17-FORUM Representing Servicemembers and Their Spouses … Representing... · 25.08.2017 · 2017...
Transcript of 17-FORUM Representing Servicemembers and Their Spouses … Representing... · 25.08.2017 · 2017...
2017 All-Ohio Legal Forum
Representing Servicemembers and Their Spouses in Family Law Cases
Family Law Committee Military and Veteran Affairs Law Committee
1.5 General CLE Hours | 1.5 Specialization Hours
August 23 – August 25, 2017 ♦ Cleveland
Speaker Biographies
Stephen T. Lynch, Esq. Ninth Coast Guard District, United States Coast Guard Cleveland, Ohio Mr. Lynch has served as the legal assistance attorney for Coast Guard units around the Great Lakes since 2001. He provides counsel to Coast Guard and other military personnel on a wide range of issues, including the Servicemembers Civil Relief Act. Mr. Lynch enlisted in the USAF in 1976 and served on active duty for over 20years. He retired with the rank of l ieutenant colonel. Currently, Mr. Lynch is an adjunct professor at Case Western Reserve University School of Law and a guest instructor at the Army JAG School in Charlottesvil le, Virginia. He was awarded the Ohio AMVETS Public Servant Award and the ABA Distinguished Service Award for Legal Assistance to Military Personnel. As co-chair of the OSBA Military and Veterans Affairs Committee, Mr. Lynch recently published two articles in the Ohio Lawyer on ways to better assist military clients. He also serves on the boards of Operation Legal Help Ohio and NAMI Geauga.
Representing Servicemembers and Their Spouses in Family Law Cases • i
Representing Servicemembers and Their Spouses in
Family Law Cases Stephen T. Lynch Ninth Coast Guard District Cleveland, Ohio
Table of Contents
Representing Servicemembers and Their Spouses in Family Law Cases—PowerPoint Presentation .........................................................................................................................1
Silent Partner: Fixing the Frozen Benefit Award ...........................................................................29
Introduction .......................................................................................................................29
What’s All the Hubbub, Bub?.............................................................................................29
How the Frozen Benefit Rule Works ..................................................................................29
How Hard Can This Be? ......................................................................................................30
Past Efforts, Future Promotions.........................................................................................31
Breathing Room and Time to Adjust..................................................................................32
Setting Up the Example......................................................................................................33
Strategy for the Servicemember........................................................................................33
Strategy for the Former Spouse.........................................................................................35
Discovery and Documents .................................................................................................35
Restoring the Balance, and Interim Rules..........................................................................36
Outline of Time-Rule Strategies .........................................................................................37
Spousal Support Settlement ..................................................................................37
A Spoonful of Alimony ...........................................................................................38
Using the Time Rule Formula Anyway ...................................................................38
Put Off the Divorce ................................................................................................39
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How to “Even Out” the Pension Division ...........................................................................41
Unequal Share of Pension ......................................................................................41
Fixed Percentage Award ........................................................................................41
Present Value .........................................................................................................42
Present Value and Payments .................................................................................43
The Western Gambit ..............................................................................................43
Continuing Conundrums ....................................................................................................44
Final Notes .........................................................................................................................46
Notice of Statutory Change............................................................................................................47
Howell v. Howell.............................................................................................................................49
Syllabus ..............................................................................................................................49
Opinion of the Court ..........................................................................................................51
Opinion of Justice Thomas .................................................................................................60
Steve Lynch, Legal Assistance AttorneyNinth Coast Guard District
OSBA Military and Veterans Affairs Committee(216)902-6042, [email protected]
August 25, 2017
Overview Intro – Key Terms & Concepts
Blended Retirement System – January 1, 2018
Child Support and Custody
Uniformed Services Former Spouses Protection Act
Military Pensions – Longevity v. “Others”
Change to USFSPA – December 23, 2016
Frozen Benefit v. Formula or “Time” Rule
Ohio & U.S. Supreme Court Decisions
Impact of Change
Conclusion2
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Key Terms & Concepts
Blended Retirement System – January 1, 2018
Reduced annuity
TSP (401K) Contributions/Matching
Continuation Pay (mid‐career)
Disposable Retired Pay
Gross minus authorized deductions, e.g., disability pay
Defense Finance and Accounting Service (DFAS)
Processes Garnishments & Military Pension Division Orders for DoD ‐ Located in Cleveland
Note for Coast Guard: Pay and Personnel Center, Topeka, KS
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Key Terms & Concepts
Military Pension Division Order (MPDO)
Not same as QDRO
Defined in USFSPA & DoD Financial Management Reg.
Servicemembers Civil Relief Act (SCRA)
Custody
Default
Service
Domicile
Survivor Benefit Plan (SBP) ‐ Annuity Program Without SBP – Former Spouse Payments End at Retiree Death
Also for Minor Children & Mentally Incompetent or Disabled Adult Child
Deemed election – Must submit to DFAS w/i one year of court order
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Key Terms & Concepts
Ten Year Rule – Direct Pension Payment From DFAS 10/10/10 ‐Marriage/Military Service/Overlap Less Than Ten? DFAS won’t process MPDO
Thrift Savings Plan
Defined contribution plan for federal civil service employees AND members of the uniformed services
Twenty Year Rule 20/20/20 – Marriage/Military Service/Overlap Commissary/Exchange/MEDICAL
Victims of Abuse Member’s Misconduct = Loss of Military Pension
Court May Order Pension Payment to Victims of Abuse
Spouses, Former Spouses or Children
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Terminology ‐Military Status
Military can mean:
Active Duty ‐ Army, AF, Navy, Marines, Coast Guard As a rule – more transient than Reserve/Guard. Questions of domicile more likely to arise – relevant for pension division jurisdiction & SCRA compliance.
Reserve Active (Title 10)
Training
Inactive
National Guard Active or in “Federal Status” (Title 10)
Mobilized for emergency (Title 32)
Training
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Terminology ‐Military Status
Military Can Mean (cont.): Retiree
Drawing pension ? AD v. Reserve and Guard
Medical Benefits – From TRICARE
Veteran – Someone who served in the military
Receiving no Payments or Services
Drawing Pension or other Payments – From VA
Receiving medical or other benefits – from VA
Dependents of the above (AD, Reserve, Guard, Retiree, Vet)
Military dependents may qualify for certain benefits
Dependents of Veterans – May Qualify for “Apportionment”
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Military Status ‐ Determination
Importance of Military Status?
Eligibility for Various Benefits Source of Income – subject to income withholding order AND command pressure to support dependents
One Tool to Help Determine Status of Individual? Contact Defense Manpower Data Center
https://scra.dmdc.osd.mil/Need: SSN, Last name and DOBDMDC, 1660 Wilson Blvd, Suite 400, Attn: Military Verification, Arlington, VA 22209‐2593
PH: (703)696‐6762 or 5790FX: (703)696‐4156
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Certificate of Military Status
Defense Manpower Data Center (DMDC)
Provide Certificate as to military service via Web –acceptable documentation to show whether individual in the military
https://scra.dmdc.osd.mil/
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Dependent Military Status
How to determine “dependent” status of a client?
Ask to see Client’s or Child’s Military “ID Card”
Ask to see a copy of member’s “orders” or Leave & Earning Statement (LES)
Spouse or CP may have a copy of orders or LES
Ask if Client has POA from military member May include location of member and grant other authority
Ask if receiving medical care through TRICARE or DEERS
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Military Dependent ID Cards
Dependents must be registered in Defense Enrollment Eligibility Reporting System (DEERS) ‐ DD Form 1172
To Get Medical Benefits
Child over 10 years old will be issued Military Dependent ID Card
Even if custodial parent does not qualify
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Military Dependent ID Cards
What if Military Parent Refuses to File Form Needed to Obtain ID Card?
Find (then visit) nearest Military ID Card Center (aka RAPIDS site)
www.dmdc.osd.mil/rsl/appj/site?execution=e1s1
Center will (ideally):
Confirm eligibility
Send notice to SM
If SM does not respond w/I 30 days, issue ID card
If not …. Seek help through military legal assistance office ‐http://legalassistance.law.af.mil/content/locator.php
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Veteran Status Determination DD Form 214 – Record of Military Service
Dates of Service, Branch of Service, Type of Discharge
Receiving Care (Medical, Counseling, Other) from Local VA Medical or Service Center?
Receiving Payments from VA? Pension or Disability?
In Some Cases ‐ Subject to Child Support, Spousal Support and Apportionment
POCs at VA – Social Workers
Veterans Wrap Around Project – Justice Evelyn Stratton http://biaoh.org/Justice%20Stratton%20Veterans%20Media%20Packet%2009%202010.pdf
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Military Pay – Things to Know
Remember – Answers to Most Military Pay Questions found at dfas.mil or “Military Divorce Handbook”
Military Pay Has Various Elements
Base Pay
Federal ‐ Taxable (Unless in Combat Zone)
State – It Depends – OH not taxed if member deployed outside of Ohio
Special Pay – Taxable (Unless in Combat Zone)
Flight – Sea – Hazardous Duty – Foreign Language – Special Warfare – Reenlistment Bonus
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Military Pay – Things to Know
Allowances – Not Taxable
Types
Basic Allowance for Subsistence
Basic Allowance for Housing
Others ‐ Bonuses
For Certain Personnel – Allowances Not Subject to W/H for Child Support –
E‐7s and Above – BAH/BAS Subject to Withholding Order
E‐6 and Below – Not Subject
Additional Details ‐ 5 CFR 581.103(b)
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Military Pay and LES
Info on Military Pay Available at Defense Finance and Accounting Service (DFAS)
https://www.dfas.mil/militarymembers.html
Members Can Get Access to LES On‐Line
“My Pay” System
Pay Tables
Updated each year
See DFAS URL Above
Pay Based on (a) Grade, (b)Time in Grade., and (c) Time in Service
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Service Regulations ‐ Support
Army ‐ AR 608‐99
Air Force ‐ AFI 36‐2906
Navy MILPERSMAN 1754‐030
Marine Corps ‐Marine Corps Order P5800.16
(LEGADMIN) Chapter 15
Coast Guard – COMDTIST M1600.2, Chap 2.E
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Support ‐ Service Regulations
Useful for Obtaining Interim Support
Prior to Issuance of withholding order
$3600 for Custodial Spouse from Navy E‐4
Need to Get Demand Letter to SM Commander
Branches Use Different Formulas (except AF)
E.g., Coast Guard One Dependent – 20% of Base Pay + BAH/Diff
Two Dependents – 25% “ ”
AF – No Formula
Need Help? Legal Assistance Office http://legalassistance.law.af.mil/content/locator.php
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Child Support – Unit Commander
Write to Unit Commander
Refer to appropriate regulation
Mention adverse effects from delays
Increased legal fees & retroactive support & arrearages
Identify action you are seeking
Risk? Voluntary allotments are temporary support –
Can be terminated by SM at will
“Cc” Congressman and/or Senior Officer in Chain (GEN
or ADM)? How about NCO/CHIEF’s Network
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DEERS & TRICARE
DEERS – Defense Enrollment Eligibility Reporting System
Documents needed to enroll in DEERS
Birth Certificate,
Paternity determination
Support order
More Info
http://www.military.com/benefits/tricare/defense‐enrollment‐eligibility‐reporting‐system‐deers.html
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TRICARE What is TRICARE?
