Source: https://www.nclamp.gov/publications/silent-partners/all-clauses-considered-writing-the-frozen-benefit-award/
Timestamp: 2019-04-24 04:52:35+00:00

Document:
Major changes in military pension division occurred in December 2016 when the President signed the National Defense Authorization Act for Fiscal Year 2017 (NDAA 17). Section 641 of the Act contained a major revision of how military pension division orders are written and will operate for those not yet receiving retired pay. Rather than allowing the states to decide how to divide military retired pay and what formula or methodology to use, Congress imposed a single uniform method of pension division on all 50 states plus other federal jurisdictions (e.g., the District of Columbia, Guam, etc.), employing a hypothetical scenario in which the military member retires on the date of divorce.
Those in the National Guard and Reserves who are not yet receiving retired pay (which usually begins around age 60).
The statutory revision has no impact on divorces with property division after retired pay has started.
A “rewrite” of the military pension division rules in the Uniformed Services Former Spouses’ Protection Act, or USFSPA, the new statute says that the “disposable retired pay” which is paid in pension shares by the retired pay center is that attributable to the “High-3” amount and years of service of the military member at the time of the parties’ decree of divorce, dissolution, annulment or legal separation. In effect, this means that the military will only pay the ex-spouse a share of the military member’s retired pay as it hypothetically exists on the day of divorce (i.e., if the court assumes that he or she had stopped serving and put in for retirement on that date). The only increase is COLAs (cost-of-living adjustments) pursuant to 10 U.S.C. § 1401a (b) which may occur between the time of the court order and the time of retirement.
Can the parties agree to “opt out” of this straight-jacket approach? Congress says “NO.” There are no exceptions for the parties’ agreement to vary from the new federal rule. Everyone must do it one way, regardless of what the husband and wife decide they want the settlement to say.
How should the courts write a proper court order to implement the frozen benefit rule? Guidance on military pension division rules and requirements was published at the end of June 2017 in the Department of Defense Financial Management Regulation. The “hypothetical clause” (as it is called by the Defense Finance and Accounting Service, or DFAS) is the most difficult clause to prepare. For those who entered military service on or after September 8, 1980, the current DoDFMR rule requires that the court order contain the member’s years of creditable service and his “High-3” amount (i.e., the average of the highest three years of compensation before the specified division date).
The court order must provide this information.
This means, in effect, that the attorneys must obtain this information, in order to avoid rejection of the pension division order.
And this, in turn, means that the attorney for the non-military spouse has to get this information or else there will be no qualified order for division of the military pension.
Because not too many attorneys are conversant with drafting such an order, the cost of military divorce will go up and counsel will start receiving rivers of rejection letters when pension orders are submitted which don’t comply with the new rule.
This Silent Partner will attempt to explain the writing of a clause for military pension division using the instructions contained in Chapter 29 of Volume 7B of the DoDFMR. It will discuss what’s needed from the standpoint of the member and the spouse or former spouse (FS). Essential reading are the several other Silent Partner infoletters on the Frozen Benefit Rule, which outlines the terms and data needed to comply with the new statute, where to find the information, strategies for the member and the spouse for compliance with NDAA 17, and how to dodge the impact of the new rules. They are at the website for the military committee of the N.C. State Bar, www.nclamp.gov > For Lawyers.
b) the member’s creditable service time as of the date of divorce, which is ____ years and ___ months (or in the case of members of the National Guard or Reserves, the creditable retirement points at divorce, which is ______ points).
When counsel is representing the SM, the language employed in the order, judgment or decree must be anchored in terms which strictly adhere to the language of the NDAA 2017. This means that the order will say that the amount to be divided is “disposable retired pay,” which is what the NDAA 17 redefined in December 2016. This approach for the order limits the FS to a smaller number for division with the SM, perhaps about 60% of the previous amount to which she or he would have been entitled under the “time rule.” The smaller the disposable retired pay (which is what is divided with the FS) the smaller the amount which must be paid to the FS.
[Wording for the servicemember] The servicemember will pay as military pension division to the former spouse a share of his “disposable retired pay” as defined in § 641, National Defense Authorization Act for FY 2017, codified at 10 U.S.C. §1408(a)(4).
The servicemember’s “High-3” amount (i.e., the average of the highest 36 months of compensation) is $________ as of the date of divorce.
The above pension share is the sole retired pay entitlement for the spouse/former spouse. All remaining retired pay of the member will be the sole and separate property of the servicemember, to which the spouse/former spouse will have no claim or entitlement.
The revised law doesn’t forbid entry of a time rule order. It merely states that the retired pay center (DFAS or the Coast Guard Pay and Personnel Center) will only honor “date-of-divorce division” for those still serving. Recognizing this limitation on payments from the government, the court may still enter a time rule order, noting that at the member’s retirement only a portion of the pension-share payment for the FS will come from the pay center. The court’s order would provide that the member is still responsible for the rest and will indemnify the FS for any difference between the two amounts.
Numerous court decisions have held that orders which require the retiree to pay more than 50% of disposable retired pay are not void or invalid; they are simply not enforceable through garnishment from the retired pay center for amounts in excess of 50%.
Avoid using “disposable retired pay” in the order to describe what is divided. Disposable retired pay, or DRP, means the restrictive definition in the frozen benefit rule (i.e., retired pay figured on the High-3 at the date of divorce) less all of the other specified deductions, such as the VA waiver and moneys owed to the federal government. The best way to word a pension clause is to provide for division of total retired pay less only the Survivor Benefit Plan (SBP) premium attributable to coverage of the former spouse. Regardless of the language used, DFAS will construe orders dividing “gross retired pay,” “total retired pay,” or any similar language as dividing DRP, but the language suggested here will be consistent with the use of indemnification if the FS’s share is reduced later.
