We recently shared information about the new military retirement plan that came into existence in 2018. Going forward, the Department of Defense will place each active and retired service member in either the legacy plan or the new one, depending on his or her length of service, and a subset of service members will have the option to either remain in the legacy plan or opt into the new one through the end of 2018.
As we described, features of the new retirement plan may complicate past and future military divorces.
Waiver of retirement pay for disability benefits
Today we discuss another important legal issue related to military retirement. In the unanimous 2017 decision of Howell v. Howell, the U.S. Supreme Court held that when a divorced service member, who had agreed to share half of each month’s retirement pay with his ex-wife, waived part of that retirement pay as a condition of receiving VA disability pay, a state court could not order him to reimburse her for the corresponding reduction in monthly retirement pay.
A closer look at the facts of this case clarifies the issues. John and Sandra divorced in 1991 in Arizona. Their divorce decree gave Sandra 50 percent of John’s future Air Force monthly retirement payments. They split these payments for about 13 years, at which time John was determined to be partially disabled based on a service-related injury, making him eligible for a small monthly VA disability payment.
Complicated federal law made it a requirement that for him to get the disability pay, which is not taxable, he had to waive a corresponding amount of his retirement payment, which is subject to tax. He logically chose the waiver, reducing his retirement payments, after which he and Sandra received $125 less each month.
The Arizona Supreme Court ordered that John reimburse her for the $125 lost each month because of the waiver. The U.S. Supreme Court reversed, saying that because federal law excludes disability pay from military retirement pay that state courts can divide in divorce, the state court had no legal authority to order the indemnification.
Before Howell, Florida and 25 other states had agreed with Arizona’s position to allow indemnification, according to the American Association of Matrimonial Lawyers. As of the date of this writing on June 28, Westlaw does not show that any Florida case has cited Howell yet.
Anyone in Florida potentially impacted by this issue in a past or future divorce should speak with an experienced lawyer who is monitoring the evolution of this legal issue and can provide informed advice.