Whether you are an active or retired service member or a member of the Reserves or National Guard, or married to someone who serves or has served, the military pension you (or your spouse) has or will earn is one of your most important assets.
Federal law allows military retirement pay to be part of the property divided between spouses in divorces in state courts according to Florida law.
Historically, a military pension was usually divided in divorce either by agreement of the parties or by the judge, if the issue was contested. For example, when the monthly benefit payments eventually start, the divorce decree might dictate that the retired service member receive one-third and his or her ex-spouse, two-thirds. The outcome will vary with each family situation.
Military retirement benefits have been a kind of defined benefit plan, meaning a set monthly payment is calculated using historical earnings levels, length of service and a multiplier (here 2.5 percent). (Length of service number in the formula is replaced by a point system for those in the Reserves and National Guard.)
On January 1, 2018, the military pension landscape became much murkier in the divorce context. As of that date, a new military retirement plan called the Blended Retirement System or BRW took effect.
Blended Retirement System
The BRS in some ways takes military retirement closer to a private retirement model, mainly because it adds a defined contribution component. This new feature looks a lot like a private 401(K) plan that combines employee contributions and matching employer deposits into a retirement account. The military is calling this account the Thrift Savings Plan or TSP. Participation in the TSP is voluntary.
The military is not only adding the TSP, but also retaining the defined benefit feature as well, except the multiplier is being adjusted down to 2 percent, meaning the monthly payments will be slightly smaller than they would have been under the legacy plan.
The BRS also has two additional new features:
- The service member has the option at retirement to accept a lump-sum payment of one-quarter or one-half the total future benefits that would be paid from date of eligibility through Social Security retirement age. Monthly payments during that time period would be reduced accordingly and at Social Security retirement age, would resume to full amount.
- Midcareer, the service member will have the option to accept Continuation Pay, which is basically a bonus, in exchange for a commitment to a minimum of three more years of service.
In Part 2 of this post, we will talk about who will remain in the old system, who will be in the new one and who has the option of choosing, until the end of 2018. We will also talk about some of the legal and practical challenges of dividing retirement benefits under the BRS in a Florida divorce.