Changing Your SBP Coverage and Election

People are accustomed to routinely changing their election of benefits.  Most companies provide employees an opportunity to change their benefits at least once a year.  Employees also frequently have an opportunity to change your elections based on certain major life events, such as marriage, the birth of a child, or divorce.

If you are a military servicemember who is at or near retirement, you should be very careful when you make your election concerning coverage under the Survivor Benefits Plan ("SBP").  SBP is an annuity payable to certain eligible beneficiaries in the event the servicemember dies and is thus no longer eligible to receive military retired pay.  SBP has many advantages and disadvantages, which may or may not be right for everyone.  SBP allows eligible beneficiaries to receive up to 55% of the servicemember's retired pay.  SBP also comes at a cost:  SBP premiums may be as high as 6.5% of the Servicemember's retired pay for up to 30 years.

The SBP election is irrevocable, except as specifically provided by statute.  See 10 U.S.C. § 1448(a)(4)(D).  Retirees who waive SBP or elect coverage at less than the maximum amount typically have no right or ability to change that election.  This is true even if you go through a divorce.  For example, if you waived SBP at retirement, neither your spouse nor the divorce court can force you (or DFAS) to change that election.   This is somewhat fair, of course, because spousal consent is required for any waiver or reduced election.   See 10 U.S.C. § 1448(a)(3)(A).

Congress did provide some exceptions to the general rule that the SBP election is irrevocable.  If the beneficiary dies, coverage automatically terminates.  If you marry for the first time or have a first child after retirement, you can add the new family member as a beneficiary.  See 10 U.S.C. § 1448(a)(5)(A).  To make this election, submit DoD Form 2656-6 and supporting documentation to DFAS Retired and Annuitant Pay within one year of the qualifying event.  If you were married and elected coverage for your spouse at retirement, unless there is a court order to the contrary, you can notify DFAS at any time of your remarriage and a new spousal election will automatically begin effective one year after that marriage date.  See 10 U.S.C. § 1448(a)(5).  Spousal concurrence must be obtained to begin coverage at any level lower than the original spousal election.  If you were married at retirement and elected not to cover your spouse, you cannot ever cover a subsequent spouse.

During the third year of retirement (i.e., between months 25 and 36), a retiree may elect to cancel SBP coverage.  See 10 U.S.C. § 1448a(a).  To make this election, submit DoD Form 2656-2 to DFAS Retired and Annuitant Pay with spousal consent (if applicable).  In the event of a divorce, you are free to terminate your coverage unless the final judgment or decree requires you to maintain SBP coverage.  If you are already participating in the SBP and you agree to continue SBP coverage for you former spouse or the court directs you to do so, you or your former spouse must make the election within one year from the date of the final judgment or divorce decree.   See 10 U.S.C. § 1448(b)(3)(A).  To do so, you or your former spouse must submit DoD Form 2656-1.

If you do not qualify for any of the aforementioned exceptions and you would like to change your SBP election, your only hope is that Congress declares an "Open Season" for changing your SBP election.  The DFAS website indicates that the last time Congress authorized an Open Season was 2005.

If you have questions about dividing military retired pay in a divorce or other questions concerning military divorce, please contact a military divorce attorney.

Continuing Health Care Coverage for the Military Former Spouse

Healthcare is one of the more important issues in our society.  And, healthcare is frequently a very important issue in the military divorce case.  Many times, military spouses do not have access to their own healthcare coverage outside the marriage.

A military spouse is entitled to varying degrees of continuing healthcare coverage, depending on whether they meet certain criteria.  If you represent clients in military divorces, you should be aware of the options available to the former spouse.

A "20/20/20 former spouse" qualifies for lifetime continuing healthcare coverage if the service member served at least 20 years of active duty, the parties were married at least 20 years, and there was at least 20 years of overlap (i.e., the former spouse was married during 20 years of the servicemember's active duty service).  See 10 U.S.C. § 1072(2)(F)(i).  This coverage is not available if the former spouse remarries.  Id.  Nor is continuing coverage available if the former spouse has medical coverage under an employer-sponsored health plan.  See 10 U.S.C. § 1072(2)(F)(ii).

