Congress Overrides State Rules for Dividing Military Retired Pay

The North Carolina Bar Association just put out this great article on rules for dividing military pay, which is equally applicable here in Colorado.  There are newe rules regarding the Frozen Benefit Rule, that they don’t teach to divorce attorneys, so make sure you hire a Colorado divorce attorney that has experience dealing with the unique issues involved in military divorces. 

 

Q: What’s the new development in division of military retired pay?

A: The National Defense Authorization Act for Fiscal Year 2017 (NDAA 17) contained a major revision of how military pension division orders are written. Instead of allowing the states to decide how to divide military retired pay and what formula or methodology to use, Congress imposed a single uniform method of pension division on all the states.

Q: What states will be affected?

A: Forty or more states require the use of the “time rule” to divide a defined benefit plan (explained below). However, as of December 23, 2016 (the date the law was enacted), all states will have to use this new method for dividing a military pension if the divorce was granted after that date and – at the time of divorce – the member was not receiving retired pay.

Q: Who will be affected?

A: The new “frozen benefit rule” in NDAA 17 doesn’t apply to everyone. Its primary impact will be on the servicemember (SM) who goes through property division while still serving in the uniformed services. That means the Army, Navy, Air Force, Marine Corps and Coast Guard, plus the commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration. It will also apply to those who are in the National Guard and Reserves and are still drilling. It has no impact on those who obtain a divorce and property division after retirement.

How the Frozen Benefit Rule Works

Q: How does the new rule work?

A: The new military pension division rule is a “rewrite” of the terms for military pension division found in the Uniformed Services Former Spouses’ Protection Act, or USFSPA.[1] This revision requires that the military retired pay to be divided will be that attributable to the rank and years of service of the military member as of the date of divorce. This is so even though the member may rise higher in rank and years of service afterwards, resulting in a larger pension to be divided, which would then be discounted by using the “marital fraction” to apply pension division to only the benefit which was acquired during the marriage. The only adjustment will be cost-of-living adjustments that occur under 10 U.S.C. § 1401a (b) between the time of the court order and the time of retirement.

Q: Can’t the parties opt out of this new approach?

A: The NDAA 17 rewrite makes no exceptions for the parties’ agreement to vary from the new federal rule. Everyone must do it one way, regardless of what the husband and wife decide they want the settlement or consent order to say.

How Hard Can This Be?

Q: If I have to enter a pension division order reflecting the Frozen Benefit Rule, how difficult will that be to prepare?

A: The “frozen benefit” division is known as a hypothetical clause at the retired pay centers.[2] It is the hardest to handle of the pension division clauses available. An attorney at one of the retired pay centers which processes military pension division orders put it this way: “… over 90% of the hypothetical orders we receive now are ambiguously written and consequently rejected. Attorneys who do not regularly practice military family law do not understand military pension division or the nature of … military retired pay. This legislative change will geometrically compound the problem.” You should expect lots of rejection letters from the retired pay centers, resulting in many motions to reconsider, amend, set aside, modify or clarify the previous order of the court.[3] Judges and attorneys may begin to rely more heavily on help from an expert who can testify as to facts in the case before the court, how the federal statutes and rules apply to them, what is needed to obtain acceptance by the retired pay center, and how the new rule works. The expert may also need to draft the order properly – if there’s enough information available to figure it out, including the member’s “High Three” annual compensation (see below).

Past Efforts, Future Promotions

Q: How did pension division work for those still serving before the Frozen Benefit Rule?

A: Aside from states which already divide only the “frozen benefit” (e.g., Florida, Texas, Oklahoma, Tennessee and Kentucky), most courts already give consideration to how the efforts of the servicemember and the spouse during the marriage should be apportioned, as well as how to deal with post-award promotions and pay increases. The time rule is based on the “marital foundation theory,” which recognizes that the individual’s final retired pay is based on a foundation of marital effort. Thus, for example, it’s clear that a servicemember would never have attained the rank at retirement of sergeant major (E-9), with 30 years of service, if it hadn’t been for the efforts expended during the marriage up to the rank of sergeant first class (E-7) over 20 years, when the parties divorced.[4] That’s one reason why a large majority of states have adopted the time rule for dividing every type of pension – it provides a fair approach to division of this asset, whether the pension is state or federal, private or public. And it accounts for the postponement of the benefit (i.e., the spouse’s inability to obtain immediate payments in most states) by allowing for the growth in the pension over time.

