former spouse act; military divorce in NC; man in uniform and women upset

Changes to the Uniformed Services Former Spouse Protection Act

The quick summary: In 2017, members of the armed forces will benefit from the first substantial development in the Uniformed Services Former Spouse Protection Act (USFSPA) in over a decade.  On December 23, 2016, Congress altered the procedure and set a national standard.  This standard states that military retirements will be divided based on the service member’s pay grade and number of years of service at the time of a Court’s Order dividing retirement pay. This new rule is NOT retroactive and so it applies only to Court Orders after December 23, 2016.

What does this mean?

Let’s say you are a married member of the military. Until recently, if you were to divorce your spouse, your spouse could benefit from your total retirement earnings. So, for example, if you joined the military in 1998, were married in 1999 and divorce in 2010, and then retired in 2020 your ex, from whom you had been divorced for 10 years, could have received the benefit of your work not only for the 11 years you were married but also the 10 years after you were divorced.

For years, critics have called this the “former spouse windfall.” The primary objection stemmed from the fact that if a service member was not retired when she was divorced, the state courts would often award the ex-husband a percentage of future retirement pay. This created a unique situation where the value of the “asset” increases based on promotions and pay increases earned after the divorce. Since 2011, the Armed Forces Tax Council has been saying that this is inconsistent with the treatment of other marital assets by divorce courts.

For example, a Court usually divides a civilian’s retirement savings based on the amount earned at the time of divorce; additions made after separation/divorce are not included in those calculations. Some groups, most notably, the former spouse support group EX-POSE, protested this change, saying that ex-spouses may have sacrificed their own careers to raise children or accommodate the frequent moves that come part and parcel with military service. They also cite the “Martial Foundation Rule,” a principal recognizes that an individual’s final retirement pay is based on the achievements at the beginning of a military career made possible only by virtue of the marriage. If the service member had not been married, perhaps she never would have achieved the promotions she received after the marriage.

These criticisms were dismissed, however, as Congress determined that being married to a veteran does not foreclose the opportunity to become educated or develop a career. Further, most pensions are considered marital property ONLY up to the time that a couple is divorced/separated. For a military pension to have a separate status (so spouses could receive benefit from work done after the marriage) is an unequal application of the marital foundation rule, as such a “rule” is not applied in any other cases.

Furthermore, it is erroneous to assume that being married always advances a career, when reality shows that this may, indeed, have the opposite result.

History of the Uniformed Services Former Spouse Protection Act

In 1982, Congress passed the Uniformed Services Former Spouse Protection Act to permit the states to divide military retirement pay in divorce and equitable distribution proceedings. Prior to the USFSPA, each state approached military retirements differently. This led to several conflicts, one of which eventually caught the attention of the Supreme Court. In 1981, the Court ruled in McCarty v. McCarty that states could not divide military retirement under state laws, but that Congress could decide to change that fact.  In 1982, Congress did just that, creating the USFSPA.

The USFSPA did a number of things, including permitting, but not require, states to divide military retirement at the time of divorce. It also forbade State Courts from ordering a veteran to retire. The USFSPA permitted state courts to allocate military benefits to a current or ex-spouse and it gave the Department of Defense authority to enforce state court orders. Specifically, final decrees of divorce, dissolution, annulment, and legal separation, and court-ordered property settlements that provide for the payment of child support, alimony, or retired pay as property, to a former spouse can be enforced by the DoD. The set up allowed each of the states to create their own guidelines for divvying up military retirement pay but permitted the federal government, through the Department of Defense, to enforce those state court orders.

It is notable that the USFSPA did not automatically entitle a former spouse to a specific portion, or even any portion, of the member’s retirement pay and it still does not. As originally written, the USFSPA only provided a manner of enforcement of court orders for retirement pay (up to a specified amount) and it permitted states to divide military disposable retirement pay as marital property upon divorce. However, the re-written USFSPA rules now also provide a cap on how retirement pay can be divided.

About the Uniformed Services Former Spouse Protection Act and Retirement Pay

Disposable retirement pay is a service member’s retirement pay, except, usually: disability pay from the VA, federal debt repayments, fines, forfeitures and Survivor Benefit Plan premiums. The USFSPA allows courts to order that the Department of Defense automatically deduct payments from a service member’s disposable retirement pay to send to the ex-spouse. The checks would be sent to the Defense Finance and Accounting Service (DFAS) and the only limiting requirement was that the total amount garnished could be no more than 65% of the retirement pay.  The payment of retirement pay also ceases upon the death of the service member or former spouse, whichever happens, sooner. All states permit the division of pension rights, treating military pensions as marital property. The only exception is Puerto Rico, which bars the division of pension rights upon divorce.  You couldn’t just file a case in Puerto Rico to be subject to their rules, though. The USFSPA also has rules regarding which state has the authority to enter the order (jurisdictions). The rules state that the service member must

  1. Have a residence in the territorial jurisdiction of the court (other than just because they had been assigned there as part of their service) OR
  2. The service member must be domiciled in the territorial jurisdiction of the Court OR
  3. The service member must consent to the jurisdiction of the Court (which could be done by a service member indicating consent through taking affirmative action in the legal proceeding). The difference, if you’re wondering, between domicile and residence is that a domicile is a place where you live (a residence) WITH an intent to remain.

No matter what the state, the member and former spouse must have been married to one another for 10 or more years during which the service member performed at least 10 years of military service creditable towards retirement pay eligibility. This is often referred to as the 10/10 rule. The 10/10 rule ONLY applies to retirement pay garnishment NOT child support or alimony payments.

What this may mean for you

If you are already under a Court, entered before December 23, 2016, that allocates a service member’s pay, this change will not impact you at all.  However, if you are considering a divorce and are a member of the armed forces or are married to a member of the armed forces, this change may have a substantial impact on your future. If you are a member of the armed forces, you should talk to your attorney about a solid strategy for timing your divorce and separation and creating a plan for allocating your retirement. This is good news for you especially if you’re in the middle of your career (more than 10 years, but not too many) because it limits the amount of your retirement that may be garnished from your income.

If you’re at the beginning of your career (under 10 years), your income would not have been garnished, but that does not mean that you could not have been ordered to pay a portion of your total retirement to your ex-spouse; now, the amount you could be Ordered to pay is limited.  The group of people receiving the least benefit is those who are at the very end of their career. In a pension division case, an attorney well-versed in the law will be essential for using the tools under the law to help a veteran protect as much of the military retirement as possible.

If you are married to a service member, qualified counsel is paramount for ensuring that you create a plan of action that allows you to benefit as much as possible from the sacrifices you have made to support your spouse during the time served in the military. These new rules may limit the future benefit you may receive, but finding an attorney who will ensure that you receive everything to which you are entitled is the best first step.

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