ANSWER:
As to what you should do, you should immediately confer with an Alabama family law lawyer who is experienced with the military divorces and the division of military pensions when done as part of a divorce. Perhaps there is some theory under Alabama law that will be of help to you in the situation you are now in (and that I am, from here in Oregon, not aware of).

As to how is it possible that you are no longer entitled to anything, it is because of the way the applicable federal law USFSPA (Uniformed Services Former Spouses' Protection Act), 10 USC § 1408, which, in sum, allows state divorce court judges to treat military retired pay (to the extent that the servicemember’s right to receive such pay accrued during the years of marriage) as marital property and provide for the division of such pay when it is ultimately received by the servicemember. The USFSPA (sometimes referred to by Alabama courts as simply FSPA) was originally enacted by Congress in 1982.

http://www.militarydivorceonline.com/usfspa.html

http://www.geocities.com/CapitolHill/Senate/5050/USFSPA.html

http://www.law.cornell.edu/uscode/html/uscode10/usc_sec_10_00001408----000-.html

Here’s the problem: The text of the federal USFSPA statute as enacted by Congress refers to “disposable retired or retainer pay.” 10 USC § 1408(c)(1). “Disposable retired or retainer pay” is defined as “the total monthly retired or retainer pay to which a military member is entitled,” minus certain deductions. § 1408(a)(4). And one of those deductions would be any amount of retired pay that is waived by the servicemember in order to receive VA disability benefits. § 1408(a)(4)(B).

Construing the USFSPA, the United States Supreme Court, in Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989), held that state courts cannot divide as marital property the amount of military retirement pay waived by the retiree in order to receive veterans' disability benefits. The Court concluded the Act provides that the amount of retirement pay waived to receive disability benefits is not included in "disposable retired or retainer pay," and that only "disposable retired or retainer pay" is subject to division; therefore, the Court held that the waived retirement pay was not subject to division as community or marital property.

Mansell decision, online at:
http://supreme.justia.com/us/490/581/case.html

http://www.usscplus.com/online/index.asp?case=4900581

http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=490&invol=581

The Mansell decision of the US Supreme Court is required to be followed by all of the state courts, including those in Alabama. And the Alabama Supreme Court did so in Ex parte Billeck, 777 So.2d 105, 109 (Ala.2000). In the Billeck case, the divorce judgment incorporated a settlement agreement between the husband and the wife. The settlement agreement provided that the husband would pay the wife periodic alimony his entire monthly U.S. Army retirement check, doing so until wife died, remarried or cohabited with a member of the opposite sex. At the time of the divorce (1989), the husband was receiving monthly military retirement benefits of $1,359.20. He paid the wife that amount as periodic alimony until January 1998, when he was declared partially disabled. He then began receiving VA disability payments, accompanied by a corresponding reduction in his military retirement benefits. Thereafter, the husband received monthly VA disability benefits of $593.20 and monthly military retirement benefits of $766; and he paid the wife $766 per month as periodic alimony.

Not being happy with the situation, wife filed a motion with the divorce court wherein she requested the court to order the husband to pay her his monthly veteran's disability benefits in addition to his military retirement benefits, as periodic alimony. The divorce court granted the motion. Husband appealed. Alabama Court of Civil Appeals affirmed, explaining that to allow the husband to reduce his periodic alimony obligation by applying for veteran's disability benefits would, in effect, void the agreement of the parties. Husband then appealed to the Alabama Supreme Court, which reversed the decisions of the lower courts. In explaining its decision, the Alabama Supreme Court said:

“In 1989, the United States Supreme Court, interpreting the FSPA, held that, although the FSPA authorizes state courts to treat "disposable retired pay" as divisible community property, it specifically limits the state courts from treating veteran's disability benefits received in lieu of retirement pay as divisible community property. Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989). In Mansell, the husband and the wife reached a property settlement agreement which was merged into the divorce judgment. That agreement provided, in part, that the husband would pay the wife 50% of his total military retirement pay, including the retirement pay that he had waived to receive veteran's disability benefits. Thereafter, the husband petitioned the trial court to modify the divorce judgment by removing the provision which required him to pay 50% of his total retirement pay to the wife. He argued that federal law preempted state courts from treating military retirement pay waived to receive veteran's disability benefits as community property. The Mansell court found that the plain language of § 1408(c)(1) clearly precluded states from treating as community property retirement pay waived by the retiree so he may receive veteran's disability benefits.”

“The Mansell decision and § 1408 clearly manifest the intent of the federal law that a retiree's veteran's disability benefits be protected from division or assignment.

