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SECTION BY SECTION ANALYSIS
UNIFORMED SERVICES DIVORCE EQUITY ACT

Section 1 (Title)

Section 1 identifies the bill as the Uniformed Services Divorce Equity Act of 2003 (Act). It would amend the Uniformed Services Former Spouses Protection Act (USFSPA), Pub. Law 97-252, 10 U.S.C. 1408 et seq., enacted in 1982 with an effective date of Feb. 1, 1983.

Section 2 (Formula for Division of Retired Pay)

Section 2 codifies the procedure now widely used in state courts for dividing military retired pay as property. The former spouse would receive a percentage of 50%, or half, of the member's retired pay. The percentage is determined by dividing the length of the marriage, in months or years, while the member was qualifying for retired pay by the total time during which the member qualified for retired pay. Example: if a marriage lasted 15 years while the member was on active duty, and the member retired with 20 years' service, the former spouse would receive 15/20, or ¾, of 50% of the member's retired pay. In the case of reserve and National Guard members (who receive retired pay under Chapter 1233 of Title 10), the percentage is determined on the basis of points earned toward retired pay.

Exception. This section also provides an exception to the proportionate formula, in instances where the member and former spouse voluntarily agree to some other approach as part of a spousal agreement. This is intended to provide flexibility for the parties so that, for example, the member could make a greater up-front payment to the former spouse in exchange for a lesser amount from the member's retired pay than would have been the case had the formula been applied.

Section 3 (Limitations on Duration of Payments of Retired Pay)

Under current law, former spouses who were married to a military member for fewer than 20 years while the member was qualifying for retired pay can receive payments of the member's retired pay for life as "property." However, the member must serve at least 20 years to qualify for retired pay. Section 3 corrects this fundamental inequity by relating the duration of payments to the time "served" as a military spouse, i.e., the length of the marriage concurrent with the member's military service.

Section 3 links the duration of such payments to the duration of the marriage. Where the period of the marriage while the member was qualifying for retired pay is less than 20 years, payments from retired pay would be made for the number of years married while the member was qualifying for retired pay. Where the duration of the marriage was 20 years or more, payments would continue for life, i.e., until the death of the former spouse or the member, whichever occurs first.

Prospective Remarriage Provision. For marriages terminated after enactment of the Act -- where the duration of a marriage was less than 20 years concurrent with military service -- payments of retired pay as property would be limited to the number of years married while the member was qualifying for retired pay, or, until the former spouse remarries, whichever occurs first. This provision would bring military retired pay into line with other federal retirement and survivor benefit programs.

For example, retirement payments to former spouses of Foreign Service personnel are terminated upon remarriage of the former spouse before age 55. For the CIA, payments to former spouses are terminated upon remarriage of the former spouse before age 60. Under the military Survivor Benefit Plan (SBP), annuities to widows or widowers of former spouses terminate if the recipient remarries before age 55.

Divorces Prior to Enactment. For marriages terminated before enactment:

If the length of the marriage while the member was qualifying for retired pay was less than 20 years, payments would be made in accordance with the court order for the number of years of the marriage while the member was qualifying. Payments would then stop.

If, at the time of enactment, payments have already been made for a period of time equal to or greater than the number of years of marriage while the member was qualifying for retired pay, the obligation for such payments would end. However, there would be a two-year period of continued payments after the date of enactment, as a transitionary measure. This is intended to cushion former spouses from the financial impact of the provision.

As a further transitionary protection for former spouses, where payments under the new limitations come to an end within two years of the date of enactment, such payments would continue until the end of the two-year period after enactment.

If the length of the marriage while the member was qualifying for retired pay was 20 years or more, payments would continue until the death of the former spouse or the member, whichever occurs first.

There is no retroactive termination of payments for divorces that occurred prior to enactment.

Termination of Payments by DFAS. Section 3(b) of the bill states how payments being made to former spouses by the Defense Finance and Accounting Service (DFAS) can be terminated. In instances where the member has made payments for the number of years of marriage concurrent with military service, or (for divorces occurring after enactment) where the former spouse remarries prior to full payment for years of concurrent marriage, DFAS payments can be ended in one of two ways: 1)upon written request from the member, where DFAS has sufficient information on the member's payment history to the former spouse, or, 2)when DFAS receives a court order modifying the original court order under which payments were being made.

This provision is intended to relieve members from having to obtain court orders, when DFAS has sufficient information on hand to implement the termination provisions of the Act.

Termination of Payments by Members. The Act does not provide procedures for terminating payments being made by members directly to former spouses. The safest course would be for a member to obtain a court order modifying the court order under which payments are being made.

Rationale. By requiring that former spouses "serve" at least 20 years to qualify for lifetime payments, Section 3 would have the following beneficial effects:

As stated above, it would put the former spouse qualification for lifetime receipt of retired pay on equal footing with the qualification of military members to receive retired pay. This is a matter of basic fairness.

It would establish federal limitations on the states' ability to divide military retired pay. The U.S. Supreme Court, in its landmark 1981 McCarty v. McCarty decision (453 U.S. 210), recognized military retired pay as an important federal program designed to reward faithful and dangerous service, serve as an inducement for enlistment and reenlistment, and encourage orderly promotion and a youthful military. Section 3 would reassert Congress' exclusive role in providing for the national defense by setting new limitations on the ability of the states to alter the payment of military retired pay.

