The value of a military pension at the time of divorce does not necessarily establish the fixed amount of future military retired pay. Military servicemembers often receive annual cost of living increases (commonly called COLAs) on their retired pay. The reason for these increases is to ensure that the benefit amount keeps up with inflation. Otherwise, a fixed amount of retired pay would lose value over time as the cost of living increases. The COLA is awarded based on the Consumer Price Index. It does not depend on the member’s performance.
If the servicemember’s ex-spouse is awarded a portion of the military pension at divorce, both parties must consider how (or whether) to allocate the COLAs. If an award of COLA to the ex-spouse is not specified in the order dividing benefits, the military will automatically add it. Without the COLA, the benefits awarded to the ex-spouse will end up worth less over time. This is the strongest argument for awarding COLA to the ex-spouse’s share of benefits. On the other hand, the servicemember may argue legitimately that the ex-spouse should not share in any increase in benefits due to the member’s post-divorce military service.
The COLA on military retired pay can have a serious impact on the amount of military retired pay received by an ex-spouse. This benefit, like many others specific to military retirement benefits, should be considered prior to completing any divorce negotiations.
The attorneys at Kowalski Family Law routinely handle divorces for servicemember and their spouses. Please call us for a free consultation to ensure military benefits are properly understood and allocated.