Military Retirement

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The Professor Nedley Series

Military Pay - Part III

Retired Pay

April 1, 2007

Military Pay-Part I - outlines various allowances provided by the military in an attempt to make military compensation equivalent to that of comparable jobs and locations in the civilian world.

Military Pay – Part II - is an outline of the many separate pays provided by the military while a member is on active duty.

Military Pay - Part III - explains how the courts deal with the division and jurisdiction issues of military retired pay.

Military Pay III 1/2 - delves into the mysteries of what to do with the post judgment election of the military member to take disability payments in lieu of earned retirement.

Warning: This is written in California for California consumption. Lawyers and Judges in other states may differ in their opinion, Hell, lawyers and judges in California may differ in their opinions. So you can't really rely on any of this. The best year-to-year source to get current information on all phases of military retirement is The Retired Military Almanac found at www.militaryalmanac.com or 1-703-532-1631 for about $10 bucks. Their 2007 version is available now. There is also a book from the American Retirees Association for about $20 bucks that is more of an advocacy book, but appears helpful. www.americanretirees.org/book . The ultimate source is acknowledge with a citation at the end of this article and that is the Defense Finance And Accounting Service (DFAS). www.dod.mil/dfas.

Overview - In the Professor's biggest understatement to date, this topic was declared to be complex. In truth, this is one the most complicated areas of family law, both from the practitioner's point of view and from the bench. Before you even start there is of course, the overriding issue of what state has jurisdiction over the issue of retirement.

There is state law vs. federal law. There is retired pay vs. disability pay. There are current wives vs. former wives. There is the Gillmore (1981) 29 Cal 3d 416 election, which provides the option of taking matured benefits prior to actual retirement,

There are three different types of retired pay. They are based upon deemed entry into the service (DIEMS), (a) there is the final basic pay calculation, (b) there is the high three years calculation and (c) the REDUX formula system. (This is reminiscent of the judicial Tier I and Tier II system - Is there a Tier III to come?)

There is a survivor benefit election vs. no SBP election. There is statutory law including the overriding Uniformed Services Former Spouses Protection Act (USFSPA - often called FUSPA) (1982) (10USC1408) vs. the Servicemember Civil Relief Act of 1997 (SCRA) (HR2537), which provides procedural protections.

There is case law that governs - French Calif.(1941) 17 Cal 2d 775, which reversed a trial court that found reserve pay to be community property while service member was still in the reserves, because he had to complete 14 years of reserve to get his retired pay, the court found it to be an expectancy. Brown (is the case cited by every attorney to stand for the timeline formula, it essentially found retired pay to be CP and held that it was divisible based upon a formula calculated by dividing the total years of marriage by the total years in the service. McCarty (1981) 453 US 210 which precluded states from dividing federal military pay was nullified by FUSPA, Mansell (1989) 490 US 581 which holds that the state's authority extends only to the servicemembers "disposable retired pay". Krempin (1999) 70 CA 4th 1008, which held that once the VA delivered the disability funds the court could impose a constructive trust where the property had already been awarded as CP. Krempin is a case where the servicemember had already agreed to divide his military pay and later applied for a got a 50/50 disability allocation. The court held that it was too late to make the change, If the servicemember is already drawing disability in lieu of retirement prior to the divorce there is probably a different answer.

The Basics:

Jurisdiction: . If the jurisdictional requirement is not met, the former spouse’s application for retired pay as property payments under the USFSPA will be rejected. For a court to have the authority to divide military retired pay, the USFSPA requires that the court have jurisdiction over the military member in one of three ways.

(1) The member may consent to the jurisdiction of the court. The member indicates his or her consent to the court’s jurisdiction by taking some affirmative action with regard to the legal proceeding, such as filing any responsive pleading in the case. Simply receiving notice of filing of the divorce complaint or petition is not sufficient.

(2) Another way for the court to have jurisdiction is for the member to be a resident of the State other than because of his or her military assignment.

(3) Finally the court could find that the member was domiciled in the particular State. The key to domicile is that it should be the court making an independent determination, and it should be noted in the divorce decree.

Formula:

In California the nonmember spouse is entitled to one-half of the retired pay that was accumulated while the servicemember was in the military and the two of them were married to each other. This is the California rule for allocation. It is based on case law.

50% x ______No. of Years Married____ = Spouses Share No. of Years of Service of CP

The numerator should be expressed in terms of whole months, dfas will supply the years of creditable service.

Limits:

10/10 Rule: FUSPA limits enforcement to marriages that were 10/10 - meaning the parties were married to each other for 10 years while he/she served 10 years in the service Even the member cannot waive this requirement. But NOTE this rule is a FUSPA enforcement rule NOT a California division of property rule.

50 % Rule: SCRA limits the amount of the member’s retired pay which can be paid to a former spouse to 50% of the member’s disposable retired pay (gross retired pay less authorized deductions).

