Military Disability in Divorce is the third installment of a 4 part series on the changes you need to know to stay up to date on the laws affecting military divorce, including military disability programs and related compensation. This information was presented by Janice Boback at the National Business Institute Continuing Legal Education for Professionals in July 2018.
Military Disability Programs for Military Retirees
Combat-Related Special Compensation (CRSC) and Concurrent Retirement Disability Pay (CRDP) are programs created by Congress to allow eligible military retirees to receive monthly entitlements in addition to retired pay.
If the Department of Defense (DoD) pays $500 a month to a veteran and then the Veteran’s Administration (VA) begins paying $500 a month to the veteran, then the DoD would stop payments, and the veteran would only receive the $500 a month from the VA and nothing from the DoD. If the DoD pays $500 a month to a veteran and then the VA begins paying $300 a month to the veteran, then the DoD would reduce their payments by $300 and the veteran would still only receive the total of $500 a month, but $300 would come from the VA and $200 from the DoD.
The benefit is that any money received from the VA is not taxable, while most DoD money is taxable or replacing taxable income with non-taxable income.
Recent Laws Affecting Monetary Disability Benefits
Technically, military retirees can only receive monetary disability benefits from either the DoD or the VA, not both. There have, however, been two laws passed recently that allow for exceptions to this rule. The first exception is the Combat Related Special Compensation (CRSC) program, and the second is the Concurrent Retirement and Disability Pay program.
Retirees cannot receive both CRSC and CRDP and must elect one each year through an annual “program election”. So, which is better?
|Combat Related Special Compensation||Concurrent Retirement & Disability Pay|
|Full Concurrent Receipt||Full Concurrent Receipt (since 2014)|
|10% minimum VA disability rating||50% minimum disability rating|
|Application required through service branch||No Application required (it is automatic)|
|Can get retro pay back to June 1, 2003||Can get retro pay back to June 1, 2004|
|Combat Related Disability||Service Related Disability|
|No Survivor Benefit||No Survivor Benefit|
|Not subject to USFSPA||Not subject to USFSPA
|Not taxable as disability payment||Taxable as recoupment of retired pay|
|Paid by DFAS monthly||Paid by DFAS monthly|
|Special compensation for combat related disabilities||Restoration of retired pay for retirees with service-connected disabilities|
|VA Individual Unemployment Eligible||VA Individual Unemployment Eligible|
A. Concurrent Retirement and Disability Pay (CRDP)
In a nutshell, the CRDP is the military disability program providing special pay and not from VA. CRDP allows the waived amount to gradually be restored if 20 yrs. service and at least 50% disability rating but only since 2004
Concurrent Retirement and Disability Pay (CRDP) allows those retired from military service to receive both military retired pay and Veterans Affairs (VA) compensation. This was changed effective January 1, 2004. Prior to 2004 receiving retirement pay and disability pay was prohibited.
You do not need to apply for CRDP. If qualified, you will be enrolled automatically but you must be eligible for retired pay to qualify for CRDP. This means that if you were placed on disability retirement but would not be eligible for military retired pay in the absence of the disability, you would not be entitled to receive CRDP. If you were placed on a disability retirement and were also eligible to receive retirement pay in the absence of the disability, you would be entitled to receive CRDP.
To be eligible for CRDP:
- Regular retiree with a VA disability rating of 50 percent or greater.
- Reserve retiree with 20 qualifying years of service, who has a VA disability rating of 50 percent or greater and has reached retirement age.
- Retired under Temporary Early Retirement Act (TERA) and have a VA disability rating of 50 percent or greater.
- Disability retiree who earned entitlement to retired pay under any provision of law other than solely by disability, and you have a VA disability rating of 50 percent or greater. You may become eligible for CRDP when you would have become eligible for retired pay.
The retired pay for retirees with 50%-90% VA-rated disability is restored by the Concurrent Retirement and Disability Payments on a graduated schedule. Veterans with a 100% disabled rating by VA can claim full CRDP without necessarily having to be phased in.