PRACTICE TIP:  The 20 years is not determined by date of filing.  It is determined by the date the final judgment or decree is entered.  So, if your client is on the verge of qualifying for 20/20/20 status, you should definitely advise the parties to consider waiting to have a final judgment entered.  Doing so could significantly reduce the former spouse's need for alimony.

A "20/20/15 former spouse" qualifies for one year of continuing healthcare coverage if the service member served at least 20 years of active duty, the parties were married at least 20 years, and there was at least 15 years of overlap (i.e., the former spouse was married during 15 years of the servicemember's active duty service).  See 10 U.S.C. § 1072(2)(G)(i).  This coverage is not available if the former spouse remarries.  Id.  Nor is continuing coverage available if the former spouse has medical coverage under an employer-sponsored health plan.  See 10 U.S.C. § 1072(2)(G)(ii).

If the former spouse does not qualify for continuing coverage under either of the foregoing plans, he or she may be eligible for coverage under the Continued Health Care Benefit Program ("CHCBP").  See 10 U.S.C. § 1078a.  This program is not the same as TRICARE.  Instead, it offers coverage similar to that available to insureds under more familiar programs such as COBRA.  CHCBP is available for former spouses who were entitled to medical and dental care through a qualified service member.  CHCBP provides guaranteed coverage, including coverage for any preexisting conditions.  So long as coverage was previously available to the former spouse, there is no minimum length of marriage or active duty service.    Transitional coverage for 36 months is available to any qualifying former spouse.  See 10 U.S.C. § 1078a(g)(1)(C).  And, unlimited coverage through CHCBP is available for former spouses who meet the following criteria:  (i) former spouse was not remarried prior to age 55; (ii) former spouse was enrolled in an approved healthcare plan at any time during the 18 months preceding the date of the final judgment of dissolution; and (iii) is actually receiving or entitled to receive (as evidenced by a court order or written agreement) a portion of the servicemember's retired pay or SBP annuity.  See 10 U.S.C. § 1078a(g)(4).  If a former spouse desires to participate in CHCBP, they must make an election within 60 days after their eligibility for TRICARE expires.  

PRACTICE TIP:  Remind former spouses about the 60-day window.  This could have a substantial impact on the client who misses deadline.  Also, If you negotiate a buyout of the former spouse's right to a share of the servicemember's retirement pay through alimony or additional equitable distribution (which is relatively common in shorter-term marriages), this may preclude the former spouse from qualifying for healthcare benefits.

To learn more about the Continued Health Care Benefit Program:

http://www.humana-military.com/south/bene/TRICAREPrograms/chcbp.asp

To review the Continued Health Care Benefit Program Handbook:

http://www.humana-military.com/CHCBP/handbooktoc.htm

For a more detailed legal discussion of the CHCBP:

http://meetings.abanet.org/webupload/commupload/FL115277/newsletterpubs/rc_sum08.pdf

If you have questions regarding these or other rights in a military divorce, contact an experienced Tampa military divorce attorney.

Do I have to pay child support if I receive disability payments from the government?

One common question is whether a parent has to pay child support if the children are receiving social security payments as a result of the parent's disability.

The short answer is that social security payments do not negate the obligation to pay child support.  A disabled parent, however, does receive credit for the social security paid for the benefit of the children.  In some cases, especially where the disabled parent has no other income, these payments may actually exceed the support obligation.  The fact of the matter is that, to make any determination, you should still have a Florida family law attorney or other qualified person apply the Florida child support guidelines, properly taking into account any social security benefits paid to the children.

Under the Florida child support guidelines, social security is treated as income for purposes of calculating the parents' child support obligation.  Specifically, under section 61.30(2)(a)(8), the social security benefits are treated as income to the disabled parent.  The disabled parent, however, also receives credit for paying support equal to the amount of the social security received on behalf of the children.  In other words, the social security funds are hypothetically earned by the disabled parent and paid by that parent to the children.

