Posts tagged with "Military Retirement"

Estimating Military Retired Pay

Mark E. Sullivan*Mr. Sullivan is a retired Army Reserve JAG colonel.  He practices family law in Raleigh, North Carolina and is the author of The Military Divorce Handbook (Am. Bar Assn., 3rd Ed. 2019) and many internet resources on military family law issues.  A Fellow of the American Academy of Matrimonial Lawyers, Mr. Sullivan has been a board-certified specialist in family law since 1989.  He works with attorneys nationwide as a consultant on military divorce issues in drafting military pension division orders.  He can be reached at 919-832-8507 and at law@ncfamilylaw.com.

 

Introduction

From time to time, our office gets inquiries by phone or e-mail regarding how to estimate the military retired pay of a member of the uniformed services.  This term means the “armed forces,” that is, the Army, Navy, Air Force, Marine Corps, and Coast Guard, and also the commissioned corps of the Public Health Service (PHS) and the National Oceanic and Atmospheric Administration (NOAA).  The rules for calculating the retired pay of the active-duty “member” one of these service components, technically called “Regular Retirement” pay, are set out in 10 U.S.C. § 1407 and 1409 for the armed services, and at equivalent sections of the U.S. Code for PHS and NOAA officers.  Below is a simplified explanation of the rules for calculation.

“What’s the Formula?”

The basic formula for determining one’s retired pay is Retired Pay Base times Retired Pay Multiplier, or RPB X RPM.  This can be illustrated as:

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The usual percentage is 2.5%, but it’s 2.0% when a) the servicemember elected to receive a mid-career cash bonus known as CSB/Redux, or when b) the member is in the Blended Retirement System.

High-3 Pay

“High-3 Pay” is the average of the highest three years (not necessarily continuous) of base pay for a member, expressed on a monthly basis.

  • How to obtain the documents and do the calculations is set out in the Silent Partner infoletter, “Military Pension Division and the Frozen Benefit Rule: Nuts ‘n’ Bolts,” found at nclamp.gov > Publications.
  • The quick way to estimate this is to take the current pay of the member, obtained from his or her Leave and Earnings Statement, or “LES” (or other equivalent pay statement, such as the “PaySlip” for Coast Guard member), and multiply it times 98%. Thus if Major Jane Doe receives $8,000 per month as her base pay, the estimate for her High-3 Pay would be $8,000 X .98% or $7,840.

The Defense Finance and Accounting Service (DFAS) is the pay center for the Army, Navy, Air Force and Marine Corps.  The Department of Defense regulation governing the Privacy Program, DoD 5400.11-R, states that the Defense Department will release the following information regarding a servicemember: date of rank, gross salary, length of military service and Basic Pay Entry Date. Para. C4.2.2.5.2.1, DoD 5400.11-R (May 14, 2007). Other items may also be disclosed.

Years of Service

“Years of service” can be determined by asking Major Jane Doe, if she is your client.  Otherwise the figure can be determined by review of her LES (look at the “Pay Date” or “Pay Entry Base Date” as well as the DIEMS, or Date Initially Entered Military Service).  The LES may be provided voluntarily by Jane or her attorney, or it may be obtained otherwise through discovery.  This information is also available through a request pursuant to DoD 5400.11-R, as noted above.  If you know Jane’s pay grade[2] and years of service, you can determine her present base pay by using the pay tables at the DFAS website, https://www.dfas.mil > Military Members.

Pay grade – not rank – is what’s needed for the pay tables. Rank can be confusing: a master sergeant in the Air Force is pay grade E-7, but it’s E-8 in the Army; a Navy captain is pay grade O-6, but a Marine Corps captain is pay grade O-3!

Example of the Calculation

Let’s follow up on the calculations for Major Jane Doe, with the data set out above.  Her “estimate” for the High-3 is $7,840, and her Retired Pay Multiplier (assuming that she has just finished serving 20 years) is 20 X 2.5%, or 50%.  The combination of these gives $3,920/mo.  This is the projected retired pay for Major Doe if she were to retire at the 20-year mark with the above as her High-3 pay.


 

“Magic Words” – Last Chapter

“Magic Words” - Last Chapter

Published on January 11, 2020

Mark Sullivan

Mark Sullivan

Law Offices of Mark E. Sullivan, P.A.