Q: What’s the result with the Frozen Benefit Rule?

A: The time rule approach goes out the window. The share of the former spouse (FS) is artificially fixed at a fictitious amount, based on what the servicemember would receive upon retirement at the time the order for pension division is entered. And then in most states the payments to the FS are postponed until the SM chooses to put in for retirement, so the pension share of the FS undergoes a second shrinkage.

Q: Will this new rule affect only the non-military spouse or former spouse?

A: No. Written by Congress, which has no institutional knowledge about the division of property and pensions in divorce, the new rule will result in many problems – both predictable and unforeseeable – for both parties and the courts of most states. Consider this example:

• Husband and Wife agree to divide the husband’s retired pay exactly according to the wording of the federal statute. The husband is a major with 16 years of service in the Marine Corps. Their settlement language tracks the new law by stating that the disposable retired pay to be divided by court order is that of the husband, based on his years of service and rank at the time of the court order, that is, “major over 16.”
• They write up the separation agreement or marital settlement document. Both sign it, and they have their signatures notarized.
• They do not, however get divorced immediately. Due to a deployment and an overseas assignment for Husband, filing for divorce does not take top priority for him. As for the wife, she needs to maintain medical coverage as a dependent spouse so she is not eager to pursue the dissolution either. Five years pass before one of them files. By that time the Husband is a lieutenant colonel over 20, not a “major over 16.”
• When the divorce is granted, with the settlement incorporated into it, it is submitted to the retired pay center. However, that pay center rejects it, since the rank and years of service at the time of the court order is no longer “major over 16,” but rather “lieutenant colonel over 20.” The latter is what must be divided, not the agreed terms.

Breathing Room and Time to Adjust

Q: As they say in the movies, “We’ve got a problem, Houston!” State law here requires the marital fraction to be expressed as marital service time over total service time. But that wouldn’t be fair if the benefit is stopped when the order is entered.

A: Congress did not leave a “grace period” for states revise their laws to accommodate this new rule. There is no decent interval set out to allow the majority of the states to write up, propose and enact laws consistent with the “new rule.” A warped formula will occur if the denominator of the marital fraction is not revised, and the result will be imposition of a double discount on the former spouse. Here’s how the double discount works:

• First, the benefit to be divided with the FS is frozen at the rank and years of service at the time of the court order.
• Then, since state laws have not been rewritten to revise the “marital fraction,” the fraction must still be calculated in most states based on years of marital pension service divided by total pension service years (marital service years ÷ total service years), rather than years of marital pension service years divided by service years up to the date of the order.
• Unless the denominator is stopped at the date of the court order (since the benefit is also fixed at that date), the pension benefit for the FS will be doubly diluted.[5] This means that the FS would get an ever-smaller share of a fixed retirement benefit.

The new law is effective and binding on the states immediately upon enactment (i.e., 12/23/2016). Although the method of dividing pensions, as well as the date of valuation and classification of marital or community property,[6] has always been a matter of state law, the rules of division will change in the military case.

Setting Up The Example

Q: Can you give me an illustration of how this works?

A: We’ll use in these examples a divorce case involving the former spouse, John Doe, and his ex-wife, Navy Commander Mary Doe. They are litigating in a time rule state, one which has not made any changes regarding the marital fraction used in dividing a military pension.

