Divorce And Family Law Representation In Omaha, Nebraska

Part 2: New military pension plan raises legal issues in divorce

At our law firm, we often serve divorce clients who either are active or retired service members or who are military spouses. The legal issues in military divorce can be unique and complex, involving both federal and Nebraska state laws. Attorney Matt Higgins, a military veteran himself, regularly handles such matters.

In part 1 of this post, we discussed the impact on military-pension division in divorce when accepting an award of military disability benefits requires waiving the same amount of pension payment. Today, we cover the new military pension program: the Blended Retirement System or BRS and issues it raises for military service members and their spouses in divorce.

History of military retirement and the new plan

The legacy military retirement plan is a defined benefit program like a private pension. Qualified retirees receive monthly payments based on a formula considering length of service, a multiplier and military pay levels. A service member is eligible after 20 years of service or a comparable number of points for those in the Reserves or National Guard.

(We use years of service for active service members, but comparable points levels exist for Reserve or Guard members.)

On January 1, 2018, the federal government launched a new military retirement system called the Blended Retirement System or BRS. It is “blended” because it combines a defined benefit program (like the legacy plan with a smaller multiplier and thus lower monthly payments) with a defined contribution component called the Thrift Savings Plan or TSP.

The TSP is like a civilian 401(k) tax-deferred account into which the service member can deposit earnings eligible for government matching according to a formula.

The legacy plan will exist side by side with the BRS. Active service members with at least 12 years of service on the date the BRS began stayed in the legacy system. Anyone joining on that date or after is automatically in the BRS. Active service members with fewer than 12 years of service on December 31, 2017, had the calendar year 2018 to decide whether to opt into the BRS.

Two other features of the BRS raise thorny issues in divorce. First, a BRS participant is offered a bonus midcareer called Continuation Pay in exchange for longer service. Second, a retiree may accept a lump-sum payout of a portion of monthly pension payments calculated from retirement through Social Security retirement-eligible age (now 67). Then, the full monthly payments resume.

Get knowledgeable legal advice

The BRS creates new legal issues for divorcing service members and their spouses. Specifically, the service member or retiree will eventually have the choices whether to accept Continuation Pay or the lump-sum option. These future choices could affect the amount of future money available to share with the former spouse.

An attorney who is abreast of cutting-edge developments in this complex area of law can advise either spouse about steps to take that will be to his or her advantage. For example, settlement agreements or proposed divorce decrees can be drafted to account for possible future developments within what state and federal laws will allow, such as required notice of future BRS elections or carefully crafted indemnification clauses.

For a former spouse already divorced with a marital settlement agreement or divorce order, if the service member opted in to the BRS (an option likely impossible to have foreseen at the time of divorce), the monthly pension payment would be less than anticipated and the TSP, Continuation Pay and lump-sum options not accounted for in the previous divorce.

For these spouses or their former service member spouses, a skilled lawyer can provide advice about potential legal remedies. For example, could a reduction in monthly pension payments support a request for more alimony based on changed circumstances?

This post only scratches the surface of the complications of divisions in military retirement. An experienced military divorce attorney can answer questions about your situation.

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Higgins Law
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