How is Disposable Retired Pay Calculated?

The Uniformed Services Former Spouse Protection Act (USFSPA), codified at  10 U.S.C. § 1408, grants State Courts the authority to treat only “disposable retired pay” as marital property in military divorce.  Many Servicemembers equate “disposable retired pay” with their “net pay.”  That is incorrect.  “Disposable retired pay” is determined before retired pay is taxed.  The USFSPA lists the deductions that qualify from gross retired pay in the calculation of “disposable retired pay,” which include the following:

            a.         Recoupments for prior overpayments.  See 10 U.S.C. § 1408(a)(4)(A)(i).

            b.         Deductions per forfeitures ordered by a court-martial.  See 10 U.S.C. § 1408(a)(4)(A)(ii).

            c.         Waiver of retired pay mandated by 38 U.S.C. § 5305, but only if waived retired pay is not restored by Concurrent Retirement and Disability Pay for Servicemembers rated 50 percent or more disabled by the Department of Veterans’ Affairs (VA).  See 10 U.S.C. § 1408(a)(4)(A)(ii); 38 U.S.C. § 5305 (mandating waiver of equivalent retired pay in order to receive VA disability compensation); 10 U.S.C. § 1414 (defining “Concurrent Retirement and Disability Pay” that restores the amount of retired pay waived in order to receive VA disability compensation for Servicemembers rated 50 percent or more disabled by the Department of Veterans Affairs (VA)); DODFMR1, Chapter 64, Concurrent Retirement and Disability Pay (CRDP), Paragraph 640502, Relation to Regular Retired Pay (stating that, “[a]s a restoration of retired pay, CRDP remains subject to the requirement to make direct payment of retired or retainer pay as property of a former spouse in compliance with court orders”).

            d.         Deductions of retired pay received under 10 U.S.C. Chapter 61, for Servicemembers retired by their respective Military Department for being unfit for continued duty.  10 U.S.C. § 1408(a)(4)(A)(iii).

            e.         Deductions to provide a Survivor Benefit Plan annuity, but only if the Former Spouse, and not a current spouse, is the beneficiary.  See 10 U.S.C. § 1408(a)(4)(A)(iv); DODFMR1, Chapter 29, Former Spouse Payments From Retired Pay, Paragraph 290701, Disposable Retired Pay, Subparagraph 290701 C.4. (stating the same).

Author Jim Cramp is a retired active duty colonel and the founder and principal attorney at the Cramp Law Firm, PLLC.  The firm provides a spectrum of family law-related services to clients in the greater San Antonio region, across the United States and throughout the world.  The firm specializes in Federal Civil Service and Military Divorce matters.

Note 1 – References to the “DODFMR” are to Dept. of Defense Financial Management Regulation 7000.14-R, Volume 7B, Military Pay Policies and Procedures – Retired Pay.