 

     

    The final set of “magic words” are ones which belong in every military pension division order, incorporated settlement or divorce decree. These required phrases are set out in the Uniformed Services Former Spouses’ Protection Act (USFSPA), 10 U.S.C. §1408, and in the rules for administration and enforcement of pension division, found at Chapter 29 of Vol. 7b, Dept. of Defense Financial Management Regulation (a.k.a. the DoDFMR).

     

    Compliance with the SCRA

    Every pension division instrument must state that there has been compliance with the Servicemembers Civil Relief Act, or SCRA. In general, this means that the rights of the servicemember (such as the right to obtain a stay of proceedings under certain conditions and the bar against default judgments) have been protected. The statute is found at Chapter 50 of Title 50, U.S. Code.

    MAGIC WORDS: “The rights of John Doe, the defendant, under the Servicemembers Civil Relief Act, Chapter 50 of Title 50, U.S. Code, have been observed.”

    The “10/10 Rule”

    Getting direct payments from the retired pay center is important for the former spouse (FS); it means a regular garnishment of retired pay, deposited in the recipient’s bank account around the first of each month. It is important for the retiree as well, since it eliminates the need to write a check to the FS every month and to keep track of COLAs (cost-of-living adjustments) once a year.

    The “retired pay center” is DFAS, the Defense Finance and Accounting Service, for those who are retired from the Army, Navy, Air Force and Marine Corps. It’s the Coast Guard Pay & Personnel Center for those retiring from the Coast Guard and the commissioned corps of the Public Health Service (PHS) and the National Oceanic and Atmospheric Administration (NOAA).

    According to the USFSPA, the retired pay center cannot garnish retired pay as property division unless it appears from the application for a share of retired pay that the marriage overlaps the creditable service by at least 10 years. Thus it is essential to include this essential language in the pension division instrument.

    MAGIC WORDS: “The parties were married to each other for at least 10 years during which the member performed at least 10 years of service creditable in determining the member’s eligibility for retired pay.”

    “Disposable” Retired Pay – It’s Disposable

    Surprisingly, the phrase “disposable retired pay” is not in the set of “magic words” for the pension order. Although Congress stated in the USFSPA that “disposable retired pay” is all that a state court can divide in military pension division (see 10 U.S.C. §1408 (a)(4)), the rules have made this term irrelevant or, more properly, disposable. All awards of a portion of the military pension are to be construed as dividing the retiree’s “disposable retired pay,” regardless of their wording. So your order will not be rejected for faulty language or the absence of “magic words” if it divides John Doe’s “military pension” or “uniformed services retired pay,” for example.

    In the Meantime…

    Interim payments must be addressed in the pension division order. That’s because the parties need to know who makes what payments while the order is being processed by the retired pay center. According to the USFSPA (see 10 U.S.C. §1408 (d)(1)), the pay center will begin pension-share payments within 90 days of the retiree’s entitlement to receive retired pay or 90 days from the receipt of an acceptable order, whichever is later. For this reason, the order should specify that the retiree is responsible for payments in the interim. In a case where John Doe is the plaintiff and the military member or retiree, the following phrasing would be useful.

    MAGIC WORDS: “Plaintiff will receive payments at the same time as Defendant. The parties acknowledge that DFAS is not required to begin payments to the former spouse until 90 days after receipt of an acceptable order or the start of retired pay, whichever is later. Defendant will be responsible for making these payments each month to Plaintiff until DFAS begins making these payments to her, and during this interim, Defendant will pay Plaintiff directly her full share, unadjusted for taxes.”

    Language for the Award – Four Options

    Finally, there are “magic words” involved in phrasing the award. The retired pay center will only accept a pension division instrument which specifies the award to the FS in terms of a fixed amount, percentage, formula, or hypothetical amount of retired pay. Examples of each one may be found in these Silent Partner infoletters: “Getting Military Pension Orders Honored by the Retired Pay Center,” and “Military Pension Division: Guidance for Lawyers.” All of the Silent Partner infoletters will be found at www.americanbar.org > Family Law Section > Military Law Committee, and at www.nclamp.gov > Publications.

