Opinion ID: 2549122
Heading Depth: 2
Heading Rank: 4

Heading: language dividing military retired pay.

Text: The major reason for rejecting applications for payments under the USFSPA is that the language dividing retired pay is faulty. The USFSPA states that for an award to be enforceable, it must be expressed either as a fixed dollar amount or as a percentage of disposable retired pay. [15] If a fixed dollar amount award is used, the former spouse would not be entitled to any of the member's retired pay cost of living adjustments (COLA's). [16] Because of the significant effect of COLA's over time, it is infrequent that an award is stated as a fixed dollar amount. The more common method of expressing the former spouse's award is as a percentage of the member's disposable retired pay. This has the benefit to the former spouse of increasing the amount of the former spouse's award over time due to periodic retired pay COLA's. All percentage awards are figured based on a member's disposable retired pay, which is a member's gross retired pay less authorized deductions. [17] The authorized deductions vary based on the date of the parties' divorce. The principal deductions now include retired pay waived to receive VA disability compensation, disability retired pay, and Survivor Benefit Plan premiums where the former spouse is elected as the beneficiary. Since the United States Supreme Court has ruled that Congress authorized the division of only disposable retired pay, not gross retired pay, [18] the regulation provides that all percentage awards are to be construed as a percentage of disposable retired pay. [19] Set-offs against the former spouse's award are not permitted. If the former spouse's award is expressed in terms which require an amount to be deducted from the award, such as a percentage of disposable retired pay less some set-off amount (e.g., the Survivor Benefit Plan premium or the former spouse's child support obligation or some other debt), the entire award is unenforceable. This type of award language does not meet the statutory requirement of a fixed dollar amount or percentage. If the award language does meet the requirements of the statute and is acceptable, but has subsequent language in the court order that requires a set-off amount be deducted from the former spouse's share, only the set-off is unenforceable. These determinations are because there is no provision of the USFSPA that authorizes set-off's. State courts have authority to divide military retired pay only as set forth by the USFSPA. [20] Thus, state court provisions not in accordance with the USFSPA are unenforceable. There is no magic language required to express a percentage or fixed dollar award. All the divorce decree needs to say is that: The former spouse is awarded ____ percent [or dollar amount] of the member's military retired pay.
Most of the problems with award language have arisen in cases where the parties were divorced while the member was still on active duty. In these cases, the former spouse's award is indeterminate since the member has not yet retired. Since the parties do not know how much longer the member will remain in military service after the divorce, a straight percentage award may not be suitable. Also, many States take the approach that the former spouse should not benefit from any of the member's post-divorce promotions or pay increases based on length of service after the divorce. These awards are often drafted in such a way that we cannot determine the amount of the award. This causes the parties to have to go back to court and obtain a clarifying order. A proposed regulation was issued in 1995 that allowed the use of formula and hypothetical awards to divide military retired pay when the parties were divorced prior to the member's becoming eligible to receive retired pay. [21] Although this proposed regulation has never been finalized, it still provides the basis for our review of these types of awards. A formula award is an award expressed in terms of a marital fraction, where the numerator covers the period of the parties' marriage while the member was performing creditable military service, and the denominator covers the member's total period of creditable military service. The former spouse's award is usually calculated by multiplying the marital fraction by ½. (A) For members retiring from active duty, the numerator is the total period of time from marriage to divorce or separation while the member was performing creditable military service. The numerator, expressed in terms of whole months, must be provided in the court order. Days or partial months will be dropped. DFAS will supply the denominator in terms of whole months of service creditable for retirement, and then work out the formula to calculate the former spouse's award as a percentage of disposable retired pay. All fractions will be carried out to six decimal places. For example, assume you have a marriage that lasted exactly 12 years or 144 months. The member serves for 25 years and then retires. Using the above formula, the former spouse would be entitled to ½ × (144/300) = 24.0000% of the members disposable retired pay. The following language is an example of an acceptable way to express an active duty formula award: The former spouse is awarded a percentage of the member's disposable military retired pay, to be computed by multiplying ____% times a fraction, the numerator of which is ____ months of marriage during the member's creditable military service, divided by the member's total number of months of creditable military service. (B) In the case of members retiring from reserve duty, a marital fraction award must be expressed in terms of reserve retirement points rather than in terms of whole months. The numerator, which for reservists is the total number of reserve retirement points earned from marriage to divorce or separation, must be provided in the court order. [22] DFAS will supply the member's total reserve retirement points for the denominator. All fractions will be carried out to six decimal places. The following language is an example of an acceptable way to express a reserve duty formula award. The former spouse is awarded a percentage of the member's disposable military retired pay, to be computed by multiplying ____% times a fraction, the numerator of which is ____ reserve retirement points earned during the period of the marriage, divided by the member's total number of reserve retirement points earned.
