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Navigating the Former Spouse Protection Act.

In the early 1980's Congress enacted legislation overturning the U.S. Supreme Court decision in McCarty v. McCarty, 453 U.S. 210 (1981), which held that a military pension was the separate property of the service member and not subject to division in a dissolution of marriage action. In the 15 years since the enactment of the Former Spouse Protection Act (FSPA), controversy surrounding the fairness of this legislation, and the implementation of the FSPA by the various states, has raged in Congress. This article will discuss the McCarty decision and its merits, the FSPA and its several amendments, Florida's approach to division of military pensions, and a brief overview of application of the FSPA in other states.

The McCarty Decision

On June 26, 1981, the Court held that, in a dissolution of marriage, federal law precluded a California court from dividing military nondisability pay pursuant to state community property laws. The Court found that dividing a military pension in state court threatened grave harm to "clear and substantial" federal interests such as providing for the retired service member in old age, encouraging enlistment and reenlistment, orderly promotions, and encouragement of a youthful military. Military pensions were viewed by the Court as different from other pension systems, because the retired officer is subject to recall to active duty at any time, continues to be subject to the Uniform Code of Military Justice, and is restricted in post-service activities, including employment. Because of these factors, military retirement had not historically been considered a "pension," but rather reduced pay for reduced services. Not even a limited "property" concept had ever existed in military compensation laws or the Court's own precedents. As early as 1881, the U.S. Supreme Court had ruled that when a military member retires or leaves active duty, compensation is continued, with reduced duties and responsibilities. U.S. v. Tyler, 105 U.S. 244 (1881).

The McCarty Court also noted that dividing military pensions made it less likely that the retired service member would choose to reduce his or her retirement pay still further by purchasing an annuity for the surviving spouse and children. Since the military retirement laws contained nothing permitting the states to divide a military pension in a dissolution of marriage, the California superior court was reversed. Congress was invited to change the law if it so desired.

The Former Spouse Protection Act

Congress did act shortly after the McCarty decision by enacting the Uniformed Services Former Spouses' Protection Act. The USFSPA, or FSPA or FSVA, is found at 10 U.S.C. [subsections] 1408 et seq. (1982), effective date February 1, 1983, retroactive to June 25, 1981, one day prior to the McCarty decision. Sponsored by Rep. Patricia Schroeder (DCO), the FSPA reversed the McCarty decision, rejecting the Court's concerns regarding military retention, enlistment, and the economic needs of older veterans. Also known as the Former Spouse Victim Act by military retirees, the FSPA has been a source of confusion and controversy at both the state and national level.

The FSPA applies to the "uniformed services," defined to include the Army, Navy, Air Force, Marine Corps, Coast Guard, commissioned corps of the National Oceanic and Atmospheric Administration, and the commissioned corps of the Public Health Service. The FSPA applies to active duty, retired, and reserve/guard (whether active duty, inactive status, or retired), pay and nonpay categories.[1]

Since the FSPA is a federal statute, its provisions and the regulations thereunder preempt or supersede state laws. A state court order that contradicts the FSPA will not be enforceable. The FSPA, with limitations, allows state courts to treat a military pension either as property solely of the service member, or as property of the member and his or her spouse in accordance with the law of the jurisdiction for pay periods beginning after June 25, 1981. In the unlikely event that a state court order divided military retirement pay before June 26, 198 1, in conformity with the FSPA, the order will be honored.[2]

A 1990 amendment to the law addressed the retroactivity problem of former spouses returning to state court on "old" divorces seeking division of the military pension. The FSPA now specifically provides that a state court may not treat retired pay as property in any proceeding to divide or partition it if a final decree of dissolution, annulment, or legal separation (including property settlement cases) was issued before June 25, 1981, and that decree did not divide or reserve jurisdiction to divide the member's retired pay.[3]

Special Federal Jurisdictional Rules

Special federal jurisdictional rules apply to divide a military pension. A state court may not divide a military pension unless the court has jurisdiction over the member by reason of his or her 1) residence, other than because of military assignment, in the territorial jurisdiction of the court; 2) domicile in the territorial jurisdiction of the court; or 3) consent to the jurisdiction of the court. It is entirely possible for divorce, child support, and alimony jurisdiction, but not pension jurisdiction, to exist in a case where the service member declines to participate and does not seek affirmative relief.[4]

The 10-Year Rule

A state court may not effectively order direct payments of the pension benefit from the Defense Finance and Accounting Service unless the former spouse was married to the service member for 10 years or more, during which time the member performed at least 10 years of service creditable for retirement purposes. A state court is not prohibited by the FSPA from dividing a military pension in a marriage of less than 10 years; however, direct payment of the pension benefit to the nonmilitary spouse by Defense Finance is not permitted.[5] There is no 10-year marriage requirement for garnishment from Defense Finance of child support, alimony, or both.