    A Helpful Checklist

    Note that “one size fits all” definitely doesn’t apply to military pension division orders. A good practitioner will check and re-check the pension division order to be sure it complies with the regulations and the statute, accomplishes the needs of the client, makes sense, and will be honored by the retired pay center. Here is a checklist that DFAS uses for pension division orders:

    DFAS CHECKLIST FOR MILITARY PENSION DIVISION ORDERS

    • FORMER SPOUSES’ PROTECTION ACT CHECK SHEET
    • MEMBER’S NAME
    • SOCIAL SECURITY NUMBER
    • SERVICE OF APPLICATION (personal, certified or registered mail, return receipt requested)
    • FINAL DECREE OF DIVORCE, DISSOLUTION OR ANNULMENT OR LEGAL SEPARATION
    • ISSUED BY A COURT – OR – A COURT ORDERED, RATIFIED OR APPROVED PROPERTY
    • SETTLEMENT INCIDENT TO SUCH A DECREE
    • AUTHENTICATED OR CERTIFIED PRIOR TO SERVICE OF PENSION ORDER
    • MEMBER PROPERLY IDENTIFIED (E.G., NAME, ADDRESS, SSN)
    • NAME, ADDRESS, AND SSN OF FORMER SPOUSE
    • ORDER PROVIDES FOR ONE OF THE FOLLOWING: A) PAYMENT OF FIXED MONTHLY AMOUNT OF $________; B) FIXED PERCENTAGE OF ______%; C) FORMULA CALCULATION (must use retirement points in Guard/Reserve case); D) HYPOTHETICAL CALCULATION:
    • MEMBER’S RIGHTS UNDER THE SERVICEMEMBERS CIVIL RELIEF ACT COMPLIED WITH
    • JURISDICTION MET
    • RESIDENCE (NOT DUE TO MILITARY ORDERS)
    • DOMICILE
    • CONSENT
    • ORDER HAS NOT BEEN AMENDED, SUPERSEDED, OR SET ASIDE
    • ORDER IS FINAL DECREE, NO APPEAL MAY BE TAKEN, NO APPEAL WAS TAKEN WITHIN TIME PERMITTED
    • FORMER SPOUSE MARRIED TO MEMBER AT LEAST 10 YEARS DURING AT LEAST 10 YEARS OF CREDITABLE SERVICE
    • PAY ENTRY DATE:
    • RETIREMENT DATE:
    • MARRIAGE DATE:
    • DIVORCE DATE:
    • IF DIVORCE AFTER 12/23/16 AND MEMBER WAS NOT RECEIVING RETIRED PAY AT DIVORCE, ORDER CONTAINS TWO DATA POINTS REQUIRED BY DoDFMR VOL. 7B, CH. 29, §2908: HIGH-3 PAY AT DIVORCE AND TOTAL YEARS OF CREDITABLE SERVICE (FOR RC MEMBER, TOTAL RETIREMENT POINTS) AT DIVORCE

    More detailed information and illustrations can be found in Chapter 8 of THE MILITARY DIVORCE HANDBOOK (Am Bar Assn., 3rd Ed. 2019).

    Magic Words – Again?

    The two prior pieces about the issue of special language in military divorce cases dealt with a) wording to secure the Survivor Benefit Plan for the non-military spouse, and b) wording required by the Frozen Benefit Rule so that the retired pay center would accept the pension division order. This “magic words” installment deals with the all-important issue of jurisdiction. If the court lacks jurisdiction, then your efforts would be wasted. Be sure that the judge makes the right findings.

    The issue of jurisdiction under 10 U.S.C. 1408, the Uniformed Services Former Spouses’ Protection Act, is covered at subsection (c)(4) of the statute. Since most cases are settled with a consent order or a separation agreement incorporated into the divorce decree, the likely “magic words” you’ll need to use would be: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his consent to the jurisdiction of the court.”

    jurisdiction to divide the uniformed services retired pay
    When the case is contested, you’ll have to look elsewhere for a jurisdictional basis for the order dividing military retired pay. The usual base to use is domicile. If your state is the “state of legal residence” of John Doe – that is, his domicile – then the order might state: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his domicile in the state of East Virginia.”

    Don’t be deceived by “home of record.” That phrase is not intended to mean one’s domicile. It’s only a reference to the place from where John Doe entered the service, and to which his household goods will be shipped upon his discharge. It may be his domicile, but that’s not dead certain. For example, when I entered military service in December 1971 [that so long ago that dinosaurs ruled the earth!], my domicile and my home of record were both Ohio, since I went on active duty from Cleveland. When I was transferred to Ft. Bragg in 1972, both were still Ohio. But in 1976 when I decided to obtain reciprocity admission to the N.C. Bar, I changed my domicile to N.C. (by changing my car title and driver’s license, my bank, my voting records, my personal property tax listing, my state income tax info, etc.), even though my home of record remained Ohio. You can look up the incidents of domicile in a Silent Partner infoletter, “Divorce and Domicile,” at www.americanbar.org > Family Law Section > Military Law Committee, or at www.nclamp.gov > Publications. The infoletter contains a checklist of every conceivable item that would be relevant in a domicile determination.

