The Supreme Court ruled (6-3) on June 26, 1981, in the case of McCarty v. McCarty , that the former spouse of a military member or retiree could not be awarded any share of that member's/retiree's retirement pay as a part of a divorce property settlement in a community property state , because then-current federal law did not authorize the treatment of military retired pay as divisible property in such a settlement. Congress responded by enacting the Uniformed Services Former Spouses' Protection Act in September 1982. The USFSPA has five main provisions. 5. The USFSPA does not direct state courts to divide retired pay or to award a former spouse a certain percentage of disposable retired pay. Concurrent Receipt of Retired Pay and Disability Compensation

In recent years, Congress has addressed an issue concerning the payment of military retired pay to retirees who qualify for disability compensation from the Department of Veteran's Affairs (VA). As modified in 1941, the law prevented the concurrent receipt of both military nondisability retired pay and veteran's disability compensation. This can result in reductions in the amount of money that a former spouse can claim in a divorce. In cases where the servicemember has waived retirement pay for non-divisible disability pay, some courts have ruled that the member must make up the difference in additional payments to the former spouse. Federal Civil Service Retirement and Waiver of Military Retired Pay

If a military retiree is divorced, later retires from the federal civil service, and elects to waive his or her military retired pay and credit his or her military service toward a single civil service pension, problems arise in the implementing a court-ordered division of military retired pay under the USFSPA. These options may have affected former spouses and military members, since (1) a court may consider or may have considered future retired pay as divisible property, although the member may not have actually retired to receive those benefits because of the drawdown, (2) the potential amount available under these programs may be substantially less than would have been available under longevity retirement (retirement after a military career of 20 years or more), (3) Congress has neither authorized nor prohibited the courts from considering these separation benefits as divisible property, and (4) national interests (i.e., the size and composition of the military) removed from the domain of domestic relations concerns of state courts, are at issue. Previous Congresses have proposed changes to USFSPA that would terminate payments upon remarriage of a former spouse. In addition, new laws that affect military benefits but are not directly related to the USFSPA may have unintended effects on equitable division of already settled or future divorce cases.
In 1981, the Supreme Court ruled that the former spouse of a military member or retiree could not be awarded any share of that member's/retiree's retired pay as a part of a divorce property settlement in a community property state. In response, Congress enacted the Uniformed Services Former Spouses' Protection Act (USFSPA) in 1982. Under the USFSPA, as amended, state courts can treat disposable military retired pay as divisible property in divorce cases. However, state laws may vary on these concepts. The USFSPA makes no assumption of such a division nor does it presume how much of a division should be made. In addition to possible receipt of retired pay, certain former spouses remain eligible to receive certain military benefits or privileges. Recent changes in other laws that affect the concurrent receipt of military retired pay and veteran disability pay may affect the amount of retired pay a former spouse receives.
In other situations, later career and financial decisions made by military retirees may affect the availability of their retired pay. For example, military retirees who take federal civilian jobs and then retire from those jobs can waive their military retired pay and credit their military time to their civilian careers. In so doing, they eliminate their military retired pay, and thereby any share that might have been awarded to the former spouse.
Since its inception, the USFSPA has remained contentious. Opponents of the law feel that it is unfair to servicemembers and should be modified or repealed. Proponents argue that the law protects the former spouse within nationally accepted standards. Some of the most frequently cited issues include (1) definition of disposable retired pay, (2) effects from new laws concerning concurrent receipt of military retired pay and veteran disability compensation, (3) interactions with other federal retirement systems, (4) effects in cases of early separation of servicemembers, and (5) treatment of benefits upon remarriage of a former spouse. As with the original provisions of the USFSPA, these and other proposed changes have been the source of great debate.
Although legislation making various changes to the USFSPA has been introduced in the past, none of this legislation has allowed for retroactive change to settled cases.