Military retirement benefits can be broken down into five categories: Pension, Thrift Savings Plan, Accrued Leave, Commissary and Exchange Privileges and Medical Care.  An in depth discussion of the first four benefits can be found below.  A discussion of Medical Care can be found in Section I. 

1.     Pension

    i.    Jurisdiction

The Uniformed Services Former Spouses’ Protection Act (USFSPA) is what gave state courts the authority to divide military pensions.  It also states that a court only has jurisdiction over the pension if: the SM is domiciled there, the SM consents to jurisdiction, or the SM resides there for reason other than military assignment.  It is important to note that it is entirely possible for a court to have jurisdiction over the SM for divorce and equitable distribution, but not have jurisdiction over the pension.  Determining the domicile of the SM can be difficult.  All SM’s have a “Home of Record” listed on their Leave and Earnings Statements (LES), but this is insufficient for showing domicile.  Instead focus on determining where the SM votes or pays taxes.  SMs have some incentive to forum shop because a limited number of states bar division of the pension or impose requirements that make it more difficult.  Consent is usually the easiest way for the court to get jurisdiction over the military pension.  In Virginia a general appearance would be sufficient to show consent.  


    ii.    Calculating the Pension Amount

Generally, members of the armed forces are eligible to receive a pension after 20 years of active service.  The military uses three different formulas for calculating the amount of the pension.  Which formula is used depends on the date the SM entered service.  The formulas are uniform across all branches of the military.  

    If the SM joined the military before 9/8/1980 the Final Basic Pay formula will be used the calculate the pension amount.  For this formula you multiply 2.5 times the number of years of creditable service and the SM will receive that percentage of his/her final basic pay at retirement.  For example, a SM with 30 years of creditable service would receive 75% of his monthly final base pay at retirement because (2.5 x 30 = 75). A cost of living adjustment is added to this amount.

    If the SM entered the military between 9/8/1980 and 8/1/1986 the formula used is the High-3.  The calculation for the percentage is the same as with the Final Basic Pay formula, but the percentage is taken from the average of the SM’s highest 36 monthly paychecks, usually this will be the 3 years before retirement.

    If the SM entered the military on or after 8/1/1986 they have the option of electing to use the High-3 formula or the REDUX formula.  If the SM opts for the REDUX formula they will receive a mid-career bonus (~$30,000).  At 20 years of service they will receive 40% of the average of their highest 36 monthly paychecks.  For each year of service over 20 the percentage increases 3.5% until 30 years of service.


    iii.    The Pension Amount for Members of the Reserves and National Guard

The Reserves and National Guard assign points to members that are earned by participation in drills and any active service.  Each year the Reserve/Guard member gets a Points Statement indicating their number of points to date with 360 points indicating a year of service.  To calculate the pension amount you would convert the points to years of service and then use the Final Basic Pay formula explained above if they entered service before 9/8/1989 or the High-3 formula if they entered on or after that date.


    iv.    Deductions for Disability and a Proposed Solution

Military members may waive a portion of their retirement benefits in lieu of receiving disability pay.  The Supreme Court has ruled that the disability pay is not divisible under the USFSPA and neither is the amount of retirement waived.  In other words, a court will only consider the difference between the retirement pay and the disability pay as divisible.  This creates an enormous incentive for retired SMs to elect disability pay.

    To stop SMs from electing disability after the fact, Property Settlement Agreements can indemnify the FS from any change in the retirement amount he/she is set to receive.  A SM can also agree not to take any action that would diminish the amount of retirement the FS is set to receive.  The Court of Appeals of Virginia has upheld these types of provisions, and as mentioned in Section A2 the court may even imply an indemnification provision.


    iv. Dividing the Pension

    First, consider whether the FS would qualify under the 10-year rule.  This Defense Finance and Accounting Service (DFAS) rule states that the FS will only be paid his/her portion of the pension directly from DFAS if at least 10 years of marriage overlapped with the SM’s service.  If the FS will not be eligible to receive payments from DFAS it may be worthwhile to consider an alternate distribution scheme whereby the FS receives comparable value from other assets.  If the 10-year rule is satisfied the Order dividing the pension must use specific language for it to be accepted by DFAS.  There are four ways to express the division of the pension.  

First, a fixed sum amount could be used (i.e. $800 per month).  This would work best if the SM is already retired and payments are continuing at a fixed amount.  

Second, a fixed percentage can be used (i.e. 50%).  This method may work if the SM is retiring soon.  

Third, a formula could be used if the SM is still on active duty and his/her retirement date is uncertain.  The numerator would the number of months the parties were married that overlaps with the SM’s service.  The denominator would the total months of service by the SM, usually unknown at that point.  This fraction is then multiplied by the FS’s share (usually 50%).  For example, the SM and FS were married for 15 years, with the SM serving that entire time.  Assume the SM eventually retires after 30 years and the FS’s marital share of the pension is 50%.  The formula would be (180/360 x .5 = 25%).  The FS would end up receiving 25% of the SM’s pension when payments begin.  This formula has the advantage of being useful if total time of service for the SM is unknown because he/she is still serving.  The denominator could also be months of service at the time of divorce if part of the pension was earned prior to the marriage.  

Fourth, the amount paid could be expressed as a fixed rank and fixed years of service.  For example, it could state that the FS will receive 50% of what a Master Sergeant/First Sergeant (E-8) would earn with 15 years of service.  

    The third and fourth methods of pension division have specific advantages/disadvantages for the SM and FS worth noting.  The third method allows the FS to potentially benefit from the SM receiving a promotion(s) after the divorce.  The fourth method seeks to address this by fixing the rank of the SM at the time of the divorce.  Generally, the third method will benefit the FS and the fourth will benefit the SM.  The FS will want to argue that contributions during the marriage made any later promotions possible.  It is important to understand how these different division methods could impact your client.  Also note that the majority of courts will use the third method if they are dividing the pension.  


2.     Thrift Savings Plan

    SMs were initially enrolled in TSP accounts in 2001, but prior to 2005 contributions were limited to 10% of their gross income.  Now SM can contribute unlimited amounts of their base pay.  They may also contribute tax-exempt special pay in limited amounts.  The TSP can be divided by a Qualified Domestic Relations Order in the same way a civilian’s TSP account could be divided.


3.    Accrued Leave

Some states allow for the division of the value of accrued leave accumulated by the SM at the time of divorce.  The Court of Appeals of Virginia has held that valuing accrued leave prior to the SM retiring is “too speculative” and declined to divide its value. Whether a court could divide the value if the retirement date is known is an open question.  Further, counsel for the FS can request a portion of the value when negotiating a PSA.


4.    Commissary and Exchange Privileges

    A FS who does not remarry will retain commissary and exchange privileges after the divorce if she satisfies the 20/20/20 rule.  That is twenty years of service by the SM, twenty years of marriage, and twenty years of overlap between the two.  

A lengthy list of other service-related benefits can be found in an informative article done by the National Council on Aging Care.