- How can I figure out my ex-spouse's share of my military pension?
Question 1: I am on active duty. Why is it so hard to make the SBP payment for my ex-wife proportionate to the military pension share that she will be getting when I retire?
A: The reason involves the variables that go into figuring out her share of the pension. Let’s go over the basics:
- SBP (the Survivor Benefit Plan) is anchored to a base amount, and the payment to a former spouse is always 55% of that base.
- The 55% can never vary, but that’s not true when it comes to the base amount, which is usually specified in dollars. It can be full retired pay down to $300 a month.
- The base can also be specified as a percentage of retired pay (e.g., 30% of retired pay, which means essentially that the SBP payment would be 16.5% of retired pay, since 30% of 55% is 16.5%).
- If no dollar amount is specified, then the military member is defaulted into “full retired pay” as the base amount, and if he is married at the time of retirement, his spouse must consent in writing to any option short of “full retired pay” as the base amount.
To get the “right base amount,” that is, the figure that (times 55%) would yield an amount that is the same as your ex-wife’s share of the retired pay, we’d have to know your retired pay.
Question 2: Yeah, but how does that affect choosing the correct amount to allow the SBP payment to be a “mirror image” of what my retired pay will be?
A: Well, to explain that, it’s necessary to set out some “facts of life” for servicemembers (SMs) about their retired pay and how it’s calculated:
- It’s a fact of life that no SM knows his retired pay, except for those who are in the “retirement zone” (i.e., the period of about six months before active-duty retirement).
- Except for these “select few” in the retirement zone, no SM knows when he or she will retire. Even with the best of plans, there are sometimes “StopLoss Orders” which bar retirement for certain individuals when their services are necessary for national defense.
- No one knows what Congress will do regarding military pay in the future, and this is one factor in determining how much a SM is paid at retirement. Usually retired pay is based on the individual’s “high-3 years” of continuous compensation during his career. “High-3 pay” can’t be known in mid-career. In fact, many SMs cannot even predict what rank they will be when they retire, and this is another factor (along with years of creditable service) that determines the “high-3” amount.
Question 3: I’m getting impatient! Aren’t there some divorce court rules that will help explain this to me?
A: Here are some important divorce rules:
Most states divide pensions, including military retired pay, using the “time rule” when the individual is still serving toward the pension (on active duty, in your case). This means that the former spouse (FS), upon the member’s retirement, gets a pension award expressed in a formula, which is usually: FS = 50% times years of marriage during service divided by years of total service times final retired pay. So we have to know the “service fraction” to find out what portion of your retired pay that your ex-wife will get, and we won’t know that till you’re retired. It could be 50% times 20/30 if you were married for 20 years and served a full 30 while on active duty. Or it might be 50% times 5/20 if you were only married for 5 years during a 20-year active duty career. So the marital fraction isn’t known and your retired pay is likewise unknown, unless you’re on the threshold of retirement.
Question 4: What does that mean for me?
A: It means that you’ll only know the exact value of two numbers—the marital fraction (or portion of the pension earned during marriage which is to be split with your ex-wife) and the pension amount—at the time that you retire. It’s only at that time when the choice can be made to zero in on a proportionate share or “mirror award.” At any other time, it’s just plain guesswork, which no one likes, most ex-spouses won’t agree to, and most judges don’t even understand (unless they have a good background in pension division or military service). It is only the SM who is in “the retirement zone” who has full control over creating an SBP structure that allows the pension share for the former spouse to be the same as what she will receive in monthly SBP payments when the retiree dies before the former spouse. This situation involves:
- knowing the marital fraction or percentage that the former spouse will get;
- knowing the final retired pay of the SM;
- using those to calculate the amount of the pension share due to the former spouse; and
- dividing that amount due to the former spouse by .55 to arrive at the base amount which is to be chosen.
Question 5: Well then, why don’t we just we just write up the consent order, agreement or divorce decree to say that we won’t make a decision on SBP and the base amount for “former spouse coverage” till I retire? That would solve the problem, right?
