New Developments on Military Retirement

We finally had to give in and start a blog. Our first topic will be the impact of two really important legal developments in the treatment of military retirement in divorce, both of which have come up in the last six months.

First, there is the National Defense Authorization Act of 2017, signed by President Obama (remember him?) as one of his last official acts. NDAA 2017 has a proviso amending the Uniformed Services Former Spouse’s Protection Act, which is the federal law that allows state courts to divide military retired pay in divorce cases. Prior to NDAA 2017, state courts could do whatever they wanted as long as they didn’t award more than half to the non-member spouse. Most courts awarded what is called a “coverture fraction,” which is the length of marriage overlapping military service, divided by total service, times one half. This fraction was applied to the actual retirement when received. NDAA 2017 says that courts must now divide a “hypothetical retirement.” So, the same fraction applies, but it is applied to “the retirement defendant would have received if he had retired on 27 May 2017 as an O-3 with 168 months of creditable service and a retired pay base of $5,247/month.” This is a good deal for the service member, but not for the non-member ex-spouse. The ex has to wait until the member retires, but under the new formulation is locked into a portion of the retirement earned as of the date of divorce. That might be fair if the spouse could get benefits immediately following the divorce, but the spouse in the above example might have to wait up to sixteen years. Fair or not, the lesson for divorce lawyers is that you now need much more data to properly draft a divorce decree dividing military retired pay, and these new clauses are going to have a much higher rejection rate at DFAS. The lesson for divorcing military personnel and their spouses is to make sure that you have an attorney who knows how to do this right.

Second, we have the US Supreme Court’s decision in Howell v. Howell, which came out in May. Howell involved a divorced military retiree who was also collecting VA disability. If you are less than 50% disabled, you must waive an equivalent amount of retired pay to receive VA disability. Retired pay is divisible in divorce, but VA disability is not. If you are representing the non-member spouse, you protect your client by putting a proviso in the divorce decree that says if the retiree does anything to reduce the amount of retired pay the ex-spouse would otherwise receive (like waiving retired pay to take VA disability), the retiree will reimburse the ex-spouse the amount that would otherwise have been received. The Supreme Court has now held that state courts cannot enforce such a proviso. The real answer here is that Congress should fix this by not requiring ANY waiver of retired pay to receive VA disability. Retired pay is deferred compensation for services performed. VA disability is compensation for future loss of earning power by reason of service-connected disability. Somehow, Congress got the idea that retirees were “double-dipping,” which is not the case at all. In 2004, it retreated and passed “concurrent receipt” legislation, but this was a compromise measure and only afforded relief to retirees who were more than 50% disabled.

So Congress and the Supreme Court have both spoken, and they haven’t been too friendly to military spouses.



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