Calculation of Military Retirement Pay & Shares

Disposable Retired Pay Subject to Division

Per 10 U.S. Code § 1408(a)(4), a state divorce court is authorized to divide a member’s disposable retired pay, which is the total pay (aka "gross pay"), minus:

• Amounts owed to the government for previous overpayments (not common),
• Forfeitures adjudged by a court-martial (even rarer),
• Pay waived to receive VA disability (common), and
• SBP premiums for the benefit of the former spouse seeking a share of the retirement (common).

Military Retirement Upon Death of Retiree or Former Spouse

Can the former spouse bequeath his/her share of retirement upon death? No - if the former spouse dies, that person's share of the retirement reverts back to the retiree, until the death of the retiree. Federal law provides: "this section does not create any right, title, or interest which can be sold, assigned, transferred, or otherwise disposed of (including by inheritance) by a spouse or former spouse." 10 U.S. Code § 1408(c)(2).

What happens to the retirement benefits upon death of the retiree? Military retirement payments to a former spouse cease upon the retiree's death. For this reason, the court will often order the retiree to protect the income flow by electing the Survivor Benefit Plan (SBP) for the former spouse.

What is the Frozen Benefit Rule?

The 2017 National Defense Authorization Act (NDAA), enacted on December 23, 2016, contains a major change in how states are permitted to divide military retirement.

In short, the former spouse’s share of a military retirement is “frozen” as of the date of dissolution. The share awarded receives the benefit of COLAs, but excludes any post-decree promotions or longevity increases. (In addition to annual COLAs, military members typically receive a longevity pay increase each time they go over 2 more years of service - i.e. on their 6th, 8th, 10th, etc anniversary of service).

The term "disposable retired pay", for purposes of division of retirement, is modified by a new subsection  10 U.S. Code § 1408(a)(4)(B), which reads:

"For purposes of subparagraph (A), the total monthly retired pay to which a member is entitled shall be (i) the amount of basic pay payable to the member for the member's pay grade and years of service at the time of the court order, as increased by (ii) each cost-of-living adjustment that occurs under section 1401a(b) of this title between the time of the court order and the time of the member's retirement using the adjustment provisions under that section applicable to the member upon retirement."

In other words, the spouse’s share of the retirement is based upon the High-3 pay of the service member at the time of dissolution, plus COLAs, but excluding any other increases.

Per section 642(b) of the Act, the frozen benefit rule applies to all cases where the decree of dissolution, legal separation, or annulment is issued after its enactment, which as indicated was on December 23, 2016. This means that if you are going back to calculate a former spouse’s share of a retirement and the decree awarding the share was prior to that date, the traditional coverture formula would apply, not the NDAA.

Military Retirement Pay Calculator Using Frozen Benefit Rule

The calculation is more cumbersome than it used to be, as DFAS requires the member’s High-3 at the time of dissolution to be included in the order dividing retirement.

I created a Military Retirement Calculator spreadsheet to calculate the former spouse’s share of active duty and reserve military retirements. YOU MUST BE LOGGED INTO GOOGLE TO ACCESS THE SHEET. Upon clicking on the link, you will be prompted to make your own copy of the sheet, which you can then fill out or edit as needed.

The 1st tab is for active duty, and the 2nd tab is for reserve retirements. The third tab is to calculate active duty SBP premiums, in case the parties have agreed to divide the premium in a way different from DFAS's method.

Please note one caveat about the Military Retirement Calculator - this is still in beta, and is constantly being upgraded. If you find an error, please feel free to contact us so I can fix it. We cannot provide technical support to help use the calculator, however.

Military Retirement Calculation When Already Retired At Divorce

The calculation of military retirement if the member is already retired at the time of divorce is simple - Multiply the marital share against the disposable retired pay. And the marital share is this equation:

Months of Marriage Overlapping Military Service
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Total Months of Military Service at time of retirement

Note that this coverture formula uses the total military service for the denominator, and the total retired pay for the multiplier, unlike the Frozen Benefit Rule which uses the military service through date of decree, but results in a lower calculation because it uses the smaller multiplier of the hypothetical military retired pay at the time of divorce.

