Division of Military Retirement Pay - Statutes and Case Law

© 2012 Brian Mork [Rev 1.3]

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Introduction

This page is an accumulation of Statutes and Case Law relevant to dividing military retired pay in divorce cases.  For related discussion, see different pages about promotions after divorce, general division of military retirement pay, or specifically division of Reserve military retirement pay.

Military retirements are a significant benefit, earned by both women and men. As of March 2011, there were more than twice as many military women divorcing than men.  Among enlisted, the military women divorce rate is about 3x that of men.  The overall military divorce rate in 2011 is 64% higher than it was in 2001. Military divorce is a significant social issue affecting both sexes. Dollar value of a military retirement in 2012 dollars range from $945,000 for an E-7 to $2,800,000 for an O-8.

This is a huge social issue that is not men vs. women.  See the video of Lt Col Patricia Larrabee question SecDef Rumsfeld for an example of a woman being taken advantage of.  This issue is about military members serving a nation vs. a legal system that struggles to understand a unique retirement system.  The goal of my web pages is to spread understanding and equity. When Lt Col Larrabee received a reply letter to her query, the answer was essentially, "The Military has done all it can to describe and advocate equity.  Now it is up to Congress to make it law."  Write your favorite legislator.  Educate your favorite attorney.

2012, Oklahoma Statute - Dual Coverture or Hypothetical Method mandated

5 May 2012, the Oklahoma state governor signed an Oklahoma law implementing the Federal recommendations about prorating for time AND rank.  They thus join Texas and other states.  This is the Hypothetical Method published by DFAS or the Dual Coverture family of methods first documented by Dr. Brian Mork.  Both arrive at the same mathematical answer, and Dual Coverture Value is much simpler.  Oklahoma SB1951 Section 3(F) states:

"If a state court determines that the disposable retired or retainer pay of a military member is marital property, the court shall award an amount consistent with the rank, pay grade, and time of service of the member at the time of separation."

In other words, retirement enhancements after a divorce, due increased rank, pay grade, or time of service are not marital assets and are not to be divided.  This seems so simple of a concept, yet over and over again, military members are forced to divide enhancements earned after divorce.  A second spouse, if there is one, is deprived of all their marital contribution because the first spouse takes it.  Reviewing court opinions, I find the causal factor is that lawyers and courts simply do understand the military system.  I want to spread understanding, which will save court time and expense, and reduce the vitriolic attitudes surrounding this isssue.

2011, NJ Appellate Court Ruling - Coverture Fraction and COLA

A January 2011 New Jersey Appellate Court ruling confirms the inability of time-only or point-only coverture fractions to equitably divide a military retirement asset. A blog entry from the lead defense attorney in the NJ case questions whether the single time coverture fraction is viable any more for military situations. Other contract firms that generate military division orders for attorneys have picked up on the same court case and discuss it on their web pages, claiming everything is too confusing now, however, a rebuttal numerically shows how the author is confused and highlights the equitable simplicity of the Dual Coverture Value method.

Although the NJ Appellate Court confirmed the utility of Dual Coverture methods, they declined the defendants request to use it because they incorrectly analyzed time-value issues. See Barr v. Barr opinion page 22-24. The court wrote
"We reject this proposition as presented because it limits plaintiff's interest as if the pension were awarded at the time of divorce, rather than deferred for almost twenty years. We have disapproved of "the mixture of two separate and distinct evaluation and distribution methods by valuing the pension in present-day dollars and then delaying distribution to a date...in the future. [The proposed method] calculate[s] the spouse's share based on present value, and defer distribution until the pension is received. Such an approach is indefensible." (italics added)
The premise asserted in the italicized part is factually incorrect. The third sentence is also factually incorrect. The court was wrong to assess this as a concern of present-value and future-value dollars.  The two pages following the above quote in their opinion become irrelevant discussion because they are based on a faulty factual assertion. Once the factual mistake was made, judicial arguments took them down the incorrect path. They claim this method does "...valuing in present-day dollars and then delaying distribution to a date in the future." This is false, in contradiction to many Federal government accountants that looked at dual coverture methods before publishing the Dept Defense report to Congress and Senate Armed Services Committees. The Appellate Court misunderstood, and based on factual inaccuracy, made a faulty judicial decision. The method proposed by the Defendant does give time-value of money to the non-military spouse for all the intervening years between valuing and distribution, and it does give calculable precision. Using Dual Coverture, both parties will get increases each year when the military pay charts reflect increases in military pay.