Government healthcare program for military service families (formerly known as CHAMPUS)
http://www.tricare.mil/
TRICARE Prime or Prime Remote
Prime Remote – More than 50 miles from military hospital
Other health insurance covering the same person
Costs for TRICARE – “Minimal” relative to other health care providers
BE CAREFUL – Can be significant penalties for failure to get preapproval
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Other Special Considerations ‐Military
Servicemembers Group Life Insurance
$400K for active duty member
Dependents also insurable
www.insurance.va.gov/
Survivors Benefit Plan
Surviving Spouse ‐ % of military retirement pension
Also children and disabled dependents
No SBP? Pension payments to spouse/former spouse cease upon death of retiree
Need to elect – Note 1 year rule
https://www.dfas.mil/retiredmilitary/provide/sbp.html
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SCRA – 50 USC §3938 ‐ “Child Custody Protection”
Courts prohibited from making permanent revision to custody order based solely on parent’s pending or potential milit0ary deployment.
Allows instead for temporary custody order that spans period of SM’s deployment
Qualifying Order
“Unaccompanied”
Dependent travel not authorized
Family members not permitted at location
No “Federal right of action” for custody proceedings.
Allocating Parental Rights – Special Considerations
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Allocating Parental Rights – Special Considerations ‐ Ohio
R.C. 3109.04(I) – Receipt of Orders for Military Service
Notify other parent subject to order w/i three days
Either parent may apply for hearing to expedite allocation or modification proceeding
List date when active military service begins
Court shall schedule hearing upon receipt of application and hold hearing NLT 30 days after receipt
Court shall NOT find past, present or possible future military service to constitute a change in circumstance justifying modification of a prior decree
Court MAY issue temporary order
SM ‐ written notice NLT thirty days after end of service
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Former Spouses’ Protection Act ‐ USFSPA
Uniformed Services Former Spouses’ Protection Act
Response to McCarty v. McCarty, 453 U.S. 210 (1981)
Supremacy Clause precluded division of military retired pay under State community property laws
USFSPA ‐ 10 U.S.C. § 1408 (1983)
States Granted Power to Divide Disposable MRP
Jurisdictional Requirements
SCRA Compliance
Pension Division Not Mandated
No Mandated Methodology in USFSPA through 2016, BUT….
2017 NDAA CHANGED THAT – Effective 12/23/16
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USFSPA – Implementation Two Agencies – Military Pension Division Orders
Defense Finance and Accounting Service ‐ DFAS
www.dfas.mil/garnishment/usfspa
Coast Guard Pay and Personnel Center
www.uscg.mil/ppc
Regulation
DoD Financial Management Regulation (FMR), Vol. 7B, Chp 29
Change to USFSPA not yet incorporated into FMR
Interim guidance on DFAS website – “Notice of Statutory Change” & “Sample Order Language”
What about U.S. Department of Veterans Affairs?
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Servicemembers Civil Relief Act ‐ Impact
Servicemembers Civil Relief Act (SCRA)
50 U.S.C. §§ 3901 – 4043
Primary Impact – Currently Serving or Personnel recently released from Active Duty
Protections Against Default Judgments ‐ §3931
Notice to Court and Appointment of Counsel
Stay of Proceedings if SM Has Notice ‐ §3932
Military Duties Prevent Appearance
Domicile Taxation – §4001 Voting ‐ §4025
See: Ohio Guide to Servicemembers Civil Relief Act, 2nd Edition – ohiobar.org/scraguide
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USFSPA – Pension Jurisdictional Requirements
Jurisdiction Determined by One of Three Factors
Domicile
Court in Military Member’s “Home” State Has Jurisdiction over Military Pension Division
Not Same as “Home of Record”
Indicators of Domicile Include Two Factors in SCRA
Where Member Votes & Pays (or Does Not Pay) Income Tax
Consent
Residence Not Due to Military Assignment
E.g., Member’s Unit in KY, but chooses to lives in OH
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“Traditional” Military Pension ‐ Details
Defined Benefits Program
Not a “Plan” Under Employment Retirement Income Security Act (ERISA)
No Vesting Without Twenty Years of AD Service or Twenty “Good” Years in Guard/Reserves
No Residual Value
Three Broad Categories
Regular or “Longevity” Retirement = Twenty Years of Honorable Service
Non‐Regular – National Guard and Reserves
Medical or Disability Retirement
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Military Pension Division Order
Must Include
Names and Addresses of Parties
Years of Marriage and Military Service
Military Member’s Grade or Rank
Statement of SCRA Rights Compliance
Jurisdictional findings
How Pension is to Be Divided
DD Form 2293 – Application for Former Spouse Payments from Retired Pay
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Pension Division Methods Now Used
DFAS and CG Pay & Personnel Center (PPC)
Implement FSPA via DoD or CG Regulations
Each now accepts one of four methods for pension division
Fixed Dollar Amount
Percentage of Retired Pay
Formula Clause
AKA Time Rule
Fixed Benefit Award
AKA Frozen Accrued Benefit , Hypothetical Award/Bright Line
FSPA Revision Dictates Use of Fixed Benefit Award for Divorce Judgment Entered Before Member’s Retirement
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Pension Division – Info DFAS Requires If Member Entered AD Before 9/8/1980:
Fixed amount, percentage, formula or hypothetical the former spouse is awarded
Member’s pay grade at time of divorce
Member’s years of creditable service at the time of divorce; or in case of reservist, creditable reserve points at time of divorce
If Member Entered AD on or after 9/8/1980 – HIGH THREE
Fixed amount, percentage, formula or hypothetical that former spouse is awarded
Member’s high‐3 amount at the time of divorce
Member’s years of creditable service at the time of divorce; or in case of reservist, creditable reserve points at time of divorce
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Military Pension Division Questions to Ask
“Active Duty” Client – Has Member Begun to Receive Military Pension?
“NG & Reserve” Client – Has Member Begun to Receive Military Pension or Has Pension Amount Been Set?
Answer “Yes”? 2017 FSPA Pension Revision Should Have No Impact on Pension Division Because Method(Formula or Fixed Benefit) Use Same Cut‐Off Date
Answer “NO”? Then 2017 FSPA Pension Revision Forces Ohio and Other States to Use Fixed Benefit Award – unless date of divorce precedes 12/23/16
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Formula Clause FORMULA CLAUSE
Sometime Referred to as Time Rule
Uses military member’s final retired pay as amount to which coverture fraction is applied
Coverture Fraction = Portion of Military Pension Attributable to the Marriage
Benefit Cut‐off Date = Date of Retirement Using Rank and Years of Service at Date of Retirement
Former Spouse Share of Retired Pay Coverture Fraction x Member’s Disposable Retired Pay for Rank and Years of Service at Date of Retirement x .5 (0r whatever percentage court awards former spouse)
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Fixed Benefit Award
FIXED BENEFIT (FB)
AKA Hypothetical, Bright Line or Frozen Accrued Benefit
Coverture Fraction = Portion of Military Pension Attributable to the Marriage
Benefit Cut‐off Date = Date of Pension Division Order
Using Rank & Years of Service at Date of Pension Division Order
Former Spouse Share of Retired Pay
Coverture Fraction x Amount of Military Pension for Rank and Years of Service at Date of Order x .5 (0r whatever percentage court awards former spouse)
FB Mandated for MPDOs of SM not yet retired as of 2017 unless date of divorce is prior to 12/23/16
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Fact Pattern for Examples to Follow Servicemember (SM)
Rank & years of service at time of divorce: E‐7/20
AD Pay of E‐7 in 2006 with 20 years: $3565 per month
High three of $3300 per month
Gross retirement pay: .5 x $3300 = $1650 per month
Rank & years of service at time of retirement: E‐9/30
AD Pay of E‐9 in 2016/30 years: $6968 per month
High three of $6800 per month
Gross retirement pay: .75 x $6800 = $5100 per month
Spouse Years married to SM at time of divorce: 20 years
Overlap SM’s military service and marriage: 20 years
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Formula Clause – Example ‐ $1980/month
Coverture Fraction = 240 months of marriage/360 months of military service: 2/3 or .66
Benefit Cut‐off Date – Date of Retirement Rank and Years of Service at Date of Retirement
E‐9 with 30 years of service as of 2016 Gross monthly retired pay = $6800 per month Disposable monthly retired pay = $6000 per month
Former Spouse’s Share of Retired Pay ‐ $1980/month
Coverture Fraction x Member’s Disposable Retired Pay for Rank and Years of Service at Date of Retirement x .5 (presumed percentage awarded former spouse by court)
.66 x $6000 x .5 = $1980 per month
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Fixed Benefit ‐ Example ‐ $990/month
Coverture Fraction = 240 months of marriage/360 months of military service: 2/3 or .66
Benefit Cut‐off Date – Date of Divorce Rank and Years of Service at Date of Divorce
E‐7 with 20 years of service as of 2006 Gross monthly retired pay = $3765 Disposable monthly retired pay = $3000
Former Spouse’s Share of Retired Pay ‐ $990 per month Coverture Fraction x Member’s Disposable Retired Pay for Rank and Years of Service at Date of Retirement x .5 (presumed percentage awarded former spouse by court )
.66 x $3000 x .5 = $990 per month
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Revised USFSPA – One Option‐ Fixed Benefit
Revision Allows Just One Method for SMs Not Yet Retired ‐Fixed Benefit
Impact? We Don’t Know for Sure, but ….
For military personnel who have already retired?
Former spouse’s share of retirement should not be impacted
For NG or Reservists Whose Retirement Amount is Fixed and Who Are No Longer Drilling
Former spouse’s share of retirement should not be impacted
For military personnel who continue to serve on active duty or accrue points towards retirement
Former spouse’s share of retirement will likely be reduced
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Revised USFSPA – Who Benefits?
Servicemembers Not Yet Retired
Active Duty, Guard and Reserve
SMs Strategy
Accelerate the Process
Experts on the Military Pension Division Process
Particularly those adept at drafting “Hypothetical” orders
Sample order language found at DFAS website
Google: “dfas sample order language”
Mark Sullivan provides numerous examples as well
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Revised USFSPA – Work Arounds for FS?
Time is Money for Former Spouse
Longer it takes for final judgment entry, the better
E.g., Case requiring extensive discovery re domicile
Spousal Support Settlement
Order for Alimony, Maintenance or Spousal Support Based on Remuneration for Employment
Not tied to Disposable Retired Pay
Remarriage or cohabitation? Be careful
Use “Time” or “Formula” Clause
Others? See “Fixing the Frozen Benefit Award”, by Mark Sullivan
apps.americanbar.org/dch/committee.cfm?com=FL115277
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Select Ohio Decisions Daniel v. Daniel, 139 Ohio St.3d 275, 2014‐Ohio‐1161
Unvested military retirement benefits earned during marriage fall within the definition of marital property in R.C. 3105.171(A)(3)(a) and must be considered for division under R.C. 3105.171(C).
Hoyt v. Hoyt, 53 Ohio St. 3d 177, 559 N.E. 2d 1292, 1990 Pension or retirement benefits earned during course of marriage are marital assets
Value of retirement plan calculated by ratio of number of years of husband’s employment during marriage to number of years of his employment
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Problems Being Worked Out
Retired Pay Centers ‐ Updated Regulations
Problems to be worked out
Applicability of FSPA Revision – Controlling Date
Date of Divorce or MPDO? Answer: Date of Divorce!
