Treatment of Disability Pay in Military Divorce

Introduction

In military divorce cases, Virginia courts are allowed by the federal Uniformed Services Former Spouses Protection Act (the “USFSPA”) to award the service member’s former spouse a portion of his or her “disposable retired pay.” The USFSPA excludes from the definition of disposable retired pay any disability pay the service member receives.

A service member may receive one of two different types of disability pay, both of which are excluded from the USFSPA definition of disposable retired pay: (1) military disability retired pay, and (2) VA disability compensation. The exclusion of disability pay benefits from the definition of disposable retired pay means that the former spouse of a service member may lose out on hundreds or thousands of dollars per month that he or she might otherwise have received in a division of the member's disposable retired pay.

This article explains the two types of disability pay available to some service members, and gives examples of how the service member’s receipt of such pay can affect the former spouse.

Military Disability Retired Pay

The first type of disability pay a member may receive is military disability retired pay. Military disability retired pay is available for those service members who are sufficiently disabled that they cannot perform their assigned duties. If a member has enough creditable service, the member may be placed on the "disability retired list" and may begin to draw disability retired pay.

Let's look at the example of (the entirely hypothetical) Marine Colonel Jessup. A year ago, Colonel Jessup left his wife in Virginia and took a new set of orders to Naval Base Guantanamo, in Guantanamo Bay, Cuba. The Colonel told his wife that he would "send for her" once he got settled in Cuba. However, soon after arriving at "Gitmo, "the Colonel fell in love with a younger Cuban woman, and told his wife their marriage was over.

Colonel Jessup's wife has now been granted a divorce from the Colonel in Virginia (her current place of residence) on the ground of desertion. The Virginia court has awarded the now former Mrs. Jessup 50% of Colonel Jessup's disposable retired pay. But that wasn't enough for the scorned Mrs. Jessup. She also filed a charge of adultery against Colonel Jessup with the Marine Corps.

Colonel Jessup is now having breakfast on base with two intrepid Navy Judge Advocates conducting an investigation of the adultery charge. Colonel Jessup is explaining to them:

"You want to investigate me, roll the dice and take your chances. I eat breakfast 300 yards from 4000 Cubans who are trained to kill me, so don't think for one second that you can come down here, flash a badge, and make me...." Just then, one of the legs of Colonel Jessup's chair snaps, causing him to fall awkwardly to the floor.

Colonel Jessup is rushed to the hospital, where doctors find that that he has cracked several vertebrae in his back. Colonel Jessup's days in the Marine Corps are over. The Colonel applies for military disability from the Corps. The Marine Corps rates Colonel Jessup as 40% disabled, and incidentally drops the adultery charge against him. Colonel Jessup leaves the military after 20 years of service.

Colonel Jessup will receive disability retired pay in an amount equal to the Colonel's normal retired pay based on his years of service, or his base pay times his disability rating, whichever amount is greater. This can be viewed as a three-step process (for the purposes of this example, assume Colonel Jessup has an active duty base pay of $3,000 per month):

  • The first step is to calculate Colonel Jessup's normal retired pay based on his years of service. This is done by multiplying his active duty base pay by his years of service by 2.5%; in this case, $3,000 x 20 years x 2.5% = $1,500.
  • The next step is to multiply Colonel Jessup's base pay times his disability rating. In this case, $3,000 x 40% = $1,200.
  • Colonel Jessup would then receive the higher of these two amounts as his military disability retired pay: in this case, he would receive $1,500 per month.

In Colonel Jessup's case, the Uniformed Services Former Spouses Protection Act provides that the amount of the Colonel's military disability retired pay that derives from multiplying his base pay times his disability rating is not divisible. Thus, in this case, $1,200 of Colonel Jessup's military disability retired pay is "off limits" to division per the order of the Virginia divorce court. The court order can be used to divide only the remaining $300 of Colonel Jessup's military disability retired pay. Thus, the former Mrs. Jessup will receive only 50% of $300, or $150 per month.

VA Disability Compensation

The second type of disability pay a member may receive is disability compensation from the Department of Veteran's Affairs ("VA disability compensation").

Let's return to the example of Colonel Jessup, and flash back to his breakfast with the Navy Judge Advocates. Again, Colonel Jessup is advising them:

"You want to investigate me, roll the dice and take your chances. I eat breakfast 300 yards from 4000 Cubans who are trained to kill me, so don't think for one second that you can come down here, flash a badge, and make me...." Just then, one of the legs of Colonel Jessup's chair snaps.

However, Colonel Jessup's lightning-quick reflexes enable him to reach out, grab the table, and stop himself from falling. He is a bit embarrassed, but uninjured.