The New Jersey court opinion is analogous to the Appellate Court saying, "1+1=3, and because the answer is an odd number, we reject the defendant's claim" (fact is wrong so conclusion is wrong). Sadly, the Appellate Court is where Circuit Court errors are suppose to be corrected (at great cost to the petitioner I might add). A state Supreme Court is more worried about the law, per se, not the application of law to any individual case. At present time, it is not clear to me that the court system has any remedy process to fix individual Appellate court factual mistakes that material damage. If there is honor among the judges of the NJ Appellate panel, they should vacate their own decision and issue a new opinion.

Both the Hypothetical Method and the Dual Coverture Method both yield only a fraction, which is then applied to continually increasing present-day military pay charts, so both parties get COLA. If you have trouble understand that both parties get time-value of money or have been confused by attorneys (or the NJ court opinion) claiming otherwise, I encourage you to read my memorandum titled "Attorney Instructions - Division of Active Duty and Reserve Military Retirement" and "Division of Military Retirement Promotion Enhancements Earned After Divorce".  The first document gives mathematical proofs and quantitative examples down to the dollar.  BOTH methods give increases for time value of money. If anybody tells you otherwise, ask them for mathematical proofs and quantitative examples, as I have done.

The NJ court recognized that to equitably divide a military retirement based on pay tables (time and rank lookup), the formula requires a dual coverture fraction of time and rank, but they stumbled when trying to implement the idea. 

The NJ Court levied upon the military member to prove "with calculable precision" what portion of a retirement is due to rank promotion, and to prove that the spouse didn't contribute, a.k.a. that you're using the correct fractions, and that you're putting the correct numbers into the two fractions. The NJ Appellate Court wrote,
"When a claim is made to exclude post-dissolution sums, the employee-spouse seeking exclusion bears the burden of proving with calculable precision what portion of the increase in the pension's value is immune from equitable distribution."
It's not clear why the burden of proof would exist to prove that post-marital earnings are not part of a marriage.  Shouldn't the burden of proof be on the person trying to take them even though the marriage was dissolved?  For example, earnings deposited into a 401(k) after marriage, for example, are presumed to belong to only the earner.

Fortunately, such proof is straitforward because the structure and precision of military retirement formulas and pay tables leave little ambiguity.  Suitable arguments are developed in my web page about promotion enhancements. The burden of calculable precision is easy. Be sure to reference the DoD Report to Congress and the Defense Finance and Accounting Service (DFAS) publications because they are authoritative non-biased sources that have already considered dozens of competing interests in America.  Both the DFAS and DoD documents are available below.  The DoD Report to Congress distills input from a dozen different military and legal National organizations concerned about these issues (see references at bottom). The publications document calculable precision (even provide example calculations) and clearly state that their formula accomplishes the desired goal.

Although the military member in the NJ case proposed a dual fraction method (and specific numbers to put into the fractions) that give results identical to the DFAS recommended formula, the NJ court rejected the proposed specific implementation, claiming incorrectly that it did not give the ex-spouse passive "earnings" or present-value to future-value (COLA) adjustments from the date of divorce up to retirement.

The NJ Appellate Court appears to have ignored factual instruction of the Federal DOD report and the DFAS document.   These documents have undergone countless hours of public scrutiny and debate. DFAS wrote the following text that is blatantly demonstrates the court's error regarding former spouse portions:
"We apply retired pay COLAs to the hypothetical retired pay amount up to the member’s actual retirement date to find a “present value” of the hypothetical retired pay as of the member’s actual retirement date."
In fact, DFAS was so concerned that this would appear biased against the military member, that they felt the need to clarify:
This adjustment does not result in the former spouse benefiting from the member’s additional service time or promotions after the hypothetical retirement date. It simply provides the former spouse with the amount he or she would have received had the member actually become eligible to receive retired pay on the hypothetical retirement date.
Notice the last two sentences mitigate the concern that it's biased because it sounds too generous to the non-military member! There is no way to read this quote and claim, as the NJ Appellate Court did, that present value or time-value of money (in the form of COLA) was being withheld from the non-military spouse.

The DOD Report to Congress Concerning Federal Former Spouse Protection Laws, page 71-72, dated September 5, 2001:
"Congress should amend the USFSPA [laws] to provide that all awards of military retired pay be based on the member’s rank and years of service at the time of divorce. This provision should be exclusively prospective. For example, if a future divorce occurs when the member is an O-4 (i.e., Major/Lieutenant Commander) with 14 years of creditable service, the award of military retired pay must be based on that rank and time served. That the member retires as an O-6 (i.e, Colonel/Captain) with 24 years of service is irrelevant to the award of military retired pay as property.