• To divide uniformed services retired pay under the new rule, the court must know the “High Three” figure for CDR Mary Doe at the date of divorce. High Three means the average of her highest three years of continuous compensation. That will usually be the most recent three years.
• The High Three amount will be found in Mary’s pay records. The document showing her pay is called the LES, or Leave and Earnings Statement. She can get these statements through her local base finance office, and she can also obtain from DFAS (the Defense Finance and Accounting Service) a pay transcript, which is a summary of the last three years of base pay. She can even get some of her pay information on-line.
• Mary’s attorney will probably place the numbers for these 36 months of base pay on a spreadsheet, and Mary will authenticate the LES’s in her trial testimony.
• The spreadsheet should be offered to the court as a summary of the written records which Mary verified, and Mary will testify that the spreadsheet is an accurate transcription of her pay records.
• If the records were obtained from the pay center (DFAS in this case), then Mary may need to obtain a business records custodian declaration.[7]

Once the evidence has been admitted, the court can direct the preparation of a court order for dividing the pension, often called a military pension division order, or MPDO, unless all the necessary language is placed in the divorce decree or incorporated settlement.[8] If the order provides the necessary information for a hypothetical award, and the retired pay center (once the order is received) can verify this, then Mary’s pension division will be locked in at the specified years, rank and High Three amount.

If John’s attorney needs to get the records, he might obtain them from Mary through discovery. Otherwise, it will require a written consent signed by Mary (for transmission to the retired pay center) if she won’t produce the data on her own, or a court order or a judge-signed subpoena sent to DFAS if she is obstinate or unresponsive. It can take weeks or months to obtain this information from the source.[9]

Fairness for the Former Spouse

Q: In our court we get lots of cases where the non-military spouse has a retirement plan as well. It doesn’t seem fair or equitable to divide the servicemember’s pension using a frozen benefit at divorce, and yet divide the spouse’s actual pension at the time of “pay status” (that is, retirement). It’s also contrary to the law in this state. Is there a way to restore the balance so that I can be fair to both parties?

A: Many judges will be searching for how to “restore the equilibrium” in pension division. They will want to find a way to award the non-military spouse, John Doe, what he would have received before the new rule was passed, a division of Mary’s retired pay as of when she retires.

Q. Is there a single “silver bullet” that will solve the problem?

A. No – there are several possible strategies. Note that these are not labelled “One Size Fits All.” While some states may prohibit or restrict a particular approach, the summary below is written to set out the entire spectrum of possible approaches to restore the balance, not to advocate one specific method for a particular case or state.

The new rules were just published at the end of June 2017 in Volume 7B, Chapter 29 of the Department of Defense Financial Management Regulation (DoDFMR).[10] It is clear that DFAS has settled on the “date of divorce” as the target for when the High Three must be fixed. Under 10 U.S.C. § 1408 (a)(2),

…”court order” means a final decree of divorce, dissolution, annulment, or legal separation issued by a court, or a court ordered, ratified, or approved property settlement incident to such a decree (including a final decree modifying the terms of a previously issued decree of divorce, dissolution, annulment, or legal separation, or a court ordered, ratified, or approved property settlement incident to such previously issued decree)….

DFAS removed everything from this sentence except “final decree of divorce, dissolution, annulment, or legal separation issued by a court” and used that to specify the High Three date. Regardless of what potential pension benefit is earned later in the servicemember’s career, it is the High Three as of the date of divorce which DFAS interprets as being “the time of the order” as specified in Section 641 of NDAA 17. For those military members who entered service on or after September 8, 1980, the following information must be provided to the retired pay center in the decree, order or incorporated settlement:

1. A fixed amount, a percentage, a formula or a hypothetical which is awarded to the FS;
2. The SM’s High Three amount at the time of divorce (i.e., the actual dollar figure); and
3. The SM’s rank and years of creditable service at divorce or, for a member of the Guard or Reserves, the creditable retirement points at divorce.

