Update on Understanding Distribution of Military Retirement Benefits in Tennessee Divorces

Grayson v. Grayson Tennessee Court of Appeals

A recent Tennessee Court of Appeals case spent significant time analyzing and discussing United States Department of Defense Financial Management Regulations regarding military retirement benefits in divorce. Grayson v. Grayson, No. E2020-01339-COA-R3-CV, 2021 Tenn. App. LEXIS 354 (Ct. App. Sep. 3, 2021).

Grayson v. Grayson Facts

In the original Grayson divorce, the husband was in the military, and not yet retired at the time husband and wife divorced in 2011. Husband later retired in 2018 and wife was unable to receive any of the retirement funds which she believed she was entitled to due to the “deficient award language contained in the 2011 order.” Grayson, *1.  The Defense Finance and Accounting Service (“DFAS”) sent wife a letter letting her know that the 2011 order failed to provide DFAS a method they could use to calculate the retirement pay distributed to wife. After receipt of that letter, Wife went back to the trial court and attempted to solve the problem by having the court issue a new Military Retired Pay Division Order. The Husband appealed.

Appeal Outcome

The Court of Appeals vacated the trial court’s orders and remanded the case to the trial court, further directed the court to incorporate language compliant with DoD regulations with sufficient findings of fact and conclusions of law to enter a formula award or hypothetical retired pay award. On Appeal Husband argued the trial court lacked jurisdiction to modify the July 21, 2011 Order years later. The Court of Appeals dispensed with this argument as Tennessee Rule of Civil Procedure 60.01 allows for the correction of an error of wording in court Orders and is not time limited. The Court of Appeals reasoned that the trial court’s intention was to correct errors in the previous order language in accordance with what is authorized in Rule 60.01. Husband further argued the trial court’s order ambiguous as DFAS could read it to determine that wife is awarded 50% of his retirement pay instead of 50% of his retirement as of the date of divorce as the trial court intended. The Court of Appeals agreed with this argument and remanded the trial court’s order with further instructions for the trial court to make findings of fact, conclusions of law, and follow the correct DoD Regulation guidance.

Discussion of DoD Regulations

The most important part of the Court’s ruling for those interested in military and family law issues in Tennessee is the section that discusses DoD Regulations.¹ (pages 20-27) As the Court of Appeals explains, the relevant DoD Regulations “provide that trial courts may ensure that a former spouse is awarded a portion of the military member’s retirement pay without benefiting from the military member’s post-divorce promotions and acquisition of years of creditable service by either expressing the retired pay award as a formula award or a hypothetical retired pay award.” Grayson, *22.

A formula award computes the former spouse’s property interest in the member’s military retired pay as a multiplication of the percentage of the former spouse’s share provided by the court order multiplied by the length of the parties’ marriage during the member’s creditable service as the numerator and the member’s total creditable service toward retirement as the denominator. An example formula award provided by DFAS shows that where the former spouse was awarded 50% of the member’s military retired pay and the couple was married for 144 months during the member’s military service and the member later retired with 240 months of service, DFAS would multiple 144/240 x .5. 144/240 =.6. .6 x .5 = .3. In this example, the former spouse would be awarded 30% of the member’s retirement benefits.

A hypothetical award calculates the award “as though the member had retired at the time of the court order dividing military retired pay or some other date prior to the member’s actual retirement.”² For a hypothetical award, the trial court must provide (1) the percentage the former spouse is awarded, (2) the hypothetical years of creditable service, (3) the hypothetical retired pay base (high-3), and (4) the hypothetical retirement date. DFAS provides an example way Court’s should format this as: “The former spouse is awarded     percent of the disposable military retired pay the member would have received had the member retired with a retired pay base (high-3) of     and with     years of creditable service on    .”³ DoD provides this example:

The court order awarded the former spouse 50 percent of the disposable retired pay the member would have received had the member retired with 17 years of creditable service, a retired pay base of $2,200.00 per month, and a hypothetical retirement date of June 1, 1999. The member actually retired on June 1, 2002, with 20 years of creditable service, a retired pay base of $2,400.00 per month, and an initial gross retired pay of $1,200.00 per month (2.5% x 20 years = 50%; 50% x $2,400.00 = $1,200.00). First, the designated agent will calculate the member’s hypothetical retired pay multiplier, which in this example is 42.5 percent (2.5% x 17 years = 42.5%). Next, the designated agent will calculate the hypothetical retired pay amount, which in this example is $935.00 per month (42.5% x $2,200.00 = $935.00).⁴

DoD Financial Management Regulation 7000.14-R provides further relevant examples such as an example court order language for a retired member, active duty formula, and reservist formulas in Figure 29-1.

If you need help ensuring that your military retirement benefits are properly distributed to you in a divorce in Tennessee or are being properly paid after a Tennessee divorce, call Cole Law Military Attorney Paul Tennison at 615-490-6020 for a consultation regarding your potential military divorce case.

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¹See Dep’t of Def. Fin. Mgmt. Reg., DoD 7000.14-R, Vol. 7B, Ch. 29 (June 2021).

² Id. 290608.

³ Id. Figure 29-1.

⁴ Id. 290608.