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With bill drafting by the Equitable Distribution Committee of the N.C. Bar Association’s Family Law Section, the General Assembly in 2019 passed H.B. 469, a series of substantial revisions in the areas of pension division and survivor annuities in the context of equitable distribution of marital property. These changes took effect for all equitable distributions on or after October 1, 2019.

Pension Division without Valuation

Sometimes it is necessary to come up with a "fair market value" of the pension rights to help in the determination of whether a trade-off is fair or even possible. Such an evaluation is a difficult task. It would typically involve projection of the life span of the military member, estimation of when he or she will retire, estimation of the grade of the member upon retirement and other factors. The work is done by a financial expert, such as a CPA, an economist or an actuary.

If a pension cannot be divided by offsetting its present value against other marital property, then the court can use a deferred division approach, granting to the non-pensioned spouse a portion of the pension payments "if, as and when received." The amount awarded is based upon the proportion of the number of years of marital pension service to the total years of pension service. This is called the marital fraction. By way of example, if Major Brown had been married for 20 years at the time he attained 20 years of service, then half of his then-existing pension rights would be marital. If he were to retire exactly at his 20th year anniversary, half of each monthly pension check would belong to Mrs. Brown as her share of marital property. If he had been married for 10 years during his 20 years of service, then one-fourth of the pension would be Mrs. Brown's.

Case law in North Carolina required the valuation of the pension in these latter cases of deferred division or “in-kind distribution,” even though there was no need to know what the present value was because the pension was being divided in shares to each party. The unnecessary work in valuing the pension means that thousands of dollars were unnecessarily spent in some cases where trial was a possibility, since going to trial without a value report meant that the court could not divide the pension.

To remedy this, H.B. 469 revised the statute to remove the valuation requirement for in-kind division. Now the court can divide a “defined benefit plan” without placing a value on it. A defined benefit plan is a pension which pays out a certain amount of money, usually on a monthly basis, based on a formula which involves years of service and a percentage of one’s pay or salary. In the case of a military pension, this involves the product of the retired pay base (the “High-3” pay of the servicemember, under 10 U.S.C. 1407) times the retired pay multiplier (2.5% times the years of creditable service, under 10 U.S.C. 1409) for most currently serving members of the uniformed services. Those who are in the Blended Retirement System, or BRS, have a retired pay multiplier of 2.0% times the service years.

Valuing the Defined Contribution Plan

Most deferred compensation these days involves a retirement account into which the employee and often the employer will make contributions. This defined contribution plan can be a 401(k) plan, a Thrift Savings Plan, a profit-sharing plan, or some other arrangement. In response to case law stating that such a plan may be divided using the marital fraction (see above), H.B. 469 rewrote the statute to state that the benefit should be divided by establishing the contributions made during the marriage, along with any gains or losses thereon. Only if there is no sufficient evidence for the court to make this determination would the marital fraction be used to separate the marital portion from the separate portion of the defined contribution plan. This change also applies to Individual Retirement Accounts, or IRA’s, which are not employer-sponsored plans.

The "Frozen Benefit Rule" and Pension Division

Dividing the pension is usually done with a court order entered by consent, sometimes called a consent judgment. The court is empowered to sign a consent judgment for equitable distribution at any time before or after a judgment of absolute divorce. Such a judgment is necessary for an in-kind division of the military pension. Direct payments under the Uniformed Services Former Spouses Protection Act, or USFSPA, are available only with a certified copy of a court order. Pursuant to an amendment to the USFSPA effective December 23, 2016, the pension division order, usually called an MPDO, or military pension division order, can only divide a “snapshot amount” of retired pay, that is, the hypothetical amount which would be received by the servicemember if he or she had retired on the day of divorce. The rule applies for all divorces granted after 12/23/16 when the member is not receiving retired pay at divorce. It is found at 10 U.S.C. 1408 (a)(4)(A).

This change in “what is divided” created what can be called a “denominator dilemma.” The marital fraction is the individual’s marital pension service as the numerator and the total pension service as the denominator. But the fixing of the benefit as of the divorce date means that the ever-expanding denominator gives the former spouse (FS) a constantly shrinking share of a frozen pension benefit. It is illogical and mathematically unsound to have a growing denominator when the pension itself is not growing. A fixed pension to be divided as “disposable retired pay” on the day of divorce means that the fraction applied to it must also be fixed on the divorce date.

To remedy this discrepancy, H.B. 469 defined the denominator of the marital fraction - in those cases where the benefit is fixed by the plan or program - as that existing as of the date of division of the benefit (i.e., the date of divorce). It no longer expands to reflect one’s entire military career. The change applies to all plans which fix the benefit as of a specific date.

Survivor Annuities

A survivor annuity is a series of payments to a spouse or former spouse when the pensioner dies. Before H.B. 469, this was not even mentioned in the N.C. General Statutes regarding equitable distribution; the only terms found was a vague reference to “death benefits.” Now the law states that the court may award a survivor annuity, also known as a “joint and survivor annuity,” when dividing the pension. The court may also allocate the cost of the survivor annuity between the parties, so as to require in some cases the spouse or FS who receives the benefit to pay for the cost of the benefit.

The survivor annuity in military cases is the Survivor Benefit Plan, found at 10 U.S.C. 1447-1455. It pays the spouse or FS 55% of the SBP base amount, usually the full amount of retired pay, at a cost of 6.5% of the base for those retiring from active duty and 10% for Guard/Reserve members.

Other Provisions

H.B. 469 also did the following:

  • Provided for the entry of a pension division order regardless of whether an equitable distribution claim is pending; and
  • Requires the court to order pre-retirement survivor annuity protection for the spouse or former spouse, to provide a continued flow of income to him or her if the employee spouse dies first.


N.C. Gen. Stat. § 50-20.1


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The CO‑COUNSEL BULLETIN, a series of information papers for military legal assistance attorneys and JAG officers in North Carolina, as well as civilian lawyers, is a product of the NC State Bar's Standing Committee on Legal Assistance for Military Personnel (LAMP). For comments or corrections, contact LAMP Committee Member Mark E. Sullivan at 919-832-8507, or