Outline of Time-Rule Strategies

Q. What if the parties are in agreement – can a consent order fix the problem?

A. When the parties are in agreement, a consent order for alimony, maintenance or spousal support is one way to obtain time-rule payments from the military pension without the limitations of the frozen benefit rule. An alimony garnishment is based on “remuneration from employment.” It is not tied to DRP, or disposable retired pay; thus the new rule and its definition of DRP do not apply to permanent alimony payments which start at retirement and function as a division of retired pay.[11]

Here are a few other pointers about the use of permanent spousal support to mimic pension division as property:

• Note that there is no “10/10 rule” for alimony payments from the retired pay center, as is the requirement when the pension is divided as property (i.e., property division payments from the retired pay center may only be made if there are at least 10 years of creditable service concurrent with at least 10 years of marriage).[12]
• Make sure that the FS payments do not end at remarriage or cohabitation (since pension-share payments would not end at either of these two events) and are not subject to modification.
• Admittedly, spousal support is usually effective immediately (not at a future date). In addition it usually consists of a fixed dollar amount, not a formula such as:

50%  X  120 months of marital pension service/total months of creditable service  X  final retired pay

There is no reason, however, why the retired pay center should refuse to accept a formula for the spousal support, rather than a specific set dollar figure.[13]

• A consent order for permanent spousal support should suffice to obtain the payments to the FS upon retirement of the SM, and the tax consequences will be the same, namely, the FS is taxed on the payments and they are excluded from the income of the payor/retiree.

Filling the Gap

Q. If there’s not enough available for the former spouse’s pension share, can the gap be filled through the use of spousal support?

A. If the court enters an order complying with pension division under the new rule but there is a shortfall, the court could include in the order an “alimony supplement,” (that is, the remaining amount being made up by alimony to be decided upon Mary Doe’s retirement) in order to get the equivalent of a time rule order.[14] John’s attorney could argue for division of the pension under the new rule, with the remaining amount made up by alimony to be decided upon Mary Doe’s retirement, in order to get the equivalent of a “time rule” order. If John is awarded alimony while Mary is still serving, the alimony should not end automatically upon Mary’s retirement; John’s attorney needs to review carefully the results of dividing Mary’s retired pay to decide whether some alimony should be continued to equalize the parties’ positions. The terms of the alimony order might make the amount adjustable depending on economic and financial factors at the time of Mary’s retirement, including any reduction of the retired pay to which John would be entitled under the time rule due to the “frozen benefit rule,” or any reduction because Mary elects VA disability compensation and that reduces John’s amount due to a “VA waiver” under 10 U.S.C. § 1408 (a)(4) and 38 U.S.C. § 5304-5305. Note that the order regarding spousal support as a “stand-in” for pension division must clearly state that the support does not end at the remarriage or cohabitation of the recipient spouse, since true pension division orders do not change upon either event.

Q. Can the court still use the standard formula and language of the time rule?

A. The revised law doesn’t say that a court may not enter a time-rule order. It merely states that the retired pay center (DFAS or the Coast Guard Pay and Personnel Center) will only honor “date-of-divorce division” for those still serving. Recognizing this limitation on payments from the pay center, the court may still enter a time-rule order, noting that at Mary’s retirement only a portion of the pension-share payment for John Doe will come from DFAS. The court’s order would provide that Mary will still be responsible for the rest and will indemnify John for any difference between the two amounts.

There is a parallel to the remedy often used in “VA waiver” cases in which the FS gets less than intended. When the retiree elects VA disability compensation, the result is often a dollar-for-dollar reduction in retired pay. The duty to indemnify is a common solution for this “VA waiver” and the former spouse’s receipt of a lower amount due to operation of the law. Why shouldn’t it work for cases in which the “operation of law” involves an amendment to USFSPA, the “frozen benefit rule”? As will be explained below, 10 U.S.C. § 1408 (e)(6), the “savings clause” in USFSPA, allows the courts to employ state enforcement remedies for any amounts which may not be payable through the retired pay center.[15]

Be sure not to use “disposable retired pay” in the order to describe what is divided. Disposable retired pay, or DRP, means the restrictive definition in the frozen benefit rule (i.e., the retired pay base at the date of divorce) less all of the other specified deductions, such as the VA waiver and moneys owed to the federal government. The best way to word a pension clause is to provide for division of total retired pay less only the SBP premium attributable to coverage of the former spouse. Regardless of the language used, DFAS will construe orders dividing retired pay as dividing “disposable retired pay.”[16]

How to “Even Out” the Pension Division

Q. What if the court can’t enter a decree which achieves a time rule division or one which is numerically the same as that which results from the time rule?

