Military Family Law: Once Over the World

Transcription

1 Military Family Law: Once Over the World MAJ Lyndsey Olson ABA LAMP CLE New Orleans, LA 5 November 2015

2 1. USFSPA Overview 2. The SCRA in Family Law Cases 3. Hindsight is 20/20, or 15/15 or 10/10 4. Property Division Military Pension Division Formulas SBP TSP 5. Disability Pay

3 Uniform Services Former Spouses Protection Act (USFSPA) USFSPA does not state HOW to divide military pension USFSPA gives State courts the authority to treat military retirement pay as marital property and divide it per state law However Court must have 1408(c)(4) jurisdiction. All of the states now allow the division of military pensions as marital/community property NO specific share for former spouse Limits amount of retired pay to be paid to former spouse 50% of Disposable Retired Pay Cannot force a SM to retire, but court may order SM to pay before retirement

4 Gaining USFSPA Jurisdiction No USFSPA jurisdiction = No military pension Also known as 1408(c)(4) jurisdiction Must have jurisdiction statement in pleadings Valid USFSPA jurisdiction is based on: Domicile Residence: not by virtue of military service Consent Long Arm Statute is not applicable

5 USFSPA Jurisdiction and Rules A breakdown of USFSPA 10 U.S.C. 1408(c)(4) Jurisdiction Requirements: Domicile: Not the same thing as the SM s Home of Record for military purposes Not mere physical presence; has two elements: Physical presence (SCRA allows SM to maintain original domicile while in other states for military duty) Intent to Remain (or return if absent)- can be shown by payment of income or property tax, voting, bank accounts, motor vehicle titles, purchase of a home How to begin determining SM s domicile? Get a copy of the LES (to see what state the SM pays taxes in) Check with SM spouse- where did they files taxes, vote, where do they own property Get DD Form 2058 which shows State of Legal Residence *NOTE though that this document does not provide a legal determination

6 USFSPA Jurisdiction and Rules Jurisdiction Requirements Con t Consent The test for consent is a matter of state law (example: SM moves the court for other relief thereby constituting a general appearance MAY equal consent) *NOTE: An SCRA stay request is not an appearance (50 U.S.C. App. 522(c)) State courts are generally split over whether specific consent is required or whether implied consent can be used to confer jurisdiction

7 USFSPA Jurisdiction and Rules Jurisdiction Requirements Con t Residence Not Due to Military Assignment Residence cannot be inferred due to SM s presence in the state due to military assignment If member chooses to live a neighboring state when militarily assigned to another, SM may be resident of neighboring state. Example: SM assigned to St. Paul, Minnesota by orders, but chooses to live in Wisconsin closer to his children who attend college in Wisconsin. Wisconsin then probably has jurisdiction for military pension division.

8 USFSPA What is Disposable Retired Pay? Disposable retired pay is a term defined in USFSPA 10 U.S.C a.(4). The disposable pay is computed by taking the gross retired pay and making certain deductions. Three impact calculation of retirement pay for pension division Court Martials or for other Benefits court marital forfeitures Insurance premium Disability Benefits If the SM is entitled to disability benefits, the SM may elect an amount of tax-free VA disability compensation and give up the same amount of military pension pay. This is always advantageous to the SM given the taxfree aspect of VA disability pay Survivor Benefit Plan (SBP) Premium Deductions

9 The SCRA in Family Cases What does the SCRA do in Family Cases? Stay of proceedings Default protections Tolling of Statute of Limitation Provisions for custody

10 To Stay or Not to Stay: Handling the SCRA The SCRA: 50 USC App : Provides for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of Servicemembers during their military service. The SCRA applies to... any judicial or administrative proceeding commenced in any court or agency in any jurisdiction subject to this Act. 511, Subd.(b). SCRA does not apply to criminal proceedings.

11 SCRA in Family Law Cases Provisions of SCRA must be met before division can be enforced by DFAS SCRA: If SM is still in military service, the pension order must state that the court has honored the SM s rights under SCRA (50 U.S.C. App. 501 et. seq.)