The FSPA also defines the pension benefit that is available for division. Net disposable retirement pay, not gross retirement pay, is subject to division. Subtract from gross retirement pay any debts owed the U.S. government, survivor benefit plan premium (if any), court martial fines and forfeitures, and amounts waived to obtain disability pay. Net disposable retirement pay is the remaining amount. The order dividing retirement benefits must provide specifically for payment of a fixed amount expressed in U.S. dollars or payment as a percentage or fraction of disposable retired pay.[6] Percentage orders automatically award the same percentage of cost of living increases to the former spouse.[7] Certain formula orders are now being accepted by Defense Finance.[8] Taxes and Social Security obligations of each retirement pay recipient are separately withheld, and separate 1099s are issued to each party for divorce decrees effective after February 2, 1991.[9] The total amount of the disposable retirement pay of a member that may be paid to a former spouse or spouses may not exceed 50 percent.

Downsizing or "right-sizing" of the military forces in the 1990's has resulted in many members receiving voluntary separation incentive or special separation bonuses. See 10 U.S.C. [subsections] 1174a, 1175. The Florida Supreme Court has held that these programs are sufficiently similar to retirement benefits that an agreement or court order distributing military retirement may be enforced against these benefits. Kelson v. Kelson, 675 So. 2d 1370 (Fla. 1996). No direct payment regulations have been issued, so enforcement at law is problematic. A former nonmilitary spouse may receive unlimited retirement splits from former military spouses. Although rare, documented instances of former military spouses receiving two or three pension interests exist. The former nonmilitary spouses' retirement benefits are not reduced or eliminated upon a remarriage, as they are in many other federal pension programs.[10] However, payments do terminate on the death of the service member. Therefore, insuring the military pension is an important consideration when representing the nonmilitary spouse.[11]

The regulations also provide that the member's retirement pay may be garnished to satisfy a court order that provides for the division of retired pay as property, not to exceed 50 percent of disposable retired pay for all court orders, or 65 percent of disposable retired pay for all court orders and garnishments for child support and/or alimony.[12] In the event Defense Finance receives multiple orders for payments to former spouses in proper form, they are honored in the order received.

Application by Former Spouse

Upon obtaining a final decree dividing a military pension, the decree is forwarded by certified mail to Defense Finance, which has now completed consolidation of the various centers.[13] DD Form 2293, "Request for Former Spouse Payments From Retired Pay," is completed and included with the certified copy of the final decree. If the member was on active duty at the time of dissolution of marriage, the decree must certify that the Soldiers and Sailors Civil Relief Act of 1940, as amended, was complied with, and evidence that the parties were married for 10 years during which time the member was on active duty earning retirement credits must be provided. Recently, Defense Finance has been requesting a copy of the marriage certificate even if the decree recites the 10-year marriage requirement. Husband and wife must be identified with addresses and Social Security numbers. Certification that the decree has not been amended or set aside must be made.[14] A formal military qualified domestic relations order is not required.

Defense Finance is allowed 90 days to respond in writing regarding whether the order will be honored. It is the policy of Defense Finance to honor orders that meet the requirements of the law. Defense Finance will not commence payments prior to the date of service on that office. Defense Finance will hold disputed amounts in a suspense account in the event of an appeal. The member may request reconsideration of any administrative decision reached by Defense Finance concerning honoring court orders.

Florida's Application of the FSPA

Practitioners familiar with military dissolution cases, and many military retirees, believe that state courts in general and Florida courts in particular approach the FSPA and Florida's equitable distribution statute by automatically awarding the nonmilitary spouse a mathematical portion of the military retirement utilizing the Deloach formula.[15] If courts do automatically award pension benefits, miscarriages of justice and errors of law are occurring. The following language from the Fifth District Court of Appeal concerning a merchant seaman's pension is instructive:

No case from any court has ever held that one spouse must automatically be awarded some portion of the other spouse's pension benefits, irrespective of all other equities and the apportionment of other assets and liabilities. Such a myopic approach to equitable distribution of pension benefits and joint liabilities would conflict not only with Diffenderfer and Bujarski, but with the admonition in Canakaris that the trial court has broad discretionary power to utilize various and interrelated remedies to achieve an overall equitable result.

