Frozen Benefit Rule: Military Retirement & Colorado Divorce

U.S. Marine holds a large American flag.

In December 2016, Congress dropped a bombshell on military divorce lawyers in Colorado Springs (and the rest of the country). For the first time since the Uniformed Services Former Spouses Protection Act was enacted 33 years previously, the federal government mandated how states can divide military retirement.

The National Defense Authorization Act, or NDAA, is the statute which sets funding levels and policies for the Department of Defense. Only rarely does the NDAA affect military divorces, but the 2017 NDAA certainly did with the “Frozen Benefit Rule.”

Although the law is now more than two years-old, there is still a surprising amount of misinformation on the internet, even on legal websites, which seem unaware of the no-longer-new law, or just have not been updated in several years.

WARNING – this blog is somewhat math-heavy, because the only way to explain how the Frozen Benefit Rule compares to Colorado’s traditional Hunt formula is with actual examples. You do not need to understand the math behind the division of a military retirement in a Colorado divorce, but your attorney better!

Dividing Military Retirement Before the 2017 NDAA

Like many government pensions, military retirement is a “defined benefit pension plan,” under which an employee is paid a monthly retirement based upon a combination of years of service and salary. Contrast that to a “defined contribution” plan, such as an IRA or 401(k), where the account balance earned during marriage is simply divided at divorce.

The military retirement has long been based upon the following formula:

2.5% x Years of Service x “High 3 Pay” (Avg highest 36 months of basic pay).

By way of example, a military member retiring at 24 years whose basic pay averaged $8000 over the 36 months immediately prior to divorce would receive a military retirement of $4800/mo (2.5% x 24 x $8000). And if the employee (or military member) was promoted after divorce, the actual retired pay, including increases due to the promotion, were divided and shared with the former spouse.

In a Colorado divorce, courts traditionally divided all defined benefit pensions using the Hunt1In re: Marriage of Hunt, 909 P.2d 525 (Colo. 1995). formula, by which the marital share was determined as follows:

Months of marriage overlapping service/employment
Total service/employment at time of retirement

Let’s assume a hypothetical marriage of 11 years, with the member retiring at 24 years of service with the $4800 retirement set forth above. The marital share would be 45.8% (11/24). And multiplying 45.8% by the $4800 retirement, the marital share would be $2200.

Every non-military defined benefit pension (PERS, FERS, etc) is still divided using the Hunt formula. So if one spouse is a 2nd grade teacher at the time of divorce, but by the time of retirement had moved his way up to school principal, then district superintendent, the other spouse’s share of the pension included the increases due to those promotions.

What is the Frozen Benefit Rule?

The Frozen Benefit Rule changed how state divorce courts can divide military retirement while the member is still on active duty or in the reserves at the time of divorce. Under 10 U.S. Code § 1408, the marital share of the retirement is calculated and divided based upon the member’s rank and years of service at the time of divorce, not at the time of retirement.

While the former spouse will receive the benefit of COLAs, she will not share in any pay increases due to the post-divorce promotions or longevity increases (i.e. going over 12, 14, 16, etc. years of service).

The Frozen Benefit formula for dividing a military retirement at divorce starts with:

Months of marriage overlapping service
Total months of service at time of decree

So far, so good. The frozen benefit numerator is the same as the Hunt formula – the months of marriage overlapping service.

And the denominator will actually be a smaller number – the total months of service at the time of divorce, not retirement. So at first, the frozen benefit rule seems helpful to spouses. Using the hypothetical from above, let’s assume the spouses were married for the first 11 years of the member’s 24-year career. At the time of divorce, there were exactly 11 years of marriage overlapping 11 years of service.

The marital share would be 100%, compared to 45.8% under the Hunt formula.

But here’s the catch – the result of that equation is multiplied not against the total military retirement at the time of actual retirement, but against the retirement earned as of the date of the divorce. And if the member has fewer than 20 years of service, we simply use the same 2.5% multiplier times however many years of service she does have.

So back to our hypothetical, let’s assume that at the time of divorce the member’s high-three pay was $4000/mo. The military retirement earned after 11 years of service would therefore be $1100 (2.5% x 11 x 4000).

So the marital share under the frozen benefit rule would be 100% x $1100, compared to the marital share under the Hunt coverture formula of 45.8% x $4800, or $2200 total. The spouse gets only half as much of the military retirement under the frozen benefit rule!

Can a Military Retirement Be Divided Using Coverture Formula?

The 2017 NDAA applies to divorce decrees issued after December 23, 2016. If a military retirement was divided in a decree prior to that, DFAS will accept the Hunt formula and divide it using the previous formula.

But for decrees issued since that date,  the decree or separation agreement must follow federal law, or DFAS will reject it. Even by agreement, the spouses cannot “opt out” of the frozen benefit rule and apply the old formula.

How About the Blended Retirement Plan?

The blended retirement plan, introduced in 2018, applies only to military members who (1) joined the military after January 1, 2018, or (2) had fewer than 12 years of service as of that date AND opted for blended retirement during 2018. Under the blended retirement, the multiplier decreased from 2.5% per year of service to 2%, and added a variety of other benefits, including an expanded TSP with a government match.

For a complete discussion of everything that the blended retirement plan changed, see the article Understanding Military Retirement Pay in the Military Divorce Guide.

You Need a Colorado Springs Military Divorce Lawyer

If your head has stopped spinning, and you would like a more thorough discussion of how the Frozen Benefit Rule applies to the division of military retirement in a Colorado divorce, see the Calculation of Military Retirement Pay & Shares article in the Military Divorce Guide. As a bonus, the article also have a link to our Military Retirement Calculator.

At Graham.Law, our Colorado Springs military divorce attorneys truly understand the frozen benefit rule, and our managing partner has taught hundreds of attorneys how to divide military retirement at statewide CLEs (see sample outline from one recent presentation).

If you have a military divorce in Colorado Springs, please consider our firm, and if your case is outside the 4th Judicial District, make sure your attorney understands the frozen benefit rule. Getting this wrong, including applying the old law, will result in DFAS rejecting your retirement order.

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