Chapter 36 - § 36.2 • THE UNIFORMED SERVICES FORMER SPOUSES PROTECTION ACT — BACKGROUND

• Jurisdiction: Colorado

§ 36.2 • THE UNIFORMED SERVICES FORMER SPOUSES PROTECTION ACT — BACKGROUND

In the 1981 case of McCarty v. McCarty, 453 U.S. 210 (1981), the U.S. Supreme Court held that federal statutes then governing military retirement pay prevented state courts from treating military retirement pay as community property. (This is federal preemption, based on the U.S. Constitution.) In direct response to McCarty, Congress enacted the USFSPA, which authorized state courts to treat "disposable retired or retainer pay" as community property. See Mansell v. Mansell, 490 U.S. 581 (1989). The federal statutes expressly defined "disposable retired or retainer pay" and required any amounts waived in order to receive disability benefits to be excluded from "disposable retired or retainer pay." Id. at 584-85.

In 1989, in Mansell, the Court addressed whether state courts, consistent with the USFSPA, could treat military retirement pay waived by the retiree in order to receive veterans' disability benefits as property divisible upon divorce. Although noting that domestic relations cases are preeminently matters of state law, the Court stated that the case presented one of those rare instances where Congress had directly and specifically legislated in the area of domestic relations. Id. at 587. The Court further noted that Congress enacted the USFSPA to change the legal landscape created by the McCarty decision. The Court asserted,

Because pre-existing federal law, as construed by [the] Court, completely pre-empted the application of state community property law to military retirement pay, Congress could overcome the McCarty decision only by enacting an affirmative grant of authority giving the States the power to treat military retirement pay as community property.

Id. at 589.

Although the Court noted that the USFSPA affirmatively granted state courts the power to divide military retirement pay, the Court asserted that the language of the Act "is both precise and limited." Id. "It provides that 'a court may treat disposable retired or retainer pay . . . either as property solely of the member or as property of the member and his spouse in accordance with the laws of the jurisdiction of such court.'" Id. 588-89. The USFSPA's definitional section, however, "specifically defines the term 'disposable retired or retainer pay' to exclude, inter alia, military retirement pay waived in order to receive veterans' disability payments. . . . Thus, under the Act's plain and precise language, state courts have been granted the authority to treat disposable retired pay as community property; they have not been granted the authority to treat total retired pay as community property." Id. at 589.

After reviewing the legislative history, the Court concluded that "Congress intended both to create new benefits for former spouses and to place limits on state courts designed to protect military retirees." Id. at 594. With regard to the effect its reading of the statute might have on the former spouse, the Court asserted:

We realize that reading the statute literally may inflict economic harm on many former spouses. But we decline to misread the statute in order to reach a sympathetic result when such a reading requires us to do violence to the plain language of the statute and to ignore much of the legislative history. Congress chose the language that requires us to decide as we do, and Congress is free to change it.

Id. Accordingly, the Court held that the USFSPA "does not grant state courts the power to treat as property divisible upon divorce military retirement pay that has been waived to receive veterans' disability benefits." Id. at 594-95.

What Does the USFSPA Authorize?

The USFSPA has five important provisions:

1) It enables state courts to treat disposable military retired pay as divisible property in divorce cases.¹
2) It allows direct payments by the uniformed services (Army, Navy, Marine Corps, Air Force, and Coast Guard) of up to 50 percent of a member's or former member's disposable retired pay to the former spouse if the settlement involved follows the USFSPA.
3) It allows for the enforcement of alimony and child support (in conjunction with previously enacted provisions of law providing for such enforcement regarding military personnel in 42 U.S.C. § 659).
4) It allows a military member or retired member to voluntarily designate a former spouse as a beneficiary under the military Survivor Benefit Plan (see § 36.7). This provision was later modified by Congress to allow state courts, under certain conditions, to order a member or retiree to provide military SBP benefits to a former spouse.
5) It defines which former spouses are eligible to secure access to military-sponsored medical care benefits (e.g., care at uniformed service facilities), as well as commissary and exchange privileges.

§ 36.2.1—Monumental Sea Change to Division of Military Retired Pay in Divorce: Now Divided by New Federal Formula

Redefining "Disposable Military Retired Pay": The NDAA 2017

As mentioned in the Author's Note, the National Defense Authorization Act for fiscal year 2017 (NDAA 2017) has made fundamental changes to the USFSPA (see § 36.2), stripping state courts of their authority to apply state domestic relations law when dividing military retired pay, and applying a new national formula. See NDAA 2017, § 641 (Senate version). State courts must now apply federal law to the division of military retired pay, and, of course, federal law preempts under the Supremacy Clause of the U.S. Constitution.²

However, the mere fact of the statutory changes has created a ripple effect in divorce cases. For instance, will Colorado continue to apply the Hunt time rule formula (see § 36.4.4) to all other retirement plan distributions, absent legislation to the contrary? How the courts will manage this mismatch remains to be seen. Colorado and most other states have, since 1995, used the Hunt/Gallo formula (see § 36.4). After passage of the NDAA 2017, any decrees of dissolution of marriage entered thereafter must apply the federally mandated division of military retired pay (rather than the Hunt/Gallo formula). NDAA 2017, Title VI, Subtitle C, § 625. Under the statute, state courts will be required to award (freeze) payments to ex-spouses of service members based on rank and years of service at divorce, rather than rank and years of service at the time of retirement. See Veterans Information Service, What Every Veteran Should Know (2017), available for purchase at www.vetsinfoservice.com/products.

The NDAA 2017 only affects members who are still in service. "The law change does not affect cases where the member has already retired. Those cases will be treated the same as they are currently, since the member's rank and time in service will have already been fixed by retirement." Email from Marshal Willick, QDRO MASTERS at Willick Law Firm, "Military Retirement Pension Division Law a Quick Primer on Recent Changes to Federal Law" (dated Jan. 20, 2017).

The New Standard

Congress has now limited state courts' authority to divide disposable military retired pay as a division of property in divorce cases and has amended, redefined, and limited former spouses' interest in military retired pay. The new statute reads as follows:

SEC. 641. USE OF MEMBER'S CURRENT PAY GRADE AND YEARS OF SERVICE AND RETIRED PAY COST-OF-LIVING ADJUSTMENTS, RATHER THAN FINAL RETIREMENT PAY GRADE AND YEARS OF SERVICE, IN A DIVISION OF PROPERTY INVOLVING DISPOSABLE RETIRED PAY.

(a) IN GENERAL, — Section 1408(a) (4) of title 10, United States Code, is amended —
(1) by redesignating subparagraphs (A), (B), (C), (D) as clauses (i), (ii), (iii), (iv), respectively;

(2) by inserting ''(A)'' after ''(4)'';

(3) in subparagraph (A), as designated by paragraph (2), by inserting ''(as determined pursuant to subparagraph (B)'' after ''member is entitled''; and

(4) by adding at the end the following new subparagraph:

''(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.''

(b) APPLICATION OF AMENDMENTS. — The amendments made by subsection (a) shall apply with respect to any division of property as part of a final decree of divorce, dissolution, annulment, or legal separation involving a member of the Armed Forces to which section 1408 of title 10, United States Code, applies that becomes final after the date of the enactment of this Act.

The statute amends the Uniformed Services Former Spouses Protection Act as follows:

10 U.S. Code 1408(a) (4) as revised by the NDAA 2017:

(4) (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 -

(A) (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;

(B) (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;

(C) (iii) in the case of a member entitled to retired pay under chapter 61 of this title, 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

(D)(iv) are deducted because of an election

...