The Uniformed Services Former Spouses’ Protection Act (USFSPA) authorizes States to treat veterans’ “disposable retired pay” as community property divisible upon divorce. 10 U. S. C. §1408. Before USFSPA, there was disagreement among the states on whether they had jurisdiction to apportion retired pay as part of a divorce. Even if a court decided it had the authority to consider the pension, courts were uncertain whether they could order the military finance element to undertake the apportionment. These questions resulted in retired pay being handled differently for service members seeking a divorce in California versus Kentucky and even between courts in the same state.
In McCarty v. McCarty, 453 U.S. 210 (1981), the United States Supreme Court held that states were statutorily precluded from dividing retirement pay as community property. The court relied on three factors to make this pronouncement. First, the statutes refer to retirement pay as a personal entitlement with no language conferring any entitlement on the service member’s spouse. Id. at 224-25.
Second, the entitlement ends upon the death of the service member. The Court noted that while survivor plans exist, the service member must elect them and pay a cost-share to put the benefit in place. Furthermore, the service member had full authority to decline any survivor benefit without any input from the spouse, so the spouse couldn’t have an expectation of a pension benefit. Id. at 226-27.
Lastly, the Court said the statutes in question specifically precluded attachment of retired pay. Therefore, a state divorce court cannot order division of retired pay by the military finance office. Id. at 228-29. The Court was careful to say that did not mean a state court could not consider the pay for purposes of ordering alimony or in the equitable division of other jointly owned property. The Court limited its ruling to whether the state court could not directly apportion the retired pay and therefore could not craft enforcement orders for that apportionment. The Court emphasized that if Congress wanted to adjust the statutory scheme, they were free to do so.
In response, Congress passed the USFSPA that same year. The Act addressed all three of these statutory restrictions outlined by the court. It specifically permitted states to consider the service member’s retirement pay as part of a divorce property settlement. Second, when a service member declines any or all of the Survivor Benefit options, the spouse must concur with that choice. Lastly, it permits the Defense Finance and Accounting Service (DFAS) to apportion the service member’s retired pay and make payments directly to the spouse in response to a court’s property settlement order.
While DFAS can apportion the member's retirement pay, there are two key limits to the direct payment to the former spouse. First, the former spouse must be what is commonly referred to as a “10 & 10 spouse.” The marriage must have lasted more than ten years, and ten of the married years must have been while the military member was on active duty. Second, DFAS will not honor a court order for direct payments that exceed 50% of the disposable retired pay.
Contrary to popular belief, USFSPA’s characterization of the pension as property is not unique to military retirements. Rather, it places military retirements on par with how states generally treat other pensions or retirement accounts. Most states accept that the value of retirement earned while married is marital property and subject to division. Unlike those pensions, though, a military retirement is not a store of value held for future payments but an ongoing entitlement paid for by the federal government with current receipts and incapable of being valued or divided until the member actually retires. Despite this key technical difference, USFSPA let states know that for practical purposes, they could consider it in the same vein as traditional pensions and put in place rules for how to divide it if and when the member retired
A second misconception, and one I was guilty of while on active duty, is that the statute “entitles” the former spouse to the division and is handled as a separate issue from the general property division. USFSPA does not entitle a spouse to anything. It merely permits the state court to consider the pension another asset for division upon divorce, just as a spouse’s civilian pension and retirement accounts are considered divisible property. The actual division of the pension can still be negotiated by the parties or divided equitably by the court, even if not fifty-fifty. (Although, as noted above, the statutes do not permit direct payments to the former spouse of more than 50% of retired pay as part of the property settlement.)
In addition to the retired pay, the USFSPA addresses other benefits. These include a former spouse’s eligibility to receive medical coverage, use the military exchanges and commissaries, and eligibility rules for Survivor Benefit Plans. The statutory rules are sometimes complex, particularly regarding remarriage and Survivor Benefits. I have linked to some valuable sites that provide information on military benefits and divorce. While a lot of information is available, it is vital that both the military member and the soon to be former spouse are represented by attorneys familiar with the applicable rules in order to craft a fair and equitable settlement and avoid surprises.
 The 50% limit is strictly for the division of the retirement as part of the property settlement. USFSPA permits direct payments up to 65% if the portion above 50% represents payments for alimony or child support.