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MILITARY DISABILITY RETIREMENT
MILITARY ORDERS – DRAFTING GUIDE

Beginning with the Mansell decision, May 30, 1989 (Mansell v. Mansell, 490 U.S. 581), the generally accepted view has been that Military Disability Retirement Pay is not divisible marital/community property. In practice Mansell had been the basis for the removal from the marital/community estate of military pension benefits that could otherwise be awarded to a Former Spouse.

The adverse impact of Mansell regarding a Former Spouse was partially offset as a result of a series of federal enactments beginning in 2004 (National Defense Authorization Acts: 2004, 2005, 2006, 2008). The result: a new section was added to the Internal Revenue Code; 26 U.S.C. 1414. The full title of this section is:
Members eligible for retired pay who are also eligible for veterans' disability compensation for disabilities rated 50 percent or higher (emphasis mine): concurrent payment of retired pay and veterans' disability compensation

The popular name for this Act is “Concurrent Receipt of Disability Pay (CRDP).

Clarification:
The military uses the term “Former Spouse”. When dealing with military issues refrain from use of the ERISA term “alternate payee”.

CRDP Is Not Applicable to All Disabled Veterans.
Because not all disabled military retirees are eligible for CRDP, it is useful for practitioner’s to be clear on the eligibility criteria for CRDP.

20 Years of Active Duty Service (Regular Component)
20 “Qualifying” Years of Service in the Guard or Reserves and attaining age 60
Retired under Temporary Early Retirement Authority (TERA)
Member must have a VA Disability Rating of 50% or Higher

As emphasized above many retirees remain ineligible for CRDP. Because this ineligible cohort of retiree’s is numerous, it is useful for attorneys representing Former Spouses to understand the magnitude of reduction to a Former Spouse’s award of a portion of a member’s retirement benefits resulting from retiree ineligibility.

Allocation of Retirement Benefits: MEMBER NOT ELIGIBLE FOR CRDP

Facts
Military Member: David Sperry
Former Spouse: Josephine Sperry

Regarding David
Date of Birth: 10/1/1975
Entered Military: 10/1/1997
Marries: 10/1/1998
Divorces: 10/1/2011
Retires: 10/1/2017
Monthly Regular Pension @ Retirement: $4,100.00
Coverture Fraction (Time Rule): 65%
(13 ÷ 20)

Marital Monthly Benefit: $2,665.00
Josephine’s Monthly Expectancy: $1,332.50

DAVID IS NOT ELIGIBLE FOR CRDP

Reason for Ineligibility:
David’s VA Disability Rating: 35%

Impact of ineligibility for CRDP on the benefit to be paid to Josephine.
First recognize how this ineligibility impacts on the Monthly Pension to be paid to David.

Monthly Regular Pension @ Retirement: $4,100.00

Now compute the impact of ineligibility. Because of David’s ineligibility, his pension will be reduced by the amount of the VA Disability Offset.

David’s VA Disability Rating: 35%

VA Monthly Disability Benefit: $1,435.00

Monthly Pension, Less Disability Offset: $2,665.00
($4,100 Less $1,435)

Now apply the Coverture Fraction to this reduced pension.

Coverture Fraction (Time Rule): 65%
(13 ÷ 20)

Monthly Marital/Community Benefit: $1,732.25
Josephine’s Reduced Monthly Benefit: $866.13

Josephine’s monthly benefit reduction
attributable to David’s ineligibility for CRDP is: $466.38

Resulting Retirement Payments:
David’s Monthly Retirement Pension: $1,798.88
David’s Monthly VA Disability Benefit: $1,435.00
Total Received By David: $3,233.88
Total Monthly to Josephine: $866.13
Total Monthly Payments: $4,100.00

Had David been eligible for CRDP, the Resulting Benefit Payments would be:
David’s Monthly Retirement Pension: $4,100.00
Coverture Fraction: 65%
Total Received By David: $2,767.50
Total Monthly to Josephine: $1,332.50
Total Monthly Payments: $4,100.00

The percentage of increase in Josephine’s monthly benefit if David were CRDP eligible would be: 54%.

Caution:
At the time of divorce in 2011, Josephine’s attorney inserted into the Property Settlement Agreement and Military Domestic Relations Order language awarding Josephine 50% of the marital part of the member’s retirement benefit. As an experienced practitioner her attorney also provided for Josephine, Former Spouse Survivor Annuity benefits. Unfortunately, no consideration was given to the possible post-divorce partial disablement of the member. The Former Spouse was left with what was deemed a solid right to a future retirement benefit. Our suggestion when representing the spouse of a military member is to create a paper trail evidencing your written notification to the Former Spouse of these circumstances and establishing that what he or she has is an expectancy that could be defeated by the facts presented in this Practice Aid.

Alert:
Clearly, some military personnel are more prone to partial or full disablement than others. It is suggested, that at the commencement of a matter attorneys obtain the member’s MOS (military occupation specialty). This may be informative as to the probability of member disablement. Regardless of the member’s MOS, the potential for disability remains. The prudent attorney representing the Former Spouse is well advised to make clear to his or her client at the time of divorce this ability of the member to defeat (in full or in part) an assignment to an alternate payee of the members disposable pay.

Troyan, Inc., conducts seminars for family bar associations and groups of family practitioners (at least 20 attendees). The content of each seminar is structured to your stated preferences. The duration of seminars varies from two hours to a full day depending on your topic preferences.