QDRO Masters at the Willick Law Group has substantial experience dealing with military retirement benefits and its division. Marshal S. Willick, Esq., Principal of the Willick Law Group, and founder of QDRO Masters, literally wrote the book on the subject, “Military Retirement Benefits in Divorce: A Lawyer’s Guide to Valuation and Distribution” for the American Bar Association in 1998, and has written articles and taught continuing legal education seminars on the subject for over 30 years. For more information on Mr. Willick’s credentials, see Marshal Willick’s Resume.
There are thousands of retired military members receiving military retired pay today. The actual amount of retired pay varies according to the military rank of the retiree and the total amount of service. Additionally, these amounts are adjusted based upon cost of living adjustments, or COLAs, issued by the federal government to account for inflation.
In military-related divorce cases, the amount of retirement benefits often exceeds the value of all other assets combined, including the equity in the marital residence. Neglecting to provide for that asset is tantamount to malpractice; thus, it is essential for every divorce lawyer, and litigant, involved in a military case to be well versed in the process of identifying and evaluating a military pension.
In order to properly divide military retirement benefits, an Order Incident to Decree (sometimes called a “military QDRO”) is required. However, the Defense Finance and Accounting Service, the federal administration responsible for disbursing these benefits, will accept a certified copy of a decree sufficiently outlining the percentage of benefits to be disbursed to both parties. Just submitting a certified copy of a decree of divorce is risky, since most decrees do not provide for common situations. For example, many military members seek disability compensation. This negatively impacts their retired pay, which means former spouses can lose out on a significant portion of the benefits awarded based upon the member’s unilateral actions. A well-drafted order incident to decree can alleviate all such issues, and help both parties avoid future litigation.
That is where QDRO Masters at the Willick Law Group comes in. The attorneys at the Willick Law Group have drafted thousands of Orders to properly divide military retirement benefits for both military members and former spouses. When you require the drafting of an Order to divide military retirement benefits, feel confident knowing that QDRO Masters, and its years of experience, will take care to properly allocate this valuable and hard-earned asset.
Thrift Savings Plan (TSP)
As of October 8, 2001, military members were authorized to begin participating in the “Thrift Savings Plan” (“TSP”), which is similar to a private sector 401(k), permitting members to invest in a variety of funds. Military members therefore now have both a defined benefit and defined contribution type of retirement program, both of which should be addressed upon divorce. As of 2012, a “Roth” (pre-tax contributions) option was added to the TSP.
Although the agency administering the TSP has proven more flexible than either the military or the “Office of Personnel Management” (“OPM”), its regulations did spawn yet another acronym for a court order dividing benefits – “RBCO,” for “Retirement Benefits Court Order.”
No QDRO is required for a TSP distribution; the TSP will honor any order that expressly relates to the TSP account of the participant, has a clearly determinable entitlement to be paid, and provides for payment to some person other than the TSP participant. This includes payments directly to the attorney for the former spouse. A spousal share may be rolled over to an “Individual Retirement Account” (“IRA”) or other eligible plan, in which no taxes are withheld. Otherwise, the spouse is taxed on the distribution, and 20% is withheld.
Members who withdraw funds prior to the age of retirement significantly impact their TSP account balances. Those sums members withdraw while actively employed in federal service or uniformed services can never be replenished. In other words, employees permanently deplete their retirement savings by the amount of money withdrawn. Even when members remove funds based on a financial hardship (negative monthly cash flow as an example) they are subject to a 10% penalty and cannot make contributions for 6 months.
Survivor Benefit Plan (SBP)
In 1986, Congress amended the “Uniformed Services Former Spouses’ Protection Act” (“USFSPA”) so that State courts could order that former spouses be members’ beneficiaries of the “Survivor Benefit Plan” (“SBP”). SBP provides eligible beneficiaries with a form of benefit called an “annuity” in the event the named beneficiary survives the member. An annuity is a monthly payment for the lifetime of the beneficiary. The amount of the annuity, or benefit, is based upon a percentage of the member’s selected “base amount,” as detailed below. However, the annuity distributed will not exceed 55% of the member’s retired pay.
If a member elects, or is “deemed” by a court to have elected, to provide the SBP to a former spouse, the member’s current spouse and children of that spouse cannot be beneficiaries. Generally, an election to make a former spouse an SBP beneficiary is not revocable and is usually made at the time of retirement, although some situations allow a retiree to add coverage after retirement. If the election was pursuant to court order, a superseding court order is necessary to change it.
It should be noted that the amount of the survivorship interest is variable. The maximum SBP is selected if the entire retired pay is selected as the “base amount.” The smaller the base amount selected, the smaller the survivor annuity – and the smaller the lifetime premium paid to supply it. Whatever the base amount selected, cost of living adjustments increase a base amount so as to keep it proportionally the same as the amount initially selected.
No matter what any court orders, the military pay center can only take the premium “off the top” of the monthly payments of the regular retirement. Unfortunately, and counter-intuitively, that results in the parties each bearing a portion of the survivorship premium in exact proportion to their shares of the retirement itself. In other words, if the retirement is begin split 50/50, then the parties share the cost of the SBP premium equally, but if the spouse is entitled to only 25% of the monthly retired pay, then the member effectively pays 75% of the SBP premium.
It is possible to have the parties actually split the premium, or to effectively cause the member, or the spouse, to bear the full financial burden of the SBP premium, but doing so requires indirectly adjusting the percentage of the monthly lifetime benefits each party receives. An explanation of why such shifting might be appropriate, and how to actually do so, is set out in further detail in Marshal Willick’s advanced family law CLE course, Divorcing the Military and Severing Civil Service – How to Attack and Defend, posted at http://willicklawgroup.com/published-works/.
Marshal S. Willick, Esq., the Principal of the Willick Law Group, and founder of QDRO Masters, has over 30 years of experience dealing with a variety of complex SBP issues, has written extensively on the subject, and has been called as an expert witness in hundreds of cases across the country to testify as to its application/availability.