U.S. Supreme Court Rules On Military Pay Case

divorce property division taxes finances

On Monday, the United States Supreme Court issued its decision in Howell v. Howell, holding that a family court cannot order a veteran to indemnify a former spouse for the loss in the divorced spouse’s portion of the veteran’s retirement pay caused by the veteran’s waiver of retirement pay to receive service-related disability benefits.

In Howell, husband and wife divorced in 1991, while husband still served in the Air Force. The divorce decree awarded wife half of husband’s military retirement. It also ordered husband to pay spousal maintenance until husband retired. Thirteen years later, the Department of Veterans Affairs found husband 20% disabled due to a shoulder injury. Husband elected to receive disability benefits and as a result waived about $250 per month of the roughly $1,500 per month of retirement pay he shared with wife. The waiver had the effect of reducing wife’s share of benefits by $125 per month.

Wife went back to the family court and asked it to insure she receive what she was promised in the decree. The family court did so by amending its order that wife receive 50% “without regard for the disability.” The Arizona supreme court affirmed, ordering that husband had to reimburse wife for the difference.

The issue before the U.S. Supreme Court focused on the preemption doctrine. In simplest terms, preemption holds that if a federal statute controls disposition of an issue and state law conflicts with that disposition, the federal statute prevails. Previously, the Supreme Court held that federal law completely preempts states from treating retirement pay as divisible marital property. After that decision, Congress passed the Uniformed Services Former Spouses Protection Act, which allowed states to treat disposable retired pay as divisible marital property. However, the Act specifically excludes from disposable retired pay amounts deducted as a result of a waiver in order to receive disability benefits. The question before the Court was simple: is a state able to order a veteran to reimburse a former spouse when, after the divorce, the veteran claims disability benefits that reduces his retirement pay?

The Court answered no, because federal law controls. The federal statute specifically excludes the waived amount from divisible retirement pay, and the states must respect that law. It reversed the Arizona court and as a result, wife received $125 less than what the divorce decree awarded.

Wife will say this ruling is not fair to her because it is different than what the decree promised. The Supreme Court responded by saying she only had an interest in what Congress authorized, not all of the retirement pay. The answer to the family court is to make some initial accounting for the contingency of disability.

How will this play out for military spouses in the future? A former spouse receiving a portion of military retirement pay will want a provision in the decree to address the contingency of the spouse becoming disabled and taking disability pay. A decree could do this by ordering the veteran to take out an insurance policy, for example, or utilize spousal support. But the important point as a takeaway is that the failure to address the contingency in the initial decree will result in potentially less retirement than anticipated by the former spouse.

If you have questions about military retirement pay and divorce, contact us – we can help.