Significant Legal Changes To Military Divorce In Florida
Recent amendments to the Uniformed Services Former Spouses Protection Act (“USFSPA”) and a seminal U.S. Supreme Court decision affecting military disability pay have upended the last twenty years of “settled” law in many states. Florida got it right in the area of valuation of military pensions and wrong with respect to how to deal with military disability pay in the context of dissolution of marriage.
MILITARY PENSION DIVISION IN THE EARLY YEARS
In 1981, Congress passed the Uniformed Services Former Spouses Protection Act, 10 U.S.C. §1408, allowing state courts to treat military pensions as either property solely of the member or as property of both the member and his or her spouse in a dissolution of marriage action. Federal action was required, since before USFSPA, the area of military pension division was considered pre-empted by federal law and a military pension was not divisible by state courts. McCarty v. McCarty, 453 U.S. 210 (1981).
Since at least 1988, by statute and as permitted by USFSPA, Florida has recognized that military pensions are marital property subject to equitable distribution. Fla. Stat. §§61.075, 61.076 (2017). Even prior to the passage of the equitable distribution statute, case law in Florida recognized that military pensions were marital property subject to division between spouses upon dissolution of marriage. (1)
EARLY VALUATION ISSUES
Although state courts recognized that military and other pensions were marital property of great value, what was less clear was how to value a non-military spouses’ interest in the military pension, particularly when said pension was not yet vested or not yet in pay status. Should the value of the non-member spouse’s interest in the military pension be based on its value as of the date of filing of the petition for dissolution of marriage, the date of the final judgment of dissolution, or the date that the member actually retired?
The liberally construed “foundation of marital effort” theory held to the idea that the final value of the pension was based on earlier marital efforts and, therefore, it was fair for the non-military spouse to share in the enhanced value of the military pension which resulted from longevity or time in service, promotions, and the like. Using a strict coverture fraction with the numerator being the months of marital service and the denominator being the total months of creditable military service resulted in the non-member spouse receiving a “smaller piece of a bigger pie,” but included value enhancements in the pension and was generally to the economic advantage of the non-military spouse. On this basis, the Deloach fraction was an acceptable method of dividing the military pension and had the advantage of permitting the computation to be done at the time of entry of final judgment, leaving open the denominator of the fraction (total months of active duty) in cases. It was the final number of months of creditable service and the final rank of the member that was used to compute retired pay, and this generally larger amount allowed the non-military spouse to enjoy these enhancements and receive a larger retirement benefit based on the idea that the later years and rank were somehow the product or culmination of the earlier years of military marital service. Deloach v. Deloach 590 So.2d 956 (Fla. 1st DCA 1991). (2)
FLORIDA REJECTS FOUNDATION OF MARITAL EFFORT THEORY IN BOYETT v. BOYETT, 703 So.2d 451 (Fla. 1997) (3)
Florida is not a community property state, rather Florida is an equitable distribution state. On this basis, the advocates of military members and those employees who have earned government or private retirements argued that it was unfair to allow the non-military spouse to receive the benefits of time in service and promotions that occurred after the date of the divorce or filing of the case. They argued that these enhancements occurred because of non-marital labor and should be segregated and set aside to the benefit of the employee. The method of accomplishing the necessary computations has been to indulge in the fiction that the employee retired at the appropriate valuation date and figure the present dollar value of the monthly benefit that would be paid at that date as if the employee had actually retired, but without any “early retirement penalty.” This dollar amount of the monthly benefit is then divided by two, if the parties were married as of the date of initial service or employment or if there is pre-marital service or employment, the correct percentage of the fictional retirement is calculated as marital and then divided by two. The result of this computation determined the share of the non-military spouse as of that date. Cost of living adjustments are added to this figure up until the date of actual retirement, in accordance with the federal or private plan provisions. See Fritz v. Fritz, 161 So.3d 425 (Fla. 2d DCA 2014).
The Deloach theory of the foundation of marital effort that justified the sharing of post-dissolution enhancement in pension benefits has been flatly rejected as unfairly compensating the non-military spouse for efforts and labor of the member spouse after the dissolution of marriage. Boyett at 452.
With the appropriate computation, the member spouse has set aside to him or her all benefits earned after the date of dissolution and the non-military spouse receives cost of living adjustment, so that his or her share of the retirement is not reduced by inflation or other market factors. Such has been the general state of the law since Boyett in 1997, and due diligence has required that the practitioner be cautious not to ignore its mandate.
