McAtee: Financial considerations in a military divorce

There are several aspects to a military divorce that are distinguishable from an everyday divorce matter. From unique retirement benefits to the potential for special considerations in child support calculations, it is important to be well-versed in your client’s rights, particularly when representing the non-service member spouse. The Uniformed Services Former Spouses Protection Act, enacted in 1982 and codified under 10 U.S.C. § 1408, allows for the division of military retirement benefits by state courts and makes enforcement of the court orders possible through the Department of Defense. The following are a few of the key financial considerations to investigate when representing a party in a military divorce case.

20/20/20 Rule

One of the most well-known “rules” for military divorces is the 20/20/20 Rule. The 20/20/20 Rule applies when the parties have been married for at least 20 years, the member spouse has served at least 20 years of military service and at least 20 of those years overlap between the marriage and the years of service. If the member spouse has served for at least 20 years, he or she will be entitled to a defined benefit pension monthly payment upon retirement. Under the USFSPA, the general rule is that up to half of the member spouse’s pension may be awarded to the former spouse through the Defense Finance and Accounting Service (DFAS). If the state court awards over half of the pension to the former spouse, the member spouse will be responsible for making those payments rather than the payments coming through DFAS.

A non-member spouse whose marriage meets the 20/20/20 Rule requirements will still be able to access health care through TRICARE for a reasonable cost and use their military ID card and benefits, including access to commissary. If they at least meet the 20/20/15 Rule, they may still be eligible for transitional (temporary) benefits for TRICARE coverage.

Under the 20/20/20 Rule, if you represent the non-member spouse, it is important that they are aware that they will no longer be eligible for military ID privileges if they remarry. Military ID privileges include many benefits such as access to TRICARE, commissaries and recreational facilities on base. Fortunately, dependent children of the parties may remain eligible for their dependent ID card to keep those benefits, even if the children reside with the non-service member parent.

Two other benefits to be aware of are the Thrift Savings Plan and Survivor Benefit Plan. The TSP is similar to a 401(k) with a match. In the event of the service member’s death while on duty or in retirement, an annuity is available to eligible beneficiaries through the Survivor Benefit Plan.

10/10 Rule

Similar to the 20/20/20 Rule, the 10/10 Rule applies to parties who were married for at least 10 years, with the member spouse serving for at least 10 years and 10 of those years overlapping. If the marriage meets those requirements, the non-
member spouse will be able to receive their payments from the member spouse’s disposable retired pay directly from DFAS. The retirement benefit is still an asset subject to division if the marriage was under 10 years, but the non-member spouse will not be able to receive direct payments from DFAS. The dissolution decree will need to specify that the member spouse is required to make the payments directly to the non-member spouse.

Child support considerations

When calculating child support for an active service member, it is important to be aware of any additional financial benefits, including in-kind compensation, that may be available to the parent. The parent’s leave and earnings statement shows the allowances they are receiving, such as a basic housing allowance. The availability of in-kind compensation, such as cost-free housing, allows for the potential imputation of additional income. Under “Situations Calling for Deviation,” the Indiana Child Support Guidelines specifically include, “A parent is a member of the armed forces and the military provides housing,” in the list of example reasons supporting a request to deviate from the child support worksheet.

If a parent is deployed, then the family separation allowance (FSA), hostile fire pay (HFP), imminent danger pay (IDP), hardship duty pay (HDP-L) and/or per diem pay may apply. The FSA allows for additional pay of $250 per month if the dependents cannot live with the service member at their permanent duty station (e.g., if the service member is on duty aboard a ship that is away for more than 30 continuous days). HFP or IDP (only one may apply at a time) totals $225 per month and is taxable unless the combat zone tax exclusion (CZTE) applies. Service members performing active duty in a combat zone for all or part of a month are eligible for their pay and allowances to be tax-free under the CZTE. HDP-L applies when a service member is serving in an overseas location where the living conditions are “substantially below” the conditions in the continental United States. Per diem rates, which cover reimbursement for meals, lodging and incidentals, can be looked up for specific locations through the Defense Travel Management Office website.

Conclusion

When a spouse or parent in a family law matter is or has previously been a member of the military, it is important to know what retirement assets and potential sources of additional income to look for. Crafting specific discovery requests will help you gather the information that you will need to best advise a military divorce client as to their options as it pertains to the distribution of a marital estate and a calculation of child support.•

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Nicole Makris McAtee is a family law attorney with Connell Michael Kerr LLP. Opinions expressed are those of the author.