Military Divorce Series: The Frozen Benefit Rule

Part 1: Military Divorce: THE FROZEN BENEFIT RULE

The Frozen Benefit Rule Defined

The new rule applies to active duty members of the military, National Guard or Reserves, who get divorced after December 23, 2016 when the amount divided will be “frozen.”

The military pay that Defense Finance Accounting System (DFAS) can divide is:

(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) 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.

10 U.S.C. § 1408 (a)(4) — Disposable Retired Pay

How the Frozen Benefit Rule Works

The new law freezes the military member’s retirement benefit at the time of entry of a court order. The amount divided will be “frozen in time” as the retired pay the military member would get at their rank and years of service at the time that the order is entered.

The Service Member provides the average of the highest 36 months of continuous compensation (High 3) at the time of divorce. This along with the years of creditable service (in an active-duty case) or the number of retirement points earned (in a Reserve or National Guard case).

Fixing a percentage at the time of the judgment order is a way to retain value. If you are divorced at year 10 of 20 years of service, an equal division of the marital share gives the former spouse 25% of the total (50% of 50%). If the service members continue to serve 10 more years for a total of 30, then an equal division of the marital share gives the former spouse 16.5% (50% of 33.3%). However, it does provide you a larger share of a smaller piece of the pie.

The Frozen Benefit Rule in a Divorce Case

The Service Member has an interest in getting the court order entered as soon as possible. Once the order is entered then the non-military spouse’s hypothetical award will be frozen at that specified rank and years of service. If the order is delayed more time will pass and there is a potential of promotion and pay increases which will then provide a potential increase to the non-service member spouse.

The FS can always ask the court for an unequal division of the property acquired during the marriage, in an attempt to even out the entire property division scheme due to the division of a truncated asset of the SM, not the final retired pay. Or the FS can ask for a greater share of the pension to make up for the smaller amount which will be divided.

This is the first of a 4 part Military Divorce Series covering the latest changes to the law affecting Military Divorce. If you have questions about military divorce or the unique aspects of divorce when you or your spouse is a member of the armed forces, we can help. Contact us today and let our military divorce expertise put your mind at ease.

THIS ARTICLE WAS PREVIOUSLY PUBLISHED AT: https://illinoislawforyou.com/military-divorce/military-divorce-series-the-frozen-benefit-rule/

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