Intersection of Military Pension Division and NC Statute
A common challenge attorneys face in a military divorce is how the Frozen Benefit Rule (FBR) will affect pension division.[1] To avoid a call to the malpractice carrier, attorneys must understand the FBR, and when it does – and does not – apply to their case.
The Frozen Benefit Rule: Is Your Client In or Out?
Any military pension case either is “in” or “out” for the FBR. What does a lawyer need to know to determine this? There are two questions to answer:
- Was the divorce entered before December 23, 2016?
- Was the servicemember receiving retired pay on the date of divorce?
If the answer to both questions is “no,” then the rule applies. If the divorce was entered prior to that 2016 date, the rule does not apply. This is of course more and more unlikely as time marches on, making the second question more relevant for most lawyers. If Mr. Jones was receiving retired pay on the date of divorce, the rule does not apply pursuant to Chapter 29, Vol. 7B of the Department of Defense Financial Management Regulation (DoDFMR).
When the Frozen Benefit Rule Applies
If the FBR applies to your military divorce case, the benefit payable to the spouse under 10 USCS § 1408 is fixed or “frozen” as of the date of divorce. What does that mean? The retired pay benefit will be measured by the hypothetical retired pay of the servicemember on the divorce date. Additionally, data points are required by the retired pay center, usually Defense Finance and Accounting Service (DFAS), for a military pension division order (MPDO) to be honored under the FBR.[2]
Pay careful attention to the intersection of this rule and the applicable statute in North Carolina. N.C. Gen. Stat. § 50-20.1(d), which was revised in 2019, applies to these cases.[3] The updated language in this statute directly addresses the time rule as applied to a pension in the FBR case. The attorney handling such a case will need to pay close attention to the marital fraction. Ordinarily, the coverture fraction would be marital pension service divided by total pension service.[4] However, since the retired pay that is divided is fixed (except for COLAs, or cost-of-living adjustments) on the date of divorce by federal statute, the court order needs to contain a fixed denominator pursuant to N.C. Gen. Stat. § 50-20.1(d). The fixed denominator should end on the date of the divorce. While this may run contrary to applicable case law, the statute supersedes case law in these situations. Also, fixing the denominator is the only way to provide for a fair division of a benefit that is fixed on the divorce date; anything else would constitute a double dilution of a spouse’s share of the pension.[5]
When the Frozen Benefit Rule Does Not Apply
If the FBR does not apply, the share of the spouse should be divided pursuant state law, typically what is often referred to as the “time rule” or “coverture fraction” for pension share: the numerator is marital months of service and the denominator is total pension service. Many states have similar law, such as the Seifert fraction under NC law.[4] The revised N.C. Gen. Stat. § 50-20.1(d) would not apply in this situation because the FBR does not restrict the benefit if it does not apply. A military pension division order should be honored by the retired pay center upon review, and a finding that it meets all criteria, without the data points required under the FBR.
There are several types of awards that the government will accept. If all variables are known, such the servicemember’s retirement date, a percentage award is commonly used. When all variables are not known, a much more complex hypothetical award may be necessary. Facing down a blank screen attempting to draft a hypothetical award is best done with a bottle of Excedrin in one hand and a military divorce resource at the ready.
Final Comment
Before you prepare the order, go through the exercise of asking yourself do you know what this means and how it affects your client? As an example, the DFAS sample order contains language setting the denominator of the marital or coverture fraction as the total military service of a servicemember. However, as pointed out above, that is not what the NC statute provides and results in a double division or dilution. This intersection can be very complex. While the above is a basic overview designed to, hopefully, bring awareness to this important issue, it does not cover every possible issue that may arise. As always in complex areas such as military pension division, it’s a good idea to seek the help of a “wingman” for assistance – someone who knows the subject matter and who has handled cases like this before. Don’t go it alone!
Kris Hilscher is a Board-Certified family law specialist practicing in Raleigh, NC. He works with attorneys nationwide on military divorce issues, drafting military pension division orders, and tackling many other military family law issues. He is the author of several articles on military divorce and serves as Chair of the Military Committee of the ABA Family Law Section and ABA’s Legal Assistance for Military Personnel Committee. He practices with Sullivan & Hilscher Family Law.
[1] Note: There are many other things a lawyer must prepare for in a military divorce; this article is limited to the frozen benefit rule.
[2] This article does not focus on having pension division orders honored. For further information, see the several Silent Partner info-letters found at the website of the military committee of the N.C. State Bar, www.nclamp.gov, under “For Lawyers.” See also The Military Divorce Handbook, 3d Ed., Mark E. Sullivan, ABA 2019.
[3] N.C. Gen. Stat. 50-20.1(d) states in relevant part: “When a pension, retirement, or deferred compensation plan, program, system, or fund, or an applicable statute limits or restricts the amount of the benefit subject to equitable distribution by a State court, the award shall be determined using the proportion of time the marriage existed (up to the date of separation of the parties) simultaneously with the total time of the employment which earned the benefit subject to equitable distribution to the total time of employment, as limited or restricted by the plan, program, system, fund, or statute that earned the benefit subject to equitable distribution.”
[4] Seifert v. Seifert, 319 N.C. 367, 354 S.E.2d 506 (1987).
[5] See Note 1 supra.