B. Combat Related Special Compensation (CRSC)
CRSC was passed by Congress in December 2002. CRSC is the military disability program that provides special compensation for combat-related disabilities. It is a tax-free entitlement received each month along with any retired pay. This means that qualified military retirees with 20 or more years of service that have “combat related” VA-rated disability will no longer have their military retirement pay reduced by the amount of their VA disability compensation. Instead, they will receive both their full military retirement pay and their VA disability compensation.
- Combat-related disabilities include:
- Armed Conflict
- Agent Orange
- Hazardous Duty
- Radiation Exposure
- An Instrumentality of War
- Gulf War
- Simulated War
- Mustard Gas or Lewisite
This military disability compensation is non-taxable, and retirees must apply to their Branch of Service to receive it. Combat-Related Special Compensation is paid by the Department of Defense under Title 10, U.S. Code.
To be eligible for CRSC:
- be entitled to or receiving military retired pay
- Have a disability rating of at least 10% by the Department of Veteran’s Affairs
- Waiver of VA pay from retired pay
- File an application with your branch of service
For a condition to qualify under CRSC, it does not have to be a DoD Disability, but it does have to qualify as a VA Disability. Even though the DoD is the one that gives CRSC, remember that the DoD amount was decreased by the conditions rated by the VA. As long as the VA rates the condition, the DoD shouldn’t decrease their amount because of that condition.
In addition to monthly CRSC payments, the Defense Finance and Accounting Services (DFAS) will audit the veteran’s account (research pay information from both DFAS and VA) and determine if they are eligible for a retroactive payment. If any money is due from DFAS, it will be received within 30-60 days of receipt of the first CRSC monthly payment. If a retroactive payment from the VA is also due, the audit will be forwarded to the VA who would be responsible for paying any money due from them. Retroactive payments may go back as far as June 1, 2003, and military disability retirees with less than 20 years of service will be automatically limited to a retroactive date of January 1, 2008.
C. Veterans Affairs (VA) Disability Compensation
According to the Congressional Budget Office, about 55 percent of the 2 million military retirees are subject to the VA offset.
If there was no VA offset and a veteran was allowed to receive both retirement and military disability (speaking for those under 50% disability) there would not be an issue; Retired pay is provided for a career of military service; VA disability compensation is given for a service-connected disability.” Prior to Jan 2004, you could not get retirement and disability. This concurrent receipt of both has been a hot topic for years now that disability reduces retirement.
What you hear are divorce clients who say “My ex-husband got VA disability, and now my share of the pension just dropped by several hundred dollars”. They want help in resolving this and finding out what options are available to restore their share of the military retired pay.
When a veteran elects VA disability compensation and has a VA rating of less than 50% or else has Combat-Related Special Compensation, this election decreases the share of the military pension which is available for division, known as “disposable retired pay.”
When there is a military pension division order which is paid out through the military pay center, then that means a reduction in the money that the former spouse can get through the pay center.
It is now not a possibility to get the judge to require the ex-husband to indemnify his former spouse by paying back or reimbursing the money the former spouse lost due to the veterans disability election. However, if there is a prior requirement for indemnification, either in a written agreement or in a prior court order it is possible. In 2017, the U.S. Supreme Court ruled on this very issue Howell v. Howell finding when there is no prior agreement or order requiring indemnification, you cannot get the court to order a reimbursement.
If there WAS an agreement or order on this, then there MAY be a chance of obtaining indemnification. The judgment dissolving the marriage should expressly state that the veteran must compensate his former spouse for any reduction due to the election of VA payments.
