Military Spouses To Receive Dramatically Reduced Pension Benefits

New Rule dramatically re-writes Uniformed Services Former Spouses’ Protection Act (FSPA) and significantly reduces the amount they can receive in pension benefits.

On December, 23, 2016, President Barack Obama signed the “National Defense Authorization Act for Fiscal Year 2017.” Read the President’s comments here.  As a result, the pension benefits that can be divided for ex-spouses by a Qualified Domestic Relations Order (QDRO) will be dramatically reduced from levels in effect since the original 1989 FSPA.

As reported by retired Army Reserve Jag colonel, Mark E. Sullivan, on the AAML website , pension benefits will now be treated as if the service member retired at the time of the pension division order, and will be based on their grade or rank at that time. Previously, a service member’s post-divorce experience could enhance pension benefits payable to an ex-spouse. This treatment was regarded as a “windfall” and was opposed by the Armed Forces Tax Council, which wrote in 2001 that the treatment was inconsistent with that of other marital assets by divorce courts.

Mr. Sullivan, who is the author of The Military Divorce Handbook (Am. Bar Assn., 2nd Ed. 2011), cited the additional issues, summarized here:

  1. There is no mention of COLAs for Alternate Payees, which may mean fixed lower payments overall;
  2. There is no provision for the parties coming to a different method of pension division; parties cannot settle cases their own ways if they do not comply with the “Fixed benefit” requirement;
  3. New rules will encourage immediate payments, as there would be no benefit to waiting until the service member’s retirement date;
  4. Removal to Federal Court to challenge treatment under state law.

There is much more to learn about this new treatment of spousal benefits and you may view Mr. Sullivan’s excellent expanded commentary here. As QDRO preparers, we want to be on the cutting edge of information for these types of developments to ensure pre-approval and qualification the first time around. If we may be helpful in sharing more information with you about this important development, please contact Paul Murray at (855) 786-9584, or at p.murray@mydoyt.com.

Paul T. Murray