RECENT FEDERAL LEGISLATION AFFECTING VALUATION OF THE MILITARY PENSION
In 2017, Congress amended the Uniformed Services Former Spouses Protection Act, 10 U.S.C. §1408 (a)(4), to change the definition of retired pay that can be equitably distributed by state courts. Since military pension benefits are governed by federal laws that are generally inconsistent with state’s laws, the state’s laws are preempted by the federal limitations and requirements due to the Supremacy Clause of the United States Constitution. Here is the essential language of the new statute wherein subparagraph {A} refers to that retired pay subject to equitable distribution:
(B) For purposes of subparagraph (A), the total monthly retired pay to which a member is entitled shall be-
(i)
the amount of basic pay payable to the member for the member’s pay grade and years of service at the time of the court order, as increased by
(ii)
each cost-of-living adjustment that occurs under section 1401a(b) of this title between the time of the court order and the time of the member’s retirement using the adjustment provisions under that section applicable to the member upon retirement.
Further, to implement the amendments to the statute, the Department of Defense Financial Management Regulations were amended at DoD 7000.14-R, Volume 7B, Chapter 29 in June of 2017 with application to cases where the former spouse and the member are divorced after December 23, 2016 when the court awards the former spouse a division of property and the member has not yet retired. The amount of “disposable retired pay” subject to division is limited consistent with the statute quoted above and, further, the court order dividing the pension must contain the following information:
If the member entered the service before September 8, 1980:
1. The fixed amount, the percentage, the formula, or the hypothetical award that the former spouse is granted;
2. The member’s pay grade at the time of divorce;
and
3. The member’s years of creditable service, on the date of divorce, dissolution, annulment, or legal separation.
In the case of a reservist, the Reserve retirement points on the date of divorce, dissolution, annulment, or legal separation.
If the member entered the service on or after September 8, 1980:
1. The fixed amount, the percentage, the formula, or the hypothetical award that the former spouse is granted;
2. The member’s retired pay base (high-3) amount at the time of divorce (the actual dollar figure);
And
3. The member’s years or creditable service, on the date of divorce, dissolution, annulment, or legal separation.
In the case of a reservist, the Reserve retirement points, on the date of divorce, dissolution, annulment, or legal separation.
Clarification
If the award language in the court order is missing any of these listed necessary variables in paragraph 280803 of the above quoted amended DoD Financial Management Regulation, then the court will have to clarify the award. (DOD FMR 7000.14-R section 290804).
WHAT DOES THE AMENDED USFSPA DO?
First, the date of valuation of the military pension is changed from the filing date of the petition for dissolution of marriage to the date of the court order that divides the military pension, as a matter of federal law. Important to note is that the amended FSPA imposes a limitation on the amount of “disposable retired pay” that can be divided and it appears that the new definition of “disposable retired pay” has pre-empted inconsistent state laws. In Florida, case law states that the date of the filing of the petition for dissolution of marriage is the date a military pension ceases to be a marital asset so this is a further limitation on marital asset classification, as opposed to valuation in military dissolution cases filed in this state. Willman v. Willman,, 944 So.2d 1151 (Fla. 1 DCA 2006). There will thus be cases where counsel will have to determine how to apply the even more restrictive Florida law to equitable distribution of a military pension, and coordinate both state and federal limitations to achieve a proper distribution.
Second, consistent with Boyett the disposable retired pay that is subject to division is the amount of basic pay measured by the member’s pay grade and years of service, again at the time of the court order, which in most cases will be the date of the final judgment of dissolution of marriage.
Third, the non-member spouse is entitled to cost-of-living adjustments that occur between the time of the court order and the member’s retirement. Congress has thus rejected the “foundation of marital effort” theory and the Deloach fraction, as a matter of federal law, thus pre-empting inconsistent laws in any state or federal territory. The end result of the amended federal law is to the financial advantage of the military member and will be implemented by the Defense Finance and Accounting Service as they review orders submitted to that office from Florida and other state courts.
