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Part 2: New military Blended Retirement System and divorce issues

| May 17, 2018 | Property Division |

Last week, we talked about the new military retirement program that was launched on January 1, 2018, called the Blended Retirement System or BRS. In that post, we described the historical, legacy plan as well as the features of the new BRS. 

Those features include a new defined contribution component that looks like a 401(k), a lump-sum option and the choice to accept a Continuation Pay bonus midcareer in exchange for longer service commitment.

Eligibility 

All service members on December 31, 2017, automatically stayed on the old plan. Anyone with less than 12 years of service on that date (or equivalent points for a Reserve or National Guard member) has an important decision to make by December 31, 2018. This group of service members have the choice to opt out of the old retirement system and into the new BRS by that date. 

This decision should be carefully made as it may make a large financial difference in retirement years, depending on the situation. The Department of Defense provides detailed information to help service members make the right opt-in decision. 

Understanding the possible legal issues that may arise should a service member become involved in divorce proceedings is also a smart idea when considering the BRS option. 

Potential BRS challenges in Florida divorce 

What is certain is that difficult legal issues will arise in Florida military divorces because of the BRS. What is uncertain is how these issues will be resolved as they come up in settlement negotiations or in court. Potential issues include: 

  • Will lump-sum and Continuation Pay amounts be included in the retirement pay federal law allows state courts to divide in divorce? Even if not, could a settlement agreement control their division?
  • For an already-finalized divorce, what legal ramifications and remedies will arise from an unanticipated BRS opt-in decision that could decrease monthly defined benefit payments because of the lower multiplier or acceptance of the lump sum? What impact could Continuation Pay have?
  • Will future optional lump-sum and Continuation Pay amounts be divisible marital property? Can a military spouse be required to give future notice if he or she accepts one of these? Could a contingency be included in the divorce concerning whether it would be split with the ex-spouse?  
  • Could a judge order a military spouse to opt in or not during 2018, or to accept or not accept a future lump sum or Continuation Pay payment?
  • And others 

As time passes and Florida courts begin to interpret the law and how it applies to divorcing parties when BRS is involved, negotiation and trial strategy can be adjusted in response. We will carefully monitor legal developments regarding BRS and provide informed advice and guidance to our military clients in divorce matters.

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