U.S. Supreme Court holding on military retirement division in divorce

The court held firmly in favor of a retired service member that he could waive part of retirement payments to get disability to the detriment of his ex-spouse.

An important issue in divorce is how to divide retirement or pension benefits between the spouses. This matter is more complex when the retirement benefits are based on military service because of the intersection of federal military law and state family law.

On May 15, 2017, the U.S. Supreme Court issued a unanimous decision on this topic that could impact current and future recipients of military retirement benefits – both service members and spouses of service members – that were or will be divided in divorce proceedings.

Waiver of retirement pay to get disability benefits

The issue presented in Howell v. Howell was whether a monthly retirement benefit amount received by the divorced spouse of a retired service member could be reduced years after payment started because the service member waived the right to receive the full amount as a condition of receiving a new grant of disability pay.

The answer from the court was yes. While it seems unfair for a spouse who has relied on a set amount of monthly benefits for years to suddenly have it reduced, the court found that federal law requires it.

Sandra and John Howell agreed in their 1991 divorce that they would split his future military retirement benefits in half. Accordingly, Sandra received half of his monthly benefits for about 13 years at which time John was awarded disability benefits through the Department of Veterans Affairs for a shoulder injury.

For a service member, disability benefits are a better choice financially because they are not taxable, whereas retirement benefits are taxed. However, to receive disability when retirement is also being paid out, the service member must waive the right to receive the same amount as the disability from the retirement.

Not surprisingly, to get disability, John elected to waive about $250 of a larger monthly retirement benefit, meaning that Sandra’s monthly retirement payout would be reduced by half of that. She went back to Arizona state court, where the original divorce was granted, to ask that he reimburse her for that reduction. The court found that she had a vested right in the entire amount of the original retirement benefit and the Arizona Supreme Court affirmed that holding.

Federal pre-emption

The U.S. Supreme Court disagreed with the Arizona high court after looking closely at the federal law that governs: the Uniformed Services Former Spouses’ Protection Act. Under the Act, states are allowed to grant division of military retirement pay in divorces as part of a couple’s community property. However, if a veteran opts to waive part of his or her retirement in lieu of disability, the state court in the divorce does not have jurisdiction to give that amount to the veteran’s spouse.

In the Howell case then, John did not have to reimburse Sandra for the reduction in retirement benefits.

This could have enormous impact on other divorce settlements and decrees involving military retirement pay across the nation. The U.S. Supreme Court advised that state courts consider whether the reduction in benefits a nonmilitary spouse could receive in such circumstances could be made up by an adjustment in alimony or at least be a factor in the initial property division.

A lawyer should be consulted about these complicated legal issues.

With offices in Riverside and Temecula, California, attorney Heather Cullen of Cullen & Murphy, , represents active and retired service members and military spouses in Southern California, including those affiliated with March Air Reserve Base, Marine Corps Base Camp Pendleton and Marine Corps Air Ground Comb at Center Twentynine Palms, in divorce, military benefit and related matters.