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How to Divide a Military Pension in a Texas Divorce

How to Divide a Military…

In a Texas divorce case, the parties must account for all of the community assets and figure out how to divide them. If they cannot agree on property division, they may have to submit to mediation, arbitration, or trial. One of the biggest challenges in property division is determining how to divide retirement plans and pensions. Different rules apply for retirement plans offered by private-sector employers and those offered by government employers. Pensions available to veterans of the U.S. Armed Forces are subject to yet another set of rules. Although military pensions are administered by the federal government, state courts can rule on how to divide the benefits in a divorce case.

Veterans in Houston

About 18.5 million people in the U.S. are veterans. As of late 2019, more than 282,000 veterans live in the greater Houston area. About fourteen percent of Houston’s veterans have served since 2001. The largest group, just over thirty-six percent, served during the Vietnam War. The majority of veterans in Houston are between the ages of 35 and 54.

What Are Military Pensions?

The U.S. Department of Defense (DOD) provides pensions for veterans who served for at least twenty years. The two main pension plans available to qualifying veterans are:

  • Final Pay: Available to veterans who entered the Armed Forces before September 8, 1980 and served for at least twenty years. The monthly benefit is based on the veteran’s final basic pay grade.
  • High-36: Available to veterans who entered the service after September 8, 1980 and served at least twenty years. The monthly benefit is based on the average of the veteran’s thirty-six months of highest pay.

Qualifying veterans who entered the service after August 1, 1986 may opt for the Career Status Bonus and REDUX (CSB/REDUX) retirement system, which uses a slightly different method of calculating monthly benefits than High-36.

The DOD and Congress have expanded veterans’ options for retirement benefits in recent years. In 2001, Congress authorized members of the uniformed services, including the Armed Forces, to participate in the Thrift Savings Plan (TSP) operated by the Federal Employees’ Retirement System. This was previously only open to civilian employees of the federal government. The DOD describes it as offering benefits similar to a 401(k) in the private sector.

In 2018, a new program known as the Blended Retirement System (BRS) went into effect. This takes into account the fact that many servicemembers leave before twenty years. It provides benefits for people with fewer years of service, and offers options including participation in the TSP and a pension plan.

Dividing a Military Pension in a Divorce

Texas treats military pension benefits accrued during marriage as community property. The Uniformed Services Former Spouse Protection Act gives state courts jurisdiction to divide military pensions in a divorce.

The parties or the court must determine how much of a veteran’s or active-duty servicemember’s pension benefit is community property. If they began service after getting married, everything accrued up to the date of the divorce is community property. If the marriage occurred second, only part of the accrued benefit may be characterized as community property. How to divide the pension benefits will depend, in part, on whether the DOD has begun paying benefits, or whether the spouse is still on active duty.

If the servicemember has not retired when they get divorced, DOD rules base the division of pension benefits on their base pay at the time of the divorce. For example, suppose a servicemember gets divorced after ten years of service, with a pay grade of O-2, but remains in the service long enough to qualify for the DOD pension and retires as an O-5. The value of the community portion of the pension is based on base pay as of the date of divorce, when the servicemember was an O-2.

The non-veteran spouse may receive a percentage of the monthly benefit payments, or a specific dollar amount out of each payment. They may also receive a cash sum or other asset at the time of the divorce in exchange for waiving the right to future payments. Three possible methods for calculating the division of a pension are:

  1. Present value: The spouse receives payment up front for their share of the pension.
  2. Deferred payments: The parties or the court calculate a percentage or dollar amount as part of the divorce, which the ex-spouse begins to receive upon the veteran’s retirement.
  3. Reserved jurisdiction: The parties reserve calculation of the ex-spouse’s share until the veteran’s retirement.

Direct Pay to a Former Spouse

Some retirement plan administrators will pay the participant’s ex-spouse directly if presented with a court order that meets certain legal requirements and the plan’s criteria. The Defense Finance and Accounting Service (DFAS) will make direct payments to former spouses of veterans who meet the following criteria:

  • The servicemember served for at least ten years;
  • The parties were married for at least ten years during the servicemember’s military service;
  • The servicemember has retired or begun the retirement process;
  • The divorce and order dividing military benefits is final and no longer appealable; and
  • The order expresses the division of benefits as a percentage or dollar amount.

If the ex-spouse does not meet all of these criteria, DFAS will not make direct payments to them. They will have to obtain payment by other means, such as payment by the servicemember.

Board-certified family attorney Stacey Valdez practices in the greater Houston, Texas area. At Stacey Valdez & Associates, our top priority is, and always will be, looking out for our clients and their families. We help people navigate difficult ordeals like divorce and child custody with compassion, respect, and tireless advocacy. Please contact us online, or give us a call at (281) 218-0900 today to schedule a confidential consultation to discuss your case. Your first meeting with us is free in most cases.