In an effort to standardize benefit divisions and “simplify” military divorces, Congress enacted the National Defense Authorization Act for Fiscal Year 2017 (NDAA 17). The new rule applies to those service members still serving (active-duty, National Guard, or Reserves), divorced after December 23rd, 2016, and is known as the “Frozen Benefit Rule” … which made divorce much more complicated for all parties involved.
The Act dramatically changed the landscape for dividing pensions in divorce by redefining disposable retired pay. The new definition of disposable retired pay in these situations is “The amount of basic pay payable to the member for the member’s pay grade and years of service at the time of the court order, as increased by each cost-of-living adjustment that occurs between the court order and the time of the member’s retirement, using the adjustment provisions in 10 U.S.C. § 1408.”
Thus, for all cases in which a still serving service member is not divorced as of December 23rd, 2016, the division of retired pay is the hypothetical retired pay attributable to the rank and years of service of the military member at the date of divorce. The new law does NOT affect cases where a service member is already retired. In those circumstances, the matter is handled as previously ordered, since the rank and years of service are already fixed at retirement.
What does this change mean for you?
For both the former spouse and the service member, this means getting a competent attorney and divorce financial professional (both with expertise in Military Divorce), on board as integral members of your team as early as possible. To halt the divisible income at the time of the divorce, and in order to present acceptable settlement language, you (and your professionals must use the “hypothetical clause” to detail the specific information needed by the respective pay center. This includes calculating the “High Three” base pay, or the average of the highest three years of continuous compensation. It is very important for this language to be worded correctly, or you risk getting it rejected and having to start over again.
What else can you do?
While this new law overrides most states’ laws there are a few workarounds at your attorney’s disposal. One such option (if you are the former spouse) is to use alimony (spousal support) payments to supplement lost income between the end of the marriage and a future date. The service member will have an easier time with this ruling as they and their attorney have access to and control of the necessary information.
Don’t be left out in the cold or in the dark related to this change. Call our office at (850) 252-6325 to schedule your 30-minute initial strategy session to discuss how I can assist you through this difficult transition.