The Killing of Krempin
| Publication year | 2017 |
| Author | Mark E. Sullivan |
Mark E. Sullivan
Mark Sullivan is a retired Army Reserve JAG colonel. He practices family law in Raleigh, North Carolina and is the author of THE MILITARY DIVORCE HANDBOOK (Am. Bar Assn., 2nd Ed. 2011) and many internet resources on military family law issues. A Fellow of the American Academy of Matrimonial Lawyers, Mr. Sullivan has been a board-certified specialist in family law since 1989. He works with attorneys and judges nationwide as a consultant and an expert witness on military divorce issues in drafting military pension division orders. He can be reached at 919-832-8507 and at mark.sullivan@ncfamilylaw.com.
On May 15, 2017, the U.S. Supreme Court published a decision that put a major obstacle in the way of equitable, just and fair distribution of military retired pay. The decision in Howell v. Howell1 does serious damage to the proposed remedy of resulting trust set out in In re Marriage of Krempin2 It expands the Court's holding prohibiting division upon divorce of waived military retired pay under Mansell v. Mansell.3
This article details the salient facts of Howell and the legal background of the Department of Veterans Affairs (VA) offset it involves and forecasts possible alternatives to protect the interests of a former spouse (FS). It also explains, from a practical standpoint, what California family law practitioners need to know in pending cases to avoid the possibility of the nonmember spouse losing her community interest in the member spouse's military retired pay due to the retiree's election of disability compensation from the VA. Finally, the article discusses what actions may be taken by the court or the FS in older cases in which there were no built-in protections against a loss of the community interest resulting from the VA offset.
John and Sandra Howell had a long-term marriage that overlapped Mr. Howell's U.S. Air Force career. When they divorced in Arizona 1991, the court awarded Mrs. Howell half of her former husband's military retired pay. Mr. Howell retired from the Air Force in 1992 and began receiving monthly retired pay. The Defense Finance and Accounting Service (DFAS) withheld half of each month's pension payment for transfer to Ms. Howell, pursuant to the Arizona dissolution judgment and the rules for military pension division contained in the Uniformed Services Former Spouses' Protection Act (USFSPA), 10 U.S. C. § 1408.
All was well until 13 years after the parties' dissolution, when Mr. Howell obtained a VA disability rating due to a shoulder injury during his active duty. He elected to receive disability compensation, which resulted in payment of $250 a month to Mr. Howell in VA disability compensation. However, his military longevity pension was reduced dollar-for-dollar by the amount of his monthly VA disability payment. This waiver of a part of his military longevity pension resulted in a reduction of $125 per month in the payment that Ms. Howell received from DFAS.
Ms. Howell returned to court in Arizona asking for an order to reimburse her for the loss that she had suffered -a drop in her pension-share payments without her consent and without court approval. The trial court ordered Mr. Howell to indemnify her for the post-dissolution drop in pension-share payments attributable to his election of VA disability compensation.
Mr. Howell appealed. The trial court's decision was upheld through the appellate courts in Arizona. He then took his case to the U.S. Supreme Court, which reversed the indemnification decision. The Supreme Court held that the Uniformed Services Former Spouses' Protection Act4 bars state courts from requiring a military retiree to indemnify former spouses for the loss in their share of the community interest in the military retirement pension lost due to the retiree's election of VA payments.
When a military member leaves the uniformed services (Army, Navy, Air Force, Marine Corps, Coast Guard, as well as the commissioned corps of the Public Health Service and the National Oceanographic and Atmospheric Administration), either by way of a discharge at the end of a term of service or by retirement, the member undergoes a discharge physical. That physical examination - by the military service or by the local VA hospital - may turn up one or more mental or physical disabilities. These conditions may be determined to be service-connected if they were incurred or aggravated during the servicemember's term of military service. When this is so, the VA will pay the servicemember a monthly amount of tax-exempt disability compensation.
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A person who retires from the uniformed services is allowed to apply for disability compensation from the Department of Veterans Affairs. The VA will pay compensation for service-connected disabilities (wounds, illnesses or conditions). However, retirees can only receive these payments if they waive an equivalent amount of their military retired pay.5 The tax-exempt status of disability pay makes these benefits more desirable than taxed longevity retirement payments.
In 2004, Congress created a remedy for those servicemembers who had waived their retired pay for VA payments. The new law stated that those individuals who had waived retired pay will have it restored when the disability ratings is 50% or greater. CRDP, or Concurrent Retirement and Disability Pay, is found at 10 U.S.C. § 1414. CRDP means that military retirees with a VA rating of 50% or more can ignore the "waiver requirement" stated above, since their retired pay has been fully restored. The restoration with CRDP is automatic; no application by the servicemember is needed.6
Accepting VA disability compensation requires an affirmative election; the military retiree can choose or decline VA disability payments. Nothing is required, and there is no "mandatory conversion" of military retired pay into VA compensation. The waiver of $100 in taxable retired pay yields $100 in tax-free disability compensation. The difficulty, however, comes when the dissolution judgment divides the military pension. DFAS will only divide DRP ("disposable retired pay"), i.e., gross pay less VA disability compensation.7 This means that the FS who is entitled to the maximum share of the pension, 50%, will only get 50% of a reduced amount of the benefit less the "waived" amount instead of 50% of the total retired pay.
This can be illustrated with an example. If John Doe's dissolution judgment granted his ex-wife, Jane Doe, one-half of his military pension (since the parties were married for his entire military career), Jane would receive $1,000 a month for a pension that is paid at $2,000 a month without a VA waiver. However, if John elected to receive $600 (for example) in VA disability compensation, then DFAS would only divide $1,400 between the parties, with the former spouse, Jane Doe, getting $700 a month (50% X $1,400) instead of $1,000. John, of course, gets the remaining $700 a month from the pension, plus an additional $600 from the Department of Veterans Affairs, which is not taxable and thus more desirable than the same $600 in pension benefits.
The usual remedy for such a post-dissolution reduction in community property payments has been the equitable remedy of indemnification.8 Whether imposed by court order or agreed to by the parties, ordering the military retiree to pay back the FS is usually used as a remedy to make the FS whole and uphold the integrity of the initial bargain.
The Supreme Court first explored VA disability offsets and military pension division in the 1989 case of Mansell v. Mansell, a decision that arose out of California.9 In that case the Court held that, under the limitations of USFSPA, retired pay that is waived to receive VA disability compensation cannot be treated by state courts as "property divisible upon divorce."10 Such VA waivers are common, as the Court recognized, because disability compensation is tax-exempt. The Court also noted that this rule "may inflict economic harm on many former spouses,"11 but said that Congress was free to alter this result if it so desired. However, no such change as to retired pay and the VA waiver was forthcoming.
The California First District Court of Appeal examined this issue ten years afterward in a nationally recognized case, In re Marriage of Krempin.12 In that case, the husband and wife separated in 1991 after a marriage of about twenty years, and provided in their stipulated judgment that wife would receive one-fourth of husband's military pension when he retired from the Air Force. The court reserved jurisdiction to make orders relating to retirement benefits that were needed to carry out the parties' agreement.
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Mr. Krempin retired from the military in 1994. At...
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