The Order:

Final Order: The order must be a final order from the State court. ie a judgment, not a temporary order. In order to submit an application for payments under the USFSPA, a former spouse needs to submit a copy of the applicable court order certified by the clerk of court within 90 days immediately preceding its service on the designated agent, along with a completed application form (DD Form 2293).

The Formula: Fixed dollar amount or percentage awards.

The amount of a former spouse’s award is entirely a matter of state law. However, in order for the award to be enforceable under the USFSPA it must be expressed in a matter consistent with USFSPA. The major reason DFAS rejects applications for payments under the USFSPA is that the language dividing retired pay is faulty. The USFSPA states that for an award to be enforceable it must be expressed in a manner consistent with the USFSPA, and the court order must provide us with all the information necessary to compute the award.

The USFSPA states that for an award to be enforceable, it must be expressed either as a fixed dollar amount or as a percentage of disposable retired pay.

If a fixed dollar amount award is used, the former spouse would not be entitled to any of the member’s retired pay cost of living adjustments (COLAs).

Because of the significant effect of COLAs over time, it is infrequent that an award is stated as a fixed dollar amount. The more common method of expressing the former spouse’s award is as a percentage of the member’s disposable retired pay. This has the benefit to the former spouse of increasing the amount of the former spouse’s award over time due to periodic retired pay COLAs.

All percentage awards are figured based on a member’s disposable retired pay, which is a member’s gross retired pay less authorized deductions.

Authorized Deductions: The authorized deductions vary based on the date of the parties’ divorce. The principal deductions now include retired pay waived to receive VA disability compensation, disability retired pay, and Survivor Benefit Plan premiums where the former spouse is elected as the beneficiary. Since the United States Supreme Court has ruled that Congress authorized the division of only disposable retired pay, not gross retired pay, the regulation provides that all percentage awards are to be construed as a percentage of disposable retired pay.

Set-offs: Set-offs against the former spouses share are not permitted. If the amount of the former spouses share is expressed as a percentage of disposable pay less some set-off amount (ie. the Survivor Benefit Premium or Court ordered child support or some other authorized debt) the entire award is unenforceable. This type of award does not meet the statutory requirement of either fixed dollar amount or a percentage.

If the award language is acceptable but another provision of the court order requires that a set-off amount be deducted from the former spouse’s share, only the set-off is unenforceable. This is because there is no provision of the USFSPA that authorizes enforcement of a set-off against the former spouse’s share. Remember the state courts have authority to divide military retired pay only as set forth by the USFSPA. Thus, state court provisions not in accordance with the USFSPA are unenforceable.

Language - Percentage of Disposable Pay While on Active Duty:

“The former spouse is awarded a percentage of the member’s disposable military retired pay, to be computed by multiplying 50% times a fraction, the numerator of which is ______ months of marriage during the member’s creditable military service, divided by the member’s total number of months of creditable military service.”

Language - Where the Member has Reserve Duty (Poimts):

“The former spouse is awarded a percentage of the member’s disposable military retired pay, to be computed by multiplying 50% times a fraction, the numerator of which is _______ reserve retirement points earned during the period of the marriage, divided by the member’s total number of reserve retirement points earned.”

Language - For Hypothetical Award (aka Gillmore Election): The following language is an example of an acceptable way to express an active duty hypothetical award. Cautionary Note - This election to take immediately when a servicemember is elgible to retire but remains on active duty is a very complex election and deprives the spouse of a share of all future COLA's that are available when the order is a percentage order at the time of actual retirement. Professor Nedley strongly recommends consulting the DFAS manual available online or seeking a specialist in military divorces or an actuary who has actual military retirement experience.

Active Duty - “The former spouse is awarded _____% of the disposable military retired pay the member would have received had the member retired with a retired pay base of ________ and with _______ years of creditable service.”

Reserve Duty - “The former spouse is awarded _____% of the disposable military retired pay the member would have received had the member become eligible to receive military retired pay with a retired pay base of _______ and with _______ reserve retirement points.”

If the court or the parties decide to adopt the hypothetical award methodology then the court order dividing an active duty member’s military retired pay must provide DFAS with: 1) the percentage awarded the former spouse, 2) the member’s rank to be used in the calculation, and 3) the years of creditable service to be used in the calculation. For reserve retirements, the court order must provide us with: 1) the percentage awarded the former spouse, 2) the member’s rank to be used, 3) the reserve retirement points to be used, and 4) years of service for basic pay purposes.

ACKNOWLEDGEMENT: Much of the information on this website comes from the Garnishment Operations Directorate, Defense Finance and Accounting Service, Cleveland Center from their booklet update 2/6/06. This website is primarily to assist judges and lawyers with a basic understanding of the military plan division in California. If you want the real scoop DFAS is the place to get it. http://www.dod.mil/dfas/militarypay/garnishment/Speech5.pdf.