Qualified Military (Pension Division) Orders
Similar to the Qualified Domestic Relations Order (QDRO) which give an alternate payee the right to receive payments from a former spouse's retirement plan. However, the rules change slightly when one of the spouses is a servicemember or is employed by federal, state, or local government agencies. This article will focus on division of military retired pay from divorce. Imagine this scenario: A married couple are in the process of a divorce, they have been married for 20 years and one spouse has served in the Navy for 20 years. They begin divorce proceedings and everything is going as smoothly as a divorce can until they reach some of the more complicated assets to divide. In this case, the military pension. Normally, under a private employer's benefit plan, a QDRO is submitted to the plan to be approved and enforced. However, a QDRO will have minimal effect in this realm. Private pension plans are governed by the Employee Retirement Income Security Act (ERISA) while Military Pension Division Orders (the military’s form of a QDRO) is handled by the Defense Finance and Accounting Service (DFAS) and authorized under the Uniformed Services Former Spouses’ Protection Act (USFSPA). Now, what does all of this alphabet soup really mean? Well, quite
simply, there are different rules when navigating under the USFSPA and filing a Qualified Military Pension Division Order.
What rules apply?
You must first understand that different statutes authorize each order and as such, requires us to adhere to different rules. For instance, under the USFSPA there are four acceptable methods for dividing the pension:
A fixed dollar amount
A Formula Clause
A Hypothetical Award
It is important to note that each award type is not suitable for everyone and each should be evaluated on a case by case basis. Also, remember that the Survivor Benefit Plan still applies in conjunction with these division orders. Were it not for the SBP, any pension payments would end once the retiree dies, However, due to the SBP, the payments will continue so long as the former spouse does not remarry before the age of 55.
Lastly, don’t forget that certain construction requirements of QDROs may not apply. QDROs require specific terms to be included for them to be valid. A MPDO does not necessarily require the same construction rules and certainly does not need to meet some of the other more specific requirements and terminology that certain employers may require.
What may limit an award amount?
Certain disability statuses may limit what may be awarded under a MPDO. Most commonly, we come across VA disability, Combat-Related Special Compensation, and military disability retired pay. Some disability pay such as the VA disability pay cannot be divided and military disability may only be partially divided.
Pay Attention to Time!
Unlike some QDROs, there are time-based restrictions before an MPDO can be submitted. To receive payments directly from DFAS, the marriage must have lasted for at least 10 years. Furthermore, those 10 years must have overlapped with 10 years of military service. For instance, if a couple was married for 15 years, but the service spouse was only in the military for 6 years, the the former spouse will not be entitled to the direct payments by the military of the MPDO, but they may still be entitled to a share of the military retiree’s pay award by the divorce court, There are even more benefits for those married for longer than 20 years and overlapping 20 years of service. You can see more about this on the Uniformed Former Spouses Protection Act (USFSPA) blog.
The Frozen Benefit Rule:
Congress has very recently overridden the States’ ability to choose what methodology to use to decide how to divide military retired pay. The National Defense Authorization Act 2017 changed how more than 40 states evaluated how military pensions were to be divided. It should be noted that this shall primarily have an effect on servicemembers who go through property division before retirement. According to the USFSPA, the revision requires that “the military pay to be divided will be attributable to the rank and years of service of the military member as of the date of the divorce.” This limits the division of benefits to only what was acquired during marriage. Thus, any promotions received after divorce will not be included in the division.
If you would like to read up on these statutes, then you can look in 10 U.S.C. 1408 to better understand the MPDO and 10 U.S.C. 1447 for more information on the Survivor Benefit Plan. f you need to determine what benefits are available under the military pension, then you can request a Leave and Earnings statement for all active duty members. Retirees on the other hand have retiree Account statements as well as retirement orders and discharge papers. Finally, if an issue arises under the SBP, the election forms may also be requested.
While these statutes and forms may be difficult to navigate, and experienced attorney can make the process easier and we are more than happy to guide you through this!