COLA – Included from date of divorce ‐ FIXED
Settlements/Orders that use method other than Fixed Award ‐ Likely rejected
Immediate payment
California and other western property states allow valuation and pay out at time of divorce
Transition Periods
Retroactivity – None
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Any Other Big Change in the Works
The Blended Retirement System – January 1, 2018
Retains Traditional Defined‐Benefit Annuity (reduced)
Thrift Savings Plan (TSP) – SM Can Contribute NOW with NO matching funds. Blended retirement system provides for:
Government automatic 1%
Up to additional 4% matching contributions
Continuation Pay Provision
Mid‐Career – Encourage Continued Service
Direct Cash Payout
Automatic Enrollment – Those Joining After 1/1/18
Opt‐in for those who join between 1/1/2017 and 12/31/17
More info? militarypay.defense.gov/BlendedRetirement/
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Related Topics – Survivor Benefit Plan
Survivor Benefit Plan(SBP)
Provides FS with Share of Pension After Death of SM
Children Are Also Eligible
Dependents Up to Age of Twenty‐Two
Disabled? No age limit
Pays 55% of selected base amount
Full monthly retired pay or less
Monthly premium is around 6.5 percent of base amount
Coverage suspended if FS remarries before 55
Cannot be divided between current and former spouse
Upon FS death, entire pension restored to SM.
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Survivor Benefit Plan
SBP Deadlines – IF COURT ORDERS SBP
SM/Retiree – Must be done within one year of divorce
FS – Deemed Election
SM Not Yet Retired
Submit to DFAS within one year of ORDER granting SBP
Use DD Form 2656‐10
Premium Only Deducted from SMs Share of Pension
No mention of SBP in court order?
DFAS presumes FS not enrolled
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SCRA ‐ Domicile
Domicile – Key Indicators
Multiple Factors
Residence, home ownership, employment, vehicle registration, driver’s license, voting, taxes, other contacts
SCRA Impacts at Least Two
Taxes ‐ 50 U.S.C. §4001
Voting ‐ 50 U.S.C. §4025
DD Form 2058 – State of Legal Residence Certificate
Leave and Earnings Statement
Absent consent, only State of domicile has jurisdiction over pension division per USFSPA
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Alimony & Child Support
Alimony and Child Support May Be Collected Military Retired Pay, VA Disability Pay (if Military Retired Pay Waived to Get VA Payment), and some portions of CRSC & Military Disability Retired Pay
Income Withholding Orders for Family Support
10 U.S.C. § 1408 42 U.S.C. §659 & 5 C.F.R. Part 581
See ‐ DoD 7000.14‐R, DoD Financial Management Reg. Vol. 7B, ch 27, para. 270102
Maximum Garnishment Amount 50% of disposable retired pay if supporting second family; 60% if
no second family
More than 12 weeks in arrears? Increase to 55% & 65%
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Veterans Disability Compensation
Department of Veterans Affairs Compensates Veterans with a “service‐connected” illness or disability
Goal to compensate for considerable loss of working time
Compensation based on variety of factors
Percentage disability rating
Dependents (spouse/children)
Other Factors ‐ e.g., seriously disabled spouse
Combined Ratings
Disability ratings are NOT additive
E.g., 60% + 20% does NOT equal 80% disability
Taxes and Property Division Generally NO
See – 38 CFR Parts 3 & 4; & benefits.va.gov/COMPENSATION
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Military Disability Retired Pay
Retired – Unfit for Duty
Physical or Mental Disability
DoD percentage rating – NOT necessarily the same as VA rating
Could be HIGHER monthly amount than military retired pay
BUT …. MDRP could be LOWER than military retired pay based on longevity (MRP‐L)
Taxes and Property Division – Generally not subject to either, but…
IF MDRP Lower than MRP‐L? MRP‐L is offset by lower disability payment AND MRP‐L balance is subject to income tax & property division
Indemnification Language
Tailor to Account for Fact that Member Does NOT Elect MDRP – It is imposed!
No Indemnification Language? See Howell v. Howell, 137 S. Ct. 546 (cert. granted, Dec. 2, 2016). Reply brief of petitioner – 2017 WL 975389
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Indemnification ‐ Absent an INDM Clause
Howell v. Howell, 137 S. Ct. 546 (May 15, 2017)
Certiori from AZ Supreme Court
Holding – Trial judge may NOT order a military retiree to reimburse his or her former spouse for moneys lost when the retiree elects to receive disability compensation from the Department of Veteran Affairs
Divorced in 1991 – Received 50% of pension when he retired in 1992 – Filed for & received VA disability compensation in 2005 – Reduced FS’s share by $125/m
Protections? Contractual reimbursement clause and/or compensatory spousal support
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Concurrent Retirement & Disability Pay “Old” Rule ‐Military retirees with service‐connected disability,
wounds, illnesses could receive tax free disability compensation – offset against retired pay
“New” Rule (2004) Concurrent Retirement and Disability Pay (CRDP)
“Twenty years of qualifying military service & VA disability rating of at least 50%
Retirees receive both payments – no offset
Reported on Retiree Account Statement (RAS)
Taxes and Property Division
Indemnification Language
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Combat Related Special Compensation Combat‐related disability of at least 10%
Not retired pay & not divisible as property
See 10 U.S.C. §1413
Retiree cannot receive BOTH CRSC & CRDP
Any CRSC means NO CRDP (even if CRDP $$ is higher)
Election by retirees once a year
Can create hardship for FS
Taxes & Property Division
Not subject to income tax
Not divisible
Indemnification Language
53
What To Do? Military Pension Division
See Daniel v. Daniel
The Military Divorce Handbook, Second Edition
Recent Change – December 23, 2016
DFAS Garnishment Section ‐ www.dfas.mil/garnishment/usfspa
“Fixing Frozen Benefit Award” paper by Mark Sullivan
Military client/opposing party still on active duty or active Guard/Reserve?
Get Familiar with “Fixed Benefit Formula”
Next Big Change ‐ Blended Retirement – Jan. 1, 2018
54
Representing Servicemembers and Their Spouses in Family Law Cases • 27
References Former Spouses Protection Act – 10 U.S.C. §1408
The Military Divorce Handbook by Mark Sullivan (Am. Bar
Assn., 2nd Ed., 2011)
ABA Section of Family Law, Military Committee
http://apps.americanbar.org/dch/committee.cfm?com=FL115277
Defense Finance and Accounting Service (DFAS)
http://www.dfas.mil/garnishment/usfspa/faqs.html
DoD Financial Management Regulation, Vol. 7B, Chap. 29
Coast Guard Pay and Personnel Center (NOT DFAS)
http://www.uscg.mil/ppc/ras/PPCPUB5825.pdf
55
Thank You
Suggestions and Comments Welcome
Think of something later? Or Need Help?
Forward to: [email protected]
Direct Office Line: (216)902‐6042
Thanks
56
28 • Representing Servicemembers and Their Spouses in Family Law Cases
SILENT PARTNER
Fixing the Frozen Benefit Award
INTRODUCTION: The Silent Partner series of info-letters, a lawyer-to-lawyer resource for military family
law issues, is a project of the military committees of the American Bar Association’s Family Law Section
and the North Carolina State Bar. For others in this series, go to www.americanbar.org > Family Law
Section > Military Committee, or to www.nclamp.gov > For Lawyers. Comments, corrections and
suggestions should be sent to the address at the end of the last page.
What’s All the Hubbub, Bub?
The National Defense Authorization Act for Fiscal Year 2017 (NDAA 17) contained a major
revision of how military pension division orders are written and will operate. Instead of allowing the
states to decide how to divide military retired pay and what formula or methodology to use, Congress
imposed a single uniform method of pension division on all the states, a hypothetical scenario in which
the military member retires on the date of divorce. Despite the fact that more than forty states employ
the “time rule” to divide a defined benefit plan, all states – as of December 23, 2016, the date the law
was enacted – will have to use this new method for dividing a military pension.
The new rule applies to those still serving – the servicemember (SM) who goes through divorce and
property division while still on active duty in the uniformed services (Army, Navy, Air Force, Marine
Corps and Coast Guard, plus the commissioned corps of the Public Health Service and the National
Oceanic and Atmospheric Administration). It also applies to those in the National Guard and Reserves
who are not yet receiving retired pay. It has no impact on those who obtain a divorce and property
division after retirement.
How the Frozen Benefit Rule Works
The new military pension division rule is a “rewrite” of the terms for military pension division found
in the Uniformed Services Former Spouses’ Protection Act, or USFSPA.1 The rewrite requires that the
military retired pay to be divided will be that attributable to the rank and years of service of the military
member at the time of the parties’ divorce.2 This is so even though the servicemember may rise in rank
and years of service afterwards, resulting in a larger pension to be divided, which would then be
discounted by using the “marital fraction” to apply pension division to only the benefit which was
1 10 U.S.C. § 1408. 2 Although the statutory language refers to “the time of the order,” the Defense Finance and Accounting Service has
interpreted this as the date of the decree of divorce, dissolution, annulment or legal separation, as explained below. See
https://www.dfas.mil/garnishment/usfspa/NDAA--17-Court-Order-Requirements.html. Representing Servicemembers and Their Spouses in Family Law Cases • 29
acquired during the marriage. The only adjustment will be cost-of-living adjustments that occur under
10 U.S.C. § 1401a (b) between the time of the court order and the time of retirement.3
The NDAA 17 rewrite makes no exceptions for the parties’ agreement to vary from the new federal
rule. Everyone must do it one way, regardless of what the husband and wife decide they want the
settlement to say.
How Hard Can This Be?
“Frozen benefit division” is known as a hypothetical clause at the retired pay centers.4 It is the most
difficult to draft of the pension division clauses available. A government lawyer familiar with the
processing of military pension orders put it this way: “… over 90% of the hypothetical orders we
receive now are ambiguously written and consequently rejected. Attorneys who do not regularly practice
military family law do not understand military pension division or the nature of … military retired pay.
This legislative change will geometrically compound the problem.”
But now everyone will have to know how to do it. Since few lawyers know how to write such an
order without a handful of Excedrin, this means the cost of military divorce will go up once again, with
3 Based on § 641 of NDAA 17, here is the author’s attempted revision and editing of the text for 10 U.S.C. § 1408 (a)(4)
[additions/changes in bold]:
(A) The term "disposable retired pay" means the total monthly retired pay to which a member is entitled (as determined
pursuant to subparagraph (B)) less amounts which –
(i) are owed by that member to the United States for previous overpayments of retired pay and for recoupments required by
law resulting from entitlement to retired pay;
(ii) are deducted from the retired pay of such member as a result of forfeitures of retired pay ordered by a court-martial or
as a result of a waiver of retired pay required by law in order to receive compensation under title 5 or title 38;
(iii) in the case of a member entitled to retired pay under chapter 61 of this title [10 USC § 1201 et seq.], are equal to the
amount of retired pay of the member under that chapter computed using the percentage of the member's disability on the
date when the member was retired (or the date on which the member's name was placed on the temporary disability retired
list); or
(iv) are deducted because of an election under chapter 73 of this title [10 USC § 1431 et seq.] to provide an annuity to a
spouse or former spouse to whom payment of a portion of such member's retired pay is being made pursuant to a court
order under this section.
(B) For purposes of subparagraph (A), the total monthly retired pay to which a member is entitled shall be—
(i) the amount of basic pay payable to the member for the member’s pay grade and years of service at the time of
the court order, as increased by
(ii) each cost-of-living adjustment that occurs under section 1401a(b) of this title between the time of the court order
and the time of the member’s retirement using the adjustment provisions under that section applicable to the
member upon retirement. [Note the error in the language at (B)(i) above. It says that, for purposes of this section, a member’s retired pay is his or her
basic pay according to pay grade and years of service at the time of the court order. In reality, retired pay is never one’s
basic pay; by law it is his “High Three” pay (average of highest three years of continuous compensation) times years of
creditable service times 2.5% in most cases. Presumably this will be corrected in a forthcoming amendment.] 4 For the Army, Navy, Air Force and Marine Corps, the retired pay center is DFAS (Defense Finance and Accounting
Service) in Cleveland, Ohio. Pension garnishments for the Coast Guard and the commissioned corps of the Public Health
Service and of the National Oceanic and Atmospheric Administration are handled by the Coast Guard Pay and Personnel
Center in Topeka, Kansas. 30 • Representing Servicemembers and Their Spouses in Family Law Cases
rivers of rejection letters flowing back to attorneys who submit their pension orders to the retired pay
center in the hope of approval.5
Then it’s back to the drawing board for another attempt, or else the local attorney will have to farm it
out to some expert who can do it properly – if there’s enough information available to figure it out. The
required data include the servicemember’s rank and years of creditable service, as well as his or her
“High Three” figure (i.e., the average of the highest 36 months of continuous compensation). An expert
will need to be located, assuming there is enough money is left to pay this draftsman for the work.
