Military Pension Division 2018: Disability and Death

1. Military Pension Division 2018:Disability and Death Mark.Sullivan@NCFamilyLaw.com Mark E. Sullivan, COL, USAR (Ret.) Raleigh, NC Macomb County Bar Assn. April 2018

2. Know the Basics

3. Gross pay, VA waiver, SBP premium, Taxable Income RETIREE ACCOUNT STMT.

4. Know the Basics - Resources SILENT PARTNER infoletters re SBP, VA disability comp., CRDP/CRSC, Howell case www.americanbar.org > Family Law Section > Mil. Committee www.nclamp.gov > For Lawyers

5. news to me! Disability Details • Waiver of ret’d pay for VA disability $ • VA is tax-free, AND…

6. V.A. DISABILITY PAY= NOT DIVISIBLE! ION PEN (ditto for most of Military Disability Retired Pay)

7. HOWELL V. HOWELLU.S. Supreme Ct. (May 2017) • Issue = indemnification for “VA waiver” • VA waiver: • When retiree elects VA disability comp. • for svc-connected wound, illness, injury or condition • Dollar-for-dollar waiver of ret’d pay IF… • VA rating < 50%, or • Receiving CRSC [Combat-Related Special Compensation]

8. VA Waiver means . . . • Share of the F.S. is also reduced • Without court approval • Without consent of the F.S.

9. Before Any Waiver . . . 50 – 50 Division $2,000 $1,000 $1,000 W H

10. VA Waiver means . . . Tax-Free VA Dis. Compensation 50 – 50 Division With 40% VA Rating $2,000 $2,000 $1,000 $1,000 $700 $700 $600 W H H H W

11. Howell - Facts • 1991 – divorce in AZ, 50-50 pens. division • 1992 – H retired fm USAF • 13 yrs later, diagnosis of VA disability • 20% rating = $250/mo • Military pension = $1,500/mo • Reduction for ex-W = $125/mo

12. Howell - Facts • Ex-W moved for enforcement • Judge ordered indemnification • Upheld in AZ Ct. of App., Supreme Ct. • Reversed by US Supreme Court

13. Howell - Ruling & Rationale • USFSPA [Uniformed Services Former Spouses’ Protection Act]* exempted VA disability comp. from division • Mansell case** barred div’n of waived military ret. pay as marital property upon divorce • This case involves, in effect, div’n of waived mil. ret. pay = INDEMNIFICATION BARRED *10 U.S.C. 1408 **U.S. Sup. Ct. 1989

14. Indemnification = D.O.A.? Indemnification

15. Howell – Return to the Facts • No contractual indem. clause • No prior court order for indemnification

16. REMEDIES FOR THE F.S. • Agreement to indemnify • Insert in the settlement: “If anything reduces W’s share or amt. of the military pension, H will promptly indemnify her as to any losses she suffers in consequence thereof.” • Indemnification allowed: by contract [EXPRESS CONTRACTUAL INDEMNIFICATION]

17. REMEDIES FOR THE F.S. • If prior S/A or MSA [incorporated into div. decree] w/ indemnification clause - OR - • If prior order requiring indemnification • AND no appeal - • Indemnification allowed: by res judicata

18. Res Judicata, Part One • FN 5, Mansell v. Mansell: “Whether the doctrine of res judicata, as applied in California, should have barred the reopening of pre-McCarty settlements is a matter of state law over which we have no jurisdiction.”

19. Res Judicata, Part Two • Subsequent history of Major Mansell’s case in cts. of Calif. and above – • Remanded • Ruling again to divide the waived military pension • Aff’d in Calif. appellate courts based on res judicata • Second pet. for cert. by Major Mansell = DENIED

20. Res Judicata, Part Three • Sheldon v. Sheldon, 456 U.S. 941 (1982) • Lower courts in Calif. divided military pension • H didn’t appeal on basis of preemption • 3 wks later McCarty decision – can’t divide mil. pension due to preemption • Calif. courts refused rehearing [res judicata] • H’s appeal => dismissed for lack of a substantial fed. question

21. Alternatives for the Judge • Justice Breyer’s thoughts – ??

22. Alternatives for the Judge • Justice Breyer’s thoughts – • “Take possibility of reduced ret. pay into acct. in valuing the property” • HUH? • What does this mean? • HOW do you calculate the chance of later VA election when John Doe is still on active duty? • Or ret’d but 13 yrs away from getting VA rating? • “Show me the algorithm!”

23. Alternatives for the Judge • Justice Breyer’s thoughts – • “Well, there’s always alimony…” • HUH? [again…] • Since when is alimony the re-work shop for property division? • What is the spouse waived alimony? Or is not eligible for it due to her own income? • Can the court award thru spousal support the amt of pension share that the FS has been shorted? • Going in the back door when front door barred…?

