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Garnishment of VA Disability Compensation

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There’s a lot of confusion in the area of garnishment of VA disability benefits for support.  This article is about IWO’s (income withholding orders) and the garnishment of VA disability compensation of military retirees for family support. The text below may help clear up the confusion.

Garnishment – Outline of Requirements

Here are the rules about mandatory withholding of support payments (pursuant to a court order) from VA disability compensation:

  • Retired pay is disbursed to retirees from the Army (10 U.S.C. §1401), Navy/Marine Corps (10 U.S.C. §6333), and Air Force (10 U.S.C. §8991), as well as the Coast Guard and the commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration.
  • Disability compensation is paid by the Department of Veterans Affairs (VA) for injuries, illnesses, wounds or other conditions that are service-connected (38 U.S.C. §1110 for wartime disabilities, and §1131 for peacetime disabilities).
  • VA disability compensation is not subject to seizure or attachment (38 U.S.C. § 5301).
  • A military retiree must waive an equivalent amount of military retired pay to receive disability compensation through the VA (38 U.S.C. § 5304-5305). 
  • The waived retired pay is restored when the retiree has a VA disability rating of 50% or more and is receiving CRDP (Concurrent Retirement and Disability Pay) (10 U.S.C. § 1414) unless the military retiree has elected to receive CRSC (Combat-Related Special Compensation) (10 U.S.C. § 1413a).
  • When the servicemember is approved for receipt of CRSC, the restoration of retired pay is rescinded and the dollar-for-dollar waiver rule remains in place.
  • To ensure the payment of court-ordered support, the federal government will allow the garnishment of VA disability compensation for family support when the recipient has waived uniformed services retired pay to obtain this disability pay (42 U.S.C. § 659).

Statute Allowing Garnishment

The text of the statute which lets courts garnish military pay and retired pay is shown here:

42 U.S.C. § 659. Consent by United States to income withholding, garnishment, and similar proceedings for enforcement of child support and alimony obligations

(a) Consent to support enforcement

Notwithstanding any other provision of law (including section 407 of this title and section 5301 of title 38), effective January 1, 1975, moneys (the entitlement to which is based upon remuneration for employment) due from, or payable by, the United States or the District of Columbia (including any agency, subdivision, or instrumentality thereof) to any individual, including members of the Armed Forces of the United States, shall be subject, in like manner and to the same extent as if the United States or the District of Columbia were a private person, to withholding in accordance with State law enacted pursuant to subsections (a)(1) and (b) of section 666 of this title and regulations of the Secretary under such subsections, and to any other legal process brought, by a State agency administering a program under a State plan approved under this part or by an individual obligee, to enforce the legal obligation of the individual to provide child support or alimony.

Rules about Garnishment

The Code of Federal Regulations (C.F.R.) sets out what moneys are subject to income withholding (i.e., garnishment). Here is what it says:

5 C.F.R. 581.103 Moneys which are subject to garnishment

(c)(7) Any payment by the Secretary of Veterans Affairs as compensation for a service-connected disability paid by the Secretary to a former member of the Armed Forces who is in receipt of retired or retainer pay if the former member has waived either the entire amount or a portion of the retired or retainer pay in order to receive such compensation. In such cases, only that part of the Department of Veterans Affairs payment that is in lieu of the waived retired pay or waived retainer pay is subject to garnishment.

Examples – Garnishment of VA Disability Pay

Here are some illustrations of how to determine what is subject to garnishment from military retired pay (using approximate numbers corresponding to the percent VA rating):

Payment or debit

Amount

Monthly military retired pay

$4,000

Debit for VA waiver (40% rating)

$600

Net military retired pay

$3,400

Since $600 of retired pay was waived for VA payment, $600 is “subject to garnishment” (with limitations on the maximum garnishment amount set forth in 5 C.F.R. § 581.402) from the retiree’s VA disability compensation.

Payment or debit

Amount

Monthly military retired pay

$4,000

Debit for VA waiver (100% rating)

$3,200

Net military retired pay

$800

Since $3,200 of retired pay was waived for VA payment, $3,200 is subject to garnishment (as limited by 5 C.F.R. § 581.402) from the retiree’s VA disability compensation, in spite of the fact that the $3,200 is restored to the retiree due to CRDP.

Payment or debit

Amount

Monthly military retired pay

$1,400

Debit for VA waiver (100% rating)

$3,200

Net military retired pay

$0

Since the retired pay is less than VA disability compensation, the retiree has waived the entire $1,400 of monthly retired pay, taking VA disability compensation in its place. Thus $1,400 is subject to garnishment (as limited by 5 C.F.R. § 581.402) from the retiree’s VA disability compensation.