A: Not at all. The failure to make an SBP election means that, if the military member dies before retirement, there is no coverage for the former spouse. Your election of former spouse coverage must be done within one year of your divorce decree. It’s unlikely (a better word might be inconceivable) that your ex-wife would agree to “no coverage now” in order to obtain a proportionate amount at your retirement. Why would she want to gamble like that?
Question 6: Whew . . . I’ve already got 2½ Excedrin headaches, and I’m not even a lawyer! What about those who are divorcing when they’re already retired. Is it easier for them?
A: No, they’re in the same impossible situation. In their case, the decision on SBP has already been made—either for full coverage for a spouse or, with written consent, for lesser coverage (that is, a base amount which is less than full retired pay). Once the base amount has been chosen, as a general rule it cannot be changed. They’re stuck with the decision that they’ve made, and they cannot alter the amount of the base to effect a mirror image between the pension payment and the SBP payment. It’s already been “cast in concrete,” as they say.
Question 7: Those of our brothers and sisters who are in the RC, or Reserve Component . . . are they in the same “concrete overshoes?”
A: Yes, pretty much so. At the 20-year mark, an RC member (i.e., a member of the Guard or Reserve) is sent a form on which to choose the appropriate SBP election for the member and, if married, the spouse. There are three options and a default.
Question 8: What is the first option on the form?
A: The form, which is called DD Form 2656-5, allows as Option A the postponement of the decision until the individual reaches “pay status,” usually age 60. If the divorce occurs at this point, in the zone of several months before age 60, then it’s possible to “fix the problem” because we can calculate the member’s retired pay, the share which the former spouse will receive, and the base which is to be chosen to accomplish a “mirror award” of SBP. The latter is done with calculations similar to those shown previously in the answer to Question 4.
Question 9: What is the second option for an RC member?
A: Option B is to select SBP coverage but make it effective for the surviving spouse only when the member turns age 60 (or, if dead, would have turned 60). This option is chosen at the 20-year mark, that is, when the RC member has 20 “good years” of service. Any selection of a lower base amount must be made then, even though the member and his spouse cannot know what the member’s final retired pay will be.
Question 10. Why is that?
A: It’s because, even if the member requests approval for immediate placement in the Retired Reserve or its equivalent, the rate of pay upon which his retirement amount is based will not be known till he turns 60. This is the active duty pay amount for all ranks, and it’s set each year by Congress. No one can possibly know that in advance of age 60 or thereabouts.
Question 11: What if the RC member hadn’t chosen “immediate application for retirement” when responding to the 20-year letter?
A: In that case, there’s yet another variable to throw into the mixture. The “marital fraction”—made up of retirement points gained during the marriage, divided by total career retirement points—cannot be known until the RC member decides to “hang it up” and apply for retirement. If that is not at the 20-year mark, then there will be additional retirement points which accumulate and there’s no way of figuring the value of a fraction when the denominator keeps on increasing by 50 or more points each year.
Question 12: Didn’t you say that there’s a third option for RC members?
A: Yes. It’s Option C, and that is the RCSBP, or Reserve Component Survivor Benefit Plan. It entitles the member to immediate coverage of a spouse, even if the RC member dies a week or a month after the selection. The Guard or Reserve member doesn’t have to have reached 60 to reap benefits for the spouse under this option; the SBP payments start at the member’s death. There is also a default provision - if the RC member fails to make an election, then he or she is defaulted into Option C.
Question 13: Why won’t Option C work in providing a proportionate share?
A: The choice is made, whether it’s full retired pay as the base or a lower amount (with written spousal concurrence) at the 20-year mark. Once again, there is no way of knowing (at the 20-year point) what one’s retired pay will be at “pay status,” usually age 60, if the individual chooses transfer to the Retired Reserve. And the marital fraction in the formula which is generally used, made up of marital retirement points over total retirement points, is impossible to determine since the denominator keeps on growing with each creditable year of Guard or Reserve service. These two variables make it just as impossible to create a “mirror award” with Option C as they do with Option B for the Guard or Reserve member.