The National Defense Authorization Act of 2016 radically changed the retirement system for military service members. It created the new Blended Retirement System (“BRS”) which became effective January 1, 2018. This new system has created some very unique issues for previously divorced military couples and those who are contemplating a military divorce in the future.
Eligible service members who choose to enroll in the BRS in 2018 can affect their future or previous ex-spouse’s pension entitlement. Those active duty service members with less than 12 years of service are given the option to enroll this year. Reserve component service members with less than 4,320 retirement points are also given the option to enroll this year. Those entering the military after January 1, 2017, are enrolled automatically this year and do not have the option of using the traditional retirement system.
To understand the BRS it is important to first understand the traditional retirement system. Under that system, after at least twenty years’ service a service member becomes eligible for a pension. For active duty, the monthly pension is calculated with a formula that takes the number of years of service multiplied by 2.5 to get a percentage and then multiplying that percentage by the average of the highest three years of the service member’s monthly base pay. For reserve component, the monthly pension is calculated by taking the number of retirement points, dividing by 360, multiplying by 2.5 to get a percentage and then multiplying that percentage by the average of the highest three years of the service member’s monthly base pay.
Under the BRS a service member can still earn a pension after twenty years but it is not as much. Instead of multiplying years of service or retirement points (divided by 360) by 2.5 that number is instead multiplied by 2.0. This in turn reduces the amount of pension the service member receives – and thus the amount an ex-spouse would be entitled to receive as well. Instead of receiving a larger pension, the service member is able to contribute towards his/her Thrift Savings Plan (“TSP”) with the military matching their contributions and he/she can take the TSP with them if they leave the service prior to twenty years.
But that’s not all. The BRS also allows the service member a “lump sum option” where at retirement he/she can take either 25% or 50% of their pension payments between the date of retired pay eligibility and social security age in one lump sum payment. This lump sum is discounted and the service member will receive a significantly reduced pension amount until they reach Social Security age. Most importantly, neither the ex-spouse’s permission nor notification is required to take this lump sum payment which obviously reduces the ex-spouse’s share of pension payments.
There is one final financial consideration. The BRS allows a mid-career Continuation Pay between the beginning of the 8th and 12th year of service. You can think of it as a bonus of sorts that the service member can take if he/she stays in an additional three years. Depending on the timing, this Continuation Pay could become a divisible item at the time of divorce.
The most important thing to note is that election of the BRS affects divorces which have already been completed. For instance, if a couple was divorced under the traditional pension plan and the service member thereafter enrolls in BRS, the ex-spouse’s pension is reduced without notice. Only an attorney familiar with military divorce law can review your divorce settlement agreement and/or final judgment of divorce to determine how the BRS will affect you.
Further, any future divorces will need to anticipate the possibility of taking a lump sum retirement option and mid-career Continuation Pay under the BRS as part of the divorce proceedings. An experienced attorney familiar with military divorce law can help service members understand and their spouses protect their rights during this difficult time.
If you or your spouse is a member of the military and is considering a divorce, you should be represented by an attorney who is familiar with military issues and divorce law. Contact Kevin J. Murphy, Esq., a life-long military dependent, former active duty service member, Afghanistan and Iraq veteran and a currently serving reservist at 856.428.8334 or firstname.lastname@example.org for a consultation. Kevin regularly blogs about issues affecting military families and more of his articles can be found by clicking here.