Past Efforts, Future Promotions
Most courts already give consideration to how the efforts of the SM and the spouse during the
marriage should be apportioned in regard to future promotions. The time rule is based on the “marital
foundation theory,” which recognizes that the individual’s final retired pay is based on a foundation of
marital effort (e.g., a servicemember would never have attained the rank of sergeant major, with 30
years of service, if it hadn’t been for the efforts expended during the marriage up to the rank of sergeant
first class over 20 years, when the parties divorced).6 That’s one reason why a large majority of states
have adopted the time rule for dividing every type of pension – it provides the fairest approach to
division of this asset, whether the pension is state or federal, private or public. And it accounts for the
postponement of the benefit (i.e., the spouse’s inability to obtain immediate payments in most states) by
allowing for the growth in the pension over time.
That approach goes out the window under this new NDAA 17 rule. The share of the former spouse
(FS) is artificially fixed, frozen like a fly in amber. And then the payments are postponed until the SM
chooses to put in for retirement, so a second shrinkage is imposed on the pension share of the FS.
Since the new frozen benefit rule was written by Congress, which knows next to nothing about the
division of property and pensions in divorce, there will be plenty of problems applying it in most state
courts. And the harmful impact won’t be limited to spouses; members and retirees will feel the pain as
well. Consider this example:
• Husband and Wife agree to divide the husband’s retired pay exactly according to the frozen
benefit rule. At the time Husband is a major in the Marine Corps with over 16 years of service.
5 A guide for attorneys on how to write acceptable military pension clauses may be found at the Silent Partner, “Guidance for
Lawyers: Military Pension Division,” and it includes the necessary elements and language for a proper hypothetical clause. 6 The majority rule provides for a fair share by dividing the actual retired pay of the member/retiree, not some hypothetical
number, and then it reduces it to give the member/retiree credit for the final years of military service after the divorce. Representing Servicemembers and Their Spouses in Family Law Cases • 31
• Their property settlement language tracks the new statute by stating that the disposable retired
pay to be divided by court order is that of Husband, based on his years of service and rank at the
time of the court order, that is, “major over 16.” It even calculates the hypothetical retired pay.
• Both sign it, and they have their signatures notarized.
• They do not, however get divorced immediately. Due to a deployment and an overseas
assignment for Husband, filing for divorce does not take top priority for him. As for Wife, she
needs to maintain medical coverage as a dependent spouse so she is not eager to pursue the
dissolution either. Five years pass before one of them files. By that time Husband is a lieutenant
colonel over 20, not a major over 16.
• When the divorce is granted, with the settlement incorporated into it, it is submitted to the
retired pay center. And the center rejects it, since the rank and years of service at the time of the
divorce is not “major over 16” but “lieutenant colonel over 20.” The latter is what must be
stated in the order or decree, not the agreed terms.7
Breathing Room and Time to Adjust
How much time was allowed for states to revise their laws to accommodate this new rule? None.
There was no “breathing room” allowed, no decent interval set out to let the majority of the states write
up, propose and enact laws consistent with the “new rule.” Counsel for the FS will need to alert the
court to this problem and show that a warped formula will occur if the denominator of the marital
fraction is not revised, to avoid imposition of a double discount on the FS.
Here’s how the double discount works: First of all, the benefit to be divided with the FS is frozen at
the rank, years of service and retired pay base at the date of divorce. In addition, since state laws have
not been rewritten to revise the “marital fraction,” the fraction will still be calculated in 90% of the
states based on years of marital pension service divided by total pension service years (marital service
years ÷ total service years), rather than years of marital pension service years divided by service years
up to the date of the divorce.
It is essential to stop the clock for the denominator at divorce since the benefit is also fixed at that
date. Anything else would doubly dilute the pension benefit granted to the spouse. This is illustrated in a
7 The same result would obtain if the parties didn’t specify exactly the components required for a hypothetical clause,
including the years of creditable service, rank, and retired pay base of the member based on his “High Three” years of pay
(see text below); the order would be rejected by the center, which would withhold acceptance until the proper information
was inserted. 32 • Representing Servicemembers and Their Spouses in Family Law Cases
2014 Texas case, Douglas v. Douglas,8 which held that the denominator in a “hypothetical clause” is the
months of creditable service during marriage up to the date of divorce, rather than the date of retirement.
The Texas Court of Appeals stated that accepting the husband’s proposition – that the denominator
should be total years of service – would impermissibly dilute the ex-wife’s share acquired during the
parties’ marriage.
The new law is effective and binding on the states upon enactment (i.e., 12/23/2016). Although the
method of dividing pensions, as well as the date of valuation and classification of marital or community
property,9 has always been a matter of state law, that will change in the military case. Since no time has
been allowed for state legislatures to adjust to the change and rewrite state laws, lawyers will need to
make adjustments “on the fly” to deal with military pension division cases which are presently on the
docket or which come to trial before the state legislature can act.
Setting up the Example
An illustration may help to paint the problems and suggest solutions more clearly. We’ll use in these
examples a divorce case involving the civilian former spouse, John Doe, and his ex-wife, Navy
Commander Mary Doe. They are litigating in a time rule state, one which has not made any changes
regarding the marital fraction used in dividing a military pension.
Strategy for the Servicemember
There’s no easy day for attorneys handling either side of the pension division case under these new
rules. But the SM’s lawyer will always have the less difficult task. The new law was tailor-made for the
servicemember, by freezing his or her retirement benefit. In addition, the SM has control over all the
evidence and testimony needed for court or in settlement.
The active-duty SM needs to provide her attorney with proof of the “High Three” figure (i.e., the
average of her highest 36 months of continuous compensation) at the time of the divorce.10 That will
8 Douglas v. Douglas, 2014 Tex. App. LEXIS 12398, citing Berry v. Berry, 647 S.W.2d 945, 946-47 (Tex. 1983). See also
Dziamko v. Chuhaj, 193 Md. App. 98, 996 A.2d 893, 903 (2010) (explanation of results from denominator of marital
fraction ending upon divorce vs. one which ends upon retirement). 9 For example, in New York, the valuation and classification date is the date of commencement of the divorce case. In
California, a spouse’s share of community property stops accruing at the “final separation.” See, e.g., In re Marriage of
Bergman, 168 Cal. App. 3d 742, 214 Cal. Rptr. 661(Cal. Ct. App. 1985). The date of final separation is also the
classification and valuation date in North Carolina. N.C. Gen. Stat. § 50-20 (b)(1). In Nevada, community property stops
accruing on the divorce date. See, e.g., Forrest v. Forrest, 99 Nev. 602, 668 P.2d 275 (1983). In other states it may be the
date of divorce, the date of irretrievable breakdown of the marriage, or a date in the discretion of the judge. 10 The other element for determination of retired pay is the “retired pay multiplier,” which is 2.5% times years of creditable
service (in an active-duty case). In a Reserve or National Guard case, the court order must also provide the applicable
number of retirement points. Representing Servicemembers and Their Spouses in Family Law Cases • 33
usually be the most recent three years. The High Three amount can be calculated from Mary’s pay
records. The document showing her pay is called the LES, or Leave and Earnings Statement. She can
get help in obtaining the data through her finance office, and she should be able to retrieve about a
year’s worth of LES’s from the Defense Finance and Accounting service (DFAS) secure pay portal
(https://mypay.dfas.mil)11 or from her own secure portal online for pay and personnel information (e.g.,
“My Navy Portal” for sailors, “Army Knowledge Online” for soldiers). Mary can also obtain a pay
transcript from DFAS summarizing the last three years of base pay.
Mary’s attorney will place the numbers for these 36 months of base pay on a spreadsheet, and Mary
will authenticate the pay in her trial testimony. The spreadsheet should be offered to the court as a
summary of the written records which have been verified by Mary, and Mary must also be able to testify
that the spreadsheet is indeed an accurate transcription of her pay records, even if she did not prepare the
spreadsheet. If the records were obtained from the pay center (DFAS in this case), then Mary may need
to obtain a declaration from the business records custodian.12
Once the evidence has been admitted, the court will require a court order for dividing the pension.
The attorney for the prevailing party is often tagged with the task of preparing the military pension
division order, or MPDO, unless all the necessary language is placed in the divorce decree, or in a
property settlement incorporated into the decree.13 If “outside assistance” from a lawyer experienced in
writing such pension orders is needed, this should be done as early as possible, most likely at the start of
the case.
Whenever possible, the SM needs to request bifurcation of the divorce from the claim for equitable
distribution or division of community property.14 The earlier that the SM gets the court to pronounce the
dissolution of the marriage, the lower his or her “High Three” figure base will be, which means the
lower the dollar amount for pension division with the spouse.
11 Members of the Army, Navy, Air Force and Marine Corps have access to the DFAS secure website mentioned above;
Coast Guard members have access to the USCG on-line pay portal, “Global Pay.” 12 Under federal law, notary seals are not required for instruments which must be verified for federal purposes; instead, the
federal government uses an unsworn declaration, made under penalty of perjury. 28 U.S.C. § 1746. 13 For the necessary terms for the MPDO, see the Silent Partner, “Getting Military Pension Orders Honored by the Retired
Pay Center.” See Note 5 supra for guidance on how to write the specific pension division clause. 14 See Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY (3rd Ed. & 2016-2017 Supp.), Sec. 3.2. In those states which
have adopted the Federal Rules of Civil Procedure, the issue of separate trials under Rule 42 (b) deals with bifurcation of
claims into separate hearings. 34 • Representing Servicemembers and Their Spouses in Family Law Cases
Strategy for the Former Spouse
When operating under the new rules, the former spouse needs to realize that, in the words of the
Rolling Stones’ 1964 hit, “Time Is on My Side.” The longer it takes to obtain the divorce, the higher the
servicemember’s rank, years of service and “High Three” will be. Should the SM move to bifurcate the
hearing into “divorce now, property division later,” the FS should oppose the request by arguing that
judicial economy and efficiency will be impaired, state law frowns upon severance of the issues and a
multiplicity of hearings (if that is accurate) and that Congress has joined inextricably the divorce and the
division of a military pension by requiring the setting of the retired pay base (the “High Three”) at the
time of divorce.15
Discovery and Documents
Once the divorce case has started, the FS ought to propound discovery immediately, asking – among
other things – for verification of when the highest three years of continuous compensation were for the
SM, and for information on what the “High Three” is so that the court can calculate this essential
element of military pension division. The latter inquiry can be posed in interrogatories and also in
document requests. If the SM is less than forthcoming in the responses, the FS can argue for putting off
the divorce until the SM begins to cooperate in responding to discovery. Counsel for John Doe, the
spouse, may be able to use principles of equity and “the clean hands doctrine” to argue that the SM must
be in compliance with the rules and orders of the court – including full, prompt and honest answers to
discovery – to be able to move for affirmative relief herself, in the form of a hearing on the application
for a divorce judgment.