“In the case before us, the trial court ordered the husband to pay the wife "all of his military retirement pay received as a result of his United States Army military service from whatever source, be it defined as military retirement pay or VA disability." The trial court stated further, "For the purpose of this Order, VA disability [benefits] shall be considered as part of his military retirement pay." The trial court's order directly contradicts the plain language of § 1408 and the Mansell decision which provide that veteran's disability benefits are not considered disposable military retirement pay subject to division or assignment. Thus, the trial court's order violates federal law. Consequently, the trial court erred in ordering the husband to pay his veteran's disability benefits to the wife, and the Court of Civil Appeals erred in affirming the judgment of the trial court.”

Here are a couple of websites that -- if they work --- will allow you to read the Billeck decision:
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=al&vol=1000343&invol=2

http://66.161.141.176/cgi-bin/texis/web/caselaw/+fci8e0lnwBmeyi2weoRxwwwxFqEVcx+vvszMvoDt_pqqqD1K3nBDXIFqqEP/svindex.html?doc=1

Sorry if these URLs don’t work.

In sum, under the terms of your state divorce court judgment, you are entitled to receive half of your ex-husband’s military retired pay, which by federal law is limited to his “DISPOSABLE retired pay.” And “disposable retired pay” in your situation, mean his retired pay (i.e., net pay)remaining after deducting the amount of "gross" retired pay he was required to waive forego in order to get the same amount of money in the form of VA disability benefits. (It is a dollar-for-dollar trade-off.) So if he is now classified for VA disability pay purposes as 100% disabled, and he authorizes the amount of his VA disability to be deducted from his military retired pay, it effectively means his retired pay is $-0-. And you are, unfortunately, they left with one-half of that amount of retired pay. (And he gets all of the dollars in the from of VA disability pay, which is not subject to division by the state divorce court. And not only that, the dollars he receives as disability pay are non-taxable, whereas those dollars, if received in the form of retired pay, would be taxable income.) Unfair? Unreasonable? Unconscionable? Inequitable? Yes, unfortunately, very true. But (damn) it is nonetheless perfectly legal.

HOWEVER, from the facts you are presenting, it appears that the arrangement contained in your divorce judgment (husband to collect 100% of his military retirement pay for two years, until wife attains age 60, and then wife receives 50% of husband’s military retirement pay from that point on) is one that was based on an AGREEMENT of the parties, rather than one that was imposed by the court after a contested trial.

Also from the facts you are presenting, I cannot tell whether you were represented by a lawyer in your divorce (or whether you choose to forego doing so and proceed as an unrepressed litigant).

Also from the facts you are presenting (and assuming the court’s judgment incorporated the terms of an agreement that is, in essence, a contract between the divorcing spouses that is then approved of by the court), did the agreement include an “INDEMNIFICATION” provision pertaining to the possibility of husband’s waiving his military retired pay so as to receive disability pay instead. An “indemnification” provision might read something like this:

"Further, Husband agrees that in the event Husband receives VA disability pay, or any other disability pay, or civil service income, and such event causes a reduction of Husband’s disposable retired pay, thus reducing Wife’s share thereof, Husband will indemnify Wife by paying to Wife directly each month any amount that is withheld from Wife by DFAS (Defense Finance and Accounting Service) for the above reason."

If there was an “indemnification” provision, you may be able to take legal action against your ex-husband to enforce the indemnification, doing so as an “enforcement of contract” legal action. HOWEVER, this all depends on whether Alabama law allows this to be done. So far as I cant tell, that may be questionable.

In the Billeck decision, that Alabama Supreme Court noted that the parties’ settlement agreement in that case “does not contain an indemnification provision to protect the monthly sum the wife would receive should the husband's military retirement benefits be reduced." The court cited a similar case from Florida, Abernethy v. Fishkin, 699 So.2d 235 (Fla.1997), in which an indemnification provision in the settlement agreement saved the wife's entitlement to her share of husband's military retirement pay if husband took any action that would reduce the amount otherwise payable to wife, like electing to receive veteran's disability benefits in lieu of retirement pay. However, because the parties’ agreement in Billeck lacked an indemnification provision, the Alabama Supreme Court had no basis or reason to comment on whether such a provision, had it been included, would or would not have been enforceable under Alabama law. (This is why I want you to confer with an Alabama lawyer, so as to get this point clarified.)

Also, IF an “indemnification” provision is permissible under Alabama law, and you were represented by a lawyer in your divorce, and your lawyer omitted to include an “indemnification” provision in the agreement, you may have legal grounds for a malpractice lawsuit against the lawyer for the financial loss you are now incurring. So, there may still be some, which is, again, why I want you to confer with an Alabama lawyer (different from anyone that you may have spoken with previously).

NOTE: I realize that this answer may not be entirely to your liking, and I regret being the bearer of information that you really don’t want to hear. But it would be unfair to you and unprofessional of me were I to provide you with anything less than truthful and honest information. I hope you understand.

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Lawrence D. Gorin, Oregon Attorney39621.7742165509