New military pension effective January 1, 2018, and will impact divorces

The new system will complicate the division of military retirement pay in divorce for both parties, even in some already finalized divorces.

Beginning on January 1, 2018, the U.S. military's retirement pay system will change drastically. The military pension program is a defined benefit program like a private pension, paying out monthly benefits based on years of service and historical earnings. The new system is the Blended Retirement System or BRS, which combines a benefit like the current one with a new defined contribution program like a civilian 401(k) plan.

These changes will significantly affect many past, pending and future military divorces. In general, divorce that involves a service member can be very complex as both federal military law and state family law are involved.

Military retirement in divorce

In a military divorce, a major issue is often division of military retirement pay, whether already received or potentially received in the future. For example, whether decided in a negotiated settlement or by a judge, the divorce decree could order that future military pension payments are divisible by half, with 50 percent going monthly to the nonmilitary spouse.

Under the current system (with some exception such as an unexpected future waiver of retirement pay in lieu of disability pay), determination of the amount of this type of award is fairly straightforward.

Currently, a service member is eligible for retirement pay after 20 creditable years of service. The monthly pay amount is calculated according to this formula:

Retired pay base (average of highest three years of pay) times Retired pay multiplier (years of service) times 2.5 percent

(Throughout this article, we are using the military service member's years of service as a yardstick. For members of the National Guard or Reserves, a parallel calculation exists based instead on points.)

The BRS

Under the BRS, the defined benefit part will remain the same, except the multiplier will drop to two percent from 2.5 percent. The new defined contribution component, called the Thrift Savings Plan or TSP, is an account into which the government will contribute an amount equal to one percent of base pay. The service member will have the option to contribute part of his or her own pay, which will trigger matching contributions from the Department of Defense or DoD according to a formula, up to a five percent service member contribution level.

Two additional BRS options may also complicate divorce:

  • Continuation pay: A service member will have the option to accept a bonus between service years eight and 12 in exchange for three more years of service.
  • Lump sum option: When a service member becomes eligible for monthly retired pay, he or she will have the option of a lump sum payout (either a discounted one-quarter or one-half of their total payout through the age of Social Security retirement), with full monthly payments to begin at Social Security retirement age.

Potential divorce complications

Service members with at least 12 years of service will stay in the existing system, but those who enter the military on or after January 1, 2018, will be placed in the BRS. Those with less than 12 years of service who were already active before 2018 have the choice between the two systems, but must decide by end of 2018.

Any service member or military spouse potentially impacted by any aspect of the BRS should seek immediate legal advice to protect any rights to retirement pay as determined by an existing or future divorce decree.

The attorneys at Rowe Law Offices, P.C., with offices in Wyomissing and Lancaster represent active and retired military and reserve service members as well as spouses of service members throughout Pennsylvania in divorce. Military clients include those affiliated with Carlisle Barracks, NSA Mechanicsburg and Tobyhanna Army Depot.