Nolo's Essential Guide to Divorce - Emily Doskow [144]
The Uniformed Servicemembers' Former Spouses' Protection Act (USFSPA)
The USFSPA is a law passed by Congress in 1982 to offer some financial protection to certain former spouses of service members. Congress passed the USFSPA to clarify that states are permitted, though not required, to treat military retirement pay as a marital asset subject to division at divorce. (The states' other option is to treat it as the separate property of the service member.)
Dividing a Military Pension
Military pensions are "defined benefit plans," which means they are true pensions-participation is mandatory, and payments at retirement are calculated using various factors including length of service. In most cases, the pension won't be paid out until the service member actually retires.
If the service member is already retired when the divorce begins, then the amount to be divided at divorce is easily determined. If not, if you're doing anything other than dividing the pension equally at retirement, then the marital share of the pension will have to he calculated by an actuary or other expert. That process, and the options for dividing a defined benefit plan, are explained in detail in Chapter 10. In brief, however, the civilian spouse has the option of waiting to receive a share of the benefits when the service member retires, or accepting a lump sum buyout either for cash or in trade for other marital assets.
Make sure your calculations are specific to the military. The military has its own mortality tables and other presumptions that affect the retirement calculation. If you hire an actuary to value a military pension, make sure the actuary uses the appropriate assumptions. Your attorney or actuary can also buy software designed to do these calculations.
Some lawyers think that it's usually better for a civilian spouse to take the lump sum at divorce, rather than staying enmeshed in a system that is somewhat unpredictable, as you'll see as you read on. In fact, the very unpredictability of factors like the service member's survival until retirement, eligibility for retirement, and rank and pay grade at the time of retirement, lead some courts to refuse to make a decision at the time of the divorce. Instead, they enter a so-called "wait and see" order and retain the right to make a decision about the benefits at the time the service member is eligible for retirement or actually retires, whichever comes first. This means ex-spouses can look forward to additional legal fees and engagement with each other at some unknown future date-not a prospect most divorcing spouses relish.
Another situation in which you might want to take a lump sum instead of waiting for your military spouse to retire is where you don't qualify under the 10/10 rule to have the military pay your share of the retirement directly to you. If you wait, you'll be relying on your former spouse to pay you your share, and if many years have passed between your divorce and your spouse's retirement, it may be difficult to enforce the order if your spouse fails to live up to its terms.
What Gets Divided?
Federal law provides that state courts may divide only "disposable retired pay" in a divorce. Disposable retired pay means the service member's gross retirement pay, minus any amounts that the government takes back through deductions-for example, prior overpayments, court-martial fines or forfeitures, or premiums for the Survivor Benefit Plan (discussed below).
Also excluded from disposable retired pay are disability pay benefits. This means that a service member who receives disability benefits as a result of a disability sustained during the marriage may withhold the disability benefit amount from the amount of disposable retired pay that