"The pay increase attributable to the promotions and additional time served should be viewed as the member’s separate property. [emphasis mine] However, as a matter of equity, the former spouse should benefit from increases in the pay table applicable to the O-4 grade. Thus, as the pay for an O-4 with 14 years of service is increased due to increases in the pay table, so too is the value of the allocation to the former spouse. The objective in this regard should be to provide the former spouse, on a present value basis, with approximately the same amount of retired pay that he or she would have actually received had payments begun on divorce. DFAS should include a formula in its recommendations that could be used by parties who divorce while the member is still on active duty.
I would again emphasize that the only way to do what is written in the quote above with a formula in a court order is the Hypothetical Method or a Dual Coverture method, and the Dual Coverture Method is much simpler and better for both parties. This Federally authoritative passage directly opposes the NJ Appellate Court claim of fact, with a specific example almost identical to the NJ case. It must be that the Appellate Court judicial panel didn't read this document or were horrendously biased against the military member.

According to the last sentence recommendation quoted above from the Congressional report, DFAS did include a formula, and this formula gives results identical to the dual fraction method requested by the defendant in the New Jersey Appellate Court case. The New Jersey Appellate Court erred by making factual assertions outside their area of expertise, and in contradiction to facts asserted by the Department of Defense, vetted through the Senate Armed Services Committee, House Committee on Armed Services, and Defense Finance and Accounting Services.

2009, Michigan Appellate Court, Skelly v. Skelly

Bonuses earned after the divorce may not be divided.  This would apply to both military Promotion Enhancements and military Reserve Early retirement Payments (PEEP) before age 60 because both are retention methods used by the military.  In Michigan, separate assets cannot be invaded unless  the receiving party demonstrates the property otherwise awarded is insufficient for suitable support and maintenance (MCL 552.23), or the prior spouse provides assistance in the acquisition or growth of PEEP (MCL 552.401). If the prior spouse has extra money to spend on benevolence, gifts, and trips, need is not demonstrated.  There is no assistance in acquistion or growth of PEEP; there may be assistance in acquiring some prior existing retirement point value, but there is zero assistance in active acquisition of additional PEEP benefit.

Specifically rebutting two typical arguments made againt the military member, 1) note PEEP is not passive growth of value like earning interest on monies not yet divided, and 2) note simply because the Federally mandated formulas are calcuated from, or "based on" the marital portion of point values, this is not the same as contributing to the separate and increased value thus calculated. Marital retirement points are "re-used" to calculate enhanced benefit, but the enhanced benefit is above and beyond and separate and not comingled and does not devalue the divisionable portion at all.

It is instructional to quote the Appellate court reversing the bad trial court opinion on the left side, and to rewrite the same words applying to a military situation on the right:

Here, the retention bonus was not earned during the marriage; thus, no portion of the retention bonus was marital property. Plaintiff had not yet earned the $ 180,000 retention bonus at the time of the parties' divorce. It is undisputed that plaintiff was required to work until May 31, 2009 in order to receive the [***7] $ 180,000 bonus. Although two installation payments were made during the marriage, plaintiff had not earned that money when it was disbursed because he had not satisfied the condition subsequent (i.e., remain employed until May 31, 2009) required by the agreement between him and his employer. If plaintiff had not remained employed by Ford until May 31, 2009, plaintiff would have been required to repay the installments he had previously received. Consequently, plaintiff did not earn the retention bonus until May 31, 2009, which occurred after the judgment of divorce was entered even though part of it had been advanced to him. Unlike in Byington where the compensation package was earned before the entry of the judgment of divorce, no portion of plaintiff's retention bonus was earned during the marriage. The trial court erred when it determined that any portion of the retention bonus was marital property.

[*584] Furthermore, the trial court erred when it concluded that the third payment was separate property subject to invasion. A party's separate estate is the property the party generally takes away from the marriage separate from the marital assets, Reeves, supra at 494. However, [**372] plaintiff [***8] did not take his retention bonus away from the marriage because he had yet to earn it. Therefore, the third installment of the retention bonus should not have been considered as separate property, and, as a result, was not subject to division by the trial court at all. We reverse the trial court's award of any portion of the retention bonus to defendant.
Here, military promotion enhancement and early payments (PEEP) retention bonuses were not earned during the marriage; thus, no portion of the PEEP was marital property. Member had not yet earned the PEEP at the time of the parties’ divorce.  It is undisputed that the plaintiff was required to work for 3 years past attaining new rank and for duty past January 28th, 2008 in order to receive PEEP.  No payments were made during the marriage and military member had not earned the money because the necessary work earning PEEP was not satisfied until years later. If military member had not continued duty with the Air Force, military member would not have received any PEEP.  Plaintiff did not earn PEEP until years after the divorce was finalized.  Unlike in Byington where the compensation package was earned before entry of the judgement of divorce, no portion of the military member’s PEEP was earned during the marriage, and the divisible retirement value (amounts and dates of payment) that were earned during the marriage are in no way reduced or burdened by using them to calculate the separate property value. The trial court erred when it determined that any portion of the PEEP was marital property. 

