§ 12.03 Military Longevity and Disability Retirement
| Jurisdiction | United States |
| Publication year | 2021 |
§ 12.03 Military Longevity and Disability Retirement
[1]—Longevity Retirement
[a]—Generally
Before June 1981, in most states military longevity retirement benefits were treated at divorce in the same manner as any other type of longevity retirement benefit.142 Most states have decided that retirement benefits earned during marriage generally are divisible at divorce, even if the benefits are unvested and payable after divorce, because they are deferred compensation for work performed during marriage.143
The Supreme Court concluded in McCarty v. McCarty144 that military longevity retirement benefits could not be divided at divorce. The issue was analyzed in a manner quite similar to Hisquierdo v. Hisquierdo,145 a preemption case decided two years earlier.146 The court noted that the spendthrift clause for military retirement permitted attachment only for the collection of "alimony"; property division was not mentioned. Further, the statute permitted the employee spouse to elect a survivor annuity for a spouse or child.147
Military retirement was seen as both an inducement to enter the armed service, and an inducement to retire. If it would be considered divisible, both federal goals would be undermined.148
Military retirement pay therefore was not divisible at divorce.149 McCarty was not given retroactive effect; decrees that divided military retirement benefits were not affected, if the decree became final before McCarty.150 If the decree was not final when McCarty was decided, however, McCarty governed.151
Congress passed the Uniformed Services Former Spouses' Protection Act ("USFSPA")152 in September 1982, approximately one year after McCarty was announced. USFSPA clarifies that the division of military non-disability retirement is not forbidden by federal law.153 The effective date of USFSPA was February 1, 1983, but is applicable to all pay periods after June 1981.154 Constitutional challenges to USFSPA have not been successful.155
USFSPA generally provides that a court may treat the employee-spouse's "disposable retired . . . pay payable . . . after June 25, 1981, either as property solely of the [employee] or as property of the [employee] and his spouse in accordance with the law of the jurisdiction. . . ."156 Since most states treat retirement pay as marital property, after enactment of USFSPA, most divorce courts have divided military retirement in cases that had not become final before the change in the law.157
The Act also provides that a court may order up to 50% of the disposable retired pay to be paid directly to the non-employee spouse from the U.S. government, if the spouses were married at least ten years while the employee was in the military.158 It was initially somewhat unclear whether pension rights were divisible if the parties were not married for at least ten years while the military spouse was on active duty. Also, some concluded that a court cannot award the non-employee spouse more than 50% of the employee's disposable retired pay.159 Most courts have held that military retirement can be divided even if the ten-year requirement is not satisfied160 ; some concluded that more than 50% of the disposable retired pay may be awarded to the non-employee.161 Amendments to the USFSPA in 1990 state that "The total amount of the disposable retired pay of a member payable under all court orders . . . may not exceed 50% of . . . disposable retired pay."162 The Alabama Supreme Court concluded that this meant that the maximum the military may pay directly to the non-military spouse is 50%; a divorce court may grant the non-employee more than 50% if it is not paid directly by the military.163 A Missouri case held that the maximum that could be awarded to the non-military spouse was 50% of the disposable pay.164 A majority of courts appear to agree that if a divorce court awards the non-military spouse more than 50% of the disposable pay, this is automatic reversible error on appeal.165 If an order awards more than 50% to the non-employee and the order is not appealed, an Alaska court has concluded that the amount should be reduced to 50%.166 A South Carolina court has disagreed.167 If the non-employee is to receive a portion of the retirement as alimony, not property division, the armed services will pay the amount directly to the spouse, regardless of whether the parties were married for ten years.