    The last test is rarely used. It involves the exercise of jurisdiction by the court in East Virginia due to John’s residing in that state, but not due to military orders. Thus your order might use the following “magic words” for jurisdiction, assuming that you have the facts to back this up: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his residence within the territorial jurisdiction of the court other than because of military assignment.” This test is only used when there is a nearby state boundary, such as the following – John is stationed at Eglin AFB, Florida, but he’s living just across the state line in Gulf Shores, Alabama, to be near his aged parents (and to get rent-free lodging). In that case, Alabama could exercise
    jurisdiction over the military pension division, since John’s residing in Alabama is not due to his military assignment in that state.

    The rules for military pension division are published by DFAS, the Defense Finance and Accounting Service; they’re found at the Dept. of Defense Financial Management Regulation, Vol. 7b, Chapter 29. The rules state that for a court order to be accepted, it must explicitly state the basis for the court’s exercise of jurisdiction. So don’t just recite the usual “blanket language” of “This court has jurisdiction over the parties and the subject matter of this case” without adding the proposed language set out above.
    Anything less than the specific basis for jurisdiction will result in a rejection letter from the retired pay center, whether that’s DFAS (for Army, Navy, Air Force and Marine Corps) or the Coast Guard Pay & Personnel Center (for USCG, and for the commissioned corps of NOAA and PHS).

    All of this (and more) can be found in Chapter 8 of THE MILITARY DIVORCE HANDBOOK (Am Bar Assn., 3rd Ed. 2019). The website is: https://www.americanbar.org/products/.

    -Mark Sullivan

     

    “Magic Words,” Volume 2

    Wording for military pension division orderThe last article on “Magic Words” pointed out the unique language required to effect a valid former-spouse election for the Survivor Benefit Plan. This exploration will cover life, not death.  When the military pension is divided by the court, the order which grants lifetime pension division can be a divorce decree, a settlement incorporated into the decree or a consent order, sometimes called a military pension division order (MPDO).  The order is required to have two special phrases (or what you might call “magic words”) to comply with federal law.

    The Frozen Benefit Rule

    The law, of course, is the federal statute which allows the division of military retired pay by state courts; that’s the Uniformed Services Former Spouses’ Protection Act, or USFSPA, located at 10 U.S.C. §1408.  An amendment in 2016 restricted the division of military retired pay to that which exists on the day of divorce.  The “Frozen Benefit Rule” thus limits any further growth of the pension by taking a snapshot at the time of divorce.  To provide information which the retired pay center needs to make this calculation, the law requires that every pension order state two data points: a) the High-3 pay of the servicemember on the date of the dissolution and b) the member’s years of creditable service (or, in the case of Guard/Reserve members, the date-of-divorce number of retirement points).  This rule applies, pursuant to 10 U.S.C. §1408 (a)(4)(A), to the military pension division cases where the divorce was granted after December 23, 2016 and the member was not receiving retired pay at divorce.

    There is no exception if you’re within this window.  Congress did not leave a loophole for the parties to “consent otherwise.” Thus the husband and wife are not free to write their own agreement, since Congress has decided to tell them what they can do.

    “High-3” Pay, Years of Service

    The High-3 compensation of an individual is his or her highest three years of base pay, stated as a monthly amount (e.g., “John Doe’s High-3 at divorce was $4,567.89 per month”).  That will require a clear understanding of John Doe’s current rank and years of service, as well as his date of initial entry into military service (or DIEMS) and his last promotion date, unless counsel somehow “gets lucky” and obtains the appropriate number of past pay statements from the servicemember.  While not on a par with calculus, the computations are not easy for most attorneys.

    The years of creditable service will depend on pay records (and other documents when there was a break in service).  Counsel must know the difference between DIEMS (see above) and the PEBD, or Pay Entry Base Date.  The retirement points calculation means that counsel must have access to John Doe’s annual Reserve/Guard points statement.