For more information on garnishment, see 5 C.F.R. § 581.301 (requiring “proper service of legal process”) and 5 C.F.R. § 581.305 (requiring an agency that receives legal process for garnishment for alimony and/or child support to comply with such process unless it is facially invalid).

Maximum Amount of Earnings

The maximum amount of disposable earnings which is subject to garnishment is found here:

5 C.F.R. §581.402   Maximum garnishment limitations.

(a) Except as provided in paragraph (b) of this section, pursuant to section 1673(b)(2) (A) and (B) of title 15 of the United States Code (the Consumer Credit Protection Act, as amended), unless a lower maximum garnishment limitation is provided by applicable State or local law, the maximum part of the aggregate disposable earnings subject to garnishment to enforce any support order(s) shall not exceed:

(1) Fifty percent of the obligor's aggregate disposable earnings for any workweek, where the obligor asserts by affidavit, or by other acceptable evidence, that he or she is supporting a spouse, a dependent child, or both, other than the former spouse, child, or both, for whose support such order is issued, except that an additional five percent will apply if it appears on the face of the legal process, or from other evidence submitted in accordance with §581.202(d), that such earnings are to enforce a support order for a period which is 12 weeks prior to that workweek. An obligor shall be considered to be supporting a spouse, dependent child, or both, only if the obligor provides over half of the support for a spouse, dependent child or both.

(2) Sixty percent of the obligor's aggregate disposable earnings for any workweek, where the obligor fails to assert by affidavit or establishes by other acceptable evidence, that he or she is supporting a spouse, dependent child, or both, other than a former spouse, child, or both, with respect to whose support such order is issued, except that an additional five percent will apply if it appears on the face of the legal process, or from other evidence submitted in accordance with §581.202(d), that such earnings are to enforce a support order for a period which is 12 weeks prior to that workweek.

(3) Where, under §581.302(a)(2), an obligor submits evidence that he or she is supporting a second spouse, child, or both a second spouse and dependent child, copies of the evidence shall be sent by the governmental entity to the garnishor, or the garnishor's representative, as well as to the court, or other authority as specified in §581.102(f)(1), together with notification that the obligor's support claim will be honored. If the garnishor disagrees with the obligor's support claim, the garnishor should immediately refer the matter to the court, or other authority, for resolution.

(b) In instances where an obligor is receiving remuneration from more than one governmental entity, an authority described in §581.102(f)(1) may apply the limitations described in paragraph (a) of this section to the total remuneration, i.e., to the combined aggregate disposable earnings received by the obligor.

Guidance from the Department of Veterans Affairs

While the VA does not provide advice on the preparation of handouts and training materials, one official at the agency – after review of the above information – stated that this caveat should be added for attorneys who wish to understand fully the issue of garnishment and income withholding orders when applied to VA disability compensation:

Only the amount of VA disability compensation paid in lieu of military retired pay can be garnished to satisfy child support or alimony obligations. See 42 U.S.C. §§ 659(a) & (h)(1)(A)(ii(V). Under 5 C.F.R. § 581.305(a)(2) & (3), VA must comply with the legal process (usually a court order) seeking garnishment for alimony or child support unless the garnishment order "would require the withholding of funds not deemed moneys due from, or payable by, the United States as remuneration for employment". 42 U.S.C. § 659(h)(1)(A)(ii(V) confirms that VA compensation paid in lieu of military retired pay qualifies as remuneration for employment. As long as a garnishment order for either child support or alimony also satisfies the definition of "legal process" in 5 C.F.R. § 581.102(f), and is a valid "legal process" under 5 C.F.R. §§ 581.303 and 581.305, VA is required to comply with it unless another exception applies in 5 C.F.R. § 581.305(a).

The U.S. Supreme Court has held that state courts are free to consider the availability of VA benefits in determining the amount of a veteran's child support obligation and, in fact, may set a support award in an amount that would necessarily require that part of the award be paid out of those benefits once they are received by the veteran. Rose v. Rose, 481 U.S. 619 (1987). In Rose, the Court held that a state court can enforce a child support order against a disabled veteran through contempt proceedings even though the only funds available to the veteran for payment are VA compensation. The Court did not expressly state that VA benefits are subject to garnishment for child support purposes after they have been paid to the beneficiary, but it appeared to carve out an exception to the exemption of VA benefits from creditors' claims under 38 U.S.C. § 5301(a) for purposes of child-support payments.

(Rev. 12/16/16)

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This SILENT PARTNER was prepared by COL Mark E. Sullivan (USA-Ret.). For revisions, comments or corrections, contact him at Sullivan & Tanner, P.A. in Raleigh, N.C. 919-832-8507, or mark.sullivan@ncfamilylaw.com