The exclusion of retired pay waived for disability pay from division by state courts created perceptions of inequity in divorce cases, particularly where a servicemember had a high VA disability rating and could waive a larger portion of his or her retired pay in favor of non-divisible disability pay. Effective in 2004, however, 10 U.S.C. § 1414 now allows for payment of both military retired pay and VA disability pay to retired servicemembers in certain situations. This is referred to as Concurrent Retirement and Disability Pay (CRDP), which incorporates a “phase-in” of disability benefits over a ten-year period (currently nearing completion). Among other requirements, to be eligible for CRDP, a retiree must have a VA disability rating of 50 percent or higher.
The introduction of CRDP has helped to resolve the inequity that would arise when retired servicemembers would waive large portions of their retired pay for disability pay, because it enables retirees with a disability rating of 50 percent or higher to receive both their disability pay and their retired pay. Thus, a former spouse may still receive his or her full share of the retired pay, without reduction by any waiver for disability pay.
So, the inequity to former spouses has been greatly reduced in this area—as former spouses are now protected from the largest reductions in their share of retired pay, those occurring with VA disability ratings of 50 percent or higher. But what about cases where servicemembers have disability ratings of less than 50 percent? Those servicemembers are still waiving retired pay to receive disability pay, and under the Mansell ruling those spouses are still seeing their shares of retired pay reduced.
That is not to say, however, that former spouses are completely out of luck in those cases. Virginia case law provides some routes for former spouses to address the reduction in their share of retired pay in cases where the disability rating is less than 50 percent. For example, Virginia courts have upheld provisions in property settlement agreements and final decrees of divorce guaranteeing “indemnification payments” by the servicemember to the spouse to make up for the share of retired pay lost due to the disability pay waiver. Courts have consistently upheld these provisions, often based on the fact that the indemnification funds can come from a servicemember’s assets other than disability pay. See, for example, Owen v. Owen, 10 Va. App. 623 (1992) and Poziombke v. Poziombke, 2006 Va. App. LEXIS 61 (Feb. 14, 2006).
These cases often involve evidence of reliance by a former spouse (i.e. an indemnification clause or a waiver of spousal support in a property settlement agreement). However, there is nothing to suggest that a court would always require such reliance to grant relief. The main takeaway is that as long as court-ordered payments to a former spouse are not designated as coming from or resulting from a servicemember’s VA disability pay (directly or indirectly), a court could, in its discretion, fashion an alternative solution to protect the former spouse.
The military divorce lawyers at Livesay & Myers, P.C., have extensive experience with the unique issues that arise in military divorce cases, including the division of military retired pay, VA disability pay, and CRDP. From our offices in Fairfax, Ashburn, Manassas and Fredericksburg, Virginia, we represent represent servicemembers and spouses across Northern Virginia. Contact us to schedule a consultation today.