In the midst of the budget furor, Congress included in the 1991 Department of Defense Authorization Act a section that is of importance to domestic relations lawyers - amendments to the Uniformed Services Former Spouses' Protection Act (FSPA) codified at 10 U.S.C. § 1408. The act was signed by the President on November 5, 1990.
This article will discuss the background of the legislation and the changes it made.
BACKGROUND
Since it was passed in 1982 the FSPA has been under attack by both retirees and former spouses - each seeking favorable changes. Over the years, relatively minor changes were made. In 1989 several bills were introduced that would have made significant changes. Representative Dornan (R-CA) introduced H.R. 572, 2277 and 2300, and Representative Schroeder (D-CO) introduced H.R. 3776. Representative Dornan's bills would have made changes favorable to the military retiree, such as the termination of payments of retired pay as property upon the remarriage of the former spouse. On the other hand, Representative Schroeder's bill would have made changes favorable to the former spouse, such as an automatic entitlement to a portion of the retiree's pay, including VA disability compensation.
HEARINGS
On April 4, 1990 a subcommittee of the House Armed Services committee held an afternoon of hearings. Testimony was taken from Representatives Dornan and Schroeder, representatives of the American Bar Association, spokespersons for the retirees and former spouses and the Department of Defense. I was one of four attorneys appearing in behalf of the ABA. We presented our views orally and in the form of a 65 page report which was the work product of about a dozen members of the Family Law Section. One key aspect of our report was that Congress should exercise restraint in considering any bill that would pre-empt state domestic relations law.
The views of the opposing groups was generally as one would expected. It was believed by some that the former spouses would seek legislation that would award them a portion of gross income, including VA disability pay. This would have, in effect, judicially overturned the ruling in Mansell v. Mansell, 490 U.S. 581 (1989). They did not assert such a position, although they did seek a redefinition of "disposable retired pay" (10 U.S.C. §1408(a)(4)) that would eliminate some of the potential control of this figure by the retiree.
THE NEW ACT
The House bill (H.R. 4739) contained several provisions affecting the FSPA. With one exception the House bill was adopted by the Senate and became law on November 5, 1990 when signed by the President (Section 555 of Public Law 101-510). The exception had to do with the effective date of the change regarding the re-opening of pre-McCarty cases, to be discussed below. The report said that the original legislation "was the product of substantial compromise among a wide diversity of opinions about the extent to which state courts ought to be able to divide military retired pay ... The legislation walks a narrow line between the rights of the states and the interests of the federal government in dealing with military retired pay in divorce settlements." It stated further that the primary modifications it would enact would "reflect a public policy judgment on the appropriate role of the federal government in limiting state court jurisdiction in divorce cases involving military retired pay that is consistent with the balancing of state and federal interests that has been the hallmark of the law since its inception."
(This amended 10 U.S.C. § 1408(c)(1).)
The committee expressed its concerned over the fact that some state courts have permitted the reopening of divorce cases finalized before the Supreme Court's decision in McCarty v. McCarty (453 U.S. 210 (1981)) that did not divide retired pay. Although Congress has twice stated in report language that this result was not intended, the practice continued.
The House bill provided that a "court may not treat retired or retainer pay as property in any proceeding to divide or partition such pay of a member as the property of the member and his spouse if a final decree of divorce, dissolution, annulment or legal separation (including court ordered, ratified, or approved property settlements incident to such a decree) was issued before the McCarty decision and did not treat retired pay as the property of the member and the member's spouse or former spouse." As to the effective date of this change, the bill stated that it would apply to judgments issued before, on or after the date of enactment of this Act, but only with respect to any requirement to make payments pursuant to such judgments after the date of enactment. In effect, individuals divorced before the McCarty decision whose cases were reopened would be relieved of the obligation to make payments after the effective date of the Act. However, the House-Senate conference committee agreed that payments in such cases should continue for two years after the effective date of the Act. As may be expected, retirees were quite upset about this.
(This amended 10 U.S.C. §1408(a)(4).)
The FSPA authorizes state courts to treat "disposable retired or retainer pay" as property and defines such pay to exclude military retired pay waived in order for the retiree to receive veterans' disability and civil service benefits. Also excluded from the computation of disposable retired pay are amounts owed by the member to the United States, fines and forfeitures from courts-martial, federal employment taxes, and amounts withheld for federal and state income tax purposes.
The House recognized that the exclusion of tax withholdings and individual debts of the service member from the computation of disposable retired pay has created unfairness in certain cases. The bill limited the deductions from monthly retired pay to amounts owed to the United Sates for previous overpayments of retired pay and recoupments required by law resulting from the entitlement to retired pay, and by requiring fines and federal employment taxes to be deducted from the retired pay after disposable retired pay is computed. The current provisions that permit the deduction from gross retired pay of amounts waived in order to receive veterans' disability compensation and civil service benefits, of pay forfeitures resulting from courts-martial, and other entitlement-based reductions were not changed. And to address the taxability of payments of retired pay to a former spouse, 10 U.S.C. §1408(c)(2) was amended to state that such payments would not be considered as wages of the member in determining his/her gross income.
(This amended 10 U.S.C. §1408(e)(1).)
The FSPA was clarified to ensure that regardless of the number of former spouses, the aggregate amount of retired pay that would be payable to them would not exceed 50 percent of the service member's disposable retired pay.
(This amended 10 U.S.C. §1408(e)(4)(B).)
The present law states that total payments from retired pay pursuant to court orders or other legal proceedings (such as garnishment) may not exceed 65 percent of "disposable retired pay". In what I consider to be a real "sleeper" the bill changes the calculation basis from 65 percent of "disposable retired pay" to 65 percent of "the amount of the retired pay payable to such member that is considered under section 462 of the Social Security Act (42 U.S.C. 662) to remuneration for employment that is payable by the United States." Neither the House nor conference committee comments address where this came from. In fact the House comments state the "current maximum of 65% of 'disposable retired pay' would be retained."
The reason I consider this to be a "sleeper" is that the definition of "remuneration" under 42 U.S.C. §662 is broader than the definition of "disposable retied pay" under 10 U.S.C. §1408. Among other things, 662 includes disability retired pay and, in some cases, amounts waived in order to receive VA disability pay. Therefore, in those cases in which the member is drawing disability pay, the maximum payments to the spouse or former spouse could increase. It remains to be seen how the services will interpret this change.
There were a few other stylistic changes to the FSPA that, for example, add headings to the various subsections.
EFFECTIVE DATE OF CHANGES
As discussed above, the change for the pre-McCarty cases took effect two years from the date of enactment. The other changes apply only with respect to divorces, dissolutions, annulments and legal separations that become effective after the end of the ninety day period beginning on the date of enactment of the Act. It is important to note, therefore, that because of this and other amendments to the Act there are several classes of former spouses as far as the definition of "disposable retired pay" is concerned. Generally, the new definition is more favorable to the non-member spouse.