12 To Stay or Not to Stay: Handling the SCRA The Rules Automatically entitled to a 90 day stay if SM or SM s attorney requests the stay. Court shall grant a 90 day stay If SM does not request the stay a stay may still be granted under the Court s discretion. Any additional stay beyond 90 days is within the Court s discretion.

13 To Stay or Not to Stay: Handling the SCRA How to request a Stay Motion must include at least two statements: A statement on how the current military duties materially affect ability to appear and a date when the Servicemember will be available to appear. A statement from the commanding officer that the current military duty prevents appearance and military leave is not authorized at the time of the statement. If not available after initial 90 day stay combined with additional stay request

14 To Stay or Not to Stay: Handling the SCRA Work Arounds Recognizes a SM s legal representative An attorney or individual possessing a POA acting on the SM s behalf with SM s express permission Legal representative can take same actions as SM Waiver of SCRA Protection Can waive for only portion of a proceeding Must be in a separate writing from that of the obligationnot less then 12 point type Must be waivered during or after period of qualifying service

15 Property Division: Military Retirement Pay Eligibility Active Duty Service (AD) Begins at retirement regardless of age Minimum 20 years Formula award expressed in terms of marital fraction Reserve/Guard (RC) Begins at age 60 (could be down to age 55 if combat vet) Must have 20 years of creditable service Amount of retired pay depends on amount of points earned Must obtain a current points statement

16 Hindsight is 20/20 or 15/15 or 10/10 Rules for Continuation of Benefits 20/20/20 - twenty years concurrent marriage and service Entitled to full military medical care (TRICARE) Commissary and exchange privileges 20/20/15 - twenty years of service, twenty years of marriage, and 15 years of overlap If dissolution after 1 April 1985 authorized medical care for a period of one year from date of dissolution Dental will no longer be available regardless of the 20/20 rule 10/10 - Ten years of marriage with ten years of service overlap allows DFAS to pay spouse directly the marital share

17 Hindsight is 20/20 or 15/15 or 10/10 Rules for Continuation of Benefits The 10/10 Rule 10 U.S. Code 1408(d)(2) DFAS will directly pay (a.k.a. garnish) a division of military pay to a former spouse if the parties were married for at least ten years during which the SM performed at least ten years of creditable service. For active duty SMs, creditable service means years of service for which the member was eligible for pay, except as specifically excluded. 10 U.S.C Excluded time, under 10 U.S.C. 972 includes time in AWOL status, time incarcerated, or time lost due to an injury caused by the member's misconduct. For a reserve component SM, creditable service is any year in which the member accrued at least 50 points. 10 U.S.C (2). Simplistically, reservists get 15 points annually for being in the reserves, plus 1 point per day of actual service. If a spouse is married for at least 10 years overlapping military duty, it doesn't matter if those 10 years are all active, all reserve, or a combination of both.

18 Hindsight is 20/20 or 15/15 or 10/10 Rules for Continuation of Benefits The 10/10 Rule - Why do I need DFAS to garnish? You don t. Military pension is still a divisible asset under MN law if you don t meet the 10/10 rule. [The Uniformed Services Former Spouses' Protection Act s] ten-year requirement refers only to when a state court may order direct payment of a military pension from the Secretary of Defense to a former spouse. Deason v. Deason, 611 N.W.2d 369, 371 (Minn. 2000). Divisible even if the pension is not vested. This general rule has been held to apply to military pensions. Deason v. Deason, 611 N.W.2d 369, 371 (Minn. 2000) citing Janssen v. Janssen, 331 N.W.2d 752, 756 (Minn.1983) HOWEVER, even if not dealing with garnishment through DFAS, state courts have authority to divide military pension only as set forth by the USFSPA See Mansell v. Mansell, 490 U.S. 581