A hypothetical award is an award based on a retired pay amount different from the member's actual retired pay. It is usually figured as if the member had retired on the date of separation or divorce. Many jurisdictions use hypothetical awards to divide military retired pay. Unlike a formula award, a hypothetical award does not give the former spouse the benefit of any of the member's pay increases due to promotions or increased service time after the divorce. The basic method for computing military retired pay is to multiply the member's retired pay base times the retired pay multiplier. [23] For members entering military service before September 8, 1980, the retired pay base is the member's final basic pay. [24] For members entering military service on or after September 8, 1980, the retired pay base is the average of the member's highest 36 months of basic pay. [25] This will usually be the last 36 months prior to retirement. The retired pay multiplier is the product of two and one-half percent times the member's years of creditable service. [26] The retired pay multiplier for a member entering military service on or after August 1, 1986, who is under age 62 and retires with less than 30 years of creditable service is reduced one percentage point for each full year less than 30, and 1/12th of one percent for each full month. [27] The retired pay is recomputed without the reduction when the member attains age 62. The years of creditable service for a reservist are computed by dividing the reserve retirement points on which the award is to be based by 360. [28] The hypothetical retired pay amount is computed the same way as the member's actual military retired pay, but based on variables that apply to the member's hypothetical retirement date. These variables must be provided to us in the applicable court order. Failure to do so will cause the court order to be rejected. The court order must provide: 1) the hypothetical retired pay base, 2) the hypothetical years of creditable service (or reserve points, in the case of a reservist), and 3) the hypothetical retirement date. The principal problem we find with hypothetical awards is that one or more of the necessary variables for the hypothetical retired pay computation is often left out of the court order. If we are not able to compute a hypothetical retired pay figure from the information provided in the court order, the parties will have to have the award clarified by the court. For members entering military service before February 8, 1980, the hypothetical retired pay base is the member's basic pay at the hypothetical retirement date. Basic pay tables are available at the DFAS website at www.dfas.mil, under Money Matters. Attorneys should be able to obtain the basic pay figure either from the member or from the applicable pay table. For members entering military service on or after September 8, 1980, the hypothetical retired pay base is the average of the member's highest 36 months of basic pay prior to the hypothetical retirement date. The high 36 months will probably be the last 36 months prior to that date. This information is specific to each member. For members retiring from active duty, the pay information can be obtained from either the member during discovery or from his pay center by subpoena. We at the Garnishment Directorate do not have access to this pay information. It must be included in the court order dividing military retired pay. A qualified reservist is not eligible to receive military retired pay until attaining age 60. [29] A reservist's high 36 months will be the 36 months prior to his or her attaining age 60. The hypothetical retired pay base for high 36 month reservists does not need to be included in the court order. We will figure the retired pay base for hypothetical awards against high 36 month reservists by using the pay tables in effect for each of the 36 months prior to the member's attaining age 60. But we will figure the hypothetical basic pay based on the member's rank and years of service for basic pay purposes given in the court order. We will convert all hypothetical awards into a percentage of the member's actual disposable retired pay according to the following method set forth in the proposed regulation. [30] Assume that the court order awards the former spouse 25% of the retired pay of an E-6 with a retired pay base of $2,040 and with 18 years of service retiring on June 1, 1997. The member's hypothetical retired pay is $2,040 × (.025 × 18) = $918. The member later retires on June 1, 2002, as an E-7 with a retired pay base of $3,200.40 and 23 years of service. The member's actual gross retired pay is $3,200.40 × (.025 × 23) = $1,840. The former spouse's award is converted to a percentage of the member's actual disposable retired pay by multiplying 25% times $918/ $1,840, which equals 12.4728%. This converted percentage is the former spouse's award, and will be set up in the retired pay system. While the percentage number has been reduced, the amount the former spouse receives is the correct amount intended by the court, because the lower percentage is multiplied against the higher dollar amount of the member's actual disposable retired pay. This percentage will be applied each month to the member's disposable retired pay to determine the amount the former spouse receives. The former spouse will automatically receive a proportionate share of the member's cost of living adjustments (COLA's). [31] The hypothetical retired pay amount is a fictional computation, since the member is not actually retiring as of the date his or her retired pay is divided. Our goal in computing a hypothetical retired pay award is to make the computation in a way that is reasonable and equitable to