Explonng the Labyrinth: Current Issues Under the Uniformed Services Former Spouses' Protecnon Act

• Author: Lieutenant Colonel Jeffrey S Guilford
• Pages: 03

'Judge kdvocate General 9 Corps Currenil) mimed a~ Chief Counrel, Rock) \loun

rain lraenal Denwr Calorada B k , California Late College at Las Angeles 1069: J D LayolaLav School. Los Angelei. 1977 LL \I Uniienifyof Yir~niaLau School IWfi~~.~

'363 L s 210 (1961)'Pub. L ho 97-262, 96 Stat 730 (19821 (codlfled a3 amended ~n 1Calteled secflonr "1 I O I SC1

!$a. 311 .\rm ph\

1nr l'-e.~Ii. -I >jr bramic

!i

H

MILITARY L.4W REX IEW [Val 132

ty percent of the retired pay benefirs Colonel McCarty had accrued as of the dirorce

Colonel \lcCany successfully sought Cnited States Supreme Courr reriell of the California ruling. iaising tno arguments First he asserted that mihtar) retired pa! cannot hr divided as marital praperty because It IS not rrulk- "retired pay ' in the civilian sense of the ward Colonel IIcCarty cited federal precedent establishing that military 'retired pa) ' actually E reduced mrrent pa) for continued serv-lce in the armed forces at a reduced level 4

This conclusion about the nature of military retired pa) could defear a spouses claim to a share of the asset If ~t IS cummt pa). then It is income the retiree earns from month tolaws of most states. therefore it uould not constien! subject to dirision The spouse aould have no more of an ~n~ term m this mane) than he or she would have in amre due) pa5 receked after rhe divorce or m the income a mhtaq retiree might earn from a job acquired after the divorce

\\-hat LS the basis forrhii 'current p q " theory'k the Court nored militar) retirement benefits do not constitute an asset That 1s earned during employment with payment deferred until retreincnt (the par-tern for civilian pensions). Instead. militan retiree5 continue to sene in a reduced capacit) b) bemg on the retired list subject to recall If their country needs them In return for this reduced sen ice.* the! receive reduced month11 pa)-mditary retired pa)

A number of rules concrmmg military retired pa) add weighr to the current pa1 argument For example. resignation lepresentc the only way to avoid being subject to mvaluntary recall to actir? dur! and such a resignation also terminates the military renred pay benefit Thus. military retired pay can he likened to a reminer riiat IS earned on a month-by-month basis

Retirees mho are recalled to actne dut) receive full pa) and

19911 FORMER SPOUSES' PRmECTIOK 4CT

allo\rmces, but not retired pay pius iull pay. Compare this to ciriiian employees h ho are asked to return to work by former employers for limited periods of time. These people typically receive pay for their current SBIYLCBS in addition to their pension

Two additional aspects of military retired pa) support Colonel McCarty's position hlilitaq pensions do not "vest" in the usual sense of the term They are not assignable. they never have aw cash value, and Congress can reduce the amount of retired pay (dawn LO zero) any time 11 chooses A change could be prospective only (affecting those who newly enlist) or partially prospective (affectmg new en-listees and those who currently sene). or it could be retroactive, reducing or terminating retired pay for those who already have served and retired.

hlilitary retirement benefits also can be reduced, or even terminated, as a result of a postretirement court-martial ~omietion This possibility suggests that current honorable service-not past performance-1s the foundation for retired pay hloreouer, the rery fact that military re~irees continue to be subject to the Uniform Code of Mihtar? JusticeX further bolsters the conclusion that military retired pay truly IS compensation for current sen ice. It also demanstrates that retirees retain significant military commitments even during periods when they are not called to acti\e duty.

Despite acknowledging the merits oi the current pay argument. the Court did not rest its holding on this rationale. Retirees and retiree groups continue to raise the issue, however, when arguing about the divisibility of military retired pay. Their position essen-tiall?. relies on state law rather than federal law because state iaw defines what constitutes marital property

However appealing the retirees' argument seems from a technical standpaint. no appellate decision has agreed not to divide military retired pay because of the "current pay'' rationale Courts seem to have focused more an the sirnilanties between military and chilian pensions than on the technicalities of administration for military retired pay

