Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

If My Ex-Spouse Waived Their Veterans’ Retirement Pay, Do I Have A Claim Under New Jersey Divorce Law?

            No.  A judge of the Family Part of the Superior Court of New Jersey cannot reimburse your ex after a divorce for a share of their veteran’s retirement pay when same was waived in order to receive other military benefits.

            In Howell v. Howell, The United States Supreme Court reviewed whether a state family court could increase, pro rata, the amount of money a divorced spouse received monthly, from her veteran ex-spouse's veteran’s retirement pay in an effort to indemnify the divorced spouse for any loss caused by the veteran’s waiver of a share of the retirement pay to receive nontaxable disability benefits from the United States Federal Government instead. The United States Supreme Court held that while the question was complicated, from a review of case law and statutory law, the answer was a clear no. According to a federal statute, 10 U.S.C. §1408(c)(1), The Uniformed Services Former Spouses’ Protection Act, a state can treat a military veteran’s retirement pay as community property and divide it during a divorce. However, the same statute also contains a provision that exempts any amount that the Federal Government redacts as a result of a waiver that a veteran may make to receive disability benefits. The United States Supreme Court has held that a state cannot treat this portion of the veteran’s retirement pay as community property, and divide it during a divorce.

            For many years the Federal Government has provided retirement pay to veterans who have retired from military service after serving a certain amount of years. The Federal Government also provides disability benefits for disabled members of the Armed Forces. In an effort to prevent “double dipping”, federal law requires that, to receive disability benefits, a retired veteran has to give up an equal amount of retirement pay. One may ask what would be the point of filing for disability benefits if the same amount is just going to be reduced from retirement pay anyway. While retirement pay is taxable, disability benefits are not, and so many veterans choose to waive retirement pay to get disability benefits.

            Unlike today, in the 1981 case of McCarty v. McCarty, the United States Supreme Court held that no part of a veteran’s retirement pay could be considered a form of community property, and as such could not be divided at divorce. The Court had categorized military retirement pay as a personal entitlement, and statutory language as well and legislative history made it clear that the United State’s Congress wanted military retired pay to actually reach its intended beneficiary. The court found that any state law that divided military retirement pay was a threat to clear and substantial federal interest, and that federal law preempted state law.

            This principle started to change in 1982 with the passage of the Uniformed Services Former Spouses’ Protection Act. This act stated that a State had the discretion to treat a veteran’s disposable retirement pay as community property, divisible during a divorce. However, in its definition of disposable retirement pay, the new Act expressly excluded amounts that are deducted from that pay from the result of waiver to receive disability benefits. 

            In the 1989 case of Mansell v. Mansell, the United States Supreme Court interpreted the new federal language. In the case, Major Gerald E. Mansell and his wife got divorced and entered into a property settlement agreement that provided that Major Mansell would pay his wife half of his total military retirement pay, including the part of the retirement pay he waived to receive disability benefits. Later, Major Mansell filed a motion to modify the property settlement agreement to omit the part of the retirement pay he had waived. While the state court refused this modification, the United States Supreme Court reversed and permitted it. The Court held that federal law barred the state court from treating the waived portion as community property divisible at divorce.

            In Howell, John Howell and Sandra Howell divorced in 1991, while John was still serving in the Air Force. In anticipation of John’s future retirement, the divorce decree considered John’s future retirement pay as community property, and awarded Sandra half of John’s military retirement, whenever it began. The decree further obligated John to pay Sandra $ 585 every month in child support, and $ 150 a month in alimony until he retired.

            John retired from the Air Force in 1992, and started to receive military retirement pay. Half of this military retirement pay went to Sandra. The Department of Veterans Affairs found that John was 20 % disabled due to a service related shoulder injury, almost thirteen years later. As such, John chose to start receiving disability benefits, and waived $ 250 a month from the $ 1,500 of military retirement pay he shared with his ex-wife. Consequently, the amount of the retirement he and his ex-wife received was reduced by around $ 125 a month each.

            As a result, Sandra asked an Arizona Family Court to enforce the original order, and restore the value of her share of John’s total retirement pay. The court found that the original decree had given Sandra a vested interest in the amount of that pay before waiver, and John was ordered to make sure that Sandra received her full 50 % of the military retirement pay without consideration of the disability. The family court’s decision was affirmed by the Arizona Supreme Court. The Arizona Supreme Court was asked if the family court could make John indemnify his ex-wife for the reduction in her share of John’s military retirement pay.  The Arizona Supreme Court found that the order of family court did not divide John’s waived military retirement pay, nor did the order make him rescind his waiver or direct him to pay any money to Sandra directly from his disability pay. The Arizona Supreme Court stated that instead, the family court order merely ordered him to reimburse his ex-wife for the reduction of her share of military retirement pay. Moreover, the court reasoned that because John made his waiver after, instead of before the family court divided his military retirement pay, the case precedent of Mansell did not apply in the case, and as such federal law did not preempt the state court’s reimbursement order. The Supreme Court of the United States granted John’s petition for review.

            The United States Supreme Court held that the decision in Mansell, did indeed apply, and would determine the outcome of this case. The Court in Mansell, held that federal law completely and totally preempts states from considering waived military retirement pay as community property that can be divisible upon divorce. The main reason that state courts have given for supporting reimbursement or indemnification orders is that they want to restore the amount of money previously awarded as community property, or in other words, restore the part of retirement pay that was lost because of the waiver after divorce. The United States Supreme Court noted that the amount of the indemnification was exactly the same amount as the waived retirement pay, down to the dollar. The Court found that regardless of the form, such reimbursement and indemnification orders would displace the federal law, and become an obstacle to the execution and accomplishment of the objectives and purposes of the United States Congress. Therefore, all such order are preempted by federal law.

            The United States Supreme Court recognized that congressional preemption can sometimes cause hardship on divorcing spouses. However, the Court noted that a state family court could, when it initially determines the value of a divorcing couple’s assets, take into account the contingency that some military retirement pay may be waived in the future, or take into account the reductions in value when it calculates, or recalculates, the actual need for spousal support. Therefore the judgment of the Supreme Court of Arizona was reversed.