The most valuable asset of a military servicemember in a divorce is often military retired pay. Servicemembers often have two retirement options: military retirement (a pension) and the federal Thrift Savings Plan (similar to a 401k). The TSP is easily divided between spouses because there is a clear account balance. The division of the military pension is much more difficult due to very restrictive rules.
The first step is to clarify what exactly is being divided. The military will divide, in most cases, only “disposable retired pay.” This is a very specific definition, that usually does NOT include all the retirement income paid to a servicemember. For example, it does NOT include disability pay that a retired servicemember receives replacing retired pay. A disabled servicemember can choose to receive a portion of retired pay as disability through what is known as a “VA Waiver” or similar means. There are several reasons that a servicemember may do this, including tax benefits and, frankly, avoiding payments to an ex spouse. The servicemember’s retired pay is reduced in most cases by the amount of disability payments. Therefore, because the military will only divide “disposable retired pay,” NOT disability pay, the ex-spouse’s share of the total retirement pay may be substantially reduced.
Such a reduction is not necessarily the result of illegal or bad faith actions by the servicemember. This process is entirely permitted by military regulation. Nevertheless, both spouses should be fully aware of these regulations in the bargaining process. Each spouse should understand exactly what he/she can expect to receive. A full understanding at the time of divorce allows each spouse to accurately plan for retirement.
Attorney David Kowalski has extensive experience allocating military retired pay and other military benefits is Wisconsin divorces. Please call him today for a free consultation.