Military Disability Severance Pay & Divorce

Who Receives Disability Severance Pay?

A service member removed from the Temporary Disability Retired List (TDRL) who meets the following criteria set forth in 10 U.S. Code § 1203 is not eligible for a full-blown Chapter 61 disability retirement (i.e. the PDRL) but instead receives disability severance pay from the military:

1. Under 20 years of service,
2. The disability was not caused by intentional misconduct or willful neglect, nor while the servicemember was AWOL,
3. The disability is or may be permanent, and
4. The disability is under 30% and incurred in the line of duty or as a result of service.

What does this mean? If a military member is unfit for duty, but not eligible for a normal 20-year retirement or for the PDRL, he is separated with disability severance pay. The payment is nowhere near as generous, but at least it’s something.

Amount of Disability Severance Pay

The formula for calculating the pay is set out in 10 U.S. Code § 1212. It is:

Years of active service (Max of 19) x 2 x base pay at the time of removal from the TDRL.

The years and months of service are rounded to the nearest whole year, with fewer than six months rounding down, and six or more months rounding up. 10 U.S. Code § 1212(b).

The base pay is normally based upon the pay grade the member was at the time he/she was placed on the TDRL, however if the member had already been selected for promotion when placed on the TDRL, or had served satisfactorily in a higher grade, even if only temporary, then the disability severance payments will utilize that higher pay grade. DoDFMR, Vol. 7A, Chapter 35, Section 5.3.3

This payment may be substantial. As an example, in 2021 an E-6 (Army Staff Sergeant) with 10 years of service has a base pay of $3987.60. That member’s severance pay would be 10 x 2 x 3987.60, or $79,752.

Disability severance payments are taxable, and subject to income withholding, unless the disability was combat-related as determined by the military. DoDFMR Vol. 7A, Chap. 35, § 5.4.

Disability Severance Pay & VA Disability Benefits

A military veteran who received disability severance pay and has a VA disability rating is also qualified to receive VA disability payments. DoDFMR Vol. 7A, Chap. 35, § 5.4.3. However, just like a disability retiree with fewer than 20 years of service has a VA waiver, the amount of disability severance is deducted from the VA disability benefits, unless the injury was in the line of duty in a hostile fire zone. DoDFMR Vol. 7A, Chap. 35, § 5.6.

Treatment of Disability Severance Pay in a Divorce

There is no clear-cut case law concerning whether disability severance pay is divisible in a Colorado divorce. In a 1997 decision, the Colorado Court of Appeals decision held that a lump sum payment to a member who opted for a voluntary separation incentive (VSI) is divisible marital property. Heupel.

However, that decision is distinguishable from disability severance pay on at least two grounds. In Heupel:

1. The lump sum was paid in lieu of retirement, not as compensation for a disability, and
2. With VSI, a member voluntarily opted to leave early and take the money, while a disability severance is involuntary.

More recent Colorado case law pertaining to the TDRL & PDRL (the Williamson and Poland cases discussed in the PDRL article) suggests that disability severance payments will likely not be treated as marital property in Colorado.