Superior Court Goes “Precedential” with a Military Pension Case
Except in communities which have significant military enclaves, most lawyers don’t know much about the world of military compensation. It is a world with different rules because many people in the military are itinerant; traveling the world in support of U.S. defense needs. The two most significant elements are living quarters allowances while in service and the retirement that becomes payable after 20 years of service. The two kind of interact in the sense that service members who spend 20 years “on the go” don’t really get a chance to develop home equity as part of their asset portfolio.
Martin v. Martin decided on July 22, 2024 brings some of these features into focus. The Martins were married in 1998 and began their six year divorce odyssey in 2016 when husband filed. In early 2017 husband agreed to pay $2,400 in monthly alimony pendente lite and to cover the house expenses in exchange for exclusive possession of the marital home. The court divided $26,500 in savings on an interim basis; 66% to wife and 34% to husband. Eventually the marital house was sold yielding just over $203,000 in proceeds.
When the case was heard in Fall, 2021 a hearing officer granted a request to leave the record open for evidence of husband’s post separation retirement accruals. This request was not opposed and a problem in the case arises out of the absence of a real record related to the documents and calculations submitted and adopted by the court on this very important subject.
The full asset constellation and relative earnings of the parties are omitted from this precedential case so while we have 27 pages of opinion, we are light on the facts. Aside from the bank account and the home proceeds we know that the military pension had vested and husband had two other non-military retirement plans. We are told that wife was awarded roughly $96,000 from the marital home (47%), $47,000 from a Navy Credit Union account (60%), $89,000 from the two private employment retirement plans (percentage not stated) and $1,156 a month (60%) of husbands military (DFAS) pension. The opinion tells us that this scheme amounted to a 60/40 split in favor of wife. Husband was earning over $9,000 a month at the time of trial while wife was making $2,000 a month. We don’t know how to back into that number nor do we have any age information. That’s pretty thin gruel for 27 pages of precedential opinion.
Wife’s appeal came from denial of alimony. The trial court thought her years of APL were “enough.” She received $144,000 over five years, a sum that was probably taxable to her and deductible by husband although that’s not discussed. It also denied wife’s request to be survivor beneficiary to the marital portion of the military pension.
In a sentence that creates more confusion than clarity the appellate panel concludes: “Notwithstanding [the $144,000 interim support]….her portion of the equitable distribution scheme was approximately $400,000” Doing the math we start with $96,000 of house proceeds, $47,000 of credit union, $18,500 in interim bank account distribution and $89,000 of defined contribution retirement. Those numbers sum to about $250,000 so to get to $400,000 you have to include the gross of the interim support payments or try to put some present value on the navy pension. Neither topic is discussed. The implication of this precedential ruling is that interim support “counts” when deciding what a party gets in equitable distribution and thus affects qualification for alimony. While alimony has always been a secondary remedy it seems new to this writer that gross taxable interim support is a resource related to equitable distribution. Not many separated spouses “bank” the money they get in support, especially when a 2017 support order was taxable to the recipient for its duration.
Turning back to the DFAS (military) pension, the Superior Court found two errors. The hearing officer and trial court awarded wife 60% of the military pension. The problem with that is federal law does not allow a non-participant (i.e., alternate payee) to receive more than half of the “disposable” military pension. 10 U.S.C. 1408(e). This can be tricky. In this case husband accrued eight years of service before marriage; thus that portion is non-marital. Second, the gross pay is subject to certain deductions for insurances before you get to “disposable” retirement pay. On the other hand, Section 1408 does not distinguish between marital and non-marital retirement even though Pennsylvania does. Thus, even though the $1,156 in awarded pension payments was more than half of the marital component of the pension, it was still less than half of the disposable component of the pension. The Superior Court indicated it was error for the trial court to have mis-read those provisions.
The other issue in the military world was the holding that wife did not have to be named survivor beneficiary of any aspect of the military pension. Once husband died, she would lose all entitlements. 10 U.S.C. 1408(d)(4). Ironically, one of the deductions from military retirement pay is a set aside for precisely that benefit. But survivor benefit coverage is not automatic 10 U.S.C. 1448 (b)(2-3). And once selected, the participant cannot name other spouses, past or present as beneficiary. 10 U.S.C. 1448 (b)(2)(B-C). The appeals court reversed this with instructions to require survivor spouse designation. What’s interesting but unanswered is whether the survivor’s benefit is based on the “entire” and not merely the “marital” portion of the participant’s benefit following death.
The case was remanded to correct these flaws, but the trial court was otherwise affirmed. The case also illustrated the challenges presented by leaving the record open. One of wife’s exceptions related to the court’s conclusions about the marital versus non-marital components of the private (non-military) defined contribution plans. It appears that no one objected to the data submitted but wife disagreed with how the trial court analyzed it. Unfortunately, none of this was on the record transcript, a flaw which any appellate lawyer will tell you is waived. The other issue which can commonly occur in these cases is the lawyer hearsay problem. At one point the husband’s lawyer stated on the record what he had been “told” by someone in the Defense Department about how the navy pension worked. This appears to have come in as evidence without objection. The representation made to the court appears to have been accurate but missed the nuance of how much of a retirement benefit can be awarded to a non-participant spouse.
Because pension related issues often do bring complications, the prudent choice in such cases may be to jointly engage an expert to ascertain how best to maximize the retirement benefit and lay out what choices the plan (public or private) will allow. That report could then be jointly submitted to the trier of fact so that an equitable remedy can be fashioned in concert with the overall property distribution scheme.