The second prong of Colonel McCarty's attack on division of milltav retired pay rested on the concept of preemption He asserted that military retirement benefits constitute an integral part of Con-gress's program to raise and maintain armies Together with other benefits and personnel management pohc~es. the prospect of milirary retired pay helps recruit members into the armed forces it helps induce members to remain m service, and it serves to encourage them to ieave active 01 reserve duty at the end of their career rhus allow ing an orderly progression through the ranks and the maintenance of a vigorous fighting force

Colonel >Warty argued that allowing States to take away a portion of retired pa3 could frustrate Congress's purpose in establishing this management tool The Court agreed In a six-to-three decision. It ruled that states are preempted from diriding military retirement benefits (the three dissenters argued that the tests for preempmn had not been met m this case). The majority concluded by noting that this ruling could adversely affect former military spouses and It invited Congress to change the result in the interests of fairness

Conaess responded to this call with amazing alacrity It conducted hearings. prepared reports and then enacted the Uniformed Semses Former Spouses' Protection Act, all m about fifteen months. Some might ray Congress acted a little too quickly Portions of the Act do not account fuiij far the complexities of military retired pay, and the resultmg latent ambiguities have spawned countless disputes We turn now to some of these disputes

11. THE DISPOSABLE RETIRED PAY ISSUE A. TAX WITHHOLDINGS

The key portion of the Act. the part that oierrulesJlcCnrty, pro^

vides that "a court may treat disyosable retired pay either as property solely of the member or as property of the member and his spouse in accordance wth the law of thejurisdiction of such c~ult.''~ The Act defines "disposable retired pay" as gross nondrsabillty"' retired pay minus certain deductions, including deductions for

19911 FORMER SPOUSES PRUTECCIOh ACC

various types of debt owed to the federal government; federal, state and local income tax withhaidmgs; federal employment taxes, life insurance; survivor benefit plan premiums in some cases, statu!ory offsets required by the retiree's Rceipt of federal civil service employment benefits; and statutory offsets required by the retme's receipt of disability benefits from the Department of Veterans' Affam!'

This formulation has caused endless problems. State marital property laws generally call for the divmm of gross retired pay, not an adlusted Moreover. the definition of disposable retired pay has not integrated well with the tax treatment of military retired pay As a result, the spouse often has received less than state law seems to call forL3

States responded to these problems largely by Ignoring the Act's plain language. The majoritv of jurisdictions that considered the matter ruled that they had authirity to award a former spouse a share of grass retired pay?4 The Supreme Court brought a halt to this practice, however, in Mansell c. .Mansell.LS

!vIILIWRY LAW REVIEW [VOl 152

Although the .Wansell case dealt with a disabiht) pa) question, the Supreme Court had to decide whether the term "disposable retired pay" had to be interpreted in strict conformity with the statutory formulation Despite arguments about fairness that echoed the ra-rionaler far tgnaring tax deductions in dividing retired pay. the Couri held that state courts can divide only ahat Congress emponered rhem LO divide- disposable retired payx6

Perhaps in reaction to ISSUBS highlighted by .Wonseil. Cangres recentl!, alleriat?d the tax aspect of the disposable retired pay pro blem" It accomplished this b! eliminating tax withholdings as one of the deductions m calculating dispoiable retired pay'l

2. DISABLED MILITARY RETIREES

   Disability pa) constitutes one of the more troublesome complex itiei in dmdmg military retired pay. Disabled military retirees can supplement or supplant militarb retired pay through benefits under either (01 both) of rho disabilit> benefit bystemb

   I Milltnry Disability R*firrd Pav

   The military disability retired pay bystem'@ applies to members aho

   The amount of disability retired pay IS based on two formulas /'' To bee han this noiks. consider a member with bixteen bears of her\ice, an active duty base pay of $2000 per month. and a thin) per-cent disability (thin? percent 1s the minimum he1 of disability rhat qualifies a member far disability retirement) Undei the fint formula. the member receives a pension based on his or her !ears of service

   ..

   19911 FORMER SPOUSES' PROTECTION ACT

   This is calculated by multiplying 2 5% times the member's yeam Of service times base pay In this case, it comes to 2.5% times sixteen years times $2000. or $800. Under the second formula, the member receives an amount based on the degree af disability. This 1s calculated by multiplying the percentage of disability times the member's base pay. In this case. it is thirty percent times 62000 or $600.

   The disabled member receives the higher amount from these farmuias.zl In the example. he or she would receive 5800 per month in military disability retired pay. The member's length of service clearly was a factor in arriving at this amount, but all of it E paid as a disability pension

   The mihtary disability retired pay system has serious consequences for a former spouse As the Act fint was formulated, all...