Furthermore, the trial court erred when it conclude that PEEP was separate property subject to invasion.  A party’s separate estate is the property the party generally takes away from the marriage separate from the marital assets.  However, military member did not take his PEEP retention bonus away from the marriage because he had yet to earn it. Therefore, PEEP retention bonus should not have been considered as separate property, and, as a result, was not subject to division by the trial court at all. We reverse the trial court's award of any portion of the retention bonus to ex-spouse.

The Appellate Court continued (mostly quoted, shortened and paraphrased):

Whether or not a future, unearned bonus can be divided in a divorce judgment is an issue of first impression for this Court. [bold added]  Any future bonuses paid to plaintiff in this case will not have been earned during the marriage, and should not have been considered a part of the marital estate.

Like the retention bonus previously discussed, future, speculative bonuses do not fit into either the category of marital assets, or separate assets, because they do not yet exist. These bonuses were not earned during the marriage and are based solely on the potential occurrence of future events unrelated to the marriage. Thus, the trial court clearly erred when it granted interest in any future bonuses earned over the course of a prospective career. The trial court erred in granting division of any bonuses that may be earned in the future from an employer.

1997, Illinois Appellate Court, Wisniewski v. Wisniewski

Mark Sullivan uses this case to claim that retirement enhancements earned after a marriage should be divided as a marital asset - in direct conflict to the 2009 Skelly case.  Sullivan's claim reflects a misunderstanding of the difference between passively earned income which is created by simply waiting for a time (interest from investment capital) vs. enhancements to retirement earned by active effort (such as competitively earned military promotions).  Mark's argument is so egregious while his presence in the legal community is so assumed to be correct, that it was worth writing a a detailed rebuttal to his claim. See also another dedicated web page about division of promotion enhancements.

Mark used this civilian retirement court case to argue that military promotion enhancements actively earned after the marriage are divisible. To use this civilian case in this manner is relying on judicial unfamiliarity or ignorance and an opposing attorney who doesn't know the difference.  This, in turn, causes judicial confusion and inequity against military members.  Mark has declined interactive discussion to clarify this issue, so I would value correspondence with anybody from the legal community who sees error in my analysis, and can help the real truth become part of the legal precidence.

1977, Arizona Supreme Court, VanLoan v. VanLoan

In 2012, Mike McCarthy used this as an expert witness against military members to deny a Dual Coverture or Hypothetical Method (either of which properly handles promotions after a divorce).   In VanLoan, after 19.4 years of married military duty, the military member argued that nothing should go to the ex-spouse because retirement was only an expectation.  Instead the court mandated a time-based coverture fraction to determine what portion of the military retirement was a marital asset.  A time(only)-based fraction is fine if there is NO promotion after the divorce, otherwise, it is inequitable against the military member (see the 2011 New Jersey Appellate decision discussion).

This 1977 case is superceded by passage of USFSPA, but a defense attorney may need to argue against it if opposing counsel cites it in a misleading way, suggesting to use single fraction methods, inappropriately claiming promotion enhancements after divorce are a marital asset. Van Loan is silent on the issue of promotions after divorce, because there were no promotions after divorce in the Van Loan case.  All Van Loan says is "Rather than give nothing to an ex-spouse after 19.4 years, retirement must be prorated according to time when there is no post-divorce promotion."  They used a time-only Single Coverture fraction of (17 yrs) / (total years).

Incidentally, the court ordered spousal support payments to stop when retirement payments were awarded.

More to Come

Send me your favorite court case with a short write-up and I will include it here.  I will continue to add the dozen or so cases I am familiar with, and want to collect more.  Here is a table of some notes, to be expanded and clarified when I have time.