A. There are several other steps which the court can employ which will help in ameliorating the result of the “frozen benefit division” for John Doe by making an equitable distribution of the marital pension. The first of these is an unequal division of the pension. In states where the court has a degree of flexibility in how much of a marital or community property asset to award the non-employee spouse, the judge may award a share to John Doe, the non-military spouse, which is larger than the usual “50% of the marital share” portion. Thus the order could be framed in terms of “70% of the marital share of Mary Doe’s military retired pay,” which would leave John with a larger share than he could receive through frozen benefit analysis.[17] If the court is free to create a new percentage without a numerical basis, then no additional work would be needed; if not, then the court may need to consider testimony from a financial expert to help estimate the monetary loss for the FS, so that a set-off can be calculated. Note, however, that it would be impossible to compare the two results at the time of the pension division order. Only in hindsight – at the time of Mary Doe’s retirement – would it be possible to measure one against the other.[18]

Q. How about fixing a specific percentage for the former spouse’s share, rather than using a formula?

A. Another alternative, when the laws of a state have not been adjusted to provide for a denominator of the marital fraction which ends on the date of the “court order,” is for the court to award to the non-military spouse a fixed percentage of the military retired pay while Mary is still serving. After all, if John is forced to receive only a share of a frozen benefit at the time of the court order, why shouldn’t he get a fixed percentage of that frozen benefit? In this situation, the amount of the frozen benefit would remain relatively stable, instead of losing value over time (as would occur if the denominator of the marital fraction remains the total amount of Mary Doe’s creditable service).

So, for example, if the property division order occurred when the parties had been married for 10 years of the 20 that Mary had already served, John would be awarded half of 50% (i.e., ½ X 10/20), or 25% of the frozen benefit. If the fixed percentage approach were not employed and Mary served for a total of 30 years, then John would still receive 50% of the frozen benefit times the marital fraction. However, the marital fraction would be 10/30, or 33%, and John’s share would be 16.5%, rather than 25%. Fixing the percentage at the same time as the benefit is fixed is one way of “retaining value” for John’s pension-share award and making a fair, just and equitable award.

Present Value

Q. What about using the present value of the pension? Is that alternative for the court limited in any way by the Frozen Benefit Rule in NCAA 17?

A. No. In addition to the future division of retired pay, state laws also recognize a second method of dividing pensions, the “present value offset.” This analyzes the present value of a series of money payments over the course of the SM’s life; these are, of course, her retired pay. The present value of this retired pay is the amount that can be used for a trade or an offset, allowing the SM to keep her pension intact.

This is beneficial for the parties since it results in a complete present accounting and division, not the postponement of property division until retirement. In addition, it provides the FS with property “in hand” when it is unknown whether the SM will even survive to apply for retirement. The court thus may consider ordering a set-off for the military pension if other property is available.

The calculations for a present value determinate require the testimony of an expert.[19] Once the financial witness (e.g., CPA, economist or actuary) has placed a value on the pension, the court needs to find some property or asset which matches the pension value and can be awarded to the FS so that the SM may retain her pension.

Q. What if the present value is too large, that is, the value is higher than the value of any other marital asset? What then?

A. The present value of a military pension can be a pretty large figure in some cases.[20] When this happens, the court may need to do a partial setoff for the marital value of another asset awarded to the FS, with the remainder to be made up in periodic payments.