both the member and former spouse. In order to do this, we will compute the hypothetical award as if the member has enough creditable service to qualify for military retired pay as of the hypothetical retirement date, even if he or she did not. Also, a member who retires with less than 20 years of creditable service has a reduction factor applied to his or her retired pay computation. [32] But the only time we will apply a reduction factor to the hypothetical retired pay calculation is if a reduction factor was used to compute the member's military retired pay. In that case, we would apply the same reduction factor to both computations to achieve equity. As we mentioned above, the retired pay multiplier for a member entering military service on or after August 1, 1986, who is under age 62 and retires with less than 30 years of creditable service is reduced one percentage point for each full year less than 30, and 1/12th of one percent for each full month. But in converting the former spouse's percentage award to a percentage of the member's actual disposable retired pay (as shown above), we will re-compute the member's actual gross retired pay without using the reduced multiplier. This will be done to achieve equity, since we will not use a reduced multiplier to compute the hypothetical retired pay amount. The following language is an example of an acceptable way to express an active duty hypothetical award. The former spouse is awarded ____% of the disposable military retired pay the member would have received had the member retired on ____(Date) with a retired pay base of ____ with ____ years of creditable service.  Percentage may be computed using a marital fraction as discussed above. The following proposed language is an example of an acceptable way to express a reserve duty hypothetical award. The former spouse is awarded ____% of the disposable military retired pay the member would have received had the member become eligible to receive military retired pay on ____(Date) at the rank of ____ with ____ reserve retirement points and ____ years of service for basic pay purposes.  Percentage may be computed using a marital fraction.  The date the member attains age 60 and is eligible to receive military retired pay.
The following proposed language is an example of an acceptable way to express an award using both an active duty marital fraction and an active duty hypothetical award together. The former spouse is awarded a percentage of the member's disposable military retired pay, to be computed by multiplying ____% times a fraction, the numerator of which is ____ months of marriage during the member's creditable military service, divided by the member's total number of months of creditable military service at retirement. For the purpose of this computation, the member's military retired pay is defined as the military retired pay the member would have received had the member retired on ____(Date) with a retired pay base of ____ with _____ years of creditable service. The following proposed language is an example of an acceptable way to express an award using both a reserve duty marital fraction and a reserve duty hypothetical award together. The former spouse is awarded a percentage of the member's disposable military retired pay, to be computed by multiplying ____% times a fraction, the numerator of which is ____ reserve retirement points earned during the period of the marriage, divided by the member's total number of reserve retirement points earned. For the purpose of this computation, the member's military retired pay is defined as the military retired pay the member would have received had the member become eligible to receive military retired pay on ____(Date) at the rank of ____ with ____ reserve retirement points and ____ years of service for basic pay purposes.  The date the member attains age 60 and is eligible to receive military retired pay.

Here, there is no way for us to determine the community interest unless a formula for calculating it is provided elsewhere in the court order.
The problem here is that there is no way for us to determine an amount or percentage. Military retired pay is a Federal entitlement, which the member either qualifies for or does not. It does not vest in any way prior to the member's retirement.
The problem here is similar to that above. Since military retired pay is a statutory entitlement, there is no value that accrues prior to the member's retiring. 4. The former spouse shall be entitled to 42% of the member's military retirement based on the amount he would have received had he retired as of the date of the divorce. Since we do not have access to the member's active duty service information, there is no way for us to determine the member's rank or years of active duty service as of the date of divorce. Thus, there is no way for us to compute a hypothetical retired pay amount. 5. The former spouse is a awarded a portion of the member's military retired pay calculated according to the Bangs formula. Here, the court order presupposes that we are familiar with that State's laws and know what the Bangs formula is, or that we are able to do legal research to resolve an ambiguity in a court order. 6. The former spouse is awarded an amount equal to 50% of the member's disposable retired pay less the amount of the Survivor Benefit Plan Premium. The amount of the former spouse's award must be expressed either as a fixed dollar amount or as a percentage of disposable retired pay. This award does not meet that requirement. This handout is prepared by the Garnishment Operations Directorate, Defense Finance and Accounting Service, Cleveland Center. It may be freely circulated, but not altered without permission. Revised 3/18/03.