Courts disagreed as to whether the employee spouse's gross retirement pay is divisible, or only the "disposable" pay.168 The issue was clarified by the Supreme Court in a case in which it analyzed the general framework of the USFSPA.169 The Court concluded that the USFSPA was not intended to totally reverse its McCarty decision. The Court held that, due to the technical and detailed definition of "disposable retired pay," Congress intended to establish an exemption to the general McCarty preemption rule. Based on this analysis, divorce courts may only divide "disposable" retirement benefits, not gross benefits.170 Still, a number of questions remain. Does this decision affect previous final judgments of the lower courts which divided gross pay?171 In addition, does it matter whether the right to benefits was decided by a court or agreed to by the parties?172 The 1990 amendments to USFSPA eliminated tax withholding as an appropriate deduction when computing disposable retired pay.173 Premiums for survivor benefits, however, are listed as appropriate deductions.174
Courts also have disagreed regarding the earliest payment date that benefits may be divided under USFSPA. One case divided benefits payable after February 1, 1983, the effective date of USFSPA.175 Other courts have divided benefits payable after June 26, 1981,176 the date McCarty was announced, or even benefits received before that.177 A Maryland court concluded that benefits earned from service before June 26, 1981 were divisible if payable later.178
A Virginia court considered the more basic general issue of when a divorce court should begin to divide benefits. In this case, the husband began receiving benefits after the parties separated, but more than a year before the wife filed for divorce. The divorce court awarded the wife a share of each payment beginning from the date the husband began receiving benefits. The appellate court properly reversed this award. The benefit received after separation but before filing may well be marital property; however, only marital property still in existence at the time the divorce action is filed is divisible. Unless the husband was guilty of dissipation179 he should not have to account for retirement benefits received before the divorce was filed.180
If a pre-McCarty decree was silent regarding the spouse's military retirement, it was argued that it should be possible, post-USFSPA, to divide the benefits. Some courts concluded that the decision would depend on what occurs in the state when marital property is not divided at divorce.181 It would also depend on whether the benefits were considered divisible property at the time the decree was entered.182 In community property states, if the community property is not divided in a divorce, the spouses hold the property after the divorce as tenants in common, and one spouse can later bring an action to partition this undivided property.183 If the pre-McCarty decree was silent regarding the benefits, the question was whether the pension benefits would be considered undivided community property if a partition action was filed after the effective date of the USFSPA. Before 1990, a few community property courts in this situation permitted partition when military retirement was considered divisible property under the state's law at the time of divorce.184 An Ohio court emphasized that the pre-McCarty decree could not be reopened because the pension benefits were divided in the separation agreement.185 Other courts concluded that McCarty cuts off any such claim.186 A 1990 amendment to the USFSPA provided that if the decree did not treat the retirement benefit as marital property or reserve jurisdiction to address retirement pay, a court may not divide military retirement based on a decree that was "issued" before June 25, 1981, the date McCarty was decided.187 The statute apparently bars a post-divorce partition action based on a pre-McCarty decree that does not mention retirement pay.188 The statute further provides that two years after the effective date of the amendment, a military spouse will no longer have to comply with such a post-divorce partition judgment (i.e., one pertaining to a pre-McCarty decree) entered before 1990.189
A California case discusses in great detail a number of issues that can arise in connection with pre-McCarty decrees that did not address a spouse's military retirement benefits.190 In that case, the parties divorced in 1978 and the decree did not mention the military member's benefits. The military member had retired in 1975. In 1990, the non-military spouse petitioned the court to reopen the matter and divide the community share of the military retired pay. The appellate court concluded that, after November 1990, California divorce courts do not have the power to reopen pre-McCarty silent decrees as to benefits payable after November 1990. However, it held that California courts could reopen silent decrees as to retirement benefits paid before that date.191 Accordingly, the appellate court affirmed the trial court's order that the employee owed the non-employee $83,038 of past retirement benefits received; this obligation was to be satisfied in installments extending beyond 1992. The California court concluded that the 1992 cut-off date contained in the 1990 amendments did not apply to an order relating to benefits received before the cut-off date.
After the 1990 amendment, it becomes important whether the decree rendered before McCarty "treats" the retirement pay as marital property. A Texas court concluded that this had...
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