If you are a military member or the spouse of a military member going through a divorce in Virginia, military retired pay is almost certain to be an important factor. Disability pay can also be a component of a servicemember’s compensation – one that is typically intertwined with a military member’s disposable retired pay. Disability pay is typically non-taxable to the servicemember. Disability pay is also not typically divisible by a court. For these reasons, you should have a clear understanding of the way in which a disability claim can affect a military pension, and ensure that your attorney does as well.
There are three separate systems for military disability benefits: 1) Military disability retired pay; 2) Veteran’s Administration (VA) disability compensation; and 3) Combat-Related Special Compensation (CRSC). You should be aware of all of these, and how they may affect your situation:
- Military Disability Retired Pay. This pay is available for servicemembers who become disabled such that they cannot perform their assigned military duties. If a servicemember has enough creditable service, he or she may be able to draw this type of disability pay.
There are three steps to determining the rate of this disability pay. For the sake of example, assume the servicemember has an active duty base pay of $4,000 per month, 20 years of creditable service, and a disability rating of 60%. To determine the calculation, first, calculate the servicemember’s normal retired pay based on his or her years of service. Let’s assume for this calculation that this number is $2,800. Then, multiply his base pay times his disability rating ($4,000 x 60% = $2,400). The servicemember receives the higher of these two amounts so in this case, he would receive a total of $2,800. However, only the difference between these two amounts (i.e. $400) would be divisible by a court in divorce proceedings.
- Veteran’s Administration (VA) Disability Benefits. These benefits are the most common, and arise when the extent of the disability is not so great as to qualify the servicemember for Military Disability Retired Pay and/or is detected after retirement. The extent of disability benefits a servicemember receives can have a significant impact on whether the former spouse’s share is affected.
If a servicemember makes a successful claim for VA Disability, and is determined to be less than 50% disabled, the VA Disability Benefits received reduce the amount of the disposable military retired pay dollar-for-dollar. Take, for example, a servicemember receiving $4,000 per month in disposable retired pay, and he and his former spouse are dividing that evenly, so each receives $2,000. If the servicemember files a successful VA Disability claim and receives $750 in benefits, that $750 would be reduced from the $4000. This would mean the servicemember would receive $2,375 in combined disposable retired pay by the VA Disability, and the former spouse would receive $1,625.
However, if a servicemember is 50% disabled or more, Concurrent Retirement and Disability Pay (CRDP) kicks in. With CRDP, the servicemember receives both his or her disposable retired pay and VA Disability Pay with no offset. Under the scenario above, the former spouse would continue to receive $2,000, while the servicemember would receive $2,750.
- Combat-Related Special Compensation (CRSC). This compensation is awarded to anyone who has a disability of at least 10% that is directly related to the award for a Purple Heart decoration or a disability rated at 10% or higher related to combat, operation, or hazardous duty. Like CRDP, any CRSC received is in addition to disposable retired pay.
As you can see, it’s possible that a servicemember can drastically reduce or even eliminate the former spouse’s share of disposable retired pay by applying for disability.
Until recently, some Virginia courts took the position that even though they couldn’t require the military to pay disability to a former spouse, they could order the servicemember to indemnify the former spouse if he or she ever claimed disability and in doing so, reduced a former spouse’s entitlement to disposable retired pay. However, this option is no longer available.
The United States Supreme Court in Howell v. Howell, 137 S. Ct. 1400 (2017) held that such indemnification orders were unconstitutional. A state divorce court couldn’t do indirectly (require indemnification for a disability claim) what it couldn’t do directly (require the military to pay a portion of a servicemember’s disability pay to a former spouse).
It can be a nasty shock for a former spouse’s share of retired pay to be reduced or eliminated due to a servicemember’s receipt of disability pay – a risk that a former spouse assumes if their divorce case goes to trial. So what can be done? In the wake of Howell, there are several options, but all require a Settlement Agreement where a case does not go to trial:
- Add an indemnification clause to the Agreement that resolves the case. This would require the servicemember’s consent, of course, but if the servicemember is willing to agree to an indemnification clause, that clause would likely be enforceable.
- Ask for an additional award of spousal support. If disability pay is already being received at the time of divorce, the former spouse could ask the court to award additional spousal support to account for the disability payments received by the servicemember party.
- Ask for a reservation to seek spousal support in the future. If the servicemember has not yet retired and claimed disability, but may do so in the future, a former spouse can ask the court to reserve his or her right to receive spousal support in the future. That way, the court can reevaluate the parties’ financial positions if disability is claimed after retirement, and make a spousal support award accordingly.
These are clearly complex issues that require careful consideration and extensive knowledge of the nuances of a military divorce. Whatever your situation, if you are a military member or military spouse going through separation and divorce, you should ensure you work with a divorce attorney who is experienced in military issues.