This rule was established by the First District Court of Appeals in Williams v. Williams, 560 So. 2d 308 (Fla. 1st DCA 1990).  In Williams, the trial court failed to credit a disabled father for social security payments received by the mother on behalf of their three children.  The court ordered that, in addition to the disability funds the mother received directly, the father also had to pay child support out of his own disability payments.  As a result, after satisfying his child support obligations, the father had no money from which to live.  The First District found that the court erred when calculating the child support guideline amount by failing properly to account for the social security payments received by the children.

In most cases, the social security payments will exceed the disabled parent's obligation to pay support.  This is especially true where the disabled parent has no other material income.

Military Divorce and Post 9/11 GI Bill Benefits

Everyone knows that a divorce typically involves dividing your marital assets.  In a military divorce, those assets frequently include the service member spouse’s military benefits, such as the right to military retirement pay, healthcare for the children, and even the value of the member spouse’s leave days accrued during the marriage.

One asset that is becoming a more frequent topic of discussion is the member spouse’s benefits under the Post 9/11 GI Bill.  This program provides up to 36 months of educational benefits, which may be used up to 15 years after the service member’s discharge from active duty.  If the service member meets the service requirements, this benefit may be transferred to a service member’s spouse or children.  See 38 U.S.C. § 3020.  The transfer can even be made online.

The Post 9/11 GI Bill is therefore a significant asset that can potentially benefit either spouse or their children.  Unlike leave pay and retirement pay, however, Post 9/11 GI Bill Benefits may not be treated as marital property, or the asset of a marital estate, subject to division in a divorce or other civil proceeding.  See 38 U.S.C. § 3020(f)(3).  In other words, a military spouse cannot ask the court to award a service member’s Post 9/11 GI Bill benefits as an asset in a divorce.  The Post 9/11 GI Bill benefits simply cannot be included in equitable distribution.

A skillful military divorce attorney, however, will advise their client on how the Post 9/11 GI Bill benefits may be used to settle the divorce, including the spouse’s alimony claim.  Many times, a dependent spouse is seeking alimony in connection with the divorce, which may include a request for rehabilitative alimony.  As part of a marital settlement agreement, the service member may agree to transfer all or part of the service member’s educational benefits under the Post 9/11 GI Bill in exchange for a waiver of alimony.  If the service member seeks to transfer the benefits, the service member typically must agree to serve four additional years of active duty service.  See DoD Transferability Fact Sheet.  The transfer must also be made prior to the entry of a final judgment, as the transfer may only be made to a “spouse.”  A subsequent divorce, however, does not affect a transfer that has already occurred.  Both sides should be aware that, as a matter of federal law, the service member may revoke the transfer at any time while still serving on active duty or as a member of the Selected Reserve.  See 38 U.S.C. § 3020(f)(2).  Thus, the Final Judgment or Divorce Decree should prohibit the Service Member from revoking the transfer and provide for indemnification, payment of alimony, or another remedy should the service member do so.

If the service member transfers the benefit, the Post 9/11 GI Bill will provide tuition assistance for the recipient spouse, and subject to certain exceptions, it may also include a housing allowance, book stipend, and other benefits.  See Summary of Benefits.  The monthly housing allowance is equivalent to the Basic Allowance for Housing (BAH) for an E-5 with dependents, based on the ZIP code of the school where the student is physically enrolled (in Tampa, this is $1,662 per month).  You can check the BAH rate for any school using the Department of Defense BAH Calculator.  The housing allowance is not available if the service member continues to receive the Basic Allowance for Housing.  Notably, if the Post 9/11 GI Bill is transferred to a child, the child could receive the housing allowance and book stipend, even if the parent service member is still on active duty and receiving the Basic Allowance for Housing.  The apparent rationale is that a couple – even if they are no longer married – only qualifies for one housing allowance.

If you have questions about a military divorce, you should consult a military divorce attorney or family law attorney experienced in military divorce.

Be Prepared: Get a Prenup to Protect Your Military Retirement

Most military service members like to think that they are prepared for the obstacles that they will face in life.  Like the Boy Scout motto, people in the military like to “be prepared.”

