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

i i • Representing Servicemembers and Their Spouses in Family Law Cases

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

Representing Servicemembers and Their Spouses in Family Law Cases • 1

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

3


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

4

2 • Representing Servicemembers and Their Spouses in Family Law Cases


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

5

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

6


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”

7

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

8


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/

9

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

10


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

11

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

12


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

13

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

14


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)

15

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

16


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

17

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

18


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

19

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

20


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

21

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

22


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

23

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

24


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

25

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?

26


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

27

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

28


“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

29

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

30


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

31

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

32


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

33

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)

34


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

35

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

36


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

37

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

38


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

39

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

40


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

41

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

42


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

43

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/

44


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.

45

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

46


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

47

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%

48


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

49

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

50


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

51

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


52


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


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


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


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

http://www.americanbar.org/

http://www.nclamp.gov/

https://www.dfas.mil/garnishment/usfspa/NDAA--17-Court-Order-Requirements.html

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

https://mypay.dfas.mil/

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

http://www.dfas.mil/

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).


• 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.


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.


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.


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

https://advance.lexis.com/search/?pdmfid=1000516&crid=2b9bbc3e-12ac-411f-b4a7-39d66bb68d34&pdsearchterms=2012+Cal.+App.+LEXIS+123&pdstartin=hlct%3A1%3A1&pdtypeofsearch=searchboxclick&pdsearchtype=SearchBox&pdqttype=and&pdpsf=&ecomp=bt-h9kk&earg=pdpsf&prid=b412b362-89cc-43a3-a4f2-5c4534c5a4fa

https://advance.lexis.com/search/?pdmfid=1000516&crid=2b9bbc3e-12ac-411f-b4a7-39d66bb68d34&pdsearchterms=2012+Cal.+App.+LEXIS+123&pdstartin=hlct%3A1%3A1&pdtypeofsearch=searchboxclick&pdsearchtype=SearchBox&pdqttype=and&pdpsf=&ecomp=bt-h9kk&earg=pdpsf&prid=b412b362-89cc-43a3-a4f2-5c4534c5a4fa

https://advance.lexis.com/search/?pdmfid=1000516&crid=d5b1298a-b419-4ab8-8508-6898f310d323&pdsearchterms=2013+Miss.+App.+LEXIS+854&pdstartin=hlct%3a1%3a1&pdtypeofsearch=searchboxclick&pdsearchtype=SearchBox&pdqttype=and&pdpsf=&ecomp=bt-h9kk&earg=pdpsf&prid=03cdd2ad-a522-47d0-94a6-cd932672eef7&srid=89b136e2-52a7-4120-a683-f65aa55d471e










https://advance.lexis.com/search/?pdmfid=1000516&crid=f9b69263-bb87-4eb0-b776-91e032980a0f&pdsearchterms=2011+Tenn.+App.+LEXIS+21&pdstartin=hlct%3A1%3A1&pdtypeofsearch=searchboxclick&pdsearchtype=SearchBox&pdqttype=and&pdpsf=&ecomp=bt-h9kk&earg=pdpsf&prid=b412b362-89cc-43a3-a4f2-5c4534c5a4fa

https://advance.lexis.com/search/?pdmfid=1000516&crid=f9b69263-bb87-4eb0-b776-91e032980a0f&pdsearchterms=2011+Tenn.+App.+LEXIS+21&pdstartin=hlct%3A1%3A1&pdtypeofsearch=searchboxclick&pdsearchtype=SearchBox&pdqttype=and&pdpsf=&ecomp=bt-h9kk&earg=pdpsf&prid=b412b362-89cc-43a3-a4f2-5c4534c5a4fa




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

mailto:[email protected]

mailto:[email protected]

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


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.


_________________

_________________

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.


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


2 HOWELL v. HOWELL


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-


3 Cite as: 581 U. S. ____ (2017)


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 “disposable 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


4 HOWELL v. HOWELL


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,


5 Cite as: 581 U. S. ____ (2017)


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.


6 HOWELL v. HOWELL


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-


7 Cite as: 581 U. S. ____ (2017)


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 generally 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


8 HOWELL v. HOWELL


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.


9 Cite as: 581 U. S. ____ (2017)


JUSTICE GORSUCH took no part in the consideration or decision of this case.


_________________

_________________

1 Cite as: 581 U. S. ____ (2017)

Opinion of THOMAS, J.


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.
