Section 641 of the National Defense Authorization Act for Fiscal Year 2017, amended the definition of “disposable retired pay” in 10 U.S.C. 1408(a)(4) in a way that significantly affects the division of military retirement benefits.
The change requires the use of the military member’s pay, rather than final retirement pay, for any division of disposable retired pay entered as part of a final decree of divorce, dissolution, annulment, or legal separation that becomes final after December 23, 2016.
The Statutory Revisions
The specific amendments to the definition of disposable retired pay are set forth below, with additions in red:
10 U.S.C. 1408(a)(4)
(A) The term “disposable retired pay” means the total monthly retired pay to which a member is entitled (as determined pursuant to subparagraph (B) less amounts which—
(i) are owed by that member to the United States for previous overpayments of retired pay and for recoupments required by law resulting from entitlement to retired pay;
(ii) are deducted from the retired pay of such member as a result of forfeitures of retired pay ordered by a court-martial or as a result of a waiver of retired pay required by law in order to receive compensation under title 5 or title 38;
(iii) in the case of a member entitled to retired pay under chapter 61 of this title, are equal to the amount of retired pay of the member under that chapter computed using the percentage of the member’s disability on the date when the member was retired (or the date on which the member’s name was placed on the temporary disability retired list); or
(iv) are deducted because of an election under chapter 73 of this title to provide an annuity to a spouse or former spouse to whom payment of a portion of such member’s retired pay is being made pursuant to a court order under this section.
(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.
10 U.S.C. 1408(a)(2) provides in relevant part that “[t]he term ‘court order’ means a final decree of divorce, dissolution, annulment, or legal separation issued by a court, or a court ordered, ratified, or approved property settlement incident to such a decree…”
Effective Date
The amendment to the definition of disposable retired pay apply with respect to any division of property as part of a final decree of divorce, dissolution, annulment, or legal separation involving a member of the Armed Forces to which section 1408 of title 10, United States Code, applies that becomes final after December 23, 2016, which is the date of the enactment of the 2017 NDAA (i.e. the date the President signed it).
Implications, Unresolved Questions, Opportunities and Potential Traps
The most immediate implication of the amendment is that DFAS will calculate retired base pay as of the date of “the court order” when implementing a division of military retired pay pursuant to a final decree entered after December 23, 2016. This means that increases in base pay due to post divorce service and promotions will accrue solely to the benefit of the member.
Date of Division. Arizona law divides marital assets as of the Date of Service, not as of the date of divorce or the date of entry of the order dividing military retired pay. Applying the literal language of the statute, the member’s pay should be determined as of the date of the Decree, unless the Decree or a settlement agreement incorporated into the Decree specifies a different date (such as the date of service). However, it is not clear whether this could be done where the date of service is before December 23, 2016 and the final Decree is entered after that date.
Pre-marital service and pay grade. If not otherwise stated, the specified percentage of disposable retired pay awarded to the former spouse will weight pre-marital service equally with marital service. Attorneys representing the Former Spouse should consider whether any pre-marital service and pay grades should be under-weighted where the member received marital pay increases, applying the same principles that the amendment applies to post marriage service and pay.
Family law attorneys are encouraged to contact Arizona’s QDRO Practice to discuss the issues particular to their case. We can provide sample settlement agreement and decree language from which you can work to address the issues raised when dividing military retired pay.