In a rare 8-0 decision, the Supreme Court recently overturned a ruling by the highest court of Arizona regarding the division of military retirement pay under a divorce decree. Howell v. Howell, decided May 15, held that any waived portion of military retirement pay cannot be treated as divisible community property in the case of divorce (197 L. Ed. 2d 781).
The ruling reaffirmed the Court’s decision in Mansell v. Mansell, clarifying that waived pay is exempt from division, regardless of whether the waiver was made before or after the issuance of the divorce decree (490 U.S. 581).
When John and Sandra Howell divorced, Sandra was awarded 50 percent of any military retirement pay John would receive. John subsequently retired and Sandra received her share for about 13 years.
Thirteen years after the issuance of the decree, John was found to be partially disabled and eligible to receive disability pay, a non-taxable benefit. In order to receive this disability pay, John was required to waive a corresponding amount of his retirement pay, which he did. This waiver decreased Sandra’s monthly payment pursuant to the division established in the decree by $125.
John appealed and the Supreme Court reversed the decision of the Arizona Supreme Court. In 1982 Congress passed the Uniformed Services Former Spouses’ Protection Act. 10 U.S.C. §1408. This law made military retirement pay divisible by state courts as community property in the case of divorce. The law specifically excluded amounts deducted from retired pay.
The Supreme Court subsequently held in Mansell that state courts could not divide “military retirement pay that has been waived to receive veterans’ disability benefits” (490 U.S. 581 at 595).
Arizona’s Supreme Court attempted to distinguish Mansell on the basis that the waiver in Mansell was made pre-decree, whereas John Howell waived a portion of his retired pay many years post-decree. The Supreme Court was not persuaded that Mansell was distinguishable.
The court held that a waiver of retirement pay, regardless of when it was made, exempted that amount from division in a divorce decree. The Court also held that Sandra did not have a vested interest because “state courts cannot ‘vest’ that which (under governing federal law) they lack the authority to give. (Howell, 197 L. Ed. 2d. 781 at 788).
The Arizona Supreme Court’s phrasing of the decision as requiring “indemnification” likewise did not change the protection of the waived retirement pay, because “such reimbursement and indemnification orders displace the federal rule and stand as an obstacle to the accomplishment and execution of the purposes and objectives of Congress” in enacting the Uniformed Services Former Spouses’ Protection Act (Id. at 789).
The Supreme Court’s decision in Howell addresses a complex question about military disability pay and indemnification. As the Court says, “the question is complicated, but the answer is not.”
Our cases and the statute make clear that the answer to the indemnification question is ‘no’” (Id. at 785).
A court may take into account the possibility of a future change to the retirement pay when deciding award amounts at the time of a divorce decree, but waived retirement pay is off limits for division.