This equation is also used for a post-decree calculation when the decree of dissolution awarding retirement was issued prior to December 23, 2016, when the 2017 National Defense Authorization Act came into effect.

Difference Between Frozen Benefit Rule & Coverture Formula

The best way to illustrate the impact of the frozen benefit rule is with a hypothetical. Assume a soldier marries one year into his enlistment. Five years later, the couple obtain a decree of dissolution. By that time, the soldier is an Army Sergeant (E-5) with 6 years of service, and there are 5 years of marriage overlapping the service.

1. Calculate Marital Percentage. First, we calculate the marital share as a percentage - that is 5 years of marriage divided by 6 years of service, or 83.33%. (Normally the calculation is more granular than this, and done by months, or even days).
2. Calculate Hypothetical Retirement. While a soldier obviously cannot retire with just 6 years of service, we would need to calculate the hypothetical retirement of that servicemember. Assume that the E-5 had a High-3 pay of $2800/mo. And also assume that the member’s retirement benefits accrue at the rate of 2.5% per year (this assumption is not necessarily a safe one with the new blended retirement system). That means the hypothetical retirement amount comes to 6 x 2.5% x $2800, or $420/mo.
3. Calculate Spouse’s Share. The spouse receives one-half of the 83.33% marital share, or 41.67%. So her share comes to 0.4167 x $420, or $175/mo, plus COLAs. NOTE - this dollar amount is solely for planning purposes - the actual share should be expressed as a percentage to ensure the former spouse receives COLAs.

By contrast, under the traditional coverture formula which Colorado and most other states used before the 2017 NDAA, we would wait to see what happened to the soldier’s career. Assume the E-5 ended up retiring as a Sergeant Major (E-9) with 28 years of service, and a High-3 pay of $6800 at retirement.

Assuming a 2.5% annual multiplier, the member’s retirement would be 28 x 0.025 x $6800, or $4760. Under the former rule in Colorado, the marital share of the retirement would be 5 years of marriage overlapping 28 years of service or 17.86%, and the former spouse’s share is half of that, or 8.9%.

Multiply 8.9% x the $4760 retirement, and the former spouse’s share under the old system comes to $425/mo. Compare that to the $175/mo the former spouse receives under the frozen benefit rule, and the new rule cost the former spouse almost 60% of the pre-NDAA retirement.

Does Frozen Benefit Affect Other Retirement Plans?

No. The federal government administers several “defined benefit” retirement plans (where there is a fixed amount paid monthly based upon salary and years of service), including FERS and CSRS. The 2017 NDAA affects only military retirement, so a spouse married to a DOD civilian with a FERS retirement  would still receive the benefits of post-divorce promotions.

The law also does not affect state defined benefit plans (such as PERA in Colorado), nor any defined benefit plan administered by a private company. In those situations, as with the civilian federal plans, the traditional coverture formula still applies, and the former spouse still receives the benefit of post-divorce enhancements to income.

It also does not have any effect on “defined contribution” retirement plans, such as the TSP (for military), or IRAs, 401(k)s, etc.

Potential Issues with the Frozen Benefit Rule

By treating military retirements differently from other defined benefit plans, a substantial unfairness arises if the military member’s share of the spouse’s own retirement plan includes post-divorce promotions, whereas the spouse’s share of the military retirement excludes them.

In the example above where the E-5’s wife’s share of military retirement was based only upon the member being an E-5, but if the wife were a GS-6 at the time of dissolution, and had been promoted to GS-13 by the time she retired, the military member would share in all of her promotions, but the opposite would not be true, and she would be excluded from his those promotions.

More Information

DFAS Notice of Statutory Change, with information and a link to suggested language.

Military Pension Division and the Radical Rewrite, an American Bar Association paper, which explains and critiques the change, and raises some interesting concerns. From retired Colonel Mark Sullivan, perhaps the country’s foremost authority on military retirement issues.