Social Security, Divorce, and the Scope of Federal Preemption
122 Pages Posted: 12 Jun 2018
Date Written: January 22, 2018
In light of the United States Supreme Court’s decision in Howell v. Howell, in May 2017, this article urges Congress to clarify its intent for the scope of federal preemption of state property distribution laws under the anti-assignment provision of the Social Security Act, 42 U.S.C. § 407.
Congress enacted the Social Security Act in 1935 to serve as a federally regulated social insurance benefit program designed to ensure a continuing source of income to retired workers, age 65 or older. Within the Act, Congress reserved for itself the exclusive authority to regulate the program, with one of the primary purposes being the uniform distribution of benefits to qualified employees, as well as to qualified spouses, whose rights are clearly provided for in § 402 of the Act. To this end, § 407 of the Act prohibits the assignment of Social Security benefits in any other legal process.
In 1975, Congress amended the Act to include § 659, which incorporates a narrow exception to the anti-assignment provision to enforce legal obligations to provide child support or alimony. However, § 659 excludes any payment of alimony in compliance with any equitable division of property between former spouses. Thus, under the plain language of the Act, Congress has federally preempted state courts from assigning Social Security benefits when equitably dividing marital property in divorce—a subject that, historically, is presumed to be governed by state law.
Relevant to this conflict of authority, in 1979, in Hisquierdo v. Hisquierdo, the United States Supreme Court earmarked the parameters of the scope of federal preemption under the Railroad Retirement Act, which the Court deemed to be analogous to the Social Security Act, and defined its preemptive reach to include not only the assignment or division of federal benefits upon divorce, but the offset of benefits as well. Its decision was based on the non-contractual nature of the federal benefits in question, which prohibited the classification of benefits as marital property divisible upon divorce.
Similarly, in 1981, in McCarty v. McCarty, the United States Supreme Court prescribed the same preemptive reach to the distribution of federal military retirement benefits. In response to the McCarty decision, in 1982, Congress enacted the Uniformed Services Former Spouses Protection Act (USFSPA), which expressly authorized state courts to distribute disposable retired pay in divorce proceedings.
In turn, in 1989, in Mansell v. Mansell, the United States Supreme Court clarified the scope of state court authority under the USFSPA by holding that state court authority was limited to disposable marital property, which did not include the portion of retired pay that was waived in the election for disability pay, which the Court held was the separate property of the disabled military retiree—analogous to the separate, non-contractual nature of Social Security benefits. Many courts viewed this limitation as inequitable to military spouses in the distribution of marital property upon divorce.
As a result of the limitation of Mansell, many state courts began a campaign to offset the portion of military retirement pay that was waived to receive disability pay with other disposable marital property, in an effort to compensate for the inequity resulting from the federal preemption of state equitable distribution laws, under which, otherwise, state courts are authorized—and obligated—to equitably divide marital property. However, other state courts deemed offsetting in this manner to violate the Supremacy Clause of the United States Constitution and the anti-assignment provision of the USFSPA.
A parallel campaign in the context of Social Security benefits has occurred since the Mansell decision in 1989. Consequently, state courts have applied no less than seven different interpretations of the proper scope of federal preemption under the Social Security Act. Such variation of interpretation of the scope of federal preemption not only affronts Congress’ goal of uniformity in the division of benefits, but it arguably deprives the participant spouse of the protection that Congress intended under the Act, and it militates against the equitable distribution of property between and among divorcing spouses.
In May 2017, in Howell v. Howell, the United States Supreme Court seized the opportunity to clarify Congress’ intent for the scope of federal preemption in the context of military retirement benefits. However, the Court simply held that the limited issue addressed in the Howell case was governed by Mansell. Consequently, the Court shed no more light on the scope of federal preemption than it did in 1989. However, in its dicta, the Court suggested that if it were to address the issue that this paper addresses—the extent of the scope of federal preemption for military retirement and analogous federal benefits, which, arguably, would include Social Security—it would likely prescribe a broad or “total” preemption of state law.
This paper discusses the seven different interpretations of the scope of federal preemption under the Social Security Act that state courts have adopted and applied, particularly since 1989, when the Court decided Mansell. It also discusses the Court’s May 2017 decision in Howell and predicts what, if any, effect the Howell decision will have on state courts that adopt any one of the respective seven approaches that are currently employed by all states—only a small handful of which comply with the requirements projected in Howell. This paper concludes that if the dicta in Howell were applicable, the application of state property distribution provisions in most states would be held to be unconstitutional under the Supremacy Clause of the United States Constitution. However, as this paper will describe, many state courts will hold that the decision in Howell, like the decision in Mansell, is inapposite to the context of Social Security. Therefore, notwithstanding the relevance of the Howell decision, this paper concludes that Congressional clarification is required to finally define the Constitutional scope of federal preemption that Congress intends to govern state courts obligated to equitably divide the marital property of divorcing spouses, when either one of whom have participated in Social Security.
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