As to documents and evidence in trial, the above approach for Mary Doe’s case would also be what
John and his attorney would use most of the time. For an effective trial presentation, John’s lawyer will
need to get and submit the above information if the court is to do a proper hypothetical clause for the
Doe case in light of the new frozen benefit rule. While the records might be obtained from Mary through
discovery, a written consent signed by Mary (for transmission to the retired pay center) may be
necessary if she won’t produce the data on her own, or perhaps a court order or a judge-signed subpoena
sent to DFAS if she is obstinate. It could take weeks or months to obtain this information from the
source.
15 For an excellent summary of arguments against bifurcation of the divorce and the property division, along with case
citations for state appellate decisions, see Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY (3rd Ed. & 2016-2017
Supp.), Sec. 3.2. Representing Servicemembers and Their Spouses in Family Law Cases • 35
Restoring the Balance, and Interim Rules
To attempt to find the flaws and wiggle through the loopholes in the new rule, the lawyer for John
Doe (the ex-husband of CDR Mary Doe) faces a daunting task, and it doesn’t simply involve the
assembly of numbers for the court to use in ruling on a hypothetical award. The strategy for John is
more of a global approach to the entire process, and it might involve half a dozen possibilities,
depending on the state court rules for pension division, opposing counsel (or pro se litigant), the
particular judge involved, the phase of the moon and other factors!
John Doe’s goal is to “restore the equilibrium” in pension division. He needs what he would have
received before the new rule was passed: a division of the amount of retired pay which Mary gets at
retirement. At best, he wants to employ an approach which will yield a result that is numerically the
same as that produced by the time rule if that were still available. His “Plan B” would be to obtain other
payments or benefits which would help him obtain what he sees as a fairer division of Mary’s retired
pay and benefits, or of the marital or community property in general.
As to John’s possible strategies, note that these are not labelled “One Size Fits All.” While some
states may prohibit or restrict a particular approach, the summary below is written to set out the entire
spectrum of possible strategies, not to advocate one specific method for a particular case or state.
Another caveat is that the final rules have yet to be published. Until there are revisions to Volume
7B, Chapter 29 of the Department of Defense Financial Management Regulation, no one will be
completely sure how the division of uniformed services retired pay shakes out. At present, the rules are
being circulated to all branches of the uniformed services for editing, comments and revisions. The only
information presently available from DFAS is a “Notice of Statutory Change” and a sample order.16
This interim guidance makes it clear that DFAS has settled on the “date of divorce” as the target for
when the High Three must be fixed. Under 10 U.S.C. § 1408 (a)(2),
…"court order" means a final decree of divorce, dissolution, annulment, or legal separation
issued by a court, or a court ordered, ratified, or approved property settlement incident to such
a decree (including a final decree modifying the terms of a previously issued decree of divorce,
dissolution, annulment, or legal separation, or a court ordered, ratified, or approved property
settlement incident to such previously issued decree)….
DFAS removed everything from this sentence except “final decree of divorce, dissolution, annulment, or
16 Type into any search engine, “Notice of Statutory Change” and “DFAS” to locate this. DFAS has placed the Notice at its
website, www.dfas.mil > Garnishment Information > Former Spouses’ Protection Act > NDAA-’17 Court Order
requirements. 36 • Representing Servicemembers and Their Spouses in Family Law Cases
legal separation issued by a court” and used that to specify the High Three date. Regardless of what
potential pension benefit is earned later in the servicemember’s career, it is the High Three as of the date
of divorce which DFAS interprets as being “the time of the order” as specified in Section 641 of NDAA
17. For those military members who entered service on or after September 8, 1980, the following
information must be provided to the retired pay center in the decree, order or incorporated settlement:
1. A fixed amount, a percentage, a formula or a hypothetical which is awarded to the FS;
2. The SM’s High Three amount at the time of divorce (i.e., the actual dollar figure); and
3. The SM’s years of creditable service at divorce or, for a member of the Guard or Reserves, the
creditable retirement points at divorce.
Outline of Time-Rule Strategies
Spousal Support Settlement. When the parties are in agreement, a consent order for alimony,
maintenance or spousal support is one way to obtain time-rule payments from the military pension
without the limitations of the frozen benefit rule. An alimony garnishment is based on “remuneration
from employment.” It is not tied to DRP, or disposable retired pay; thus the new rule and its definition
of DRP do not apply to permanent alimony payments which start at retirement and function as a division
of retired pay.17
Here are a few other pointers about the use of permanent spousal support to mimic pension division
as property:
• Note that there is no “10/10 rule” for alimony payments from the retired pay center, as is the
requirement when the pension is divided as property (i.e., property division payments from the
retired pay center may only be made if there are at least 10 years of creditable service concurrent
with at least 10 years of marriage).18
• Make sure that the FS payments do not end at remarriage or cohabitation (since pension-share
payments would not end at either of these two events) and are not subject to modification.
17 The rules for collecting alimony, child support or both from an individual’s military retired pay are found at 42 U.S.C. §
659 and 5 C.F.R. Part 581. The money from which family support may be withheld is termed “remuneration for
employment.” This includes military retired pay, and even military disability retired pay. DoD 7000.14-R, Department of
Defense Financial Management Regulation (DoDFMR), Military Pay Policy and Procedures – Retired Pay (DoDFMR),
Vol. 7B, ch. 27, para. 270102. It is advisable to mention the above citation to the DoDFMR in the permanent alimony order
so as to avoid confusion by those who are processing the order. 18 10 U.S.C. § 1408 (d)(2).
Representing Servicemembers and Their Spouses in Family Law Cases • 37
• Admittedly, spousal support is usually effective immediately (not at a future date). In addition it
usually consists of a fixed dollar amount, not a formula such as:
50% X120 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑓 𝑚𝑎𝑟𝑖𝑡𝑎𝑙 𝑝𝑒𝑛𝑠𝑖𝑜𝑛 𝑠𝑒𝑟𝑣𝑖𝑐𝑒
𝑡𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑓 𝑐𝑟𝑒𝑑𝑖𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑟𝑣𝑖𝑐𝑒 X final retired pay.
There is no reason, however, why the retired pay center should refuse to accept a formula for the
spousal support, rather than a specific set dollar figure.19
• A consent order for permanent spousal support should suffice to obtain the payments to the FS
upon retirement of the SM, and the tax consequences will be the same, namely, the FS is taxed
on the payments and they are excluded from the income of the payor/retiree.
A Spoonful of Alimony. John’s attorney could argue for division of the pension under the new rule, with
the remaining amount made up by alimony to be decided upon Mary Doe’s retirement, in order to get
the equivalent of a “time rule” order. If John is awarded alimony while Mary is still serving, the alimony
should not end automatically upon Mary’s retirement; John’s attorney needs to review carefully the
results of dividing Mary’s retired pay to decide whether some alimony should be continued to equalize
the parties’ positions. The terms of the alimony order might make the amount adjustable depending on
economic and financial factors at the time of Mary’s retirement, including any reduction of the retired
pay to which John would be entitled under the time rule due to the “frozen benefit rule,” or any
reduction because Mary elects VA disability compensation and that reduces John’s amount due to a
“VA waiver” under 10 U.S.C. § 1408 (a)(4) and 38 U.S.C. § 5304-5305. Note that the order regarding
spousal support as a “stand-in” for pension division must clearly state that the support does not end at
the remarriage or cohabitation of the recipient spouse, since true pension division orders do not change
upon either event.
Using the Time Rule Formula Anyway. The revised law doesn’t say that a court may not enter a time-
rule order. It merely states that the retired pay center (DFAS or the Coast Guard Pay and Personnel
Center) will only honor “date-of-divorce division” for those still serving. Recognizing this limitation on
payments from the pay center, the court may still enter a time rule order, noting that at Mary’s
retirement only a portion of the pension-share payment for John Doe will come from DFAS. The court’s
order would provide that Mary will still be responsible for the rest and will indemnify John for any
difference between the two amounts.
19 The application form for payments from military retired pay is DD Form 2293.
38 • Representing Servicemembers and Their Spouses in Family Law Cases
There is a parallel to the remedy often used in “VA waiver” cases in which the FS gets less than
intended. When the retiree elects VA disability compensation, the result is often a dollar-for-dollar
reduction in retired pay. The duty to indemnify is a common solution for this “VA waiver” and the
former spouse’s receipt of a lower amount due to operation of the law. Why shouldn’t it work for cases
in which the “operation of law” involves an amendment to USFSPA, the “frozen benefit rule”? As will
be explained below, 10 U.S.C. § 1408 (e)(6), the “savings clause” in USFSPA, allows the courts to
employ state enforcement remedies for any amounts which may not be payable through the retired pay
center.20
Be sure not to use “disposable retired pay” in the order to describe what is divided. Disposable
retired pay, or DRP, means the restrictive definition in the frozen benefit rule (i.e., the retired pay base
at the date of divorce) less all of the other specified deductions, such as the VA waiver and moneys
owed to the federal government. The best way to word a pension clause is to provide for division of total
retired pay less only the SBP premium attributable to coverage of the former spouse. Regardless of the
language used, DFAS will construe orders dividing retired pay as dividing “disposable retired pay.”21
Put Off the Divorce. Delay of the divorce will gain time for the FS, and time is money. The longer the
divorce is postponed, the higher the retired pay base (i.e., the “High Three”) of the SM. Intervening
months and years will yield “step increases” (i.e., pay increases which occur every two years),
Congressional pay raises and possibly promotions. Who could object to this approach? The expected
naysayers for this strategy are two types of attorneys whom we’ll call “Naïve Ned” and “Ethical Ethyl.”
Naïve Ned says, “It can’t be done! How can you postpone the divorce for more than a couple of
weeks on the outside, once the case has been filed?” Sadly, Ned hasn’t had much experience in the big,
wide world outside his office walls.
Many legitimate tactics exist for slowing down the wheels of litigation. Rather than accepting
service of process, Ned could politely tell his opponent that the client will not allow him to do an
acceptance, and that regular service of process must be employed. When the client is finally served, Ned
can ask for an extension of time for filing an answer. If there is a flaw in the pleadings, Ned may file a
motion to dismiss. If there are questions regarding grounds for the divorce or the validity of the
plaintiff’s claim of domicile, then Ned can initiate discovery. With these and other tactics, an attorney in
Syracuse, New York (for whom the author was a consultant) was able to drag out and delay a divorce
decree from 2010 (when the case was filed) until 2014. And all the while the client, a retired Army
colonel, was begging him to speed it up and get the divorce granted!
20 See also Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY (3rd Ed. & 2016-2017 Supp.), Sec. 6.4. 21 DoDFMR, Vol. 7B, ch. 29, Sec. 290601.
Representing Servicemembers and Their Spouses in Family Law Cases • 39
Ethical Ethyl takes a different approach. “While it may be possible to postpone the divorce, there are
serious concerns under the Rules of Professional Conduct. It’s never right to delay the litigation.
Counsel has an ethical duty to move forward toward completion, not drag his feet. Slowing down the
process with the goal of delay is simply unethical!” Unfortunately, Ethyl hasn’t read the Rules very
closely.
While delay for its own sake is improper, delay which results from the legitimate use of objections,
discovery, motions and other tactics is not inappropriate or a violation of the Rules of Professional
Conduct. The Rules prohibit “unreasonable delay” or “improper delay.” They do not bar the use of
legitimate devices, such as discovery, to obtain needed information, even though the employment of
discovery and the unresponsiveness of the other side may lead to lengthy delays in the legal process.