24. Alternatives for the Judge • Justice Breyer’s thoughts – ?????? • a STAR TREK issue!

25. Alternatives [cont’d] • Present value setoff – John gets the pension, Jane gets the house! • Unequal div’n of property to acct. for award to F.S. of “unstable asset” • Re-open the property division (if VA dis. comp. taken after init. div’n)? • Reservation of alimony ??

26. Mich. Cases - Indemnification McGee v. Carmine, 802 N.W.2d 669 (Mich. App. 2010) • 1989 consent order • FS to get 50% of disposable ret’d pay • Future elections that might harm FS – retiree not to make any benefit election which would reduce monthly pension w/o FS consent

27. Mich. Cases - Indemnification McGee v. Carmine, 802 N.W.2d 669 (Mich. App. 2010) • In 2008 retiree applied for CRSC [Combat-Related Special Compensation] • Judge ruled that FS was to get half of pension regardless of what elections he chose to make

28. Mich. Cases - Indemnification McGee v. Carmine, 802 N.W.2d 669 (Mich. App. 2010) • Retiree req’dto reimburse former spouse for share of retirement waived for disability • Order cannot require payment from disability benefits • But veteran can pay from disability if desired – or any other source of $

29. Mich. Cases - Indemnification Foster v. Foster, 2018 Mich. App. LEXIS 809 (unpub.) • 2008 consent div. decree • …required retiree to indemnify FS if ex-H rec’d increased disability pmt which reduced pension-share pmts to FS • Remanded by Mich. Supreme Ct. for review in light of Howell case

30. Mich. Cases - indemnification Foster v. Foster • COA noted that ex-H never appealed the divorce jmt “nor has he moved for relief from that judgment.” • “Thus he is engaging in an improper collateral attack on the divorce judgment.” • Also statutory construction analysis by the COA

31. And so. . . ? ? B.L.U.F. Summary “In conclusion…” The “Take-Away”

32. The Death of Indemnity?

33. How to protect the non-military spouse from VA waivers • Indemnification Clause • DON’T SAY “John will take no action…” • DO SAY “John will compensate Mary…”

34. Indemnification Clause • State facts, assumptions [“John is COL with over 18 years’ service in Army, will receive pension based on longevity after at least 20 years of service.”]

35. Indemnification Clause • State facts, assumptions [“John is COL with over 18 years’ service in Army, will receive pension based on longevity after at least 20 years of service”] • State intent [“Mary to get unreduced share of pension based on years of service”]

36. Indemnification Clause • State facts, assumptions [“John is COL with over 18 years’ service in Army, will receive pension based on longevity after at least 20 years of service”] • State intent [“Mary to get unreduced share of pension based on years of service”] • Don’t call it Disposable Retired Pay – that limits her share b/c VA is excluded from DRP

37. Indemnification Clause • State duty of SM/retiree [“John will compensate Mary for any loss which she suffers if there is any reduction in her share of the longevity pension.”]

38. Disability and DEATH…

39. ? DID YOU FORGET SOMETHING? ? ? ? ?

40. For those left behind - • S.B.P. [Survivor Benefit Plan…?] • or Single Biggest Problem????

41. SBP – Single Biggest Problem? • SBP = 10 USC 1447 et seq. • Benefit at death of retiree/SM = 55% of base amount • Cost (fm retired pay) = 6.5% of base amt for “spouse/former spouse coverage”

42. SBP DEFINED • Court can order SBP coverage • Without it, payments to former spouse end at the retiree's death • Unitary – cannot divide, share with your NEW spouse!

43. SBP DEFINED • Premiums come “off the top” before DRP (if court-ordered) • Avoid SGLI as alternative (Ridgwaycase)

44. TYPICALCLAUSE??? “MARY DOE SHALL RECEIVE 46.5% OF ALL THE MILITARY RETIREMENT BENEFITS OF JOHN DOE, INCLUDING EVERYTHING ATTRIBUTABLE TO HIS SERVICE IN THE MILITARY TOWARDS A PENSION, AND EVERY PENSION BENEFIT OF HIS.”

45. LIFE & DEATH If representing SPOUSE – • Life: SPECIFY SHARE OF PENSION • Death: IF SM DIES AFTER DIVORCE, SBP COVERAGE TO ‘FORMER SPOUSE’ • “John will elect Mary immediately as his former-spouse SBP beneficiary.”

46. SBP Strategies • Shifting the premium to FS… • SBP not available if FS remarries before 55

47. Summary • VA disability comp. = “VA WAIVER” • Indemnification • Howell v. Howell • Survivor Benefit Plan

48. Whooo ya’ gonna call?

49. “Who ya’ gonna call?” • ABA FAMILY LAW SECTION’S MILITARY COMMITTEE -www.americanbar.org> Fam. Law Section > Mil. Committee • NC STATE BAR LAMP COMM. - www.nclamp.gov> For Lawyers

50. “Who ya’ gonna call?” • DFAS WEBSITE: www.dfas.mil • ARMY RETIREMENT SERVICES: www.armyg1.army.mil/rso/rso.asp