The recent ruling in the Supreme Court case Howell v. Howell shines a light on the confusing issue of retired and disability pay. The plaintiff, former Airman John Howell, believed he didn't have to consider his VA disability pay as part of the divisible assets in divorce. The Supreme Court agreed, and ruled in his favor.
What the ruling did what just confirm the existing case law, which was established in 1989. Both rulings confirm that VA Disability Pay is not considered divisible property in divorce. Therefore, when a retiree with a disability rating under 50% elects to waive a portion of their retirement pay for (tax-free) disability pay, the reduced retired pay is split if there is a court order.
It is important to remember that the Uniformed Services Former Spouses' Protection Act (USFSPA) does not provide for an automatic entitlement to a division of military retired pay. It does give state courts the authority to treat military retired pay as they would other marital property. Additionally, the USFSPA affords the retiree protection, in that certain conditions must be met for the Defense Finance and Accounting Service-Cleveland Center (DFAS-CL) to make direct payments to the former spouse. Direct payments to former spouses cannot be made unless the parties were married to each other for at least 10 years, during which time the member performed at least 10 years of creditable military service. For those that do not meet this 10/10 requirement at the time of divorce, Service Members must make payments directly to their former spouse.
Under USFSPA, despite the amount awarded to a former spouse, there is a maximum of 50% of the "disposable" retired pay that DFAS-CL will pay directly (65% for child support garnishment orders). Disposable retired pay is the product of the gross retired pay minus:
1. Amounts owed by the member for previous overpayments or recoupments;
2. Amounts deducted for court martial fines;
3. Amounts waived under Title 5 for Civil Service employment or under Title 38 for VA disability compensation;
4. Survivor Benefit Plan (SBP) premiums (only if the former spouse to receive the division is also the named former spouse SBP beneficiary);
5. (For post-Nov. 14, 1986 court order dates): amounts of retired pay based on disability (per Title 10, Chap. 61);
6. (For pre-Feb. 3, 1991 court order dates): amounts owed the U.S.;
7. (For post-Feb. 3, 1991 court order dates): amounts withheld for federal and state income taxes, consistent with the member's tax liability.
If a former spouse was awarded a percentage of retired pay (rather than a set amount), the total dollars awarded may change due to a change in the member's authorized deductions. Percentage awards will also automatically receive a proportionate share of the member's cost-of-living adjustments (COLAs).
For more information on the Uniformed Services Former Spouses' Protection Act and DFAS, visit https://soldierforlife.army.mil/retirement/usfspa.
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