Value of Military Pension Appealed in Clarksville, Tennessee Postdivorce Dispute: Foster v. Foster

Facts: Husband and Wife divorced in 2006 after 13 years of marriage. At the time of divorce, Husband had served 14 years in the United States Army and held the rank of Captain. Their marital dissolution agreement provided:

The parties mutually acknowledge that they have been married during 13 years (156 months) of Husband’s active military service and that he now holds the rank of Captain. In the event Husband should retire from the military at a higher rank and thereby becomes eligible for retired military pay, the parties agree that Wife shall have 33% of Husband’s disposable retirement pay at the grade of Captain and that said amount shall be payable for a period of 13 years (156 months) regardless of whether Husband attains a higher rank than Captain.

In May 2015, Husband retired from the military at the rank of Major after 23 years of service.

In January 2016, Wife petitioned to hold Husband in civil contempt for his failure to pay her a portion of his retirement pay.

After hearing, the trial court found that, at the time of divorce, Husband’s right to receive military retirement pay was unvested and subject to forfeiture if he failed to reach the required 20 years of service. Using the retained jurisdiction method to calculate Wife’s award as 33% of Husband’s actual retirement pay at the rate of Captain and citing the 2015 military pay chart, the trial court found that Captains with 23 years of service were eligible to receive $3844 per month in disposable retirement pay at the time of Husband’s retirement. The trial court held that Wife was entitled to receive 33% of that amount, or $1281.33 per month, for a period of 156 months beginning in May 2015.

Husband appealed.

On Appeal: The Court of Appeals affirmed the trial court.

Husband argued the trial court erred in using the retained jurisdiction method to calculate the amount of Wife’s award. Thus, he argued that Wife should receive 33% of the benefit that he had accrued as a Captain with 14 years of service in 2006 instead of 33% of the benefit a Captain retiring with 23 years of service in 2015 would receive.

The primary goal in interpreting a marital dissolution agreement, as with any other contract, is to ascertain and give effect to the intent of the parties at the time the agreement was executed. To determine the intent of the parties, courts begin with the language of the agreement itself. If the language is clear and unambiguous, the agreement must be interpreted as written according to its plain terms. Courts must avoid rewriting the agreement under the guise of construing it because the parties are not entitled to a marital dissolution agreement that is different from the one they negotiated.

An employee spouse’s right to receive retirement benefits, both military and nonmilitary, may be “vested” or “unvested” at the time of the divorce. The employee has a vested right to retirement benefits when he or she has completed the requisite term of employment necessary to become entitled to receive retirement benefits when he or she elects to retire. That vested right matures when the employee has an unconventional right to immediate payment because he or she has reached retirement age and elected to retire. The employee’s right to retirement benefits is unvested when he or she has not yet completed the requisite term of service.

Tennessee courts use one of two methods in valuing and distributing retirement benefits: the present value method or the retained jurisdiction method.

The present value method requires the court to place a present cash value on the retirement benefit as of the date of divorce. The present cash value method is preferable when the amount of the employee spouse’s retirement benefits can be ascertained accurately at the time of divorce.

The retained jurisdiction method requires the court to retain jurisdiction over the matter and deferred distribution of the retirement benefits until they become payable. Rather than determine the value of the retirement benefits at the time of divorce, the trial court may express the marital property interests of each spouse as a fraction or percentage of the employee spouse’s future monthly benefit.

The retained jurisdiction method is usually appropriate when the employees right to the retirement benefits is unvested at the time of the divorce. That is the case because the value of an unvested retirement right may never be realized. Retaining jurisdiction over the matter and deferring distribution of retirement benefits until they become payable allows the trial court to equalize the risk of forfeiture between the parties and avoid requiring present payment for a benefit that may potentially never be obtained.

The Court found it appropriate to use the retained jurisdiction method to value the benefits. It also found the marital dissolution agreement to be unambiguous:

At the time of the parties’ divorce, Husband had completed 14 years of Army service. Enlisted members of the Army must complete at least 20 years of service before they may request to be retired with benefits. As such, at the time of the divorce, it was not yet clear that Husband would serve the number of years required to achieve retirement and receive retirement benefits. Because Husband could have forfeited his benefits prior to serving the requisite number of years, his interest in the retirement benefits could have potentially had zero actual value at the time of the divorce. As such, the trial court’s use of the retained jurisdiction method to value the benefits was appropriate in this case.

Moreover, the language used in . . . [the] marital dissolution agreement is clear and unambiguous. In pertinent part, it provides, “Wife shall have 33% of Husband’s disposable retirement pay at the grade of Captain . . . regardless of whether Husband attains a higher rank than Capt.” Thus, the only language that qualifies Wife’s right to receive 33% of Husband’s actual disposable retirement pay provides that her award should be based on Husband’s rank at the time of the divorce. There is nothing in the agreement to suggest that the amount of Wife’s award should be based in any way on Husband’s pay at the time of the divorce.

Thus, the trial court’s judgment was affirmed.

Foster v. Foster (Tennessee Court of Appeals, Middle Section, July 14, 2017).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce and Family-Law Attorney.

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K.O. Herston is a family-law attorney in Knoxville, Tennessee whose practice is devoted exclusively to family law, including divorce, child custody, child support, alimony, prenuptial agreements, and other aspects of family law.

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