As an example:
Sam’s total retired pay is $1,600 and the court awards Diane, his former wife, 50%, or $800. Then Sam obtains a VA disability rating (less than 50%) and elects to receive VA disability compensation of $600. This means that Sam will waive $600 of the retired pay and get a $600 payment from the VA. Thereafter the payment to Diane from the pay center is only $500 a month instead of $800 (that is, 50% of $1,000 instead of $1,600). Her share of the benefit is reduced by $300 due to Sam’s decision to receive VA payments. Sam’s income is now $500 from the pension which will be taxed and $600 from VA (for a total of $1,100) of which $600 is tax-free while Diane will only be getting $500 of which she will have to pay taxes. Should Sam have to reimburse Diane the missing $300 each month?
D. Howell v. Howell and the Disposition of Military Retirement Pay in Divorce
Holding: A state court may not order a veteran to indemnify a divorced spouse for the loss in the divorced spouse’s portion of the veteran’s retirement pay caused by the veteran’s waiver of retirement pay to receive service-related disability benefits.
This case was decided by the U.S. Supreme Court on May 15, 2017, when the unanimous court handed a victory to Air Force veteran John Howell who had been divorced from his former spouse, Sandra, for more than 25 years. The Divorce decree had required John to pay 50% of his retirement pay to Sandra. Subsequent to the divorce, John waived part of his retirement pay for disability benefits. This, of course, reduced Sandra’s share. The U.S. Supreme Court was loud and clear, “John cannot be required to reimburse Sandra for the money she lost each month as a result of his waiver”.
The Howells were divorced in 1991 and John was to retire the next year so the divorce judgment provided that Sandra was to receive 50% of John’s military retirement pay. John was receiving 50% ($750) and Sandra was receiving 50% ($750). In 2005, John waived $250 of his $1,500 retirement pay so that he could receive $250 as disability benefits. As a result, he began receiving $625 in retirement pay, Sandra began receiving $625 in retirement pay, and John received an additional non-taxable check each month for $250.
- Divorce Judgment Provided: John $750 + Sandra $750 = Total $1500
- After Waiver: John $875 + Sandra $625 = Total $1500
Sandra went back to court to obtain an order that John had to compensate her for the loss of the $125 each month and the State Court agreed with her. John appealed and the U.S. Supreme Court unanimously reversed the State Court in May 2017.
The Court relied on Uniformed Services Former Spouses’ Protection Act (USFSPA), a 1982 federal law governing the disposition of military retirement pay in divorces, and the 1989 Supreme Court case [Mansell v Mansell, 490 US 581 (1989)] which interpreted the USFSPA.
In the Mansell case, Major Mansell and his wife, Gaye, were married for 23 years and were divorced in 1979 with each party receiving 50% of the military retirement pay. Major Mansell received both Air Force retirement pay and disability benefits. Major Mansell asked the California Court to modify his divorce judgment so that he did not have to share his disability benefits and the California Court denied his request. The U.S. Supreme Court reversed that judgment and held that the USFSPA exempted that portion of the retirement pay that a service member waived in order to receive disability benefits from the amount that is divisible in a divorce.
The USFSPA makes it clear that the state courts can divide up “disposable retired pay,” which is defined as the service member’s retired pay, minus any portion of that pay waived in favor of disability benefits. Therefore, USFSPA does not permit state courts to treat retirement pay that has been waived to receive veterans’ disability benefits as something that can be divided.
Through concurrent retirement and disability pay, retirees with a 50% or higher disability rating receive both 100% military retirement pay and VA disability pay. Ex-spouses in those cases will still be compensated at the same rate, while those with veteran ex-spouses with less could see up to half of their award taken away under the Supreme Court ruling.
Justice Stephen Bryer mentioned that the federal statute may make life difficult for former military spouses like Sandra. However, the Supreme Court does not have the jurisdiction to determine what is owed to a former spouse, that power lies with the state. He added that the lower courts could try to account for the possibility that a veteran may later waive a part of his or her retirement pay for disability benefits or recalculate spousal support based on later changes in circumstances.
Military divorce can be complicated especially when military disability pay is involved. If you have questions about military divorce or the unique aspects of military disability in a divorce, Anderson & Boback can help. Contact us today and let our military divorce expertise guide you through this complicated time.