It would recognize the sacrifice and valuable contributions of former spouses when such services occurred during the entire time the military member was qualifying for retired pay. It does so by providing lifetime payments for such former spouses, such as they currently receive.

Section 4 ("Windfall Benefit")

Section 4 restricts awards under the USFSPA to an amount or percentage of the member's retired pay based on pay grade and length of service at the time of divorce, not retirement. It also ensures that former spouses receive increases based on cumulative percentage increases in retired pay between the time of divorce and time of the member's retirement.

This amendment applies to situations where the divorce occurs prior to the member's retirement. It would close the so-called "windfall benefit" loophole. Under current law, former spouses may be awarded a percentage or dollar amount of a member's retired pay calculated at the time of retirement. This is true even though the divorce may have taken place long before the member's retirement, when the member was in a lower pay grade. Thus, former spouses often share in the additional monies earned by the military member based on continued promotions and

additional lengths of service occurring after the divorce, in which the former spouse had no role.

Section 4 corrects this inequity.

Prospective Application. The provision applies to divorces occurring on or after the date of enactment of the Act.

Section 5. (Prohibition on Payments Before Retirement)

Section 5 specifically prohibits courts from ordering members to impute payments from retired pay and make such payments to former spouses as property until the member actually retires.

Section 6 (Statute of Limitations)

Section 6 establishes a two-year statute of limitations. Former spouses would have two years from the date of divorce to obtain a court order apportioning the member's retired pay. Currently, there is no limitation of any kind. This permits former spouses to make claims on retired pay years after a divorce has occurred, making retirees liable for large arrearages as well as prospective payments. The intent of the amendment is to require the parties in a military divorce to resolve issues relating to apportionment of retired pay in a timely manner, during the divorce proceedings or shortly thereafter, so both parties can make long-term financial plans with confidence.

Prospective Application. The provision would apply to divorces issued on or after the date of enactment.

Limitation on Retroactive Payments. In the case of divorces that occurred prior to enactment, courts are prohibited from ordering retroactive payments to former spouses in cases where more than two years has elapsed between the divorce and the issuance of a court order for property payments from the member's retired pay.

Section 7 (Termination of Liability)

Section 7 amends the current law by providing that not only do payments to former spouses terminate upon the death of the member or former spouse, whichever occurs first, but also liability for such payments.

Thus, under the new approach contained in the Act, where former spouses receive payments commensurate with the number of years married while the member is qualifying for retired pay, if the former spouse were to die prior to end of the member's obligation to make payments there would be no requirement for the member to continue payments to the former spouse's estate.

Section 8 (Disability Pay)

Section 8 contains an absolute prohibition against (i) the apportionment of disability pay paid by the Department of Veterans Affairs (VA), where retired pay is waived to receive such disability pay, and by the Department of Defense (DOD), and (ii) the garnishment of such disability pay for alimony under section 459 of the Social Security Act (42 U.S.C. 659).

The provision is intended to prohibit once and for all the division by courts of military disability pay for payment to former spouses. This is consistent with the 1989 U.S. Supreme Court decision in Mansell v. Mansell (490 U.S. 581), which clearly held that that only a military member's "disposable retired pay" - specifically excluding disability pay - is subject to apportionment for payment to former spouses.

The provision also resolves a conflict between the USFSPA and the Social Security Act over the apportionment of VA disability pay received in lieu of waived retired pay. Under the USFSPA, only "disposable retired pay" may be divided by the courts for payments to former spouses. Disposable retired pay is defined to exclude both (i) amounts of retired pay waived in order to receive VA disability pay (Title 38, U.S. Code) and (ii) DOD disability pay (Chapter 61, Title 10, U.S. Code). Notwithstanding these restrictions, the Social Security Act (42 U.S.C. 659(h)) specifically permits the garnishment by former spouses of VA disability pay received in lieu of waived retired pay for payments of alimony and child support. In addition, some courts have permitted the garnishment of DOD disability pay.

Section 8 resolves the ambiguity in the law by:

* Amending the USFSPA to provide that under no circumstances may state courts include VA or DOD disability pay as (i) part of disposable retired pay of the member for purposes of property payments under 10 U.S.C. 1408, or (ii) as part of amounts that can be garnished as alimony under 42 U.S.C. 659; and

* Amending 42 U.S.C. 659 to modify language authorizing the garnishment of VA disability compensation received in lieu of waived retired pay, prohibiting such garnishment for purposes of alimony payments.

Garnishment for Child Support Allowed. The effect of these changes would be to prohibit garnishment of disability pay for alimony, but permit such garnishment for purposes of child support.

Prospective Effect. The changes would apply to court orders and legal processes issued on or after June 25, 1981. In the case of court orders or legal processes issued prior to enactment, the effect would be prospective only, that is, applying only to pay periods after enactment of the Act. Retirees would not be able to recoup previous payments to former spouses from VA or DOD disability compensation.

Section 9 (Gender-Neutral Designations)

This provision makes technical corrections, including changing six "his" references in the original USFSPA to "the member's."


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