    None of this is simple, and it’s often a wise idea to hire an attorney who’s “been around the block” with these problems a couple of times.  That’s what we call a co-pilot or – in the words of Tom Cruise – a “wingman.”  It’s also possible to attempt this alone by reading “Military Pension Division and the Frozen Benefit Rule: Nuts ‘n’ Bolts,” a Silent Partner infoletter which may be found at https://www.americanbar.org/groups/family_law/ > Military Law Committee, or at www.nclamp.gov > Publications.

    All of this (and more) can be found at “The Frozen Benefit Rule” in Chapter 8 of THE MILITARY DIVORCE HANDBOOK (Am Bar Assn., 3rd Ed. 2019).

    Survivor Annuity Success

    Last week we received word from the Defense Department of a major victory in one of our cases.  It involved the Survivor Benefit Plan.

    EX-WIFE OBTAINS SURVIVOR BENEFIT PLAN PROTECTION-

    -COURT ORDER FINALLY HONORED BY FEDERAL GOVERNMENT.

    THE BASICS

    Federal law allows a former spouse to obtain Survivor Benefit Plan coverage in military divorce cases, but the application must be made within strict deadlines. If they’re missed, the benefit may be lost.

    THE BACKSTORY

    Our client, “Jane Doe,” married her husband in 1964 and the parties were divorced in 2004 in Minnesota.  That’s a marriage of 40 years!

    Before they were divorced. “John Doe” was determined to be mentally incompetent. We were hired by the parties’ adult daughter, “Susan,” who was the permanent guardian of her father.

    The divorce judgment awarded the Survivor Benefit Plan protections (55% of husband’s retired pay for the rest of her life) to Jane Doe.

    The problem was – no one was aware of the “deadline dilemma.”  When SBP (the Survivor Benefit Plan) is ordered in a divorce case, the military member or retiree (here – John Doe) must apply to the government for coverage within a year of divorce.  And the former spouse, Jane Doe, has to submit a deemed election document to the government within one year of the court order granting SBP to her.

    Neither party knew anything about the deadlines and they were missed.  Then in 2014 John died.  Ordinarily, that’s the end of the case…

    Not here, however!

    Jane and her local attorney in Minnesota – a National Guard JAG officer whom I have known for 20 years – contacted us in 2015 to assist them in securing former-spouse SBP coverage. We then contacted Susan, the daughter and guardian of the deceased ex-husband.

    Supporting Our Military Families

    We made an application to the Board for Correction of Naval Records (BCNR), requesting an administrative change in the military records of the former husband to show that he’d made the election of SBP “on time,” that is, within the statutory record window.

    I signed the application memo on January 30, 2018.  Just last week the BCNR had voted to approve our request for SBP coverage for our client.

    “Susan” – the guardian – was overjoyed.  The client was ecstatic.  This means that we’ll be able to ensure that the client receives a benefit which equals 55% of the late ex-husband’s retired pay for the rest of her life.

    And there will be a lump-sum back payment to Jane for what was due to her for the past 5 years.

    And it’s increased by COLAs to account for inflation!  Jane can live to be 102 and still receive payments for the survivor annuity.

    THE BOTTOM LINE

    Here are some practice tips for the lawyer or client not familiar with these rules and restrictions:

    1. A) Ensure that SBP is included in the divorce settlement.
    2. B) Be sure to comply with the statutory deadlines for SBP registration with the retired pay center.
    3. C) If they’re missed, apply to the appropriate Board for Correction of Military Records (10 U.S.C. 1552) to ask for correction of the military records to reflect SBP coverage.

    There’s an expanded section on Board applications in my book, The Military Divorce Handbook (Am. Bar Assn., 3rd Ed. 2019).  Go to Chapter 8 – it’s all there, with references to the statutes and the regulations.  The appendices show examples of documents to file in support of an application.

    –Mark E. Sullivan

     

    The Military Divorce Handbook has sold almost 400 copies in 2 ½ months and will go into its second printing within the next 30 days!  The revenues it has brought in for the ABA Family Law Section have helped make it possible to continue the good work that the Section does.

     

    Costly Mistakes in Military Divorce

    In too many military divorces, a client or lawyer makes a costly mistake.  Often it’s because the client is unaware of the options or the law, someone relies on rumors and myths, “barracks lawyers” and buddies provide well-meaning but erroneous information, the attorney is unaware of the rules for military retirement and its division, or the rules themselves are too complex, illogical and confusing.  For advice and assistance navigating your military divorce, call us at 919-832-8507 for a consultation.