19 Property Division : MPDO not a QDRO The Basics Military pay is a Federal entitlement - not a qualified pension plan under ERISA No requirement for QDRO If there are any issues DFAS will ask for a clarifying order or affidavit from both parties Do not rely on decree only - You should have a MPDO Considerations To value or not to value When to trade for the pension Role of an expert in military pensions division

20 Property Division: Military Pension Division Orders (MPDOs) The pension division clauses must include: The names and addresses of the parties, as well as their SSN s; The years of marriage and of military service; The military member s grade or rank; A statement that the SCRA rights of the member have been honored (if the member is on active duty when the decree is entered) Jurisdictional findings (domicile, consent, or residence) under 10 U.S.C (c)(4); A statement that DFAS should pay the spouse at his/her address as shown therein. A statement as to what DFAS will pay the spouse: The order may award a percentage or a fixed dollar amount to the former spouse of the military member. Payments are made once a month, starting no earlier than 90 days after service of the decree on DFAS or the start of retired pay, whichever is later. The payments end no later than the death of the member or spouse, whichever occurs first. Payments are prospective only; no arrears are allowed. The USFSPA does not provide for garnishment of payments missed prior to the approval of the application by DFAS.

21 Property Division: Calculating the Marital Share USFSPA gives state courts authority to treat military retirement pay as marital property and divide it per state law Pension divided by marital share No specific required share for former spouse Limits amount of retired pay to be paid to former spouse to 50% of Disposable Retired Pay No minimum number of years for divisibility: 10/10 year rule: Only means that DFAS will pay spouse directly for the marital share

22 Property Division: Show me the MPDO Awarding the Marital Share Amount is a matter of state law, but must be consistent with the USFSPA Formula used depends on who you represent: Fractions Formula award expressed in terms of marital fraction of months for Active Duty Formula award expressed in terms of points for RC Hypotheticals Fixed dollar awards

23 Division Formulas Calculating the Marital Share The martial share is calculated as follows: Months of marriage (by valuation date) overlapping service Total months of military service at retirement

24 Property Division: Calculating the Marital Share Months of marriage overlapping service Total months of military service at retirement 10 years = 120 months = = 42% 24 years = 288 months Marital Share = 42% of the disposable retirement pay. If the court chooses to award the spouse 50% of the share, than the spouse will receive 21%. The SM receives the other half of the marital share (21%) plus any separate property interest from non-marital military service, in the example above (14 years) for a total of 79% OR to figure a marital share dollar amount Number of years of military service during the marriage before the valuation date X Amount of retirement Pay = $ (marital $ of pension) Total years of military service

25 Retirement Calculations and Division Formulas How Military Retired Pay is Calculated Prior to September 1980: Eligible for the Final Pay retirement system. Between September 8th, 1980 and August 1986: Eligible for the High 36 (High 3) system. After August 1986: SM is under the REDUX system, which means SM has the option to choose either the High 36 retirement system, or the Career Status Bonus/REDUX (CSB) retirement system. If SM declines to make a choice, SM will automatically receive the High 36 retirement plan. In all of these retirement systems, if SM stays in the armed forces for 20 or more years, you are eligible to receive a pension based on a percentage of your basic pay, and if you stay in for 40 years, you are eligible for 100% of your basic pay. The multiplier is the percentage of base pay a SM receives for each year of service.

26 Retirement Calculations and Division Formulas Cost of Living Adjustments (COLAs) All three retirement systems have an annual cost of living adjustment. Over the course of a SM s lifetime, the retirement COLA could more than double the SM s retirement check. The COLA for the final pay and high 36 systems is determined each year by the national Consumer Price Index. But the COLA for the CSB/REDUX retirement system is the Consumer Price Index minus 1%. *A note for a pension division awards: A percentage clause DFAS automatically provides for COLA adjustments DFAS will not award COLA if a fixed dollar amount is awarded

27 Retirement Calculations and Division Formulas How Active Service Military Retired Pay is Calculated: The Multiplier The multiplier is the percentage of base pay a SM receives for each year of service. For the Final Pay and High 36 systems the SM earns 2.5% per year of service. That means the SM gets 50% for 20 years of service up to a maximum of 100% for 40 years. The multiplier for the CSB/REDUX system is 2% per year for the first 20 years, but SMs get an increase to 3.5% for each additional year passed 20. That means SMs get 40% for 20 years, but up to 100% for 40 years. That is a significant difference.

