Military Retirment Benefits

Military Retirment Benefits

Military Divorce & Retirement is not much different than any other type of divorce in Texas. However, there are a few issues that should be taken into consideration.

The military retirement system is composed of three (3) types of pensions; (i) longevity pay, (ii) reservist pay, and (iii) reservist pay.

(i)  Longevity Retired Pay. When a regular service member attains 20 or more years of credited service, he/she qualifies for an immediate lifetime retirement. Payments are made monthly and are subject to annual cost-of-living allowances (COLAs). Longevity Retired Pay is subject to division pursuant to divorce.

(ii)  Reservist Retired Pay. Certain members of the uniformed services may be serving in the Army, Navy, Marine and Coast Guard Reserves. A reservist may retire with 20 or more years credited service and are eligible for retired pay beginning at their age 60. A reservist’s retired pay is based on the number of days (points) of service, unlike longevity pay, which is based on years of service. Reservist Retired Pay is subject to division pursuant to divorce.

(iii)  Disability Pay. When a service member, either regular or reservist, becomes disabled either prior to or subsequent to attaining 20 or more years of credited service, a portion of the service member’s longevity pay is converted to disability pay. Disability pay is not considered property and is not properly subject to division pursuant to divorce.

Pursuant to divorce, only a portion of a service member’s retired pay is subject to division. That portion is called disposable retired pay, which may be equal to or less than the service member’s gross retired pay.


Uniformed Services Thrift Savings Plan

The Thrift Savings Plan is the federal government’s equivalent of the 401(k) plan, a cash or deferred arrangement. Although other federal employees could make contribution to the Civilian Thrift Savings Plan in 1987, members of the uniformed services could not begin making contribution to the Thrift Savings Plan until January 2002


Rights of Military Personnel, Residency and Jurisdiction

Similar to non-military divorce, a service member, active or reservist, unless waived, must be served with a summons and complaint before a count may act.

Residency often becomes an issue for service members and their spouses when seeking a divorce. In order to divorce in the State of Texas, one of the parties must be a resident of Texas for the preceding six month period the filing the suit, and a resident for the county in which the suit was filed for preceding 90 day period for reason other than on the basis of military orders. Under the Servicemembers Civil Relief Act a court may postpone a divorce preceding for the term of an active duty service member and for up to a year after discharge from active duty.


Spousal and Child Support

Each of the branches of the uniformed services has regulations which require service members to provide adequate support to family members. However, the services have no authority (without a court order) to force an individual to pay such support against his/her will. If a military member fails to provide support, the military can (and does) punish an individual, but such punishment is usually covered under the Privacy Act of 1974, and the military is not allowed to discuss the punishment with anyone.

Exactly what constitutes “adequate support” differs from service-to-service. Generally, Child and Spousal support payments may not exceed 60% service member’s pay and allowances. Child and spousal support may be enforced with garnishment or involuntary allotment order issued by a civil court.


Governmental Retirement Systems

Governmental retirement systems are unlike private employer retirement benefits. When dividing private employer retirement benefits in a divorce, those benefits are generally, but not always, subject to the Employee Retirement Income Security Act of 1974 (ERISA) and assignment are mostly consistent. Governmental retirement systems, however, are not covered by ERISA, and the assignment of benefits vary from system to system, and state to state. Some governmental retirement systems are assignable and some are not. In some cases, some portions of the benefits are assignable and some are not.


Federal retirement systems

There are two (2) federal retirement systems that cover most federal employees: (i) Federal Employees Retirement System (FERS) which covers most federal employees hired after December 31, 1983 and the Civil Service Retirement System (CSRS) which covers most federal employees hired prior to January 1, 1984. The primary differences between FERS and CSRS is (i) the benefit formula and (ii) FERS employees are subject to Social Security and CSRS employees are not.


Texas Statewide Retirement systems

There are six (6) different statewide retirement systems in Texas – (i) the Employees Retirement System of Texas, (ii) the Judicial Retirement System of Texas Plan One, (iii) the Judicial Retirement System of Texas Plan Two, (iv) the Teacher Retirement System of Texas, (v) the Texas County and District Retirement System, and (vi) the Texas Municipal Retirement System. There is very little consistency regarding these plans with respect to marital dissolution. Non-employee former spouses’ rights to the plan benefits are limited in each of these plans, often ignoring community property law such that non-employee cannot receive their rightful share of the benefits by direct payment from the systems. It is essential that when going through the minefield of divorce in Texas, former spouses should be informed of how these plans work to their disadvantage.


Local retirement systems

In City of Houston, there are three (3) retirement systems (i) the Houston Municipal Retirement System (HMEPS), (ii) the Houston Police Officers Pension System HPOPS), and (iii) the Houston Firefighters’ Relief and Retirement Fund HFRRF. Each of these plans are considered single employer contributory defined benefit plans, with Deferred Retirement Option Plan (DROP) provisions from certain employees.

DROPs are, as the name implies, an optional form of receiving the plan benefit. They are often misunderstood in the context of marital dissolution. But here is generally how they work:

When a city employee attains eligibility to participant in the DROP (20 years of creditable service for HPOPS and HFRRF and it vary with HMEPS), the monthly retirement benefit the employee would have received if he/she had retired is credited monthly to a notional DROP account and interest is credited monthly to the running monthly balance. If eligible, the employees monthly DROP credit is increased annually by cost-of-living adjustments (COLAs) which vary from plan to plan.

When the employee goes off the City payroll, DROP credits cease to be made and the balance in the DROP account is made available for distribution. In addition, the employee would then begin receiving his/her monthly retirement payment. The monthly retirement benefit is no less than the last DROP credit and may be increased (HPOPS and HFRRF) due to provisions in the plans.

The Stavinoha opinion (Stavinoha v. Stavinoha, 126 S.W.3d 604) should have put to rest any issue on the extent of community property in a DROP account. In a nut shell, the community property interest in a DROP, like all other pension and retirement benefits, is the benefit that was earned during the parties’ marriage.

The Texas Municipal Retirement System – The TMRS can best be described as a multi-member hybrid defined benefit plan. It is not a traditional defined benefit plan. It is more like a contributory cash balance plan. The benefits under the plan are determined by:

1.      Member payroll contributions;

2.      Prior service credits (paid by the employer city);

3.      Updated service credits (paid by the employer city)

4.      Interest on the member payroll contributions, prior service credits, and updated service credits; and

5.      Employer matching contributions on the member payroll contributions and interest on the member payroll contributions.

6.      The total of these contributions, credits, interest, and matching contributions make up a member’s reserve. The monthly benefit a retiree would receive is actuarially determined based on the member’s reserve and age.

To the extent made or credited to a member’s account during the parties’ marriage, those contributions, credits and interest would be considered community property. However, the TMRS administrators do not see it that way and only consider community property the employee payroll contributions and interest on employee payroll contributions as community property to the extent credited to the employees account during the parties’ marriage. The TMRS administrators do not recognize any prior service credits, updated service credits, or interest on these credits as community property, even though they may have accrued during the parties’ marriage.