; i.e., reservist/guard). Both of these methods are further elaborated in this article. Additionally, it is significant to be aware that DFAS will not assume any information not included in the court order dividing the military pension.
Language of the Military Pension Division Order
Fixed Dollar Amount. The most basic and straightforward option is formulating the language for the former spouse to receive a specific dollar amount per month. However, this language does not entitle the former spouse to receive any Cost of Living Adjustment (COLA). A COLA can increase the value of the pension over time. This consequence makes it important for the practitioner to be aware that this type of language is rare in a military-pension-division order. However, DFAS will honor the language and the award so long as the prerequisites are met. As this is increasingly rare in military pension division orders, this option will not be addressed further.
The Time Rule. The time rule is similar to the coverture fraction used in other jurisdictions—the numerator is the number of months the parties were married during the servicemember spouse’s time in service divided by the denominator, which is the number of the servicemember’s total months in the service. The marital fraction is usually, but not always, multiplied by ½ or 50% for the former spouse (i.e., the non-servicemember spouse). The denominator—the number of months DFAS will supply the denominator, which is the number of months of the servicemember’s creditable military service. The court order does not need to include the denominator. Generally, the Time Rule language will be used in cases where the servicemember has accrued twenty active duty years of service creditable toward the pension. In a Time Rule formula, the award will automatically include a cost of living adjustment (COLA), which can be beneficial to the nonservicemember spouse.
For example, John Doe has served twentyfive years on active duty in the military. Jane Doe was married to John Doe for ten years. The ten years of marriage coincided with John’s military service. The Time Rule formula language would be the following: “The former spouse/alternate payee is awarded a percentage of the member’s military retired pay, to be computed by multiplying 50% times a fraction, the numerator of which is 120 months of marriage during the member’s creditable military service, and the denominator of which is the member’s total number of months of creditable military service.”
Points. Any time a servicemember serves as a reservist or in the National Guard, the calculation toward earning a military pension is based on an accumulation of points. The points are then “converted” to active-duty service. In other words, the number of points accumulated by the servicemember must be equivalent to twenty years of active-duty service in order for the servicemember to receive a military pension.
Reservists/Guard serve “part-time” in the military. They are required to pass the tests to qualify and join the military. However, because they serve part-time, reservists/guard do not show up for their military duties every day as do active duty servicemembers (unless the reservist/guard is activated). Consequently, the times they are required to and do show up for their military duties are the times when they accumulate points that count toward being eligible for and earning a pension.
The military has a system that assigns how many points a servicemember will earn for exactly which duties that count toward pension eligibility. A servicemember receives one retirement point per day of active service. For example, servicemembers can earn points for funeral-honors duty. There is a list and breakdown as to exactly the types of activities servicemembers can earn points for and how many points each type of activity is worth. Whether or not a servicemember’s points are correctly calculated is another matter that will not be addressed in this article. What is essential is that in order to be eligible and, therefore, to receive a military pension, the servicemember spouse must have accumulated enough points.
For example, John Doe has served his entire military career as a reservist, which is the equivalent of twenty years active duty. The points language would be the following: “The former spouse/alternate payee is awarded a percentage of the member’s military retired pay, to be computed by multiplying 50% times a fraction, the numerator of which
is the number of Reserve retirement points acquired during the marriage prior to the date of separation (reserve retirement points earned during the period of marriage), divided by the member’s total number of reserve retirement points earned.”
Calculating a Military Pension Based on Military Service of Time and Points
It is increasingly likely for servicemembers to have a combination of both forms of military service—active-duty years and time as a reservist/ guard. In this situation, it is easy to improperly assume that calculating the marital portion of the military pension is applying the Time Rule formula. For example, a servicemember spouse served ten years of active-duty service and then became a reservist and then went to the National Guard. The servicemember marriedfive years after he enlisted in the military (i.e., he was married during the latter five years of his active-duty service). The servicemember was married for a total of thirteen years, which means he was married another eight years while he was a reservist and guard. The servicemember retired from the National Guard with a total of twenty-eight years in the military and earned a total number of points that made him eligible for the pension (i.e., an equivalent of twenty active-duty years). The servicemember was married while he was active-duty and divorced before he retired from the military. Because the servicemember was married and divorced while he was in the military, it is easy to presume that calculation of the marital portion of the military pension is based on time (i.e., the 10/10 rule of the number of years he was married while he was in service).
That assumption is incorrect. Case law throughout the country dictates that determining the marital portion of a servicemember’s military pension is determined on points, not time, when a servicemember has a military career that is a combination of active-duty and reservist/guard time. Why? When a servicemember is in the military as an active-duty, every day of military service counts towards the pension. When a servicemember is in the military as a reservist/guard, he or she has to accumulate the requisite number of total points to be eligible for the pension. Thirty days of service as an active-duty servicemember equals thirty points to the military pension. Thirty days of service as a reservist/guard might equal no points or some points to the military pension, because it is completely dependent on whether the servicemember performs qualifying military duties that earn points toward the military pension. Time does not equal the same contribution to a military pension for the active-duty servicemember as compared to the reservist/guard.
Consequently, when a servicemember has military service with a combination of active-duty and reservist/guard service, the servicemember has to serve more than twenty years in order to be eligible for the military pension. The servicemember now has to accumulate a certain number of points that is equivalent to at least twenty active-duty years, even though the servicemember is in the military for more than twenty years. When a servicemember serves as a reservist/guard, the military pension is based on the nature and frequency of service in the military. The military pension is based on a calculation of the balance of points, not time. Accordingly, the marital portion also has to be calculated and based on points, not time.
The Blended Retirement System
As the military has evolved, so has its retirement system. The military retirement system has now transitioned to a Blended Retirement System (BRS), which is similar to a 401(K). The new system and the intricacies of the BRS will not be addressed in this article, but practitioners should take note of this change. Servicemembers who joined on or after January 1, 2018, were automatically enrolled in BRS. Servicemembers who joined the Uniformed Service on or before December 31, 2017, were grandfathered into the legacy pension system detailed in this article. The opt-in period for the majority of servicemembers closed December 31, 2018. Active-duty servicemembers with fewer than twelve years of service as of December 31, 2017, or members of the National Guard or Reserve in a paid status who had accrued fewer than 4,320 retirement points as of December 31, 2017, had a choice of opting into the BRS or remaining grandfathered under the legacy retirement system. While it is important to be aware of and recognize how the military retirement system has evolved, it is equally significant to be aware that the traditional military pension under the legacy system still remains. Consequently, practitioners should be careful to distinguish the retirement system under which the servicemember is entitled.
Conclusion
Calculating the division of military retirement benefits can be quite complicated. Understanding the rules governing the entitlement to pension benefits and how a marital portion is calculated can have a significant impact on how—and how much—the non-servicemember spouse is paid after a divorce.
Rachel Smith is licensed in North Carolina, Pennsylvania, and California, and in the Supreme Court of the United States. She works with QDRO Solutions, LLC, providing valuations and drafting qualified domestic relations orders in family law cases. She also educates legal professionals about the intersection of military law and benefits with the civilian judicial system. She can be reached at rachel@ myqdrosolutions.com and at (301) 327-1396.
