The Cap on Division of Military Retirement — or not

December 17, 2013 § Leave a comment

Henry and Tracey Stout found themselves in a divorce proceeding after twenty-five years of marriage. After the entered into a consent, the chancellor divided the marital estate, awarding Tracey, among other things, 64.75% of Henry’s military retirement.

Henry appealed, arguing that Tracey was entitled to no more than 50% of his military retirement, based on the specific limitation of 10 USC § 1408(e), which states that: “The total amount of the disposable retired pay of a member payable under all court orders pursuant to section (c) may not exceed 50% of such disposable retired pay.”

The COA addressed Henry’s appeal in the case of Stout v. Stout, handed down December 10, 2013. Judge Roberts, for the majority, started his analysis by looking to other jurisdictions:

… This issue is a matter of first impression in Mississippi; therefore, it is prudent to consult the interpretations of this issue from other jurisdictions. In a slip opinion in Gonzalez v. Gonzalez, No. M2008-07143-COA-R3-CV, 2011 WL 221888, at *5 (Tenn. Ct. App. 2011), the Tennessee Court of Appeals stated:

It appears that the United States military does not view § 1408(e)(1) as a limit. The Defense Finance and Accounting Service observes that “the amount of a former spouse’s award is entirely a matter of state law.” DIVIDING MILITARY RETIRED PAY 6 (2006), http://www.dfas.mil/militarypay/garnishment/Speech5.pdf; see also UNIFORMED SERVICES FORMER SPOUSE’S PROTECTION ACT 2–3 (2010), http://www.redstone.army.mil/legal/data/1–usfspa.pdf (“If a state court awarded you 60% of your former spouse’s retired pay and you qualify under this statute to get direct pay, then you would collect 50% through the Finance Center and your former spouse would be responsible for providing the other 10% to you.”) DOMESTIC RELATIONS FROM A MILITARY PERSPECTIVE; FREQUENTLY ASKED QUESTIONS [http://www.cnic.navy.mil/navycni/groups/public/documents/document/cnicp_ a134503.pdf] (“The 50% maximum of DRP [disposable retired pay] is a limit on how much retired pay can be paid directly, but it is not a limit on how much a court can award.”).

Although not an exhaustive list, courts in Minnesota, Delaware, Texas, Alabama, Kansas, Washington, Maryland, and Iowa also take this view of the statute. [Footnote omitted] However, several states do consider there to be a 50% limit. [Footnote omitted] The majority view is that the statute is not an absolute cap, but rather a cap on what the government can pay directly to a spouse or former spouse. We find the majority view to be persuasive; therefore, the chancellor did not err in awarding Tracey more than 50% of Henry’s military retirement benefits. This issue is also without merit.

I find it interesting that the COA wound up dealing with this issue. If this is, as Judge Roberts found, an issue of first impression in Mississippi, aren’t those kinds of cases supposed to be the province of the MSSC?

Until the MSSC addresses it, then, we will be among the states holding that the 50% limit is a limit on what the government DFAS can be ordered to withhold, not a limit on what can be awarded by the court.

This is an important case for you to know and understand if you ever deal with military retirement, as do many of us in areas of Mississippi with military installations and military retirees.

Another aspect of this case bearing mention is the fact that the chancellor awarded a percentage of the military retirement as a part of equitable distribution, but did not place a value on the total of the benefit received. Henry charged that this was error. Judge Roberts addressed it this way:

¶17. Henry next argues that the chancellor erred in not determining a specific monetary value of his military retirement and assigning a percentage of that value to Tracey’s estate. Had the chancellor added in this value, Henry claims Tracey’s estate would have been much greater and alimony could have been avoided. Without that value, according to Henry, there is ambiguity in the equitable distribution of the marital estate. Military retirement benefits are considered personal property, and as such, are subject to equitable division in a divorce proceeding. Hemsley v. Hemsley, 639 So. 2d 909, 914 (Miss. 1994). The chancellor placed a monthly value of $1,770.53 per month, but did not determine a lump-sum value. Henry cites to no authority that a chancellor is required to determine a lump-sum value of military retirement benefits. Though not at issue in other cases, there is case law describing a chancellor solely determining the monthly value of the retirement benefits and not a lump sum. However, there is also case law that shows a chancellor actually put a lump monetary value on the retirement benefits. Neither line of cases instructs that one valuation is required or more appropriate than the other. We cannot find that the chancellor erred in not determining a lump-sum amount of the military retirement benefits awarded to Tracey. We also note that the chancellor did take into account the monthly amount Tracey would receive when she determined whether Tracey was entitled to alimony and if so, in what amount.   

I wonder whether the discrepancy in case law cited by Judge Roberts is due to the fact that military retirement can be divided in equitable distribution or ordered to be paid as alimony, in the discretion of the chancellor. The cases referred to are not cited, so we do not know whether they are equitable division or alimony cases. Clearly, if paid as alimony its total valuation would be beside the point. As equitable distribution, I’m not so sure, because the value of the assets divided must be taken into account. In either case, however, as Judge Roberts pointed out, equitable division does not mean an equal division. The chancellor did an exemplary job limning out Tracey’s need for financial support post-equitable-division, so it is unlikely that placing a value on the benefits received in this case would have changed the outcome.

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