RECENT DECISION BY THE UNITED STATES SUPREME COURT AFFECTING DISABILITY WAIVERS IN FAMILY LAW CASES; HOWELL v. HOWELL, 581 U.S. ____ (2017)
The law has long recognized that military disability payments are not subject to equitable distribution in a dissolution of marriage action. Such was the mandate of Mansell v. Mansell, 490 U.S. 581 (1989), a case where the member received disability payments before the final judgment of dissolution of marriage and “all cards were on the table,” meaning there was no secret agenda and no unilateral change in financial circumstance post final judgment related to the disability waiver. Such disability payments could be considered in an alimony ability to pay analysis, but were not property to be divided in equitable distribution. (4)
However, in situations where the member applied for disability after the final judgment of dissolution of marriage and waived a portion of his or her disposable retired pay in order to obtain such benefits, tax-free, a problem arose. The problem was that in cases where the disability rating was less than 50%, the law required the member to waive, or give up, his or her regular retired pay, dollar for dollar in the amount of tax-free disability received. This reduced “disposable retired pay” and, thus, reduced the court ordered and often agreed upon share of the non-military spouse. When this occurred, understandably, the non-military spouse cried foul and the parties returned to court to adjust the decree. After over fifteen (15) years of litigation of the issue, the majority of states declared the non-military spouse to have the equities on his or her side and ordered “indemnification” from a non-disability source. If the case called for alimony, alimony could be adjusted. The parties often agreed in marital settlement agreements to “indemnification” meaning that although the member spouse had a right to apply for disability benefits, such application and perhaps granting of the application to the benefit of the member could not serve to reduce or diminish the non-military spouse’s monthly pension benefit. Some cases even directed indemnification in the absence of a contractual agreement as a matter of general equity. (5)
As this scenario played out nationwide, the Howell case reach the United States Supreme Court. In Howell, the non-military wife was awarded 50% of the husband’s retirement pay. About 13 years after the divorce, the husband applied for and received a 20% disability, reducing his “disposable retired pay” by about $250 per month because of the required waiver of regular retired pay. This reduced the wife’s share of the retirement by $125.00 per month. Was the wife entitled to indemnification? The Arizona court said yes, she had a vested right. The United States Supreme Court, however, unanimously said no, the husband had a federal right to apply for and receive disability, and a state’s court cannot “vest” that which they have no right to give in the first place. The non-military spouse’s rights were, at best, contingent upon the member spouse’s right to apply for and receive disability pay at any time. Pre-emption applies and there are important federal interests at stake: interests in attracting and retaining military personnel. (Howell at 8). State courts remain free to take into account that disposable retired pay might be waived, and take into account such possible reduction in value when it assesses family support. For the practitioner, the importance of a reservation of jurisdiction over alimony must be evaluated in each case. (6)
CONCLUSION
Military family law cases involve an interplay between federal statutes and regulations, federal court decisions, and state laws. This discussion shows how all three branches of the federal government have the final word and can significantly alter the rights and responsibilities of military members and their families, after years of debate, seemingly quickly, efficiently, and with clarity.
Peter Cushing, Winter Park, Florida, October, 2017.
Peter Cushing is a board certified marital and family law attorney and a retired Captain, Judge Advocate General’s Corps, U.S. Navy Reserve. He has written and lectured extensively on issues of military family law for the Florida Bar since 1995. He is a member of the Florida, New York, and Hawaii bars. He practices law and does consulting work throughout the state of Florida and various states on military family law matters. This article was published in The Florida Bar Family Law Section Commentator Spring, 2018.
ENDNOTES
•1. Diffenderfer v. Diffenderfer, 491 So.2d 265, (Fla. 1986), Pastore v. Pastore, 497 So.2d 635 (Fla. 1986).
•2. Deloach v. Deloach, 590 So.2d 956 (Fla. 1st DCA 1991), disapproved by Boyett v. Boyett 703 So.2d 451 (Fla. 1997).
•3. Boyett v. Boyett, 703 So.2d 451 (Fla.1997).
•4. Rose v. Rose, 481 U.S. 619, (1987).
•5. Abernethy v. Fishkin, 699 So.2d 235 (Fla. 1997), Janovic v. Janovic, 814 So.2d 1096 (Fla. 1st DCA 1992), Longanecker v. Longanecker, 782 So.2d 406, (Fla. 2d DCA 2001) which allowed indemnification even without a specific contractual provision. Same, Blann v. Blann, 971 So. 2d 135, (Fla. 1st DCA 2008). To these sorts of decisions, Justice Roberts of the United States Supreme Court had an interesting comment:
If you have a law that bars courts from dividing up disability pay, but allows them to award money from another source to compensate for the inability to divide disability pay, he concluded, “that’s the sort of thing that gives law a bad name.”
Recommended Citation: Amy Howe, Argument analysis: Quiet bench means few signals on military divorce case, SCOTUSblog (Mar. 20, 2017, 9:36 PM), http://www.scotusblog.com/2017/03/argument-analysis-quiet-bench-means-signals-military-divorce-case/
•6. Howell v. Howell, 581 U.S. _____, 2017.
•7. In cases of “concurrent receipt” where the disability is 50% or more, there is no “dollar for dollar” waiver of disposable retired pay and thus no reduction in the non-military spouse’s share of the regular retirement. See 10 U.S.C. §1414 (2004).