Division of Military Retired Pay in Virginia
Divorce, when one or both spouses are current or former members of the military, can be quite a bit different than a civilian divorce. One of the main differences is the existence of a servicemember’s military retired pay. Issues such as the logistics of dividing the retired pay, the impact of disability pay, and survivor’s benefits must all be considered. The following are five issues that can arise in a military divorce.
Military Retired Pay in General and Divorce
Virginia courts have the ability to divide a military member’s “disposable retired pay” between the member and his or her spouse. Courts in some other states do not have this ability, and courts in foreign countries do not have this ability, so where the divorce takes place can have a major impact on the division of military retired pay, which can often be a large asset.
Direct Pay to the Spouse & DFAS
The Defense Finance and Accounting Services (“DFAS”) is the agency who administers the issuance and division of military retired pay. Once the parties agree on (or a Court orders) a division of military retired pay, DFAS will pay the spouse’s share directly to the spouse, but only if that spouse satisfies the “10/10/10 requirement.” To satisfy this requirement, the spouse and servicemember must have been married for at least ten total years, the servicemember must have been a member of the armed forces for ten total years, and at least ten years of the military service must have taken place during the marriage. If a spouse does not satisfy the 10/10/10 requirement he or she can still be awarded a portion of the military retired pay, but they would have to receive their share from the member directly.
Some or all of a servicemember’s retired pay can be classified as disability pay, depending on the extent to which the servicemember became disabled as a result of his or her military service. A servicemember typically has an incentive to get some of all of their award to be classified as disability pay, as it then is not subject to federal or state income tax. No court has the authority to order the division of a military member’s disability pay. That said, there are a number of ways a spouse can seek to share in the benefits of disability pay, sometimes through an award of spousal support, sometimes through a greater award of the remainder of the marital property. Also, the CRSC and CRDP, explained below, also operate to increase the amount of disposable military retired pay certain servicemembers can receive by allowing them to receive disability payments in addition to, rather than instead of, disposable retired pay.
Combat Related Special Compensation and Concurrent Retirement and Disability Pay
Combat-Related Special Compensation (CRSC) provides servicemembers a monthly compensation that replaces their VA disability offset. This means that qualified servicemembers with 20 or more years of service that have “combat related” VA-rated disability will not have their military retirement pay reduced by the amount of their VA disability compensation. Instead they will receive both their full military retirement pay and their VA disability compensation. Concurrent Retirement and Disability Pay (CRDP) is similar to this, albeit for non-combat related disability. Before 2005, by law a servicemember’s disposable retired pay had to be offset by the amount of disability pay he or she received. Under CRDP, starting in 2005, eligible retirees (who have more than 20 years of service and a greater than 50% disability rating) will begin to receive their disability pay in addition to, rather than instead of, their disposable retired pay. Unlike the CRSC, however, CRDP is being phased in at 10% per year starting in 2005 and ending in 2014.
Survivor’s Benefit Plan
The Survivor’s Benefit Plan, or SBP, pays the surviving spouse of a servicemember continued retirement benefits after the servicemember’s death. The SBP is typically part of settlement negotiations in a military divorce, and can be awarded by a Virginia Court. However one must be aware that a spouse seeking SBP coverage from the military must take certain steps to ensure they qualify for SBP. Regardless of what the parties agree to, or what the Court order, a spouse wishing to preserve his or her right to SBP must send a “deemed election” letter to the military along with the required form and supporting documentation within one year after divorce or risk losing this benefit. Who pays for the SBP can also be at issue. By default, the SBP is paid by a reduction off the top of the amount of military retired pay that is divided between the servicemember and the former spouse. Parties may want to change this, especially if the former spouse is receiving a comparatively small share of the overall military retired pay. Under current DFAS regulations, the only way to reallocate the cost of the SBP is to adjust the actual share of the retired pay paid to the spouse. This is in sharp contract to federal employee pensions and many other private pensions which allow the parties to divide the responsibility for SBP cost directly, without having to adjust the actual shares of the pensions received by the parties.