Opinion ID: 2549122
Heading Depth: 3
Heading Rank: 3

Heading: Hypothetical awards for divorces while member is on active duty.

Text: 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.