And, just in case we are asleep at the wheel, there are people constantly reminding us every step of the way that we should protect ourselves.  It starts early.  For example, a parent might remind us to bring an umbrella – because it might rain.  As we get older, we learn to buy car insurance because we might have an accident.  People buy alarm systems to detect and deter intruders.  Most people pay for life insurance to hedge against the risk that they might die.  And, if you have a mortgage, homeowner’s insurance is mandatory to protect against risks such as fire and wind.

Americans also like contracts.  Remember the license agreements that you had to accept just to install a game on your computer?  When you went out on your own, your first credit card certainly came with a cardholder agreement.  If you wanted to rent an apartment, that definitely required a lease.  Did you want cell phone service?  You needed a contract.

But, for some strange reason, people enter into marriage with no contract or agreement whatsoever.  They just trust each other.  Remarkably, they turn a blind eye to the fact that more than 50% of marriages result in divorce.

A prenuptial agreement or “prenup” can protect you against losses that might result from your divorce.  If you don’t have a prenuptial agreement, what do you stand to lose?  You can start with giving away roughly half of the net worth that you worked so hard to accumulate during the marriage.  And, to the extent you earned them during the marriage, you will likely have to divide your pension, retirement benefits, and/or retirement accounts.  This means your "ex" will take half of the marital portion of your Thrift Savings Plan, military retirement pay, and even your IRA account, if you have one.  You may also have the privilege of paying a large percentage of your monthly salary to your “ex” as alimony.  And, without a prenup, you could be forced to pay off half of your ex’s bad debt.  You could even be saddled with half of your “ex’s” student loans. 

But, there is rarely someone in your corner to remind you about getting a prenup.  Until recently, that is.  Since the Great Recession, 3 out of 4 family law attorneys report that prenups are on the rise.  This may be due to the devastating impact of the financial collapse, which has made people questions how much they can earn in the future and makes them want to keep what they have earned. 

Recently, I have had several parents call my office about prenups for the children.  One retired military officer wanted a prenup for his son, who was about to start flight school.  The father was concerned that his son might lose half of his hard-earned military retirement pay if the marriage didn’t last a lifetime.  A mother recently called me because she had refused to pay for the wedding unless the couple signed a prenuptial agreement.  And, an accountant paying lifetime alimony called me last year in hopes that a prenup might avoid the same fate for his son.

In certain circumstances, a prenuptial agreement can make a marriage more likely to last.  A spouse is more likely to return to work or keep working if he or she cannot rely on alimony in the event that the marriage breaks down.  And, in some cases, a spouse may be less likely to leave or look around if he or she knows that they will not be able to use the divorce to raid the other party’s retirement pay, pension, assets, and income.  And, one Florida court specifically held that a prenup may be enforceable to protect a pilot's pension and military retirement pay.  See Gordon v. Gordon, 25 So. 3d 615, 617-18 (Fla. 4th DCA 2009).

Fortunately, despite what you might have heard, prenuptial agreements are enforceable under Florida law.  In 2007, the Florida Legislature passed the Uniform Premarital Agreement Act.  See Fla. Stat. § 61.079.  Under the Act, a premarital agreement must be in writing and signed by both parties.  Id.  The Act allows Parties to negotiate and agree upon the following issues:  (i) the parties’ rights and obligations concerning any assets and liabilities; (ii) the right to buy, sell, use, transfer, or dispose of property; (iii) the distribution of property upon separation, dissolution, death, or other event; (iv) the right to alimony; (v) the making of a will or trust; and (vi) the disposition of life insurance proceeds.  See Fla. Stat. § 61.079(4)(a).

Florida courts have held that the parties do not need to attorneys for a prenuptial agreement to be enforceable.  See Casto v. Casto, 508 So. 2d 330, 334-35 (Fla. 1987).  The Florida Supreme court has also held, however, that a prenuptial agreement may not be enforceable if the agreement was procured by as a result of fraud, deceit, duress, coercion, misrepresentation, or overreaching.  See Casto, 508 So. 2d at 333.  Additionally, a prenup may be set aside if there is a showing that the agreement is unreasonable on its face for failure to provide adequately for the challenging spouse coupled with a lack of adequate financial disclosure.  Id.  So, even though a lawyer is not absolutely necessary, an agreement is far more likely to be upheld with the assistance of counsel.  