Thus, if the present value of CDR Mary Doe’s retired pay were $400,000 and the marital component were $300,000 (that is, the parties were married for 15 of the 20 years used by the expert in the pension value report), then the court might set off the pension, awarded to Mary, by granting sole ownership to John of marital assets worth $200,000. To complete the equation, the court could order Mary to pay $100,000 to John by making annual payments of $20,000 for five years. This could be done by requiring Mary to set up an allotment immediately for the monthly payment of $1,666.67 ($20,000 ÷ 12 months) to John. Or the court could enter a military pension division order requiring monthly payments of $1,667.67 from Mary’s retired pay. The retired pay center will honor these “fixed dollar amount” payments so long as they do not exceed the allowable percent of the pension (i.e., 50%) which may be garnished as property division.[21]

Fixed Percentage and Present Payment

Q. Is there a way to require present pension payments to the former spouse since the present pension benefit is frozen?

A. In several jurisdictions, most of them western states, the court may order SM to begin present payments to the nonmilitary spouse as soon as the SM is eligible to retire and receive monthly payments. This is so whether the military member has actually retired or not.

The seminal case is In re Marriage of Luciano,[22] in which the judge ordered pension-share payments for the wife to begin when the SM-husband retired from the Air Force. The California Court of Appeals reversed, stating that it would be unfair to postpone payment to the ex-wife since that would give the SM the power to determine when she received her own property. The Court went on to say that the employee spouse cannot defeat the nonemployee spouse’s interest in community property by relying on a condition solely within his control. The proper order for the judge to issue would state that the former wife is the one who has the choice as to when to start receiving her share of the pension. This election may be made at any time after the pension is matured, through a motion filed by the nonemployee spouse. The Court stated that, if the motion is made before retired pay starts, this constitutes an irrevocable election to give up increased payments in the future which might accrue due to increased age, longer service and a higher salary.[23]

Nothing in the “frozen benefit rule” blocks this “western gambit,” as illustrated by the Luciano case. The logical approach for a nonmilitary spouse in a state that follows this rule is to move immediately for payments, beginning as soon as the SM attains sufficient service for retirement (usually after 20 years of active duty). Since there can no longer be an increased payment in the future, as mentioned above, and the benefit to the FS is locked into the rank and years of service at the time of the court order dividing military retired pay, the court should expect that most nonmilitary spouse would file a motion to elect payments from the SM as soon as the pension matures.

Continuing Conundrums

Q. What are the questions which remain?

A. The remaining questions are numerous. The answers may be provided in case law developments or in implementing regulations. Let’s look at a few of these.

How should the courts write a proper court order to implement the frozen benefit rule? Definitive guidance on the rules for military pension division has been published in the Department of Defense Financial Management Regulation.[24] The “hypothetical clause” (as it is called by DFAS) is the most difficult clause to prepare. For those who entered military service after September 1980, the current DoDFMR rule requires that the court order contain detailed information about the servicemember; this includes years of creditable service as well as the “retired pay base” calculated according to the “High Three,” the monthly average for the highest three years of continuous compensation (i.e., base pay) before the specified division date.[25]

At present, counsel must provide this information to the court. What if a court order specifies the “old definition” of disposable retired pay? Will it be rejected by the retired pay center, as would happen before the frozen benefit rule when an order was found to be unacceptable, with directions to counsel who submitted the order to specify the required data for a hypothetical clause? Practitioners must wait to see whether DFAS will alter its course and utilize its computers to set the “High Three” in all future frozen benefit rule cases, or whether the data will still have to retrieved by counsel, calculated and set out in the court order submitted to the retired pay center. To be on the safe side, courts should adhere strictly to the current requirements for a hypothetical clause.

Q. What if the retiree refuses to comply with a pension division order entered with the language which the court previously employed before NDAA 17 became law. Upon issuance of a show cause order, can the court sanction the retiree? Can the court enter a contempt order?

