Dividing Military Retirement Pay and Disability Pay: A More Equitable Approach

• Author: Captain Mark E, Henderson
• Pages: 03

There has been a dramatic change during the past twenty years in the treatment of military retirement pay as property that is divisible pursuant to a divorce.' In some ways, these changes parallel the changes taking place in other pensions Military retirement pay, however, is different than ocher pen. sions because it is a creation of the federal government AS a result, the developments leading to the divisibility of military retirement pay have followed a somewhat different course than other civilian pensions

In 1981, the Supreme Court held in .!kcarty v. .McCarty2 that the federal preemption doctrine prohibited the states from dividing military retirement pay. The inequity that this decision caused to former spouses of service members led Con. gress to enact the Uniformed Services Former Spouses' Protection Act (USFSPA).?

Although the LSFSPA returned the ability to divide military retirement pay to the states, it also contained certain limitations restricting the states' ability to divide military retirement pay. These limitations were the result of concern over national defense requirements and being equitable to service members.i Several of these limitations caused some contro- 'Judge ldiocate Generals Carp Lnlfed States Arms Currenrli, aiiigned 8s Sa- nlor Defense Counsel XVIII AIrbarne Carpo. Fom Brag%, Sorfh Carolina Farmerli anxned as Trial Counsel 3d Armored D!w110n Buabach Germans 1888-1890. Chief Legal Arrlsmnc~ 36 Armored Divlalon, Frankfurt German) 1886-1888, Funded Legal Education Program 18S3-1986 E S isginla Polgrechnaal In~nfure 1881 J D Unnerilti of Georgia 1886, LL\I The Judge Idweate Geoerars Sehaol 1881 This aifl~le

IS based upon a thesis diiioitmon that the anrho? submitted 10Iuifi lo Parr, the denree ro~uiremenfi of the 39th Judle .Adrocate Officer Graduate

and resulted in litigation .4lthough some of the controYersy and confusion generated by these limitations already has been resolved either by litigation or by legislation, two major areas of controversy remain.

The first mqor area of controversy concerns what method of diwdmg retirement pay should be applied to military retirement pay Using one approach, the court would determine the value of the pension at the time of divorce and award each of the parties one-half. Unfortunately, this is far more complex than It sounds. Using another approach, the court could retain juri5dictlon of the matter and divide the pension between the parties as it 1s received by the service member While this approach soires some of the problems of the first approach, it also has disadvantages.

The second area of controversy IS what portion of military retirement pay the former spouse should receive and when should he or she begin receiving it. One issue is whether the former spouse should share in postdivorce adjustments. such as cost of living increases and promotions that occur after the divorce The major issue involved in when the former spouse should begin receiving retired pay is whether the service member should begin paying nhiie he or she is stili serving on active duty.

Another maor area of controversy concerning military benefits is whether military disability pay should be subject to division by the state courts The United States Supreme Court held in Jlansell L.. Mansellj that neither military disability pay, nor the retired pay waived to receive disability pay. can be SubJeCt to division

This article examines ail three of these maior areas of con-

I1 History of Dividing Military Retirement Pay

1. Dzeiding Military Retirement Pay Pnor to L'SFSPA.

   Pnar to the SuDreme Court Decision in McCartv D. .McCartu.E

   found that military retirement pay was nor subject to division because it was not marital property.' Like other pensions, che most frequently used rationale consisted of either the impossibility of establishing a present value for the pension or the speculative nature of the pension

   Subsequently, courts began to recognize chat vested military retirement plans should be considered marital property and, as such, should be subject to division upon divorce.R While recognizing the divisibility of vested military pensions, courts initially refused to consider unvested pensions as marital property subject to dwision.1° Subsequently, courts began to consider military pensions marital property subject to division whether or not they were vested.''

   Thus, prior to 1981, some states were dividing military retirement pay the same way they divided other pensions. Because military pensions are a creation of Che federal government, however, some staces concluded chat federal preemption precluded them from considering military retirement pensions as marital property.1i The result was that these states treated military retirement pay differently from civilian pensions because they believed they were compelled to do so l3

   -in m Marriage of Ellis 36 Calo .APD 234, 538 P2d 1347 (1876)n Hiscox, Hiscox I78 Ind .App 378 386 h E 2d 1166. (19791 Paulron ! Paulran 269 Ark 523. 601 S il 2d 873 (1980)

