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MILITARY SEPARATION BENEFITS
© 1996 National Legal Research Group, Inc.
FLORIDA: Kelson v. Kelson, 675 So. 2d 1370 (Fla. 1996).
Voluntary Separation Incentive (VSI) benefits paid to a service member upon voluntary separation from the armed forces qualify as military retirement pay under a property settlement agreement that provides for division of military retirement pay, and federal law does not preclude a state court from enforcing a property settlement that is found to encompass VSI benefits.
OKLAHOMA: Pavatt v. Pavatt, 920 P.2d 1074 (Okla. Ct. App. 1996).
The husband's Special Separation Benefit (SSB) was a retirement plan asset that must be divided with the wife pursuant to the parties' divorce decree.
On December 5, 1991, Congress authorized the Voluntary Separation Incentive (VSI) and Special Separation Benefit (SSB) programs, which took effect in 1992. Pub. L. No. 102-190, 20661-20664, 105 Stat. 1290, 1394-99 (1991) (codified at 10 U.S.C. 201174a-201175). These incentive programs were designed to induce members of the armed forces to leave the military voluntarily. H.R. Conf. Rep. No. 102-311, 102d Cong., 1st Sess., reprinted in 1991 U.S.C.C.A.N. 1111-12. Under both of the programs, qualifying service members who voluntarily leave active duty before their retirement vests receive benefits based on their salary at the time of separation and on years of service. The service member may choose a series of annual payments, referred to as a voluntary separation incentive, or a lump-sum special separation benefit. 10 U.S.C. 201174a(b), (e)(3); 201175(c), (e)(1).
Kelson v. Kelson and Pavatt v. Pavatt both hold that these separation benefits are divisible pursuant to a separation agreement that divides military retirement pay. Kelson v. Kelsonalso holds that although these benefits are not covered by the Uniformed Services Former Spouses Protection Act (USFSPA), federal law does not preclude a state court from enforcing a separation agreement or decree against VSI/SSB benefits.
In Kelson, the parties' 1990 separation agreement provided for the wife to receive a monthly share of the husband's "retired/retainer pay," but two years after the dissolution the husband elected to leave active duty and receive VSI benefits, with an annual payment of over $18,000 for 32 years, rather than retired pay in monthly increments for life. The trial court and appeals court held that the VSI benefits could not be considered retired/retainer pay and that the trial court lacked jurisdiction to modify the agreement to encompass the VSI benefits.
The Florida Supreme Court held that VSI benefits are the functional equivalent of military retirement pay and thus qualify as military retirement pay under a property settlement that divides military retirement pay. The court cited other cases that have reached the same conclusion: In re Crawford, 180 Ariz. 324, 884 P.2d 210 (Ct. App. 1994) (whether SSB payment represents retirement proceeds or a payment in lieu of retirement benefits, some portion of it is attributable to retirement funds); Blair v. Blair, 271 Mont. 196, 894 P.2d 958 (1995) (election of SSB is an election of early retirement); Kulscar v. Kulscar, 896 P.2d 1206 (Okla. Ct. App. 1995) (SSB payment is either retirement proceeds or payment in lieu of retirement benefits). A contrary holding would enable a service member to defeat the other spouse's court-awarded interest in military retirement benefits by unilaterally altering the form of those benefits in a manner that was unforeseeable at the time the award was made, the court reasoned.
Next, the court considered whether USFSPA applies to VSI/SSB payments, and decided that it does not. USFSPA was enacted prior to the enactment of the VSI/SSB programs and makes no mention of benefits payable under either of the special incentive programs, the court observed. It disagreed with the holding in Abernethy v. Fishkin, 638 So. 2d 160 (Fla. Dist. Ct. App. 1994), that VSI benefits qualify as retirement pay that is subject to equitable distribution under USFSPA.
The court went on to hold, however, that enforcement of a separation agreement or dissolution decree against VSI/SSB benefits is not precluded by federal law. The United States Supreme Court reiterated in Mansell v. Mansell, 490 U.S. 587 (1989), that Congress rarely intends to displace state authority in the area of domestic relations, and there was no direct enactment requiring preemption here, the court explained. The fact that a service member's right to VSI benefits is not "transferable" does not require a finding of preemption, the court said, noting that even USFSPA, which permits equitable distribution of retirement benefits, contains a similar provision prohibiting transfer of retirement pay. Equitable division of VSI/SSB benefits is not inconsistent with congressional intent, the court found, pointing to legislative history describing the programs as a package of benefits to assist separating personnel and their families. The court also quoted from a Department of Defense pamphlet which states that the treatment of VSI or SSB benefits in divorce proceedings is not dictated by federal law.
Concurrences and Dissents. The court splintered in the case, however. Two justices concurred in the opinion discussed above, for a total of three justices subscribing to those views. Two other justices concurred in the result only, arguing that VSI payments are within the scope of USFSPA as well as the property settlement agreement under review.
Two justices authored separate dissenting opinions, with an additional justice concurring in each dissent. One of the dissents, citing Mansell, argued that VSI payments are not subject to equitable distribution absent a specific directive to the contrary in USFSPA. Furthermore, the dissent argued, no authority existed for the trial court to retroactively modify the property settlement agreement to provide for division of benefits that did not exist at the time the parties entered into the agreement. The other dissent contended that the trial court lacked jurisdiction to modify the agreement. In Pavatt v. Pavatt, the Oklahoma Court of Appeals stood by its earlier decision in Kulscar v. Kulscar, which approved treating SSB benefits as retirement pay under a divorce decree dividing a husband's military retirement benefits. The court in Kulscarrejected an analysis which would allow the service member to retain the entire compensation for unilaterally altering a retirement plan asset in which the other party had a court-decreed interest.
Likewise, the court decided, the husband's SSB payment here was a retirement plan asset, and was thus marital property subject to division. As a matter of law, the wife was entitled to share in the SSB payment pursuant to the provision in the parties' divorce decree dividing the husband's military retirement pay. The court decided, however, that the husband could not be held in contempt for refusing to pay the wife her portion of the SSB payment. The divorce decree was not clear enough to give the husband notice that it required payment of SSB benefits as military retirement pay, the court reasoned.
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