A. When a retiree doesn’t pay according to a pension division order which uses the original definition of DRP, these are valid questions about the ability to obtain compliance through the court’s contempt powers at a show cause hearing. Will the court’s contempt sanction be upheld? Perhaps an appellate court will strike down the punishment on the basis of federal preemption, ruling that the frozen benefit rule cancels all other methods of dividing the future retired pay of a still-serving member. We will need to await further case-law developments to determine the answer.

Q. I can envision all sorts of motions in my court to change the language in pension orders, whether entered before the enactment of NDAA 17 or afterwards. How will these motions be handled?

A. If an order sets out terms under the original definition (pre-NDAA 17) of disposable retired pay (DRP), either party could want to petition the court to change the order to comply with the present definition. The SM would be motivated by a desire to ensure that only the lower, fixed benefit would be divided by the court, and to obtain protection from a contempt sanction. The FS may be motivated by a desire to obtain immediate garnishment payments through a court order which will “pass muster” at the retired pay center by strict compliance with the frozen benefit rule. It remains to be seen whether courts in a particular state may – due to an intervening change in federal law – allow a motion to alter or amend under Rule 59 (or its equivalent in states which have not adopted the federal Rules of Civil Procedure). The same may be said about a motion to set side under Rule 60. Will the existence of a final judgment bar that change? Generally speaking, courts refuse to modify final property division judgments or to allow them to be attacked collaterally.[26]

Q. Does federal law address what happens when there is a state court order which exceeds what may be done under the strict terms of USFSPA? That is, what if a time rule order dividing the pension is final and unappealed, and then the attorney for the former spouse finds out that it will not be honored by the retired pay center (or that it will only be honored to the extent that it divides the “frozen benefit,” rather than final retired pay), thus shortchanging the former spouse?

A. There is an argument that the court may still hold the retiree liable for the unpaid portion of the pension under 10 U.S.C. § 1408 (e)(6). That section of USFSPA, known as the “savings clause,” states:

(6) Nothing in this section shall be construed to relieve a member of liability for the payment of alimony, child support, or other payments required by a court order on the grounds that payments made out of disposable retired pay under this section have been made in the maximum amount permitted under paragraph (1) or subparagraph (B) of paragraph (4). Any such unsatisfied obligation of a member may be enforced by any means available under law other than the means provided under this section in any case in which the maximum amount permitted under paragraph (1) [e.g., 50% of disposable retired pay] has been paid….

Numerous court have held that orders which require the member to pay more than 50% of disposable retired pay are not void or invalid; they are simply not enforceable through garnishment from the retired pay center for amounts in excess of 50%.[27] Can counsel for the FS defeat the arguments of the SM/retiree that federal law preempts state court orders, since this section of USFSPA provides an “escape hatch” for the former spouse in enforcement of the pension division order? Or will appellate courts hold that the savings clause only applies to amounts within the definition of disposable retired pay which are not available for payment, pointing out that the new law changed the very definition of disposable retired pay, and that the USFSPA only makes disposable retired pay divisible?

Final Notes

There are other issues which may come before the court as the John’s “Plan B,” that is, other methods and strategies to award the former spouse a “fair deal” (or perhaps a “fairer deal,” in John Doe’s view) regarding division of military retirement benefits. These would include requiring the SM to pay the full cost of the Survivor Benefit Plan, or valuing the SM’s military medical coverage and placing that as an asset in the SM’s share of marital or community property.[28] These do not involve a larger portion of the pension; rather, they focus on other benefits which may be valued and allocated in the property division process.

The court could also look at the larger picture in property division and decide upon an unequal division of the community or marital property. Assuming that there is other property acquired during the marriage, the court could award the pension to the servicemember and award most or all of the remaining property to the spouse.

All of the above methods may be urged upon the court by the former spouse’s attorney. These are some of the alternatives for fixing the frozen benefit approach imposed by NDAA 17.

Rev. 3/27/2019

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The Just for Judges series of info-letters is prepared by Mark E. Sullivan (COL, USA – Ret.), a family law attorney in Raleigh, N.C. For comments or suggested changes, contact him at mark.sullivan@ncfamilylaw.com or 919-832-8507.