28 Retirement Calculations and Division Formulas How Reserve Component Military Retired Pay is Calculated Final Pay: divide the total number of retirement points by 360. That gives you the years of service (in active-duty years). Multiply that figure by (2.5 percent). Multiply that number by the basic monthly active-duty pay for your grade and years of service on the retired-pay effective date (normally your 60th birthday). Round that figure down to the nearest dollar to get the actual monthly retired pay. High 36 (High 3): divide the total number of retirement points by 360 to get years of service in active-duty years. Multiply that figure by (2.5 percent). Multiply that figure by the average of the 36 highest months of active-duty base pay for your rank. Round that figure down to the nearest dollar to get the actual monthly retired pay. This formula is commonly known as the High-3 retirement plan.

29 Retirement Calculations and Division Formulas How Reserve Component Military Retired Pay is Calculated Members on active duty or full-time National Guard duty who entered service on or after Aug. 1, 1986, and have completed 15 years or more of total active federal military service can choose either the High 36 (High 3) retirement plan or Redux. The Redux retirement system comes with a Career Status Bonus. The Redux portion determines monthly retirement income, and the Career Status Bonus provides a one-time $30,000 payment. Members can choose either High-3 or Redux no later than their 15th anniversary of active duty, using DD Form Although Redux provides a $30,000 bonus, monthly retirement pay under this system is less than under the other two systems. For 20 years of service, members receive 40 percent of the average of their highest 36 months of basic pay, rather than 50 percent. Also, unlike traditional retirement that provides full annual cost-of-living adjustments for inflation, COLA raises for Redux retirees are one percentage point less than inflation. There is a one-time catch-up COLA raise at age 62 that puts Redux retirement pay on par with traditional retirement pay, but after that, annual COLA adjustments under Redux again begin to lag inflation by one percentage point per year.

30 Division Formulas Fixed Dollar Amount A monthly amount needs to be provided in the court order. Former spouse would not be entitled to any of the member s retired pay cost of living adjustments (COLAs) (DoDFMR, Vol. 7B, Subparagraph C.) All the court order needs to say is the following: Example: The former spouse is awarded dollars per month of the member s disposable military retired pay.

31 Division Formulas Percentage Awards All percentage awards are figured using a member s disposable retired pay, which is a member s gross retired pay less authorized deductions (VA disability compensation, disability retired pay, and Survivor Benefit Plan (SBP) premiums where the former spouse is elected as the former spouse beneficiary.) all percentage awards are to be construed as a percentage of disposable retired pay Do Not: Express the award of disposable retired pay less the amount of some other obligation (like child support or SBP) this is unenforceable. Tie a former spouse s award to some other figure that is subject to change like SBP premiums- this will make the award indeterminate. Set-offs against the former spouse s award are not permitted. Example: The former spouse is awarded percent of the member s disposable military retired pay.

32 Division Formulas Percentage Awards Formula Awards Many States take the approach that the former spouse should not benefit from any of the member s post-divorce promotions or pay increases based on length of service after the divorce. Formula award is usually expressed in terms of a marital fraction the numerator covers the period of the parties marriage while the member was performing creditable military service the denominator covers the member s total period of creditable military service. The former spouse s award is usually calculated by multiplying the marital fraction by ½ or 50%. However, the parties can provide a different percentage.

33 Division Formulas Percentage Awards Formula Awards- Active Duty Numerator of a marital fraction is usually the total period of time from marriage to divorce or separation while the member was performing creditable military service. If you want DFAS to compute a formula award dividing an active duty retirement, then the order must provide the numerator of the fraction, expressed in terms of whole months. If the numerator is expressed in terms of years or days, DFAS will convert it to months by rounding down to the nearest whole month, and dropping any odd days or partial months. Failing to provide the number to be used in the numerator will cause the court order to be rejected. DFAS will supply the denominator in terms of whole months of creditable service for multiplier purposes, and then work out the formula to determine the former spouse s award as a percentage of disposable retired pay. (Computations carried out to six decimal places.)

