Close-up photo veteran woman in a wheelchair.

Claims Appeals Board Holds CRDP is Divisible

Last year, we wrote about a decision from the Department of Defense Claims Appeals Board (CAB) holding that a portion of a Chapter 61 disability retired pay is divisible and should be awarded to a former spouse. That post has a more detailed explanation of disability retirement, and especially of Concurrent Retirement and Disability Pay (CRDP). Or see our VA disability & CRDP article in the Military Divorce Guide for a more in-depth look at those concepts.

In that decision, named Redacted, the CAB reasoned the following:

  • The disability retired pay received from the Defense Finance & Accounting Service (DFAS) pursuant to 10 U.S. Code §1201(b) is not divisible.
  • The VA disability paid by the Department of Veterans Affairs is not divisible (note that this is a separate payment from disability retirement, despite its similar name)
  • A retiree who receives VA disability payments must waive, dollar for dollar, his/her military retirement in return for those payments.
  • Certain retirees are not required to waive retirement to receive VA disability (especially those with a 50% or higher disability rating, a rating which most members who qualify for a disability retirement likely have), and their waived retired pay is restored using CRDP.
  • CRDP is not a disability retirement under retirement, not disability retirement, so the CRDP portion of a disability retirement is still subject to division in a dissolution of marriage case.

In essence, the CAB found that while it may feel to a retiree like he/she is only receiving two payments – disability retirement & VA disability, neither of which is divisible, he/she is, in fact, really receiving a third payment, CRDP, which is divisible despite being built into the disability retirement.

The CRDP Legal Landscape Since Redacted

In our 2022 blog post, we noted that the CAB decision was only binding on the specific parties concerned, and DFAS had not yet implemented it systemwide for all retirees and former spouses.

Since that time, there are two legal developments to report – a state trial court decision applying Redacted and dividing CRDP, and DFAS rejecting the decision and changing its regulation to counter it.

DOD Regulation Rejects Dividing CRDP in Disability Retired Pay

Gavel banging on cubes forming the word Appeal

First, the bad news for military spouses, and good news for retirees.

The Department of Defense responded to Redacted by deciding it was wrongly decided, so in February 2023 updated Chapter 29, Volume 7B of the Financial Management Regulation to clarify its position. The updated regulation adds a new section 7.2 Computing Disposable Retired Pay for Disability Retirements with additional language precluding the division of CRDP. Section 7.2.5 reads:

“The nature of the Disability Retired Pay is not changed simply because the retiree is found by the DVA to have a service-connected disability that entitles the member to receive both benefits concurrently under 10 U.S.C. § 1414 even though the amount of Disability Retired Pay that can be received concurrently with DVA Disability Compensation may be limited.”

In plain English, this means don’t count on DFAS dividing CRDP in disability retirement cases, because their official agency interpretation is that CRDP payments received by a disability retiree are in the nature of disability retired pay, and therefore cannot be awarded to a former spouse.

Newport News Case – Lott

A family law judge in Newport News, Virginia addressed similar facts in a dissolution case. In Lott, the parties’ agreement had a fairly standard clause dividing the military member’s “disposable retired pay”. The member ultimately retired with a Chapter 61 disability retirement, receiving both disability retired pay from DFAS, and VA disability payments from the Department of Veterans Affairs.

The issue in Lott was the same as in the Redacted case – whether the CRDP payments to offset a VA waiver which are received by a retiree with over 20 years of service are divisible marital property. And relying heavily upon that CAB decision, the Lott court found CRDP payments were divisible:

“Where Defendant retired with a Chapter 61 status with more than 20 years of active-duty service, per 10 U.S.C. 1414(b)(1), Defendant is now no longer actually receiving a portion of Chapter 61 retired pay, but instead a portion of divisible and distributable CRDP under 10 U.S.C. § 1408.”

Lott.

In Lott, the retiree’s VA disability payment exceeded his entire disability retirement, so effectively everything he received was CRDP instead of disability retirement. And therefore, the court found the whole retirement to be divisible, other than deducting the SBP premium from the retired pay first:

“That portion of pay that Defendant would have been receiving under longevity anyways, technically given under his Chapter 61 status, is therefore divisible CRDP considered disposable retired pay under 10 U.S.C. § 1408.”

Lott.

The Lott case has no precedential value – it’s a trial court decision, not an appellate one. However, when a domestic relations attorney has a similar issue arise in their own case, it may be useful to cite as persuasive authority for the proposition that state family law courts can order CRDP payments divided. And if a court can order it, then the former spouse need not depend upon DFAS – the trial court could simply order the retiree to make those payments, under penalty of contempt if he/she does not comply.

The Future of Disability Retired Pay & CRDP

Absent a statutory change or court case with binding precedent (i.e. in federal court), the Redacted decision appears dead, so far as DoD is concerned, due to the change in its Financial Management Regulation. Then on the other hand, there is at least one state court which has followed Redacted.

It appears that DoD disagrees with the statutory interpretation from Redacted decision, and only regards it as binding on the specific parties involves. I checked with Mark Sullivan, the nationwide guru on military family law issues and author of the Bible all practitioners need to have – the Military Divorce Handbook. He has two cases where DFAS has rejected a division of CRDP in conjunction with disability retirements.

Mark is appealing both cases through the administrative process (the cases are currently at DOHA, or the Defense Office of Hearings and Appeals, which is one level below the Claims Appeals Board which issued last year’s Redacted decision). If you are a military spouse seeking a division of CRDP in a disability retirement case, be ready for a battle through the DFAS bureaucracy. And retain Mark to represent you, he knows how to battle DFAS.

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