Year
Name
State
Comments
1986
King
Michigan
Disability may not be divided. Prohibits circumvention by awarding an “offsetting award”. If member waives retirement to get disability, then waived retirement portion is NOT divisible.
1986
Siefert
North Carolina
“Non-military spouse is permitted to share in increases in retirement due to post-separation efforts which were built on the foundation of marital effort”. The court was talking about passive financial interest amounts on the value of a retirement, which was dated at the time of divorce rather than the time of receiving the award. Be careful to not cite this regarding enhancements due to active effort such as promotions or additional duty, which are easily, numerically, separable.
1995
Boonstra

Enforces finalized Judgement of Divorce that said agreed “50% of pension” after party appealed 7 years later. However, this is differen than an order requiring  “50% of pension earned during the marriage”.   Re-interpreting what is a marital asset (years) was forbidden.
1997
Gingrich

DFAS “hypothetical method” (prorate with TWO coverture fractions of time, and rank promotions) implicit. Only debate in this case was about fixed-dollar (old chart with no COLA), or fixed-rank (which gives COLA because military officers get raises each year). Indiana Overholtzer case argues that COLA was NOT part of the divided asset, so military member retains it all (not divided).
1998
McNamara
Michigan
Retirement treated as income, not as divisible asset. Appeal court decides against “he keeps funds he contributed to” and “she keeps funds she contributed to”.
1998
VanderVeen
Michigan
“built on prior years” or “on a foundation of prior years” is NOT sufficient cause to divide a promotion portions of a pension. Application: Reserve early retirement payements before age 60 are dependent on separate, distinct, periods of duty that are not dependent on married time in any way – it's just as if they and the resultant retirement benefit were a separate job.
2008
Tillman
Alaska
In order to do 60:40 split, non-pensioner IS given time-based coverture fraction of promotions earned post-divorce,
ONLY because of the intended 60:40 split.  A non-50:50 bias is an argument why most cases should NOT divice post-divorce promotions.
2008
Hart
Guam, Arizona, California
Jurisdictional nightmare.
2008
Overholtzer
Indiana
Quote: “Any additional retirement/retainer benefit which accrues to [retiree] as a result of his continued active service with the United States Air Force, such as increases in military rank, increased time in service, and annual adjustments authorized for active duty personnel, shall be the sole and separate property of [retiree] and shall not be subject to any interest of [spouse] and shall not be included in the calculation.” They even give all COLA to only the military member.
2009
Hays
Oregon
Awarding what wasn't part of original property at time of divorce is in error.
2009
Snodgrass
Kentucky
Specifically deals with promotions after divorce and Reserve early retirement (?), favorable to military member.

Grier
Texas
Heavily cited. “Valuation at the time of divorce” says promotion benefits go only to retiree. After  USFSPA, does court still need to set an evaluation date and adjudicate what part of military pension was marital property?

Conclusion

I am open to interactive discussion to clarify any of these issues with spouses, attorneys or others of the legal community.  I continue to strive for equity for both parties of a divorce, integrity exhibited by the attorneys, and lucid clarity for the courts.  Feel free to contact me if I can help you work through your legal situation.

References

  1. Defense Finance and Accounting Services' publication "Guidance on Dividing Military Retired Pay", 2 April 2012, 20 pgs, 119 KB pdf. (DFAS.mil, increa copy)  This replaces the prior edition titled "Attorney Instructions - Dividing Military Retired Pay", April 2001, 19 pgs, 74kb pdf. (DFAS.mil, increa copy).
  2. DoD Report to Committee on Armed Services of the US Senate and House of Representatives, 1998. (Defense.gov, increa copy) (84 pgs, 279kb pdf)
  3. Attorney Instructions - Division of Reserve Military Retirement (increa copy) (24 pgs, 381kb pdf)
  4. Marshall Willick position paper to DoD Report committee. 1999.
  5. Mark Sullivan editorial regarding the DoD Report to Congress. 2001.
  6. Division of Military Retirement Promotion Enhancements Earned After Divorce (increa copy) - a rebuttal to Mark Sullivan's editorial.
  7. Appellate Court of Illinois Marriage of Wisniewski, 675 N.E.2d 1362, 1369 (Ill. Ct. App. 1997).
  8. Oklahoma state SB1951, signed into law 5 May 2012 (6 pages).
  9. Barr v. Barr New Jersey Appellate Court ruling, January 2011, 418 N.J. Super. 18 (App. Div. 2011). Argued by Jennifer Millner and Eliana T. Baer and Robert A. Epstein v. Mr. Silber and David E. Alberts in front of Axelrad, R.B. Coleman, and Liholts. (FindLaw.com, Law.com #1Law.com #2, Leagle.comRutgers.edu, increa copy) (31 pgs, 106kb)

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