34 Division Formulas Percentage Awards Formula Award Active Duty Examples: Example 1 : Effective, 2008, as division of marital property, Husband shall pay Wife 50% of the marital share of his disposable retired pay each month. The marital share is a fraction made up of months of marital pension service, divided by the total months of Husband s military service. Example 2: The former spouse is awarded a percentage of the member s disposable military retired pay, to be computed by multiplying % times a fraction, the numerator of which is months of marriage during the member s creditable military service, divided by the member s total number of months of creditable military service.

35 Division Formulas Percentage Awards Formula Awards Reserve Retirement If the court order provides a formula award to divide a reserve retirement, then the order must provide DFAS with the numerator of the marital fraction, expressed in terms of reserve retirement points earned during the marriage. For such orders, failing to provide the numerator expressed as reserve points earned during the marriage will cause the order to be rejected. DFAS will supply the member s total reserve retirement points for the denominator, and carry out the computation to six decimal places.

36 Division Formulas Percentage Awards Formula Awards Reserve Examples: Example 1: The former spouse is awarded a percentage of the member s disposable military retired pay, to be computed by multiplying % times a fraction, the numerator of which is reserve retirement points earned during the period of the marriage, divided by the member s total number of reserve retirement points earned. Example 2: Effective, 2008, as division of marital property, Husband shall pay Wife a percentage of Husband s disposable retired pay to be computed by multiplying 50% times a faction, the numerator of which is 1102 reserve retirement points earned during the period of marriage and the denominator of which shall be the total number of reserve retirement points at respondent s retirement.

37 Division Formulas Percentage Awards Hypothetical Awards A hypothetical retired pay award (or hypothetical award) is an award expressed as a percentage of a hypothetical retired pay amount that is different from the member s actual retired pay. If the court order uses a hypothetical award, it is usually figured as if the member had retired on the date of separation or divorce. A hypothetical award does not give the former spouse the benefit of any of the member s pay increases due to promotions or increased service time after the divorce. A hypothetical retired pay amount is computed the same way as a member s actual military retired pay, but based on variables that apply to the member s hypothetical retirement.

38 Division Formulas Percentage Awards Hypothetical Awards To be able to compute a hypothetical award, these variables must be provided in the applicable court order. Failure to do so will cause the court order to be rejected because DFAS cannot compute the award. Example 1: (works for all regardless of pay entry date) The former spouse is awarded % of the disposable military retired pay the member would have received had the member retired with a retired pay base* of $ (dollar amount) and with years of creditable service on. Example 2: (High 36 Active Duty) The former spouse is awarded % of the disposable military retired pay the member would have received had the member retired on his actual retirement date with the rank of and with years of creditable service. Example 3: (High 36 Reservist) The former spouse is awarded % of the disposable military retired pay the member would have received had the member become eligible to receive military retired pay with a retired pay base of $(dollar amount) and with reserve retirement points on.

39 Retirement Calculations and Division Formulas Military Retirement Pay Calculator: Useful for hypotheticals Use as a tool, but not an absolute- don t depend on this to summarily address all the needs of your client s situation

40 Retirement Calculations and Division Formulas

41 Property Division: Thrift Savings Plan (TSP) TSP can be: divided in a divorce, annulment or legal separation. garnished to satisfy a participant s past-due alimony or child support obligations. A TSP can be divided by presenting TSP with a Retirement Benefits Court Order that complies with 5 U.S.C. 8435(c), 8467 and 5 C.F.R. part 1653 subp. A. TSP provides a model order From a valid order, TSP will pay out the payee s present designated entitlement, but will not honor an order for a future payment.

