Military Retirement Plans
Qualified Domestic Relations Order (QDRO)
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In 1983 the Uniformed Services Former Spouses Protection Act became effective, which allowed former spouses to receive a portion of a member’s military retired pay if a state court should so order. The paradigm created at this time is now referred to as the “Legacy Plan.” This is a defined benefit plan, but unlike private company pension plans, a former spouse is limited to 50% of the member disposable military retired pay. The term “Disposable Retired Pay” is a term of art, and the attorney dividing the military retirement plan must be familiar with this terminology when dividing military retired pay.
Since the National Defense Authorization Act (NDAA) of 2016, which created the new Blended Retirement System, it is crucial to understand the differences between the Legacy Plan and the Blended system, and which factors and calculation methods are acceptable to divide retirements under each. The Blended system also ushered in the ability for non-career members of the military to accrue retirement benefits under a defined contribution plan.
The NDAA of 2017 changed the dates for purposes of calculating a community’s interest in a military pension, and understanding the way in which this interacts with the Frozen Benefit Rule, and how that rule distinguishes military orders in the first place, is essential to being able to draft orders that comply with federal law and secure each party’s legal rights and interests in a military pension.
It is also important for the attorney dividing the military retirement plan to understand the meaning of the 10/10 rule before even attempting to draft a military retirement order. The 10/10 rule requires that the former spouse be married to the member for a period of 10 years or more during which the military member performed at least 10 years of creditable service. If the 10/10 rule is not met, then the United States Department of Finance and Accounting Service (DFAS) will not honor a court order to divide the military retirement benefit and will not make direct payments to the former spouse.
It is important that the attorney dividing the military retirement benefits understand the complexity of the survivor benefit plan (SBP). If the court order dividing the military retired pay does not include SBP protection for the former spouse, the former spouses’ benefit will cease upon the military member’s death. Even if the court order requires the election by the military member to elect his former spouse as a beneficiary of the SBP plan, the SBP can also be lost if the election is not made by the military member at the time of retirement. In order to protect the former spouse, a “deemed election” should be made within 1 year of the date of the court order. A military retirement attorney must understand the intricacies of making such a “deemed election”.
The military retirement attorney must also understand the complexities of the REDUX Program. Prior to the military member reaching the 15th year of military service, the military member has an option to receive a Career Status Bonus of $30,000.00. The effect of the member opting for the REDUX retirement plan substantially affects the amount of money he/she will receive at the time of retirement which is then subject to division. If the military retirement attorney does not adequately address the REDUX retirement program, then the former spouse could not only lose out on receiving his/her portion of the $30,000 but also be harmed by receiving less money at the time the military member actually retires.