No Indemnification for Wife Awarded Community Share of Husband's Military Pension if Retirement Delayed Beyond His Eligibility Date

No Indemnification for Wife Awarded Community Share of Husband’s Military Pension if Retirement Delayed Beyond His Eligibility Date

In community property division, civilian spouse was awarded 29% of husband’s military pension. Upon eligibility for retirement benefits, divorce decree required husband indemnify wife should he delay retirement to remain active duty. Arizona Supreme Court determined federal law does not entitle non-military spouse to indemnification should the service member choose to retire later than eligible. Trial court erred in requiring husband start making military-based pension payments to wife before his actual retirement. Vacated in part and remanded.

No Indemnification for Wife Awarded Community Share of Husband's Military Pension if Retirement Delayed Beyond His Eligibility Date

Shelly Rae Barron and Paul Roger Barron (2019)

Military Pension as Community Property

Should husband decide to remain on active duty after 20 years’ service, the divorce decree required he start paying wife her share of military retirement pay (MRP) as though actually retired from the Marine’s when eligible in 2023. He appealed the order, arguing the trial court improperly ordered him to indemnify the wife if he continued with active duty service beyond his retirement eligibility date.

Arizona Court of Appeals reversed the family court’s order. Rejecting the appellate court’s analysis, the Arizona Supreme Court vacated that portion of the opinion addressing indemnification in federal law.  

Divorce Treatment of Military Retirement Benefits in Federal Law

The court’s analysis starts with the Uniformed Services Former Spouses Protection Act, 10 USC § 1408. The USFSPA gave Arizona and other states authority to “treat disposable retired pay as community property” in military divorce proceedings.

The wife argued indemnification was proper under Koelsch v. Koelsch, 148 Ariz. 176 (1986). Koelsch permits court-ordered indemnification under Arizona law if the service member elects to keep working beyond his or her retirement date when benefits are “matured and payable.” Yet Koelsch did not involve community property division of a military pension under federal statute.

Following the U.S. Supreme Court Decision in Howell

The court compared a pension waiver in the military divorce of Mr. and Mrs. Howell with Barron’s indemnification. In re Howell, 238 Ariz. 407 (2015), reversed, Howell, 137 S.Ct. 1400. In Howell, it was years after the divorce decree was entered that the retired military spouse elected to waive a portion of MRP to receive disability benefits instead. As a result, wife’s monthly pension benefit substantially decreased and she sought to recover the difference. The trial court ordered husband to indemnify wife as her right to MRP was vested – an order upheld by the state supreme court. The U.S. Supreme Court reversed on appeal, however, because Congress did not grant states authority over the “disability-related waived portion of military retirement pay.”

Furthermore, waived military retired pay is not divisible community property under federal law, which preempts state law. Even though the divorce decree awarded a civilian spouse half the MRP, “such an interest ‘is, at most, contingent, depending for its amount on a subsequent condition: [the military spouse’s] possible waiver of that pay.'”

The family law judge can divide a military pension “only to the extent it is disposable retired pay” as defined by § 1408(a)(4)(A) of the USFSPA. Otherwise, ordering indemnification would displace federal law while obstructing congressional purposes and objectives. The same reasoning applies in Barron.

What Is Disposable Retired Pay?

The trial court is limited to treating a service member’s disposable retired pay as community property. Continuing its USFSPA analysis, the court defined disposable retired pay as “the total monthly retired pay to which a member is entitled.” Specifically, “entitled” means the service member must have “applied and been approved for military retirement benefits” and, importantly, must actually retire to become entitled to MRP.

Distinguishing Koelsch, a service member’s interest in the military pension is “neither vested nor mature until the member retires and benefits are approved.” Like Howell, the non-military spouse’s interest in the MRP is a contingency which cannot be implemented until the service member actually retires:

Because the USFSPA only permits state courts to divide ‘disposable retired pay,’ and no entitlement to MRP exists until the member retires and is approved to receive such benefits, state courts cannot order service members to make MRP-based payments to former spouses before retirement.

During divorce proceedings, the trial court may award portions of a military pension before the service member retires, but it cannot order MRP-based payments until actual military retirement occurs.

This U.S. Marine had not applied for, had not received approval for, and was not receiving military pension benefits at the time of divorce. Therefore, the trial court erred in requiring MRP-based payments to the other spouse beginning when the service member “purportedly became eligible to retire” in 2023.  

Arizona Supreme Court vacated part of the lower court opinion in Barron v. Barron, 796 Ariz. Adv. Rep. 31 (Ariz.Ct.App., July 31, 2018), and remanded the case to the trial court for further proceedings.

Barron v. Barron, CV-18-0234-PR (Ariz., May 21, 2019)

For precise language, please read the court’s original opinion. Legal citations have been omitted.

To learn more about military pension division under the USFSPA, read Stewart Law Group’s discussion on Dividing Your Military Retirement in Arizona divorce.