New military retirement plan raises questions for military divorces

Contextual

The new plan adds new options and components that will complicate settlement negotiations and trials.

Federal law allows military pensions and retirement benefits to be divided in state court divorces as part of the division of property between the divorcing parties. Historically, military retirement has been a defined benefit plan that pays out monthly benefits once eligibility starts. The parties at divorce might negotiate a division of those monthly benefits or if they cannot settle the matter, the judge in the divorce will decide.

New military retirement features

Beginning in 2018, the military kicked off a new military retirement plan called the Blended Retirement System or BRS that keeps a defined benefit component (according to a tweaked formula that results in a slightly lower monthly payout) and adds a new defined contribution plan that looks much like a civilian 401(k) plan with soldier contributions and government matches being deposited into a Thrift Savings Plan or TSP.

The BRS also offers Continuation Pay, which is essentially a mid-career bonus that, if accepted, requires the service member to serve more time. Also, at retirement, the BRS gives the option to take a lump-sum payout and reduced monthly payments until Social Security retirement age, when the full monthly payment level will resume.

Eligibility

Who gets what falls into three groups:

  1. Legacy plan: Anyone with at least 12 years of service (or equivalent points for Reserve or National Guard) on December 31, 2017, stays on the old plan.
  2. BRS: Anyone who begins active service on or after January 1, 2018, is automatically on the BRS.
  3. Opt-in decision: Members with less than 12 years of service on December 31, 2017, remain on the old system, but may opt into the new BRS if they do so by December 31, 2018.

Family law issues raised by the BRS

These developments may impact people who have already finalized military divorces, those currently in negotiation or court, and future divorces between service members and their spouses. There are some legal questions that may yet be unclear, so a knowledgeable lawyer who handles military divorce should be consulted as soon as possible.

Some potential issues include:

  • For already-finalized divorces that provide for a split of future military retirement, if the military ex-spouse opts into the new system, that could reduce the amount of future monthly payments unexpectedly. What about the unforeseen options of Continuation Pay or the lump-sum decision, and the TSP? Will the nonmilitary ex-spouse be able to get the divorce agreement or order modified? What about future notification of Continuation Pay or lump-sum payouts - is there a right to notice to the nonmilitary spouse about future choices made by the military spouse, and is there a community property right in those amounts?
  • The same issues will need to be resolved in current military divorce negotiations or trials if the military spouse has the option whether to opt-in through the end of 2018.
  • Family attorneys handling these divorces in 2018 and going forward will need to advise clients (and advocate before judges) about potential issues and rights related to the new BRS provisions and options.
  • Settlements and divorce decrees may become more complex as the parties attempt to include contingency provisions that will activate depending on future choices made under the BRS.

Anyone facing these issues in military divorce should speak with an experienced lawyer as soon as possible to understand his or her rights and options.

The attorneys at The Law Office of Heather Cullen with offices in Riverside and Temecula, California, represent active and retired service members and military spouses in divorce and related matters throughout Southern California. We also represent parties in military divorces who live or are stationed anywhere in the world if the divorce can be filed in Riverside County or San Bernardino County.