November 3, 2022

Military Divorce: 5 Things to Know

By Garrett Sorensen, Financial Advisor, Marcum Wealth

Military Divorce: 5 Things to Know Marital Dissolution

There are considerable differences between a civilian divorce and a military divorce—differences that, if not thoughtfully considered, could mean an inequitable sharing of assets and more work for your client even years after the divorce is finalized.

To help with these considerations, here are five things to know regarding Military divorce.

1. Start with the Basics

When dealing with non-Military divorce, we often ask, “where do you work, what do you do?” and then move on. With a military divorce, a deeper dive is required. Information about rank, time in service (years in the military), branch of service, and unit information will be imperative, but might be a more difficult task than expected. Some of this information can feel like learning a new language, but it is a language in which you must become well versed if navigating a military divorce.

Potential knowledge gaps to consider:

  1. What is their current rank? Is there a chance for promotion?
  2. Years in service, and is it split between active and reserve?
  3. Branch (Army, Navy, Air Force, Marines, Coast Guard, Space Force) and are they a reservist (Guard or Reserves?)
  4. Brigade, Battalion, Company, and the contact information for their chain of command.

2. Understand how service members are paid and how it may change

It is important to remember that only base pay is used in retirement calculations, and that most special pay or incentive pay is not guaranteed or continued for the duration of military service. However, that does not mean that your client might not be entitled to portions of these payments, even while the divorce is underway. For example, army regulation states that a service member must provide “an amount equal to the BAH Reserve Component/Transit 0F 1(BAH RC/T) WITH DEPENDENT rate (formerly known as BAH II)” if the family is not provided on base housing. Other regulations like this can usually be found online or by reaching out to a local post JAG office for that service member’s branch of service.

Following are four main types of pay service members may receive:

  1. Base Pay: pay service members receive based on rank achieved.
  2. Special Pay: an added payment a service member might receive for special qualifications such as Airborne, Flight, Diver, speaking another language, and many others. Special pay is not a permanent payment and will not be included in retirement calculations.
  3. Incentive Pay: a special payment service members may receive for specific requests. This might be a bonus or re-enlisting, or monthly payments for a number of years for extended service. Incentive pay is not necessarily a common thing today, but there are still plenty of military professions that offer these regularly.
  4. Allowance Pay: This is usually Basic Allowance for Sustenance (BAS) and Basic Allowance for Housing (BAH). There are other allowances, but these two will be the most common.

3. Retirement type. Highest pay, high 3, Blended, Active, AGR, or reserve?

Not all service members in the military today will receive the same retirement benefit payout calculation. The three most common types of retirement seen today are:

  1. Highest Pay: This is the oldest retirement plan and while many retirees may be under this plan there are very few active-duty service people who qualify for this retirement calculation. However, many retirees may be under this retirement calculation.
  2. High 3: The most common retirement plan today, High 3 pays retirees the average of the highest three earning years. Most service members retiring before 2026 will retire under the High 3 plan.
  3. Blended Retirement System: The newest retirement plan, BRS for short, is a retirement calculation that uses the High 3 for base pay calculation in retirement, but the percentage received is lowered due to an automatic contribution and match currently taking place in the service members Thrift Savings Plan (TSP). All new service members joining since Jan 1st of 2018 are automatically placed on this plan. However, service members had the option to opt-into this retirement plan as early as 2016. So, we could start seeing a large portion of retirees being on the BRS as early as 2016, if not earlier.

Cost-of-Living Adjustments (COLA) are also important when considering a Military retiree’s pay, especially when determining how retirement pay will be split. Rules vary by state, but it is critical to remember that if you settle on a flat dollar division of retirement payment, even if you have COLA adjustment language added to the separation agreement, the Department of Financial and Accounting Services (DFAS) will only process the ordered flat dollar amount. A new Department of Defense form must be submitted for each increase, ultimately resulting in more work and time for your client if this is the division agreed upon.

It is also important to consider whether there will be a VA disability rating payout that will offset the retirement pay. It’s a complicated calculation but the key take away is that for some service members, up-to 50 percent of their retirement pay can be offset by the tax-free VA disability payment, which is not entitled to division in a divorce. If using a percentage division amount, this could potentially lower the amount your client is entitled to in retirement.

4. Know the Thrift Savings Plan

The Thrift Savings Plan, or TSP, is the government’s version of a private-sponsored plan for civilians. There are different types of TSP accounts, including governmental, military, and civilian. The rules can vary even among the different types of TSP plans. However, the Military TSP is considered a marital asset when it comes to the division of property. While the assets will be divided by a Retirement Benefits Court Order (RBCO) instead of a Qualified Domestic Relations Order (QDRO), the division of these assets can be very similar to a 401k on the civilian side. However, there are a few nuances that should be considered with the division of this asset. Luckily, the TSP has a booklet that can be downloaded from their website. The booklet will provide you with specifics of what you need to know about the division of the TSP assets.

5. Consider alternatives to direct splitting of assets using military benefit programs

Speaking with clients early on might be a conversation of what they are entitled to or what they are not willing to concede. While ensuring your clients get their equitable share in the divorce proceedings is imperative, there are other alternatives to explore that might be more beneficial to your clients now and in the future. Knowing and understanding the benefits the service member is entitled to might open doors for a more amicable division of assets. For example, if the service member still has their entitlement to the GI Bill, they might be more receptive to transferring this benefit to their former spouse to prevent a RBCO on the TSP.

There are over 10,000 programs designed to benefit our military service members. Ranging anywhere from having access to capital to start a business, to tax-free shopping on a military base. Exploring the alternatives that can be transferred or applied later will help ensure your client receives or keeps all they are entitled to. Another example is the Survivor Benefits Pension program, or SBP. This is a program that can continue to pay up to 55% of a service member’s pension to a current or former spouse after they have passed. Knowing how this benefit can help your client will be incredibly important when it comes to completing the final division of assets.

Count on Marcum

Military divorce has many layers. Age, rank, unit, state, pay types, retirement types, thrift plans, and benefit programs all need to be discovered, properly evaluated, and accounted for. As a current Sergeant First-Class in the Tennessee Army National Guard and former Active-Duty U.S. Army with first-hand experience of military divorce, the language and process are familiar. Please reach out if you have any questions or want to discuss further.


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