   'in re \Larria%e of Firhian, 10 Cal 3d 592. 517 P2d 448. 111 Cal Rplr 369. CBI~denid 416 US 825 (1974) Ramaeg Y Ramaep. 96 Idaho 672, 535 P2d 63 (1676); Kruger 5 Kruger. 138 h J Super 413, 364 A 2d 340 (1076). modlhrd on wpral. 73h J 454 375 A 26 519 (1977j, LeClerr 7, LeClerf. 80 S hl 235, 453 P2d 756 11859). Mora Y Mara 429 S W 2d 660 (lex Clr ADD 1865)

   "Durham % Durham. 280 Ark 3 708 S W2d 618 (I686j, Wllion I. Wilson 408 h E 26 1169 (ind Cr .4pp 1680). Rafelrff r Rarcllff. 5SS S K2d 292 (KY Cr AID 1979). Botd \ Bo>d 118 Mkh .App 774, 323 NW2d 663 (1882). Copeland Y Cope. land. 91 X kl 409, 575 P2d 89 11978) (although pension involved *ab vested, courtstaled I" dicta that UnveLed penalon cannot be sald to ~~nitlfutea ~ m ~ e r r p right

   because the benefits rest YWO the rhlm of the employer')am$. 741 P2d 849 (hlaika 1687), Van Loan v Van Loan. 556 PZd 214 n le Marriage af Brown, I 5 Cal 36 838. 644 P2d 661, 126 Cal Rpri

   Il67Sj

   On June 26. 1981, the Supreme Court of the United States decided the landmark case of McCarty P McCarty" and held that dirision of military retirement pay was foreclosed under rhe preemption doctrine.16 The court a150 made clear that state courts could not make offsetting awards of other community property to compensate the former spouse for his or her interest in the military retirement benefits.lo

   McCarfy was a decisive point in the development of the divisibility of military retirement pay. McCarly caused states already dividing military retiremenr pay to overrule prior case law and stop awarding military retirement pay as property.l' Thus, states were required to treat military pensions differ. ently than other civilian pensions.

   Because McCarty represented a major change in the way some states were dividing military pensions, the issue naturally arose as to whether McCarty should be applied ret. roactively Searly erery stare that considered the issue deter. mined that McCarty should not be applied retroactively..8

   Despite the prohibition on the divisibility of retirement pay. hawever some states determined that McCarty did not pro. hibit them from considering a sewm member's military re. tirement pay in determining an apprapnate level of alimony.-8 Still. aaarding alimon3- in lieu of dividing military retirement pay as property was not a sufficient remedy to resolve the inequity of a former military spouse being deprived of a POT. tion of the serwce member's pension while a similarly situated civilian spouse was entitled to a portion of the employee spouse's pension. When military retirement pay LS dlrided as property, the former spouse receives either a lifetune annuity-if the court uses the retained jurlsdiction method-or a large lump sum cash payment-if the court uses the present cash value method In contrast, when military retirement pay IS considered in an award of alimony. the award may be subJKC to reduction or termination upon a change of circumstances related to either party's earning power or remarriage of the former spause.

2. The L'SFSPA.

   To resolve the inequity to the military spouse, Congress enacted the Uniformed Services Former Spouses' Protection Act.20 This 1982 act was intended to overrule McCarty and allow for the divisibility of military retirement pay.21 The act went even further and provides a mechanism that allows for the direct payment of military retirement pay to the former spouse under certain circumstances.z2

   Not surprisingly, this reversion of the power to divide mili. tary retirement pay to the states caused some convulsions in many states. Those states that were dividing military retirement pay prior to ,WcCarty had to decide whether the USFSPA was retroactive within their jurisdictions The USFSPA contained language which stated that a court may treat disposable retired pay for pay periods beginning after June 26, 1981, either as property solely of the member or as property of the member and his or her spouse In accordance with the law of the jurisdiction of each state C O U T ~ . ~ ~

   The legislative history of the USFSPA also suggests that Congress intended that the USFSPA would permit spouses to reenter state courts to obtain new divisions of military retirement pay.24

   Despite the clear intent of Congress, applying the USFSPA retroactively was not a simple matter. The doctrine of res judicata prohibited the relitigation of cases that became final during the nineteen-month period between the date of the Mc-Carty decision and the effective date of the USFSPA. Nonetheless, the majority of states that considered military retirement pay as divisible prior to the Supreme Court's decision in McCarty decided that the statute was to be applied retroactively and allowed numerous cases that were decided between June 26, 1981, and February 1, 1983, to be reopenedz6 To reach this result, some states relied upon state rules of procedure analogous to Federal Rule of Civil Procedure 60(b), which per-

   mits...