42 Property Division: Thrift Savings Plan (TSP) A court order be issued to freeze the TSP account. That will prevent or limit post-separation loans or withdrawals. Loan as alternative to cash payout (consider tax consequences) member should take steps to file a new designation of beneficiary with TSP to ensure that the beneficiary they want to receive benefits is the person currently named. Otherwise, TSP has no option but to pay out to the beneficiary listed, even if that is a former spouse! That is true even if the former spouse waived any interest in the TSP account.

43 Property Division: Show me the MPDO Survivor Benefit Plan (SBP) Annuity that pays 55% of base amount selected $300 is the lowest base amount possible ($165 per mo) SBP premium: Excluded from taxable portion of retirement pay Expensive: 6.5% of selected base amount plus 3.5 % for RC members Cannot assign cost to one party - must adjust percent Cannot split between former spouse and new spouse Whether to ask for former spouse SBP is situational Former spouse coverage not an automatic benefit Suspends if former spouse remarries before age 55 Very strict time-lines or may be lost

44 Property Division Survivor Benefit Plan (SBP) Former spouse election must be done within one year of the divorce decree if submitted by retiree If submitted by former spouse, deadline is one year from SBP order - must be done with a deemed election letter. Former spouse coverage must be specified in the order SGLI is not a good substitute for SBP- election is unenforceable See Ridgeway v. Ridgeway, 454 US 46 (1981)

45 Disability Pay What type of disability pay? Disability = Non martial divisibility and nonreallocation of assets Impact of disability after division Indemnity Waivers Disability = source of income for child support

46 Disability Pay CRSC is not longevity retired pay; it is an additional form of compensation for certain members of the armed forces. 10 U.S.C. 1413a (g) states that [p]ayments under this section are not retired pay. Thus payments are not divisible as property. Thus, disability compensation may significantly lessen the former spouse pension share Minnesota has upheld indemnity clauses: Gatfield v. Gatfield, 682 N.W.2d 632, 636 (Minn. App. 2004) (holding USFSPA does not preclude agreement to waive disability pay and indemnify former spouse against loss of retirement). An indemnification agreement basically states that the service member or retiree will pay back the former spouse any money they lose if the service member opts for Veterans Affairs payments or if the service member does anything else to reduce the former spouse s share of the pension. The Supreme Court has held that it is an impermissible circumvention of the holding in Mansell v. Mansell that prevents division of military disability payments to award former spouse spousal maintenance based solely on the fact that the service member was receiving disability pay. CRSC is available for support determinations and for garnishment for alimony and child support. This is also true of CRDP.

47 Disability Pay Service-Related vs. Combat-Related Service Related (CRDP eligibility) An illness or injury which the Soldier incurred while in active military service or which existed prior to entry into active military service and was made worse by such service. Combat Related (CRSC eligibility) For the purposes of CRSC, a combat-related illness/injury can be a illness or injury that results by the means of combat or training for combat. It can be caused by any of these situations: Simulations of War (SW) (i.e. FTX, Special Forces training exercises, combat confidence course or lanes training, or other training which is used to prepare for combat); Hazardous Service (HS) (i.e. aerial flight, parachute duty, demolition duty, experimental stress duty, and diving duty) Instrumentalities of War (IN) (i.e. tanks, Agent Orange, grenade simulators, military planes, and other items unique to the military). Or by actual combat (AC) - directly or indirectly (i.e. Purple Heart (PH) injuries or secondary conditions as a result of the injury).

48 Disability Pay Concurrent Retirement and Disability Pay For regular (AD, AGR) retirees At least 20 years of qualifying military service, and A Veterans Administration (VA) disability rating of at least 50% The disability does not have to be combatrelated. Will receive BOTH full military retirement and VA disability payment

49 Resources for Military Pension Division ABA Operation Standby -attorney-to-attorney consultation resource for military attorneys. Operation_StandBy DFAS Guide tml Silent Partner Series

50 QUESTIONS? Major Lyndsey M.D. Olson General Counsel Minnesota National Guard 20 West 12 th Street St. Paul, Minnesota Phone: (651)