Disability Distribution and Survivor Benefit Plan Coverage in a Virginia Divorce

In divorces where one or both spouses serve in the military, or are retired servicemembers, the situation can present unique issues because both state and federal law will govern the divorce.  For example, state law in Virginia grants courts jurisdiction over divorces when a servicemember or their civilian spouse resides in a county, is stationed there, or last lived there prior to moving overseas.  However the Servicemembers Civil Relief Act (SCRA), a federal law, also applies and it can allow servicemembers to establish domicile in other ways.  It also requires a stay of proceedings in certain situations when the divorce would interfere with an active duty soldier’s service.  This is just an example to illustrate how both federal and state law intersect in cases of military divorce.  One area where this is particularly common is with respect to military retirement, disability, and survivor benefit coverage.  It is important to understand how federal laws impact the distribution of these assets during a military divorce.

 

Retirement

            The Uniformed Services Former Spouses Protection Act (USFSPA) governs the division and distribution of military retirement pay.  This is a federal law that authorizes state courts to divide a servicemembers’ “disposable retired pay.”  Disposable retired pay is the gross retirement pay minus: recoupments or repayments to the federal government, court-martial fines or forfeitures, disability pay benefits, and Survivor Benefit Plan premiums.  Courts can only divide the retirement pay after those deductions are made and cannot order a split of the gross retirement pay.  The USFSPA also allows for the direct payment of the military retirement benefit to the former spouse in cases where the marriage overlapped for ten or more years with the servicemembers time in the military.  For instance if John and Jane were married for 15 years before getting divorced and John served in the military for 10 of those years, Jane’s portion of the retirement pay can come directly from the Defense Finance and Accounting Service (DFAS) which administers military retirement pay.  A court could still divide the retirement pay if less than 10 years of the marriage overlapped with military service, but in those cases the pay would come from the former spouse.  In our example that means John would receive the entire retirement payment from DFAS and then would send Jane her portion.

            Importantly, the USFSPA only authorizes the division of military retirement pay; it does not provide any formula for the division.  That Military retirement and benefitsmeans state law governs how military pay is divided as long as it complies with the USFSPA.  In Virginia, military retirement pay is considered “marital property” when it is earned during the marriage.  To determine what percentage of the retirement pay is marital property you use a fraction where the numerator is the months or years married and the denominator is the total time the spouse served in the military.  As an example, if John was in the military for 20 years and was married to Jane for 10 of those years the fraction would be 10 / 20 or 50%.  That means one half of the retirement pay is considered marital property.  Normally a court would divide the marital property so that each party gets half.  Half of 50% would be 25%, so in our example Jane would receive 25% of John’s disposable retired pay.  In cases where the servicemember spouse is still on active duty the total time in the military remains to be determined.  In those situations the division would be phrased in a way that allows DFAS to fill in the blank with the total time served at retirement.

 

Disability

            As mentioned earlier, the USFSPA excludes disability pay form the definition of disposable retirement pay, meaning it cannot be divided by a state court in a divorce proceeding.  There are two forms of disability pay.  Military disability retired pay is granted to those disabled to the point where they cannot perform their duties.  If it is greater than the amount of retired pay it takes the place of retired pay and none of it is divisible.  If it is less than the amount of retired pay received it constitutes a portion of the retired pay that is not divisible.  The other form of disability is VA disability compensation, which covers disabilities developed while on active duty.  This disability payment requires the servicemember to wavie a corresponding portion of their retirement pay.

With both forms of disability pay the disposable retirement pay is ultimately reduced because the disability pay is either excluded or taken off the top.  This can have drastic implications for both a servicemember and their former spouse.  Consider the example where Jane receives 25% of Jack’s disposable retirement pay.  If Jack’s disposable retirement pay is $2000 per month, Jane receives $500 and Jack $1500.  If a portion of Jack’s retirement is for disability, it reduces Jane’s share by lowering the amount of disposable retirement pay.  Say $400 of the retirement pay is for disability, which means the disposable retirement pay is now $1600.  In this scenario Jane’s portion is reduced to $400 per month while Jack receives the remaining disposable retirement pay of $1200 plus the full disability portion of $400, so his monthly total rises to $1600.

As you can see the amount of disability pay can have a significant impact on each spouse’s portion of the military retirement pay.  One way to address this issue is with a Property Settlement Agreement (PSA).  Your attorney at Smith Strong can negotiate a PSA that requires the servicemember to make a payment each month that covers any money lost from the retirement pay due to the exclusion of disability pay.  Such a provision has been found to be enforceable by the Virginia Court of Appeals. 

As a final note, in some cases disability pay is paid concurrently with military retirement pay.  Concurrent Retirement and Disability Pay (CRDP) is available for military retirees who served 20 or more years and have a service-connected disability rated at 50% or higher.  In these situations the servicemembers retirement pay is not offset by the disability, which means a higher disposable retirement income. 

 

Survivor Benefit Plan

            A Survivor Benefit Plan (SBP) is an annuity that pays a monthly sum to the beneficiary after the death of a retired servicemember.  It is a portion of the former servicemember’s military retirement pay and exists to supplement that lost income.  SBP coverage is typically an issue in military divorces where a large percentage of the retirement pay is marital property.  In cases where a spouse is awarded SBP coverage it is important that the servicemember elects the coverage at the time he or she withdraws from active service.  If that is not possible DFAS will have to be notified with a copy of the court order.

The attorneys of Smith Strong, PLC can assist you in determining how a military retirement benefit would be distributed in your divorce.  Our attorneys are familiar with all of the intricacies of military benefits.  Please call one of our offices at 804-325-1245 (Richmond) or 757-941-4298 (Williamsburg). 

References:

Owen v. Owen, 14 Va. App. 623, 628 (1992)

Va. Code Ann. § 20-107.3