The investigation into the adultery charge against Colonel Jessup proceeds and the investigators find incontrovertible evidence that the Colonel had indeed committed the crime. In order to avoid a court-martial, Colonel Jessup agrees to quietly retire.

Again, for the purposes of this example, assume Colonel Jessup has an active duty base pay of $3,000 per month; thus, with 20 years active duty service, the Colonel's normal retired pay will be $1,500 per month ($3,000 x 20 years x 2.5%). However, as part of his processing out of the military, Colonel Jessup applies for VA disability compensation, based on a number of chronic injuries he has endured over the course of his storied military career.

Colonel Jessup enters the civilian world. The former Mrs. Jessup's attorney makes sure that DFAS receives the Virginia court order awarding her 50% of Colonel Jessup's disposable retired pay. DFAS honors the order, and begins distributing Colonel Jessup's military retirement, $750 to the Colonel and $750 to the former Mrs. Jessup.

Seven months after his retirement, Colonel Jessup's application for VA disability compensation is approved. For his chronic injuries, Colonel Jessup will be entitled to receive $1,200 per month in VA disability compensation, if he waives an equivalent amount of his military retired pay.

What is the benefit to Colonel Jessup of waiving $1,200 per month of his retired pay in exchange for $1,200 per month in VA disability compensation?

First, the Colonel will receive a big tax benefit. VA disability compensation, unlike military retired pay, is tax-free!

Second, the VA disability compensation offers Colonel Jessup a unique opportunity to retaliate against the former Mrs. Jessup. The USFSPA provides that the retired pay waived by Colonel Jessup in order to receive VA disability compensation is not divisible by state courts or DFAS. Thus, once the Colonel waives $1,200 of his military retired pay in exchange for $1,200 of VA disability compensation, DFAS will divide only the remaining $300 of retired pay. The former Mrs. Jessup will now receive only $150 per month, and Colonel Jessup will receive a total of $1,350 per month (his 50% of the remaining $300 retired pay, plus the $1,200 VA disability compensation).

Planning for Disability Pay

The harsh results for the former Mrs. Jessup described above--with her monthly allotment in each example being reduced to only $150 per month from Colonel Jessup’s military retirement--could have been avoided with proper planning by her attorney. The former Mrs. Jessup and her attorney could have pursued one of two courses in order to protect her against the reduction of her share of the Colonel’s retired pay that occurred in each example.

First, the attorney could have negotiated a Property Settlement Agreement (“PSA”) with Colonel Jessup, with a provision that, in the event the Colonel received military disability retired pay or VA disability compensation; he would pay 50% of such pay directly to her.

Such a PSA is enforceable under Virginia law, pursuant to a 1992 ruling of the Virginia Court of Appeals. In the case of Owen v. Owen, 14 Va. App. 623, 628, 419 S.E.2d 267, ___ (1992), the Court of Appeals held that a service member and his former spouse

"…may use a property settlement agreement to guarantee a certain level of income by providing for alternative payments to compensate for a reduction in payment level based on a reduction in retirement benefits…. Such an arrangement does not offend the federal prohibition against a direct assignment of military disability pay by property settlement agreement."

Second, had Colonel Jessup refused to enter into a PSA containing such a provision, the former Mrs. Jessup and her attorney could simply have asked the divorce court to withhold jurisdiction to order Colonel Jessup to pay his former wife spousal support based on any change in the parties’ circumstances.

Then, at such time as the former Mrs. Jessup’s share of her husband’s retired pay was reduced by his accepting disability pay, the attorney could have asked the court to “make up the difference” by ordering the Colonel to pay spousal support. Since in each case the former Mrs. Jessup’s monthly allotment was reduced from $750 per month to $150 per month, the attorney could have asked the court to order the Colonel to pay her at least $600 per month spousal support to “even things out.”

Conclusion

A proper understanding of the issues surrounding military disability retired pay and VA disability compensation is important in most military divorce cases. Every service member or spouse going through such a divorce should consult an attorney knowledgeable in such matters.

*Special note regarding "concurrent receipt" of disability pay and retired pay: the above was written prior to the enactment of the FY 2004 National Defense Authorization Act (NDAA), which provides for a 10-year phased restoration of retired pay for retirees with a disability rating of 50 percent or greater, who had 20 years or more of creditable service. Also, any retired pay offset attributable to a combat- or operations- related disability is now restored in full. If you or your spouse fall into either of these categories- your disability rating is 50 percent or greater (and you completed 20 years or more creditable service) or your disability is combat- or operations- related, you should raise this issue with our military divorce attorney during your consultation.


This article is supplied by Livesay& Myers, P.C., specializing in military divorce cases.
Published: April 14, 2004


Remember, legal information is not legal advice. For specific advice, please consult a lawyer. For a more in-depth discussion about other military and financial issues, see...