If you have questions about prenuptial agreements, please contact us to consult an experienced Tampa divorce and family law attorney.

SGLI and Other Life Insurance to Secure Alimony and Child Support

If you are military service member or spouse facing a family law case, you should consider retaining an experienced military divorce attorney.

Federal law often governs how courts may allocate military pay and other benefits.  One example is the limit placed on the Service Members Group Life Insurance policy or "SGLI."

Clients often ask about whether the Court will require a party to procure life insurance to secure their alimony or child support obligation.  Like many legal questions, the answer is "it depends."

Courts do have the authority to order a party to provide term life insurance to secure his or her child support and alimony payments. See Fla. Stat. §§ 61.08(3), 61.13(1)(c); Sobelman v. Sobelman, 541 So. 2d 1153, 1154 (Fla. 1989). 

When determining whether life insurance is appropriate, the court will consider the need for the insurance, the cost and availability of the insurance, and the financial impact upon the obligor.  See Child v. Child, 34 So. 3d 159 (Fla. 3d DCA 2010); Plichta v. Plichta, 899 So. 2d 1283, 1287 (Fla. 2d DCA 2005).  See also Byers v. Byers, 910 So. 2d 336, 346 (Fla. 4th DCA 2005). 

Florida courts have held, however, that certain "special circumstances" must be present to require a payor to purchase life insurance on his or her alimony or child support obligation.  See Child v. Child, 34 So. 3d 159 (Fla. 3d DCA 2010); Massam v. Massam, 993 So. 2d 1022 (Fla. 2d DCA 2008); Melo v. Melo, 864 So.2d 1268 (Fla. 3d DCA 2004); Frechter v. Frechter, 548 So.2d 712 (Fla. 3d DCA 1989). 

But, the "special circumstances" are not particularly difficult to prove.  The special circumstances may be present where the former spouse would face difficult financial circumstances if the support payments were to cease upon the death of the obligor.  The circumstances may be present where the surviving party has limited earning capacity or children to support.  See, e.g., Child v. Child, 34 So. 3d 159 (Fla. 3d DCA 2010); Kotlarz v. Kotlarz, 21 So. 3d 892, 893 (Fla. 1st DCA 2009); Richardson v. Richardson, 900 So.2d 656, 661 (Fla. 2d DCA 2005); Massam v. Massam, 993 So. 2d 1022 (Fla. 2d DCA 2008);Davidson v. Davidson, 882 So. 2d 418 (Fla. 4th DCA 2004).

If the special circumstances are present, the Party requesting the life insurance must establish that the amount of insurance sought is available at an affordable cost.  See Massam, 993 So. 2d at 1022; Rubinstein v. Rubinstein, 866 So. 2d 80 (Fla. 3d DCA 2003); Zimmerman v. Zimmerman, 755 So. 2d 730 (Fla. 1st DCA 2000); and Schere v. Schere, 645 So. 2d 21 (Fla. 3d DCA 1994). 

It would seem that any military spouse could easily establish that SGLI is readily available for all service members at an affordable cost.  The United States Supreme Court, has held, however, that a state court may not order a service member to include his former spouse as a beneficiary of the SGLI policy.  See Ridgway v. Ridgway, 454 US 46 (1981).  This is true even if the Service Member signed a marital settlement agreement and agreed to include the former spouse as a beneficiary.  Accordingly, parties and practitioners alike should beware any order or agreement that makes specific reference to the SGLI.  The better approach is to request a general term life insurance policy in a designated amount, and the service member may choose to satisfy this requirement by making the SGLI beneficiary designation or purchasing term life insurance through a private insurer.

If you have questions about alimony or child support, please contact us to consult an experienced Tampa divorce and family law attorney.