Supreme Court Invalidates Indemnification Provisions For Military Retirement

Any smart divorce lawyer representing a military spouse always seeks to add indemnification language to military retirement pay division orders – the order that divides the servicemember’s military retirement.  The indemnification aims to reimburse the spouse for any reduction in military retirement pay caused by the election of VA disability pay.  The provisions normally provide:

The Former Husband shall not merge his disposable military retired pay with any other pension and shall not pursue any course of action that would defeat or reduce the Former Wife’s right to receive the portion of the disposable military retire pay as provided herein.  If the Former Husband voluntarily merges, constructively waives, forfeits, or otherwise defeats or reduces the award to the Former Spouse hereunder, the Member shall pay directly to the Former Spouse the amount provided in Paragraph 1 above, no later than the 5th day of each month, under the same terms and conditions as if those payments were made under the other terms of this Order.

Florida courts have upheld such provisions, writing:   “[federal law] does not prevent the enforcement of an indemnification provision which provides for alternative payments from non-disability sources to compensate for the reduction in military retirement benefits divided as part of the property settlement agreement. Furthermore, even in the absence of an express indemnification provision, the trial court may order an equivalent benefit as part of an action to enforce a property settlement agreement if one spouse commits a voluntary act which defeats the intent of the parties.” Blann v. Blann, 971 So. 2d 135 (FLA 1st DCA 2007).

On May 15, 2017, the United States Supreme Court in Howell v. Howell made clear that indemnification provisions requiring reimbursement for waiver of military retired pay for disability pay are preempted by federal law.  The Court, wrote:

Neither can the State avoid Mansell by describing the family court order as an order requiring John to “reimburse” or to “indemnify” Sandra, rather than an order that divides property. The difference is semantic and nothing more. The principal reason the state courts have given for ordering reimbursement or indemnification is that they wish to restore the amount previously awarded as community property, i.e., to restore that portion of retirement pay lost due to the postdivorce waiver. And we note that here, the amount of indemnification mirrors the waived retirement pay, dollar for dollar. Regardless of their form, such reimbursement and indemnification orders displace the federal rule and stand as an obstacle to the accomplishment and execution of the purposes and objectives of Congress. All such orders are thus preempted.

What does this mean for service members currently reimbursing former spouses for accepting disability pay that reduces military retirement pay?  It’s not exactly clear.  Based on Howell,  indemnification provisions are unlawful and cannot be enforced by courts.  Still, the Supreme Court made clear that state courts could factor in the loss of retirement pay to the spouse and recalculate spousal support.  State courts could also value a military retirement at less than face value at the time of dissolution and grant the military spouse property other than the retirement.

One thing is clear – it’s been a bad year for military spouses.  Both the changes in the NDAA and Howell are indicative of a broader movement to restrict the military retirement pay and other benefits that a former spouse can receive in a dissolution action.

 

Posted in Uncategorized.