In a 1998 divorce and property division case, the author embarked on a campaign of discovery to
ascertain whether the plaintiff, a soldier, was a legitimate resident of North Carolina. Domicile is an
essential element of divorce, and the defendant was a maid at a motel in coastal Georgia, so it could not
be her domicile which was at stake. The plaintiff was in New York. Using sequential discovery (i.e.,
interrogatories followed some weeks later by document requests, and then followed by requests for
admissions, rather than simultaneous service of all of these on the plaintiff), the author beamed in
amusement when the plaintiff – instead of answering the discovery immediately – decided to obtain an
extension of time for response by 30 days, following that with his objections and motion for protective
order. In due course the author filed a motion to compel. A hearing was eventually calendared on the
objections, motion for protective order and motion to compel. The latter motion was granted, and the
clock just kept on ticking. The plaintiff eventually fired his first lawyer and hired a new one to get the
case moving faster. Legitimately using these discovery tactics, the author was able to get the granting of
a divorce postponed for 18 months, thus allowing the client to obtain a share of the SM-husband’s
retired pay (which otherwise would have been lost due to a change in state law).
If you get the file when the divorce has already been granted (after 12/23/16), don’t give up. Check
to see if the divorce is valid. A faulty dissolution might be set aside by the court, giving the FS a larger
potential pension to divide.22 Imitating Sherlock Holmes may pay dividends in terms of flushing out a
flawed divorce, so get out that magnifying glass!
22 A guide to scrutinizing the validity of divorces is found at the Silent Partner, “‘Lost’ Military Pensions: The Ten
Commandments.” 40 • Representing Servicemembers and Their Spouses in Family Law Cases
How to “Even Out” the Pension Division
The next five methods are not true adjustments to the pension division to make it numerically the
same as that which results from the time rule. They will, however, help in ameliorating the result of the
“frozen benefit division” for John Doe (the ex-husband of Commander Mary Doe).
Unequal Share of Pension. In states where the court has a degree of flexibility in how much of a marital
or community property asset to award the non-employee spouse, John’s attorney can ask the court to
award a share to him that is larger than the usual “50% of the marital share” portion. Thus the order
could be framed in terms of “70% of the marital share of Mary Doe’s military retired pay,” which would
leave John with a larger share than he could receive through frozen benefit analysis.23 Have a financial
expert help to estimate the monetary loss for the FS, so that a set-off can be calculated. Note, however,
that it would be impossible to compare the two results at the time of the pension division order. Only in
hindsight – at the time of Mary Doe’s retirement – would it be possible to measure one against the
other.24
Fixed Percentage Award. Another alternative, when the laws of a state have not been adjusted to provide
for a denominator of the marital fraction which ends on the date of the “court order,” is to have the court
award to John Doe, the non-military spouse, a fixed percentage of the military retired pay while Mary is
still serving. After all, if John is forced to receive only a share of a frozen benefit at the time of the court
order, why shouldn’t he get a fixed percentage of that frozen benefit? In this situation, the amount of the
frozen benefit would remain relatively stable, instead of losing value over time (as would occur if the
denominator of the marital fraction remains the total amount of Mary Doe’s creditable service). So, for
example, if the property division order occurred when the parties had been married for 10 years of the
20 that Mary had already served, John would be awarded half of 50% (i.e., ½ X 10/20), or 25% of the
frozen benefit. If the fixed percentage approach were not employed and Mary served for a total of 30
years, then John would still receive 50% of the frozen benefit times the marital fraction. However, at
that time the marital fraction would be 10/30, or 33%, and John’s share would be 16.5%, rather than
25%. Fixing the percentage at the same time as the benefit is fixed is one way of “retaining value” for
John’s pension-share award.
23 John’s share of the pension, divided as property, is limited to 50% of disposable retired pay which may be garnished
through the retired pay center. 10 U.S.C. § 1408 (e)(1). 24 It would also be possible to have the court award other assets to John in view of his loss due to the truncated division set
out in the new frozen benefit rule. Representing Servicemembers and Their Spouses in Family Law Cases • 41
Present Value. In addition to the future division of retired pay, state laws also recognize a second
method of dividing pensions, the “present value offset.” This analyzes the present value of a series of
money payments over the course of the SM’s life; these are, of course, her retired pay. The present value
of this retired pay is the amount that can be used for a trade or an offset, allowing the SM to keep her
pension intact. This is beneficial for the parties since it results in a complete present accounting and
division, not the postponement of property division until retirement. In addition, it provides the spouse
with property “in hand” when it is unknown whether the SM will live for few or many years after
retirement, or even survive to apply for retirement.
Evaluating a pension is a complex task. It is not for the faint-hearted, the unprepared, or the amateur.
These complicated computations generally demand an evaluation report and the testimony of an
expert.25 The steps to be taken include these:
• Counsel must locate the appropriate state cases which describe the methodology to use in
ascertaining the present value of periodic payments.26
• The FS needs to find and hire an expert (e.g., CPA, economist or actuary).
• The FS needs to get a “wingman” to counsel and educate the expert in understanding the military
retirement system; this wingman might be a senior lawyer with lots of experience in handling
military pension cases, a retired JAG officer, or a judge advocate who is a member of the
National Guard or Reserves with experience in this area.
• The expert needs to read the cases, apply the methodology and placed a value on the pension. In
an ideal world, counsel may even have one or two examples of pension present-value reports to
give the expert to help out in regard to what must be done, what discounts need to be applied,
what mortality table should be used, and so on.
• Then the hunt is on for some property or asset which matches the pension value and can be given
to the FS in exchange for the division of the pension, or which can be awarded to the FS by the
judge in a contested case so that the SM may retain the military pension.
25 See, e.g.,Trant v. Trant, 545 So. 2d 428 (Fla. Dist. Ct. App. 1989), cited in Smith v. Smith, 934 So. 2d 636 (Fla. Dist. Ct.
App. 2006). 26 See, e.g., Cochran v. Cochran, 198 N.C. App. 224, 679 S.E.2d 469 (2009) and Bishop v. Bishop, 113 N.C. App. 725, 440
S.E.2d 591 (1994) for rules regarding the present value of pensions and the methodology to be employed in North
Carolina. 42 • Representing Servicemembers and Their Spouses in Family Law Cases
Present Value and Payments. The present value of a military pension can be a pretty large figure in some
cases.27 When this happens, the court may need to do a partial setoff for the marital value of another
asset awarded to the FS, with the remainder to be made up in periodic payments. Thus, if the present
value of CDR Mary Doe’s retired pay were $400,000 and the marital component were $300,000 (that is,
the parties were married for 15 of the 20 years used by the expert in the pension value report), then the
court might set off the pension, awarded to Mary, by granting sole ownership to John of marital assets
worth $200,000. To complete the equation, the court could order Mary to pay $100,000 to John by
making annual payments of $20,000 for five years. This could be done by requiring Mary to set up an
allotment immediately for the monthly payment of $1,666.67 ($20,000 ÷ 12 months) to John. Or the
court could enter a military pension division order requiring monthly payments of $1,667.67 from
Mary’s retired pay. The retired pay center will honor these “set dollar amount” payments so long as they
do not exceed the allowable percent of disposable retired pay which may be garnished as property
division, that is, 50%.28
The Western Gambit. In several jurisdictions (mostly western states), the court may order the SM to
begin present payments to the nonmilitary spouse as soon as the SM is eligible to retire and receive
monthly payments. This is so whether the military member has actually retired or not.
The seminal case is In re Marriage of Luciano,29 in which the judge ordered pension-share payments
for the wife to begin when the SM-husband retired from the Air Force. The California Court of Appeals
reversed, stating that it would be unfair to postpone payment to the ex-wife since that would give the
SM the power to determine when she received her own property. The Court went on to say that the
employee spouse cannot defeat the nonemployee spouse’s interest in community property by relying on
a condition solely within his control. The proper order for the judge to issue would state that the former
wife is the one who has the choice as to when to start receiving her share of the pension. This election
27 See, e.g., Cunningham v. Cunningham, 173 N.C. App. 641, 619 S.E.2d 593 (2005) (remanding case for presentation of
husband’s valuation of military pension; wife’s value, without expert, was about $560,000 for a Marine Corps lieutenant
colonel). 28 This 50% means half of the disposable retired pay of the SM calculated at the date of the court order. The same limits
apply if the court – instead of time payments on a present-value setoff – decides to order the SM to pay the FS a fixed
dollar amount upon retirement. See Note 23 supra. 29 In re Marriage of Luciano, 104 Cal. App. 3d 956, 164 Cal. Rptr. 93 (1980). See also In re Marriage of Scott, 156 Cal. App.
3d 251, 202 Cal. Rptr. 716 (Ct. App. 1984); Ruggles v. Ruggles, 860 P.2d 182 (N.M. 1993); Koelsch v. Koelsch, 713 P.2d
1234 (Ariz. 1986); Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989); Balderson v. Balderson, 896 P.2d 956 (Ida.
1994); Blake v. Blake, 807 P.2d 1211 (Colo. App. 1990); In re Marriage of Harris, 107 Wn. App. 597, 27 P.3d 656 (Ct.
App. 2001); Maccarone v. Maccarone, 108 A.3d 1053 (R.I. 2015); Janson v. Janson, 773 A.2d 901 (R.I. 2001); Furia v.
Furia, 692 A.2d 327 (R.I. 1997); and Bailey v. Bailey, 745 P.2d 830 (Utah App. 1987) (“… the distribution of retirement
benefits should generally be postponed until benefits are received or at least until the earner is eligible to retire.” (emphasis
added)). Representing Servicemembers and Their Spouses in Family Law Cases • 43
may be made at any time after the pension is matured, through a motion filed by the nonemployee
spouse. The Court stated that, if the motion is made before retired pay starts, this constitutes an
irrevocable election to give up increased payments in the future which might accrue due to increased
age, longer service and a higher salary.30
Nothing in the frozen benefit rule blocks or bars this “western gambit,” as illustrated by the Luciano
case. And the logical approach – nay, the only rational approach – for a nonmilitary spouse in those
states which follow Luciano is to move immediately for payments, to start as soon as the SM attains
sufficient service for retirement (usually after 20 years of active duty). Since there can no longer be an
increased payment in the future, as mentioned above, and the benefit to the FS is locked into the rank
and years of service at the time of divorce, every nonmilitary spouse should file a motion to elect
payments from the SM as soon as the pension matures.
Continuing Conundrums
Several questions remain. The answers may be provided in case law developments or in
implementing regulations.
How should the courts write a proper court order to implement the frozen benefit rule? Definitive
guidance on the rules for military pension division will be published in the Department of Defense
Financial Management Regulation.31 The “hypothetical clause” (as it is called by DFAS) is the most
difficult clause to prepare. For those who entered military service after September 1980, the current
DoDFMR rule requires that the court order contain detailed information about the servicemember; this
includes his years of creditable service as well as the “retired pay base” calculated according to the
“High Three,” the average of the highest three years of continuous compensation before the specified
division date.32
At present, counsel must provide this information to the court. What if a court order specifies the
“old definition” of disposable retired pay? Will it be rejected by the retired pay center, as would happen
before the frozen benefit rule when an order was found to be unacceptable? Will the center send to
counsel or the former spouse directions to specify the required data for a hypothetical clause? Until the
new rules have been set out in the DoDFMR, counsel should adhere strictly to the current requirements
for a hypothetical clause and the interim guidance from DFAS.
30 In re Marriage of Luciano, 104 Cal. App. 3d at 960–961, 164 Cal. Rptr. at 95–96. 31 See Note 17 supra. 32 DoDFMR, Vol. 7B, ch. 29, Sec. 290608.
44 • Representing Servicemembers and Their Spouses in Family Law Cases
When a retiree doesn’t pay according to a pension division order which uses the original definition
of DRP, will the FS be able to obtain compliance through a show cause hearing? Will the court’s
contempt sanction be upheld? Or will an appellate court strike down the punishment on the basis of
federal preemption, ruling that the frozen benefit rule cancels all other methods of dividing the future
retired pay of a still-serving member?