[Wording for the spouse/former spouse] The servicemember is responsible for full payment of the funds due to the spouse/former spouse under the terms of this document.
Federal law limits what the retired pay center can distribute to the former spouse as a share of military retired pay, pursuant to § 641, National Defense Authorization Act for FY 2017, codified at 10 U.S.C. § 1408(a)(4). The member will pay the former spouse the share set out herein and, pursuant to 10 U.S.C. § 1408(e)(6), will indemnify the former spouse for any loss or damages resulting from failure to pay as stated above. As to any differential between what is due herein and what the retired pay center disburses, the parties will decide on an appropriate method for payment (e.g., consent order for alimony garnishment through the retired pay center, inter-bank transfer, allotment, or personal check) within 30 days after the first garnishment payment to the former spouse. If the parties cannot agree then the court will make the determination. The court reserves jurisdiction regarding enforcement of the terms herein for military pension division.
Sometimes the terms for pension division are set out in a separation agreement, property settlement agreement or marital settlement agreement. Thereafter the settlement is submitted to the court for incorporation into the divorce decree.
In states such as California and Florida, the divorce or dissolution may be granted in close proximity to the execution of the separation agreement. Since the dissolution is based upon no-fault grounds and there is no required period of separation in those states, this means that the required data shown above may be included in the agreement since it is unlikely to change if the divorce follows soon after the agreement is signed.
A different scenario, however can face the SM or spouse in a state such as North Carolina, where grounds for divorce involve a separation period of one year (with the intent that the separation be permanent), or in another state where a waiting period is involved. In such jurisdictions, the settlement may be executed shortly after the parties separate, and yet the divorce might be granted a year later. The same situation would occur if the military member were deployed shortly after the signing of the agreement, thus delaying the filing for divorce.
Federal law requires that the High-3 amount and years of service for the husband, Major Richard Roe, currently on active duty with the U.S. Marine Corps, be submitted to the retired pay center (in this case, the Defense Finance and Accounting Service, or DFAS) as of the date of divorce. Since that information may change between the date of execution of this document and the date of the parties’ divorce, the parties agree that Major Doe must submit verification of this information to the wife, Roberta Roe, at the time that either of them files for a judgment of absolute divorce in this state or any other jurisdiction. They further agree that this information will be included in the divorce judgment, so that the wife can apply to DFAS for division of military retired pay.
The preparation of a military pension division clause or order should be done only after reading the available rules and Section 641 of NDAA 17, as well as existing state law regarding the division of military pensions and defined benefit plans. Be sure to understand the law and the cases, and contact an expert in military pension division whenever possible, even an attorney from another state.
 This ignores the fact that over forty states use the “time rule” to divide a defined benefit plan, which involves a marital fraction composed of marital pension service divided by total pension service times final retired pay. Irrespective of state laws, cases and rules, the federal law applies to those still serving whose divorces or property division orders are after December 23, 2016, the date the law was enacted.
 DoD 7000.14-R, Department of Defense Financial Management Regulation (DoDFMR), Military Pay Policy and Procedures (DoDFMR). Retired pay is found in Vol. 7B, and Chapter 29 covers former-spouse payments.
 DoDFMR, Vol. 7B, ch. 29, Sec. 290608. For members of the National Guard or Reserves, any order which contains a fraction must be expressed in terms of retirement points, not months or years.
 The order must be expressed as a fixed amount, a percentage, a formula or a hypothetical which is awarded to the FS.
 See “Fixing the Frozen Benefit Rule” for more information on these and how to calculate and verify the High-3 amount.
 The end-point for marital pension service is the date of classification and valuation of marital or community property under state law. For example, New York’s date for valuation and classification is the date of commencement of the divorce case. In California, a spouse’s share of community property stops accruing at the “final separation.” See, e.g., In re Marriage of Bergman, 168 Cal. App. 3d 742, 214 Cal. Rptr. 661(Cal. Ct. App. 1985). The date of final separation is also the classification and valuation date in North Carolina. N.C. Gen. Stat. § 50-20 (b)(1). In Nevada, community property stops accruing on the divorce date. See, e.g., Forrest v. Forrest, 99 Nev. 602, 668 P.2d 275 (1983). In other states it may be the date of divorce, the date of irretrievable breakdown of the marriage, or a date in the discretion of the judge.
 Two points need to be made. First, the denominator which is mathematically correct would be described as “total pension service as of divorce,” since divorce is the date when the pension is frozen, according to DFAS; the SM, however, may want to stretch this out to read “total pension service,” which would mean in most cases an even smaller share for the FS. Whether state rules would allow that argument is another question, since it involves the law and cases in 50 or more jurisdictions. Secondly, marital pension service is measured in months except for members of the National Guard or Reserves. According to DFAS, when a formula for pension division contains a fraction and the SM is in the Guard or Reserves, the fraction must be stated in terms of retirement points.
 See Notes 11 and 12 supra as to marital pension service and total pension service. The denominator which is mathematically correct when final retired pay is divided would be described as “total pension service,” meaning that the pay is measured as of the end of the member’s career. However, since divorce is the date when the pension is frozen by the retired pay center, the spouse may want to shrink the denominator so that it reads “total pension service as of the date of divorce,” which would mean in most cases a larger share for the FS. Whether state rules would allow that argument is another question, since it involves the law and cases in 50 or more jurisdictions.

References: § 1401
 § 641
 §1408
 § 641
 § 1408
 § 1408
 § 50
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