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MILITARY PENSIONS – DIVORCE
NEW FEDERAL STATUTE
PREMPTS STATE FAMILY LAW OF DIVORCE

Family Law, traditionally a domain of each state, has in one aspect been changed. Regarding the division of military retirement benefits incident to divorce, a recently enacted federal statute now controls the determination in all states of the amount of a military member's pension that may be subject to division in divorce. [1]

This radical reduction of the monthly retirement benefit of a military person that may be awarded to a Former Spouse, is best discussed with the aid of two Illustrations.

Illustration # 1. Monthly Benefit At Divorce

Military Spouse: Tom Walther
Date of Birth April 1, 1982
DIEMS [2] April 1, 2004
Date of Marriage April 1, 2006
Divorced April 1, 2017
Rank & Pay Grade (Major, U.S. Army) O-4

Based on the above.
Married Service to Divorce 11 years [3]
Total Service to Divorce 13 years
Accrued Monthly Benefit at Divorce $2,305.55
Marital Monthly Benefit $1,950.85
Award to Spouse Jane Walther $975.43

The Second Illustration, follows the military member, Tom Walther, to his retirement. This illustrations indicates what Tom could expect at retirement based on historical COLA and military promotion policies.

Illustration # 2. Monthly Benefit At Retirement. This Illustration follows the "Coverture Fraction" methodology as used in each of the three below indicated decisions.

Note:
The calculations for Illustration #2 , use of the Coverture Fraction as exemplified by:
New Jersey: Marx v. Marx, 627 A.2d 691
New York: Majauskas v. Majauskas, 463 N.E.2d 15
California: In re Brown, 544 P.2d 561

Commentary:
At this time virtually all states apply some form of the "time rule" or "Coverture Fraction". Three notable exceptions are:
Florida pursuant to Boyett
Texas pursuant to Berry
Kentucky pursuant to Foster.

Illustration # 2, is based on a Coverture Fraction calculation of Tom's Monthly Benefit at Retirement (25 years of service at age 47).[4]

Tom Walther's monthly benefit at Retirement $5,891.59
Married Service 11 Years
Total Service at Retirement 25 Years
Coverture Fraction 44%
(11 ÷ 25)
Marital Monthly Benefit $2,592.30
Jane's Monthly Benefit $1,296.15

Until the passage of the National Defense Authorization Act 2016 (Act), virtually all states when applying the Deferred Distribution Settlement Method (use of a Qualified Domestic Relations Order) applied Illustration # 2, Coverture Fraction format.

When the property is a Military Pension and the divorce effective date is subsequent to December 22, 2016, this right of each state to decide what is marital property, was abolished by an Act of Congress,. Then, the amount of the member's pension that may be assigned to the Former Spouse is Regulated by Federal Statute.

Result: for the great majority of states that followed the Coverture Fraction method, are now prohibited (when the divorce involves a military person) from determining the amount of the member's pension that is subject to division in divorce.

Section 614 of the Act, modified 10 U.S.C. 1408(a)(4)(B)(i), making use of the traditional Coverture Fraction unacceptable for the division of military retirement benefits incident to divorce subsequent to December 22, 2016. [5]

This deep reduction in a Former Spouse's share of the member's retirement benefit is certainly cause for attorney angst. Additionally, the new complexity of crafting settlements acceptable to DFAS must also be recognized by Family Attorneys. [6]

Consider DFAS – Notice of Statutory Change (NDAA-'17 Court Order Requirements). A key requirement for compliance with its Order Qualification procedures is that the member's monthly benefit as of the "date of divorce" shall be:

…The member's high-3 amount at the time of divorce (the actual dollar figure) …

This "retired pay" calculation was expanded by Financial Management Regulation (FMR), Volume 7B, Chapter 29: "Former Spouse Payments from Retired Pay". Summary of Major Changes, which provided

A. The amount of retired pay is limited to that which the member would have been entitled using the member's retired pay base and years of service on the date of the final decree of divorce, dissolution, annulment, or legal separation; and
B. COLA would be added from the date of divorce, dissolution, annulment, or legal separation to the member's date of retirement.

First, let us use the above illustrations to make clear how a military pension would have been awarded to a Former Spouse prior to Federal Preemption of this function.

The adverse economic impact on the spouses of military members can as these illustrations show, be significant. For Jane Walther, the reduction is 24.74%.

Clarification of the 24.74% Reduction to Former Spouse's Pension Benefit.

Illustration, #2, indicated the Coverture Fraction assigned to the Former Spouse a portion of the member's disposable retired pay.[7] Were the State format of the Coverture Fraction to be applied, Jane's monthly Retirement Pension would have been calculated as follows.

Average Monthly Pay at Retirement [8] $9,426.25
Total Monthly Pension at Retirement $5,891.59
(.025* $9,426.25* 25)

Coverture Fraction (at Retirement) 44%
(11 years ÷ 25 years)
Marital Monthly benefit at Retirement $2,592.30

Half of Marital to Former Spouse $1,296.15

Because of the Federal Preemption Statute, Jane's' monthly benefit is Required to be calculated as follows:

Average Monthly Pay at Divorce $7,094.00
Total Monthly Pension at Divorce $2,305.55
Coverture Fraction (at Retirement) 44%
(11 years ÷ 25 years)

Marital Monthly benefit at Divorce $1,950.85
Half of Marital to Former Spouse $975.43

Loss to Former Spouse as a result of Act of Congress 24.74%
Pre-Act Monthly Benefit $1,296.15
Post-Act Monthly Benefit $975.43
[($1,296.15 - $975.43) ÷ $1,296.15 = 24.74%]

TO PREPARE CALCULATIONS FOR A MILITARY DIVORCE ACTION FILED SUBSEQUENT TO DECEMBER 22, 2016 CONTACT TROYAN FOR CALCULATIONS AND PREPARATION OF MILITARY ORDERS ACCEPTABLE TO DEFENSE FINANCE ACCOUNTING SERVICE (DFAS).