If an order entered after 12/23/16 sets out terms under the original DRP definition and the SM wants
to petition the court to change the order to comply with the present definition, will the court allow a
motion to alter or amend under Rule 59 or its equivalent (in states which have not adopted the federal
Rules of Civil Procedure)? What about a motion to set side under Rule 60? Or will the existence of a
final decision bar that change? Generally speaking, courts refuse to modify final property division
judgments or to allow them to be attacked collaterally.33
What happens if a time rule order dividing the pension is final and unappealed, and then the attorney
for the former spouse finds out that it will not be honored by the retired pay center? What if the order
will only be honored to the extent that it divides the “frozen benefit,” rather than final retired pay? Can
the court still hold the retiree liable for the unpaid portion of the pension under 10 U.S.C. § 1408 (e)(6)?
That section of USFSPA, known as the “savings clause,” states:
(6) Nothing in this section shall be construed to relieve a member of liability for the payment of alimony, child support, or other payments required by a court order on the grounds that payments made out of disposable retired pay under this section have been made in the maximum amount permitted under paragraph (1) or subparagraph (B) of paragraph (4). Any such unsatisfied obligation of a member may be enforced by any means available under law other than the means provided under this section in any case in which the maximum amount permitted under paragraph (1) [e.g., 50% of disposable retired pay] has been paid….
Numerous court decisions have held that orders which require the retiree to pay more than 50%
of disposable retired pay are not void or invalid; they are simply not enforceable through
garnishment from the retired pay center for amounts in excess of 50%.34 Can counsel for the FS
defeat the arguments of the SM/retiree that federal law preempts state court orders, since this
section of USFSPA provides an “escape hatch” for the FS in enforcement of the pension division
order?
33 See, e.g., In re Marriage of Thorne, 203 Cal. App. 4th 492, 136 Cal. Rptr. 3d 887 (2012); Moore v. Moore, 484 S.W.3d 386
(Mo. App. Unpub. 2016). 34 See, e.g., In re Hicks, 530 B.R. 912 (M.D. Fla. 2015); In re Madsen, 2002 Bankr. LEXIS 2037 (Bankr. S.D. Iowa 2002); In
re Mackmeekan, 117 B.R. 642 (D. Kan. 1990); Ex Parte Smallwood, 811 So. 2d 537 (Ala. 2001); Grier v. Grier, 731
S.W.2d 931 (Tex. 1987); Forney v. Minard, 849 P.2d 724 (Wyo. 1993); Marquis v. Marquis, 175 Md. App. 734, 931 A.2d
1164 (Md. Ct. Spec. App. 2007); Deliduka v. Deliduka, 347 N.W.2d 52 (Minn. Ct. App. 1984); Stout v. Stout, 144 So. 3d
177 (Miss. App. 2013); Gonzalez v. Gonzalez, 2011 Tenn. App. LEXIS 21; Maxwell v. Maxwell, 796 P.2d 403, 406 n.6
(Utah Ct. App. 1990); In re Marriage of Bocanegra, 58 Wn. App. 271, 792 P.2d 1263 (Wash. Ct. App. 1990); Geesaman v.
Geesaman, 1993 Del. Fam. Ct. LEXIS 126 (Del. Fam. Ct. 1993). Representing Servicemembers and Their Spouses in Family Law Cases • 45
Final Notes
Labelled as John Doe’s “Plan B” above under Strategy for the Former Spouse, other methods and
strategies exist for obtaining a “fair deal” (or perhaps a “fairer deal,” in John’s view) regarding division
of military retirement benefits. These would include requiring the SM to pay the full cost of the Survivor
Benefit Plan, or valuing the SM’s military medical coverage and placing that as an asset in the SM’s
share of marital or community property.35 These do not involve a larger portion of the pension; rather,
they focus on other benefits which may be valued and allocated in the property division process.
All of the above methods should be considered by lawyer for the former spouse. And this should be
done in consultation with an expert in dividing military retired pay, so as to choose the best alternatives
to the frozen benefit approach imposed by NDAA 17.
These rules and requirements, strategies and suggestions may not apply to everyone. There are
certainly variations among the states as to what may be done in the area of division of retired pay. For
example, while some states may allow “make-up alimony” to adjust the equities when a spouse is left
short in the pension division, others maintain a strict line of division between spousal support (based on
need and the ability to pay) and property division (based on the value of what was acquired during the
marriage and how best to divide it). Be sure to understand the law and the cases, consult an expert in
your state (if you’re not one yourself), and contact a specialist in military pension division whenever
possible – even if it’s in another state! You can’t ask too many questions or know too much in this area.
“One size” does not fit all!
* * *
Rev. 2-20-17 The SILENT PARTNER series of info-letters is prepared by Mark E. Sullivan (COL, USA – Ret.), a family law attorney in Raleigh, N.C. For comments or
suggested changes, contact him at [email protected]; or 919-832-8507; alternate – [email protected], 919-306-3015.
35 Both of these approaches are covered in detail in Chapter 8 of Sullivan, THE MILITARY DIVORCE HANDBOOK (American
Bar Assn., 2nd Ed. 2011) and both may be employed in any military divorce case, not just one which falls under the frozen
benefit rule. 46 • Representing Servicemembers and Their Spouses in Family Law Cases
Representing Servicemembers and Their Spouses in Family Law Cases • 47
48 • Representing Servicemembers and Their Spouses in Family Law Cases
1 (Slip Opinion) OCTOBER TERM, 2016
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as isbeing done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has beenprepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
HOWELL v. HOWELL
CERTIORARI TO THE SUPREME COURT OF ARIZONA
No. 15–1031. Argued March 20, 2017—Decided May 15, 2017
The Uniformed Services Former Spouses’ Protection Act authorizesStates to treat veterans’ “disposable retired pay” as community prop-erty divisible upon divorce, 10 U. S. C. §1408, but expressly excludesfrom its definition of “disposable retired pay” amounts deducted fromthat pay “as a result of a waiver . . . required by law in order to re-ceive” disability benefits, §1408(a)(4)(B). The divorce decree of peti-tioner John Howell and respondent Sandra Howell awarded Sandra 50% of John’s future Air Force retirement pay, which she began to re-ceive when John retired the following year. About 13 years later, the Department of Veterans Affairs found that John was partially disa-bled due to an earlier service-related injury. To receive disabilitypay, federal law required John to give up an equivalent amount of re-tirement pay. 38 U. S. C. §5305. By his election, John waived about$250 of his retirement pay, which also reduced the value of Sandra’s 50% share. Sandra petitioned the Arizona family court to enforce the original divorce decree and restore the value of her share of John’s to-tal retirement pay. The court held that the original divorce decree had given Sandra a vested interest in the prewaiver amount of John’s retirement pay and ordered John to ensure that she receive her full50% without regard for the disability waiver. The Arizona Supreme Court affirmed, holding that federal law did not pre-empt the family court’s order.
Held: A state court may not order a veteran to indemnify a divorced spouse for the loss in the divorced spouse’s portion of the veteran’s re-tirement pay caused by the veteran’s waiver of retirement pay to re-ceive service-related disability benefits. This Court’s decision in Mansell v. Mansell, 490 U. S. 581, determines the outcome here. There, the Court held that federal law completely pre-empts theStates from treating waived military retirement pay as divisible
Representing Servicemembers and Their Spouses in Family Law Cases • 49
2 HOWELL v. HOWELL
Syllabus
community property. Id., at 594–595. The Arizona Supreme Court attempted to distinguish Mansell by emphasizing the fact that theveteran’s waiver in that case took place before the divorce proceeding while the waiver here took place several years after the divorce. This temporal difference highlights only that John’s military pay at thetime it came to Sandra was subject to a future contingency, meaningthat the value of Sandra’s share of military retirement pay was pos-sibly worth less at the time of the divorce. Nothing in this circum-stance makes the Arizona courts’ reimbursement award to Sandra any the less an award of the portion of military pay that John waived in order to obtain disability benefits. That the Arizona courts re-ferred to her interest in the waivable portion as having “vested” doesnot help: State courts cannot “vest” that which they lack the authori-ty to give. Neither can the State avoid Mansell by describing thefamily court order as an order requiring John to “reimburse” or to“indemnify” Sandra, rather than an order dividing property, a se-mantic difference and nothing more. Regardless of their form, such orders displace the federal rule and stand as an obstacle to the ac-complishment and execution of the purposes and objectives of Con-gress. Family courts remain free to take account of the contingency that some military retirement pay might be waived or take account of reductions in value when calculating or recalculating the need for spousal support. Here, however, the state courts made clear that the original divorce decree divided the whole of John’s military pay, and their decisions rested entirely upon the need to restore Sandra’s lost portion. Pp. 6–8.
238 Ariz. 407, 361 P. 3d 936, reversed and remanded.
BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, GINSBURG, ALITO, SOTOMAYOR, and KAGAN, JJ., joined. THOMAS, J., filed an opinion concurring in part and concurringin the judgment. GORSUCH, J., took no part in the consideration or deci-sion of the case.
50 • Representing Servicemembers and Their Spouses in Family Law Cases
_________________
_________________
1 Cite as: 581 U. S. ____ (2017)
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in thepreliminary print of the United States Reports. Readers are requested tonotify the Reporter of Decisions, Supreme Court of the United States, Wash-ington, D. C. 20543, of any typographical or other formal errors, in orderthat corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 15–1031
JOHN HOWELL, PETITIONER v. SANDRA HOWELL
ON WRIT OF CERTIORARI TO THE SUPREME COURT OF ARIZONA
[May 15, 2017]
JUSTICE BREYER delivered the opinion of the Court. A federal statute provides that a State may treat as
community property, and divide at divorce, a military veteran’s retirement pay. See 10 U. S. C. §1408(c)(1). The statute, however, exempts from this grant of permission any amount that the Government deducts “as a result of awaiver” that the veteran must make “in order to receive” disability benefits. §1408(a)(4)(B). We have held that a State cannot treat as community property, and divide atdivorce, this portion (the waived portion) of the veteran’s retirement pay. See Mansell v. Mansell, 490 U. S. 581, 594–595 (1989).
In this case a State treated as community property andawarded to a veteran’s spouse upon divorce a portion of the veteran’s total retirement pay. Long after the divorce,the veteran waived a share of the retirement pay in orderto receive nontaxable disability benefits from the Federal Government instead. Can the State subsequently in-crease, pro rata, the amount the divorced spouse receiveseach month from the veteran’s retirement pay in order to indemnify the divorced spouse for the loss caused by the veteran’s waiver? The question is complicated, but the
Representing Servicemembers and Their Spouses in Family Law Cases • 51
2 HOWELL v. HOWELL
Opinion of the Court
answer is not. Our cases and the statute make clear that the answer to the indemnification question is “no.”
I A
The Federal Government has long provided retirementpay to those veterans who have retired from the Armed Forces after serving, e.g., 20 years or more. It also pro-vides disabled members of the Armed Forces with disabil-ity benefits. In order to prevent double counting, however,federal law typically insists that, to receive disability benefits, a retired veteran must give up an equivalent amount of retirement pay. And, since retirement pay is taxable while disability benefits are not, the veteran oftenelects to waive retirement pay in order to receive disability benefits. See 10 U. S. C. §3911 et seq. (Army retirement benefits); §6321 et seq. (Navy and Marines retirementbenefits); §8911 et seq. (Air Force retirement benefits); 38U. S. C. §5305 (requiring a waiver to receive disability benefits); §5301(a)(1) (exempting disability benefits from taxation). See generally McCarty v. McCarty, 453 U. S. 210, 211–215 (1981) (describing the military’s nondisabil-ity retirement system).
