March 6, 2012
As most divorce attorneys know, federal law prevents state courts from treating veterans' disability benefits or military disability benefits as marital or community property. Mansell v. Mansell, 490 U.S. 581 (1989).
But what about temporary disability pay? Under federal law, if a service member has a disability rating of at least 30%, but the disability has not yet been determined to be permanent, the member is placed on the Temporary Disability Retired List ("TDRL"). 10 U.S.C. § 1202 (Westlaw current through P.L. 112‑89 [excluding P.L. 112‑55, 112‑74, 112‑78, and 112‑81], approved 1‑3‑12). The service member can remain on the list for as long as five years, after which he or she must be either returned to active duty, retired normally (if he or she has sufficient years of active service), or retired for disability.
While on the TDRL, service members receive temporary disability pay. Temporary disability pay is the larger of (1) 2.5% of the member's monthly base pay for each year of prior service, or (2) the member's base pay times his or her disability percentage. Id. § 1401(a).
Is temporary disability pay subject to equitable distribution? The question was presented to a Colorado court in In re Marriage of Poland, 264 P.3d 647, 648 (Colo. App. 2011). The power of state courts to divide military benefits is set forth in the Uniformed Services Former Spouses Protection Act, 10 U.S.C. § 1408. That statute generally provides that state courts can divide only "disposable retired pay." But the definition of "disposable retired pay" does not include,
in the case of a member entitled to retired pay under chapter 61 of this title, [amounts that] are equal to the amount of retired pay of the member under that chapter computed using the percentage of the member's disability on the date when the member was retired (or the date on which the member's name was placed on the temporary disability retired list)[.]
Id. § 1408(a)(4)(C). Temporary disability pay is paid under 10 U.S.C. § 1202, which is part of chapter 61 of title 10. By expressly stating that amounts based upon the service member's initial disability rating are not disposable retired pay, § 1408(a)(4)(C) implicitly states that amounts received above that level are disposable retired pay. The Colorado court so held:
We conclude, based on 10 U.S.C. § 1408(a)(4)(C), that an amount equal to the amount of TDRL pay, as calculated based on husband's percentage of disability when he was placed on the TDRL, must be excluded from the marital property, but that any amounts in excess of that amount may be divided under the decree.
264 P.3d at 649. The amount of temporary disability, based on the member's disability rating, is essentially the second of the two formulas set forth above. The first formula, however, does not use the member's disability rating. Thus, where the first formula produces a larger result than the second, it would appear that the difference can be treated as marital property. The difference was significant in Poland, as the husband was actually eligible for normal retirement benefits, so that a portion of his temporary disability pay was essentially a form of retirement pay.