New U.S. military retirement plan launched in 2018 will impact divorces

New plan will add a 401(k)-like component.

Getting divorced in Ohio is a major legal and personal event under any circumstance. But when one or both of the spouses is or was affiliated with the U.S. military, there are higher levels of complexity. While Ohio state law governs most aspects of divorce, federal military law and regulations also apply in a military divorce. In addition, the logistics of military life can add more challenge to the experience.

One complicated aspect of military divorce is the division of military retirement benefits, which involves issues of valuation, timing and involvement of the military establishment at payout time.

Blended Retirement System

In 2018, the military overhauled its retirement plan, raising new issues for related divorces.

Historically, the military retirement plan has been a defined benefit plan, like a pension in the private sector that pays out monthly checks upon retirement. On January 1, 2018, however, the military added a new defined contribution component to the plan, which operates like a civilian 401(k) to which service members make payroll contributions that the Department of Defense, or DoD, matches according to a predefined formula.

The account that receives the contributions is the Thrift Savings Plan or TSP.

Eligibility

Service members who activated on January 1, 2018, or later are automatically in the new Blended Retirement System, or BRS. All other active service members on that date automatically remain in the legacy system, but anyone with less than 12 years of service has the option to opt into the BRS through December 31, 2018.

(These plans also apply to Reserve and National Guard members, but for these purposes calculations use a point system, not years of service.)

Options making divorce more complicated

The BRS also adds two more major optional components. First, continuation pay is an optional bonus offered in exchange for additional service time. Second, a lump sum payout is optional at retirement in exchange for a reduced monthly payment from the pension part of the plan, until the service member reaches Social Security retirement age.

Having options to be decided in the future makes it harder to negotiate an agreement or advocate in court for a fair court order that takes into account how the other nonmilitary spouse will be affected. Can the service member be bound in divorce to say how he or she will choose in the future? Can he or she be required to notify the other spouse in the future and negotiate at that time how the other spouse will benefit or at least not be harmed by the decision? Can triggering provisions be put in to the divorce decree that say if a certain option is chosen in the future, this is what will happen?

What about a divorce going on right now where the service member spouse has the option to opt in by the end of 2018?

This is only the tip of the iceberg of potential legal issues. It is important that anyone facing military divorce talk to an attorney who is familiar with the new changes. In addition, if a military divorce is already final, but the service-member spouse involved qualifies for the BRS opt in, the other spouse may want to discuss the impact of that decision and any related option.

The lawyers at The Lampe Law Office, LLC, in West Chester represent active and retired military service members and military spouses, including those affiliated with Wright Patterson Air Force Base or Youngstown-Warren Air Reserve Station, in all matters related to divorce, including division of military pensions.