Hallman v. Hallman, 575 So. 2d 738, 739 (Fla. 5th DCA 1991). Thus, marital assets may be offset by marital liabilities, or other assets may be awarded to the nonmilitary spouse to achieve equitable distribution. See Johnson v. Johnson, 602 So. 2d 1348 (Fla. 2d DCA 1992). Although the Florida Supreme Court has said that it is generally preferable to treat a military pension as a marital asset, and F.S. [sections] 61.076 (1988) says all pensions are marital assets--they may also be treated as a stream of income from which alimony may be paid. Retirement plans should not be treated simultaneously as both assets and sources of income.[16] The Johnson court also found that a lack of sufficient assets or other circumstances exist which leave the court no choice but to utilize pension benefits in calculating permanent, periodic alimony. Finally, a court can consider lengthy periods of separation of the parties as justification for not including pension benefits in the marital distribution scheme or in choosing a date to value assets. Sheffield v. Sheffield, 522 So. 2d 986 (Fla. 1st DCA 1988); Temple v. Temple, 519 So. 2d 1054 (Fla. 4th DCA 1988); Bobb u. Bobb, 552 So. 2d 334 (Fla. 4th DCA 1989). If the military pension is treated as an asset, the factors contained in F.S. [sections] 61.075 should be considered and findings of fact made. The parties' contributions to child rearing must be considered, especially where the military member is a "geographic bachelor." Days v. Days, 617 So. 2d 417 (Fla. 1st DCA 1993). However, in a childless marriage where the parties live in separate states for most of a long-term marriage, pursuing their own careers but "dating" on holidays, the pension should not be divided, but rather treated solely as the property of the member in accordance with the FSPA and Florida case law. Whether the nonmilitary spouse should share in "nonpassive" post-dissolution increases in pension plans based upon the "foundation of marital effort" theory should soon be decided by the Florida Supreme Court because of a conflict among circuits. See Boyett v. Boyett, 683 So. 2d 1140 (Fla. 5th DCA 1996).

Whatever the outcome on this important issue, if courts fail to include findings of fact in military pension cases and simply divide the pension using the Deloach formula, the impression is left that the division is accomplished automatically as a matter of law, instead of equitably as the law requires. Florida is not a community property state. The general perception of unfairness drives proposals for reform in Congress by both former spouses and military retirees.

Federal Proposals for Reform

Spearheaded by the American Retirees Association on behalf of military retirees and Ex-Partners of Servicemen for Equality, bills seeking to amend the FSPA have been introduced on a regular basis since 1982. The popular or unpopular suggestions for change have been:

* H.R. 572--Terminates the nonmilitary spouse's property interest in military retirement benefits in the event of a remarriage.

* H.R. 3776--Creates a presumption that the nonmilitary spouse should receive a pro rata division of retired pay if the couple were married at least 10 years; eliminates 10-year requirement for direct payments.

* H.R. 2200--Restricts awards under FSPA to an amount or percentage of the military member's pay at the time of divorce, not retirement; establishes a two-year statute of limitations for former spouses to seek a division of retired pay from time of divorce; reaffirms current prohibition on division of veteran's disability pay.

* H.R. 3574--provides former spouse entitlement to separation bonus payout benefits connected to military "right-sizing."

Conclusion

The FSPA is complex and controversial. Only the broad outlines of the current debate can be presented here. Surprisingly, there is a perception of unfairness by both the military retiree and the nonmilitary spouse concerning both the substance and the application of the law. With the recent draw downs and right-sizing of all branches of the military, it seems clear that the fundamental promise of a 20-year, half-pay retirement benefit to service members should be acknowledged as withdrawn by the United States and eliminated from all recruitment materials. Given the high divorce rate in the military, the provisions of the FSPA should be explained to all members upon enlistment and reenlistment. Our volunteer soldiers and sailors deserve to know the facts concerning this important area of military compensation so that they can intelligently decide whether to assume the risks and obligations of military life.

As required by our equitable distribution statute, findings of fact by state courts concerning contributions of both spouses to the acquisition of the retirement asset and to the marriage would serve to explain both equal and unequal distributions of the military retirement to the parties so that the fairness of the court's decision can be understood and evaluated. Whether to treat the military retirement as property solely of the member, as property of the member and his or her spouse, and whether a division should be equal or unequal remains the prerogative of the state family court judge. The fair exercise of discretion by the court largely determines whether the FSPA will protect former spouses or victimize military retirees.

[1] 32 C.F.R. Part 63 (1986).

[2] 32 C.F.R. [sections] 63.6(c)(7) (1986).

