Military Divorce: How Benefits and Pension Are Divided

If you or your spouse is serving or has served in the military, your divorce involves financial assets and benefit programs that most civilian divorce attorneys rarely handle. The rules are specific, the deadlines matter, and mistakes made in the settlement agreement can be permanent. This guide covers the major financial pieces of a military divorce in plain English.

The USFSPA: The Law That Makes Military Pension Divisible

Before 1982, military retirement pay was considered the service member's sole property — courts couldn't touch it in a divorce. The Uniformed Services Former Spouses' Protection Act (USFSPA), enacted in 1982, changed that by authorizing state courts to treat military retired pay as marital property and divide it just like a civilian pension.

The USFSPA doesn't mandate division — it gives courts the authority to divide. Whether and how much is awarded to the non-service-member spouse depends on the state's property division rules (community property or equitable distribution) and the specific facts of the marriage. The Defense Finance and Accounting Service (DFAS) administers USFSPA payments and is the agency that actually sends checks to eligible former spouses.

One important limit: the USFSPA allows courts to divide only up to 50% of the service member's disposable retired pay. When combined with child support or alimony garnishments, the total garnishment may not exceed 65% of disposable retired pay.

The 10/10 Rule — Widely Misunderstood

The 10/10 rule is probably the most misunderstood concept in military divorce. Many people believe it means a former spouse can't receive any share of a military pension unless they were married for at least 10 years of the service member's military service. That's not what it means.

What the 10/10 rule actually determines is who sends the check. If the marriage lasted at least 10 years and overlapped at least 10 years of creditable military service, DFAS can pay the former spouse directly — the former spouse receives their share straight from the government rather than relying on the service member to forward it.

If the 10/10 threshold is not met, the court order dividing the pension is still legally valid. The non-service-member spouse is still entitled to whatever share the court awarded. The difference is that the service member must make those payments personally — DFAS can't be the intermediary. For a former spouse, this creates payment risk that doesn't exist when DFAS pays directly.

Disposable Retired Pay: What Can Actually Be Divided

Courts can only divide disposable retired pay — a specific number that's lower than the service member's gross retirement pay. Disposable retired pay is gross retired pay minus certain deductions, the most significant of which is VA disability compensation.

The VA disability offset — a critical risk

Here's where many former spouses get hurt financially without realizing it until it's too late: VA disability compensation is tax-free, while military retired pay is taxable. Many veterans elect to waive a portion of their taxable retired pay in exchange for an equal amount of tax-free VA disability compensation — a process called the VA disability waiver.

The problem: the waived amount is subtracted from disposable retired pay before the former spouse's share is calculated. If a service member waives $1,000/month in retired pay to receive $1,000/month in VA disability instead, the disposable retired pay available for division drops by $1,000 — and the former spouse's share shrinks accordingly. The service member ends up with the same total monthly income, but the former spouse receives less.

The Survivor Benefit Plan (SBP) — Don't Forget This

The Survivor Benefit Plan is a government insurance program that pays a monthly benefit to a designated beneficiary after the service member dies. Without it, the former spouse's pension share — whatever the court awarded — ends the moment the service member passes away. With SBP coverage, those payments continue.

For former spouses, SBP coverage must be addressed at the time of divorce. Specifically, the service member must elect "former spouse" coverage within one year of the divorce, or the former spouse must obtain a "deemed election" through a specific court order. Miss that one-year window and SBP coverage for the former spouse may be permanently lost — regardless of what the divorce decree says.

SBP comes at a cost: the premium is approximately 6.5% of the covered base amount, deducted from the retired pay. The settlement should clearly specify who bears that cost — whether it reduces the service member's share or is factored into the overall division.

The 20/20/20 and 20/20/15 Rules: Healthcare and Other Benefits

Military spouses who meet the 20/20/20 threshold keep significant benefits after divorce — benefits that have real dollar value for long-term military spouses.

The 20/20/20 rule requires three overlapping criteria: the marriage lasted at least 20 years, the service member served at least 20 years of creditable military service, and there were at least 20 years of overlap between the marriage and the military service. Former spouses who qualify retain full TRICARE healthcare coverage, access to commissary and exchange privileges, and the ability to use military installations. TRICARE coverage continues indefinitely as long as the former spouse remains unmarried.

The 20/20/15 rule applies when the overlap is at least 15 years (but less than 20). These former spouses receive one year of TRICARE coverage post-divorce. After that year, they may continue healthcare coverage through the Continued Health Care Benefit Program (CHCBP) — a transitional program that provides TRICARE-equivalent coverage for up to 36 months, though premiums apply.

The Thrift Savings Plan (TSP): Not a QDRO

The Thrift Savings Plan is the federal government's equivalent of a 401(k) — a defined contribution retirement account that many service members contribute to throughout their career. Like a 401(k), the marital portion of a TSP can be divided in a divorce. Unlike a 401(k), a standard QDRO doesn't work.

The TSP is governed by Title 5 of the U.S. Code, not ERISA, which means the ERISA-based QDRO framework does not apply. To divide a TSP, the court must issue a Retirement Benefits Court Order (RBCO) — a specific type of court order that the TSP will accept. The TSP publishes guidance on what an RBCO must contain, including language requirements that are specific and non-negotiable.

Critically, the RBCO must expressly reference the "Thrift Savings Plan" by name. General language like "all government retirement accounts" or "federal retirement benefits" is not sufficient — the TSP will reject orders that don't name it specifically. The order must also specify a dollar amount or percentage of the account as of a specific date, not vague terms like "the marital portion."

BAH and Other Allowances

Basic Allowance for Housing (BAH) and other military allowances are not marital property — they can't be divided or awarded as a property settlement. However, they may be treated as income for the purpose of calculating child support and spousal support, which means they indirectly affect those amounts.

After divorce, a service member's BAH rate typically changes. A service member who was receiving BAH at the "with dependents" rate may drop to the "without dependents" rate once no qualifying dependent remains in their household. This reduction in allowance is a real change in take-home pay that both parties should account for when modeling post-divorce budgets — especially if support obligations are being calculated based on current income.

VA Disability Compensation: Cannot Be Divided

VA disability compensation is not marital property. Courts cannot divide it, award it to a former spouse, or treat it as a marital asset. This is federal law — a state court order attempting to divide VA disability pay has no legal effect.

What VA disability can be used for is income: courts in most states may consider VA disability compensation as income when calculating child support and alimony amounts. A veteran receiving $2,000/month in VA disability has that income factored into support calculations — they can't shield it by arguing it's off-limits for support purposes.