In 1981 we considered federal military retirement pay alone, i.e., not in the context of pay waived to receivedisability benefits. The question was whether a State could consider any of a veteran’s retirement pay to be aform of community property, divisible at divorce. The Court concluded that the States could not. See McCarty, supra. We noted that the relevant legislative history referred to military retirement pay as a “ ‘personal enti-tlement.’ ” Id., at 224. We added that other language inthe statute as well as its history made “clear that Con-gress intended that military retired pay ‘actually reach the beneficiary.’ ” Id., at 228. We found a “conflict between the terms of the federal retirement statutes and the [state-
52 • Representing Servicemembers and Their Spouses in Family Law Cases
3 Cite as: 581 U. S. ____ (2017)
Opinion of the Court
conferred] community property right.” Id., at 232. And we concluded that the division of military retirement pay bythe States threatened to harm clear and substantial fed-eral interests. Hence federal law pre-empted the state law. Id., at 235.
In 1982 Congress responded by passing the UniformedServices Former Spouses’ Protection Act, 10 U. S. C. §1408. Congress wrote that a State may treat veterans’ “disposable retired pay” as divisible property, i.e., commu-nity property divisible upon divorce. §1408(c)(1). But the new Act expressly excluded from its definition of “dispos- able retired pay” amounts deducted from that pay “as a result of a waiver . . . required by law in order to receive” disability benefits. §1408(a)(4)(B). (A recent amendmentto the statute renumbered the waiver provision. It now appears at §1408(a)(4)(A)(ii). See Pub. L. 114–328, §641(a), 130 Stat. 2164.)
In 1989 we interpreted the new federal language in Mansell, 490 U. S. 581. Major Gerald E. Mansell and hiswife had divorced in California. At the time of the divorce, they entered into a “property settlement which provided,in part, that Major Mansell would pay Mrs. Mansell 50percent of his total military retirement pay, including that portion of retirement pay waived so that Major Mansellcould receive disability benefits.” Id., at 586. The divorce decree incorporated this settlement and permitted the division. Major Mansell later moved to modify the decree so that it would omit the portion of the retirement paythat he had waived. The California courts refused to do so. But this Court reversed. It held that federal law forbade California from treating the waived portion ascommunity property divisible at divorce.
Justice Thurgood Marshall, writing for the Court, pointedout that federal law, as construed in McCarty, “completelypre-empted the application of state community property law to military retirement pay.” 490 U. S., at 588. He
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noted that Congress could “overcome” this pre-emption “by enacting an affirmative grant of authority giving the States the power to treat military retirement pay as com-munity property.” Ibid. He recognized that Congress, with its new Act, had done that, but only to a limited extent. The Act provided a “precise and limited” grant of the power to divide federal military retirement pay. Ibid. It did not “gran[t]” the States “the authority to treattotal retired pay as community property.” Id., at 589. Rather, Congress excluded from its grant of authority thedisability-related waived portion of military retirement pay. Hence, in respect to the waived portion of retirement pay, McCarty, with its rule of federal pre-emption, still applies. Ibid.
B John Howell, the petitioner, and Sandra Howell, the
respondent, were divorced in 1991, while John was serving in the Air Force. Anticipating John’s eventual retirement,the divorce decree treated John’s future retirement pay as community property. It awarded Sandra “as her sole and separate property FIFTY PERCENT (50%) of [John’s] military retirement when it begins.” App. to Pet. for Cert.41a. It also ordered John to pay child support of $585 per month and spousal maintenance of $150 per month until the time of John’s retirement.
In 1992 John retired from the Air Force and began toreceive military retirement pay, half of which went toSandra. About 13 years later the Department of Veterans Affairs found that John was 20% disabled due to a service-related shoulder injury. John elected to receive disability benefits and consequently had to waive about $250 per month of the roughly $1,500 of military retirement pay he shared with Sandra. Doing so reduced the amount of retirement pay that he and Sandra received by about $125 per month each. In re Marriage of Howell, 238 Ariz. 407,
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408, 361 P. 3d 936, 937 (2015)Sandra then asked the Arizona family court to enforce
the original decree, in effect restoring the value of her share of John’s total retirement pay. The court held that the original divorce decree had given Sandra a “vested” interest in the prewaiver amount of that pay, and ordered John to ensure that Sandra “receive her full 50% of the military retirement without regard for the disability.” App. to Pet. for Cert. 28a.
The Arizona Supreme Court affirmed the family court’sdecision. See 238 Ariz. 407, 361 P. 3d 936. It asked whether the family court could “order John to indemnifySandra for the reduction” of her share of John’s military retirement pay. Id., at 409, 361 P. 3d, at 938. It wrote that the family court order did not “divide” John’s waivedmilitary retirement pay, the order did not require John “to rescind” his waiver, nor did the order “direct him to payany amount to Sandra from his disability pay.” Id., at 410, 361 P. 3d, at 939. Rather the family court simply ordered John to “reimburse” Sandra for “reducing . . . her share” of military retirement pay. Ibid. The high court concluded that because John had made his waiver after, rather than before, the family court divided his military retirement pay, our decision in Mansell did not control the case, and thus federal law did not preempt the familycourt’s reimbursement order. 238 Ariz., at 410, 361 P. 3d, at 939.
Because different state courts have come to different conclusions on the matter, we granted John Howell’spetition for certiorari. Compare Glover v. Ranney, 314 P. 3d 535, 539–540 (Alaska 2013); Krapf v. Krapf, 439 Mass. 97, 106–107, 786 N. E. 2d 318, 325–326 (2003); and John-son v. Johnson, 37 S. W. 3d 892, 897–898 (Tenn. 2001), with Mallard v. Burkhart, 95 So. 3d 1264, 1269–1272 (Miss. 2012); and Youngbluth v. Youngbluth, 2010 VT 40, 188 Vt. 53, 62–65, 6 A. 3d 677, 682–685.
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II This Court’s decision in Mansell determines the outcome
here. In Mansell, the Court held that federal law com-pletely pre-empts the States from treating waived military retirement pay as divisible community property. 490 U. S., at 594–595. Yet that which federal law pre-empts is just what the Arizona family court did here. App. to Pet.for Cert. 28a, 35a (finding that the divorce decree gaveSandra a “vested” interest in John’s retirement pay andordering that Sandra receive her share “without regard for the disability”).
The Arizona Supreme Court, the respondent, and theSolicitor General try to distinguish Mansell. But we do not find their efforts convincing. The Arizona SupremeCourt, like several other state courts, emphasized the factthat the veteran’s waiver in Mansell took place before the divorce proceeding; the waiver here took place several years after the divorce proceedings. See 238 Ariz., at 410, 361 P. 3d, at 939; see also Abernethy v. Fishkin, 699 So. 2d 235, 240 (Fla. 1997) (noting that a veteran had not yet waived retirement pay at the time of the divorce andpermitting indemnification in light of the parties’ “intentto maintain level monthly payments pursuant to their property settlement agreement”). Hence here, as the Solicitor General emphasizes, the nonmilitary spouse and the family court were likely to have assumed that a fullshare of the veteran’s retirement pay would remain avail-able after the assets were distributed.
Nonetheless, the temporal difference highlights only that John’s military retirement pay at the time it came toSandra was subject to later reduction (should John exer-cise a waiver to receive disability benefits to which he is entitled). The state court did not extinguish (and mostlikely would not have had the legal power to extinguish) that future contingency. The existence of that contingency meant that the value of Sandra’s share of military retire-
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ment pay was possibly worth less—perhaps less than Sandra and others thought—at the time of the divorce. So too is an ownership interest in property (say, A’s property interest in Blackacre) worth less if it is subject to defea-sance or termination upon the occurrence of a later event (say, B’s death). See generally Restatement (Third) of Property §24.3 (2010) (describing property interests that are defeasible); id., §25.3, and Comment a (describingcontingent future interests subject to divestment).
We see nothing in this circumstance that makes the reimbursement award to Sandra any the less an award of the portion of military retirement pay that John waived in order to obtain disability benefits. And that is the portionthat Congress omitted from the Act’s definition of “dispos-able retired pay,” namely, the portion that federal law prohibits state courts from awarding to a divorced veter-an’s former spouse. Mansell, supra, at 589. That the Arizona courts referred to Sandra’s interest in the waiv-able portion as having “vested” does not help. State courts cannot “vest” that which (under governing federal law) they lack the authority to give. Cf. 38 U. S. C. §5301(a)(1) (providing that disability benefits are gener- ally nonassignable). Accordingly, while the divorce decree might be said to “vest” Sandra with an immediate right tohalf of John’s military retirement pay, that interest is, at most, contingent, depending for its amount on a subse-quent condition: John’s possible waiver of that pay.
Neither can the State avoid Mansell by describing thefamily court order as an order requiring John to “reim-burse” or to “indemnify” Sandra, rather than an order thatdivides property. The difference is semantic and nothing more. The principal reason the state courts have given forordering reimbursement or indemnification is that they wish to restore the amount previously awarded as com-munity property, i.e., to restore that portion of retirementpay lost due to the postdivorce waiver. And we note that
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here, the amount of indemnification mirrors the waived retirement pay, dollar for dollar. Regardless of their form, such reimbursement and indemnification orders displacethe federal rule and stand as an obstacle to the accom-plishment and execution of the purposes and objectives of Congress. All such orders are thus pre-empted.
The basic reasons McCarty gave for believing that Con-gress intended to exempt military retirement pay fromstate community property laws apply a fortiori to disabil-ity pay. See 453 U. S., at 232–235 (describing the federal interests in attracting and retaining military personnel). And those reasons apply with equal force to a veteran’spostdivorce waiver to receive disability benefits to which he or she has become entitled.
We recognize, as we recognized in Mansell, the hardship that congressional pre-emption can sometimes work ondivorcing spouses. See 490 U. S., at 594. But we note that a family court, when it first determines the value of a family’s assets, remains free to take account of the contin-gency that some military retirement pay might be waived,or, as the petitioner himself recognizes, take account of reductions in value when it calculates or recalculates the need for spousal support. See Rose v. Rose, 481 U. S. 619, 630–634, and n. 6 (1987); 10 U. S. C. §1408(e)(6).
We need not and do not decide these matters, for here the state courts made clear that the original divorce de-cree divided the whole of John’s military retirement pay, and their decisions rested entirely upon the need to re-store Sandra’s lost portion. Consequently, the determina-tion of the Supreme Court of Arizona must be reversed. See Mansell, supra, at 594.
III The judgment of the Supreme Court of Arizona is re-
versed, and the case is remanded for further proceedingsnot inconsistent with this opinion.
It is so ordered.
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JUSTICE GORSUCH took no part in the consideration or decision of this case.
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Opinion of THOMAS, J.
SUPREME COURT OF THE UNITED STATES
No. 15–1031
JOHN HOWELL, PETITIONER v. SANDRA HOWELL
ON WRIT OF CERTIORARI TO THE SUPREME COURT OF ARIZONA
[May 15, 2017]
JUSTICE THOMAS, concurring in part and concurring in the judgment.
I join all of the opinion of the Court except its briefdiscussion of “purposes and objectives” pre-emption. Ante, at 8. As I have previously explained, “[t]hat framework isan illegitimate basis for finding the pre-emption of statelaw.” Hillman v. Maretta, 569 U. S. ___, ___ (2013) (THOMAS, J., concurring in judgment) (slip op., at 1); seealso Wyeth v. Levine, 555 U. S. 555, 583 (2009) (same). In any event, that framework is not necessary to support theCourt’s judgment in this case.
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