[3] Act Nov. 5, 1990, Pub. L. No. 101-510, Div. A, Title V, Part E, [sections] 555(e), 104 Stat. 1570; interestingly, the 1990 amendment required military members to continue to make payments for a period of two more years until November 5, 1992. For an example of a retroactive suit see Lewis v. Lewis, 695 F. Supp. 1089 (D.C. Nev. 1988), where the wife sued to reopen a 1974 state divorce, the controversy was removed to federal court, and wife prevailed. She was aided by Nev. Rev. Stat. [sections] 125.161 (1987), allowing the reopening; this did not offend old FSPA. Same scenario in California; see In Re Marriage of Potter, 224 Cal. Rptr. 312, 179 Cal. App. 3d 73 (Cal. Ct. App.. 1986). The controversy is not settled in Texas; see Trahan v. Trahan, 894 S.W.2d 113 (Tex. App. 1995), holding that the FSPA amendment did not destroy wife's retroactive award that was res judicata in Texas. Florida never passed legislation allowing reopening so the retroactive issue appears closed here.

[4] 10 U.S.C.A. [sections] 1408(c) (West Supp. 1994). In Bernhard v. Bernhard, 22 FLR 1089 (Pa. Super. Ct. 1996), a lower court order dismissing an army colonel's divorce petition was reversed. Although the couple had purchased a home in Maryland and resided there for 15 years, the wife failed to prove that the husband had abandoned his Pennsylvania domicile since a service person's domicile is presumed not to change from that person's domicile at time of enlistment and is largely a matter of intention. Thus "domicile" cannot be assumed simply by establishing a family in a particular state since military personnel have no choice concerning where they may be stationed. Had the wife filed in Maryland, the husband could have raised a jurisdictional defense or done nothing and defended any pension division administratively at Defense Finance. Note, however, that express consent to pension jurisdiction is not required; participating in the case on the merits or requesting affirmative relief is sufficient. Allen v. Allen, 484 So. 2d 269 (La. Ct. App. 1986), cert. den., 488 So. 2d 199, 107 S. Ct. 178. See also Sheppard v. Sheppard, 286 So. 2d 37 (Fla. 1st D.C.A. 1973) (as to military domicile), and Miller v. Miller, 222 Cal. Rptr. 652 (Cal. Ct.App. 1986); FSPA prevents "forum shopping" by nonmilitary spouse.

[5] Deloach u. Deloach, 590 So. 2d 956, 968 n.8 (Fla. 1st D.C.A. 1991); 10 U.S.C.A. [sections] 1408(d)(2) (West Supp.1994).

[6] 10 U S.C.A. [sections] 1408(a)(2)(C) (West Supp. 1994).

[7] 32 C.F.R. [sections] 63.6 (h)(2) (1994).

[8] Defense Finance and Accounting Service FSPA Bulletin dated October 24, 1995.

[9] See 10 U.S.C.A. [sections] 1408(c)(4) (West Supp. 1994).

[10] Foreign Service Retirement and Disability System (FSRDS) payments of retirement annuities to former spouses end upon remarriage of former spouse before age 55 if remarriage occurred on or after November 8, 1984; Under the Foreign Service Pension System (FSPS), for employees who began service after January 1, 1984, payments to former spouses end upon remarriage of former spouse before age 55. See 22 U.S.C.S. [subsections] 4068, 4071j(a)(1)(B) (Law. Co-op. 1993); Central Intelligence Agency (CIA) annuities payable to former spouses are terminated upon remarriage of former spouse before age 55. 50 U.S.C.S [sections] 403. (Law. Co-op. 1993). Social Security System benefits for former spouses terminate upon remarriage of the former spouse. 42 U.S.C.A. [subsections] 402(b)(1)(H) and (c)(1)(H) (Law. Co-op. 1993).

[11] 32 C.F.R. [sections] 63.6(h)(3) (1990); See also Cushing, The Ten Commandments of Military Divorce: Representing The Non- Military Spouse, 69 Fla. B.J. 66 (July/Aug. 1995), 69 Fla. B.J. 84 (Oct. 1995). 12 32 C.F.R. Ch. I [sections] 63.6 (1986).

[12] Current address of Defense Finance for retirement split applications is: Defense Finance and Accounting Service Cleveland Center, Code LF- Room 1417 Garnishment Operations Directorate P.O. Box 998002 Cleveland, OH 44199-8002

[14] 32 C.F.R. Part 63 (1990); Fla. Stat. [sections] 61.076 (1988).

[15] See Deloach v. Deloach, 590 So. 2d 956, 968 n.8 (Fla. 1st D.C.A. 1991).

[16] Diffenderfer v. Diffenderfer, 491 So. 2d 265 (Fla. 1986).

Peter C. Cushing is a board-certified marital and family attorney. He is a Commander, Judge Advocate General Corps, USNR. Mr. Cushing has practiced law in Orlando since 1984. He is a member of the Florida, New York, and Hawaii bars. Mr. Cushing has written and lectured on military law and has represented active duty and retired military members from all branches of the services for over 15 years.

This column is submitted on behalf of the Family Law Section, Deborah Brandstatter Marks, chair, and John S. Morse, editor.
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Date:Dec 1, 1997
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