State divorce courts are authorized to divide and distribute military non-disability retired pay. Pennsylvania treats military retired pay as marital property.
The federal Uniformed Services Former Spouses’ Protection Act authorizes courts to award up to 50% of the disposable retired pay of a military spouse, provided that the parties were married for at least ten years. See the Uniformed Services Former Spouses’ Protection Act, Department of Defense Authorization Act 1983, Pub. L. 97-252, § 1006(a), 96 Stat. 737 (1982), effective February 1, 1983, 10 U.S.C.A. § 1408, retroactive to June 25, 1981.
Federal law does not provide complete protection to a non-military spouse because military retirement pay that has been waived in order to receive veterans’ disability payments is exempt from distribution as marital property on the theory that disability payments are compensation for lost earnings and are therefore not property subject to equitable distribution. Therefore, the military spouse can unilaterally exclude a portion of their retirement benefits from the marital estate by converting retired pay to disability payments. State law allowing equitable distribution of veteran’s compensation where the veteran has waived a portion of his or her military retirement pay has no effect because federal law preempts the state law. It is important to keep in mind that a court order distributing retirement benefits cannot be overridden by a subsequent conversion to disability payments, thus a Pennsylvania court can order payment of the shortfall from other funds.
To protect military retired pay awarded to a spouse in divorce, one should carefully consider acquiring a Survivor Plan, which allows the retired spouse to provide an annuity to a former spouse. 10 U.S.C.A. §§ 1447 et seq., It is important to note that a military separation payment is not a substitute for a retirement benefit and is not marital property when received post-separation.
A special court order is required to divide military retirement. There are specific requirements for the court order to be accepted and implemented by DFAS.