Mitch Mcconnell Stops Vote to Continue Military Pay
The Military Compensation department, which is folded into the United States Department of Defense (DOD), aims to "develop and oversee [the] implementation of personnel policies that maintain fair and competitive compensation and entitlement systems." In addition to managing service members' basic pay; special and incentive pay; allowances; stipends; and educational benefits, those responsibilities include overseeing the military retirement pay scale.
The DOD maintains three basic retirement plans, all of which are available to active duty (i.e. non-reserve) veterans, and two of which are available to non-regular (i.e. reserve) members. Additionally, the department maintains a disability retirement plan. Each plan has distinct characteristics and specific eligibility criteria. While our guide will go over the basics, we encourage veterans and service members with questions about their military retirement scale — or any compensation issues — to contact the Military Compensation department.
Three Important Terms: Retired Base Pay, Retired Pay Multiplier and COLA
As with any retirement or financial plan, there are a lot of specific terms and acronyms involved in the various retired military pay scale options. There are three terms in particular that will come up in the introduction to each retirement compensation option: Retired Base Pay, Retired Pay Multiplier and COLA.
What Is Retired Base Pay? Retired Base Pay is the starting point for calculating your benefits entitlement upon retirement under each plan. There are two ways that Retired Base Pay is calculated — the final pay method and the high-36 month average method. Under the final pay method, your Retired Base Pay is equal to your final basic pay. Under the high-36 month average method, your Retired Base Pay is calculated by adding up your highest 36 months of base pay and dividing the total by 36. Which method will apply to you? It depends on when you joined the service.
What Is the Retired Pay Multiplier? Retirement pay is based on a percentage of your Retired Base Pay. That percentage is called the Retired Pay Multiplier. As a general rule, that percentage rate increases as your years of service accumulate. Just how years of service are calculated varies depending on whether you were a regular or reserve member.
Let's take the example of an active member participating in the High-36 plan. Here's how the Retired Pay Multiplier changes as years of service accumulate:
- As of 20 years, 50% of Retired Base Pay
- As of 21 years, 52.5%
- As of 22 years, 55%
- As of 23 years, 57.5%
- As of 24 years, 60%
- As of 25 years, 62.5%
- As of 30 years, 75%
- As of 35 years, 87.5%
- As of 40 years, 100%
- As of 41 years, 102.5%
What Is COLA? COLA is an acronym that stands for Cost of Living Adjustment. Think of it as an adjustment for inflation. Military retirement benefits are all adjusted annually depending on the Department of Labor's Consumer Price Index (CPI). In some cases, the adjustment is equal to the CPI percentage, though in the REDUX plan — one of the plans will be introduced below — the adjustment is less than the CPI percentage.
Members who have accumulated over 20 years of active service or, in the case of reserve members, qualifying service, are eligible for retirement. As a general rule, entitlement begins at age 60, though in some cases there may be a lower qualifying age.
Final Pay (Regular Members and Reserve Members): The Final Pay plan is the primary plan for reserve members who entered the service prior to September 8, 1980. Reservists' Retired Base Pay is the monthly rate applied on the day of retirement at the highest grade you satisfactorily held during your service.
The Final Pay plan uses a Retired Pay Multiplier of 2.5% times the years of eligible service. Eligible service is calculated by all accumulated reserve points divided by 360. For active members, the Final Pay plan applies a 2.5% multiplier times years of creditable service — which is the sum of years of active service plus any additional years based on all accumulated reserve points, divided by 360. The Retired Pay Multiplier is applied to the active member's Final Pay.
Active and reserve members can calculate their entitlement under the Final Pay Plan using the U.S. military pension calculator provided by the DOD's Military Compensation department.
High-36 (Regular Members and Reserve Members): The High-36 plan is the primary plan for members who entered service after September 8, 1980, but before January 1, 2018. The Retired Pay Multiplier under the High-36 plan is the same as the Retired Pay Multiplier under the Final Pay Plan.
For reserve members, the Retired Base Pay under the High-36 plan is the monthly rate applied on the day of retirement at the highest grade you satisfactorily held during your service. (Most often, this will be the average of the 36 months of your pay grade and years of service taken from the pay in effect in the 36 months just before your retirement pay began.)
For active members, the Retired Base Pay is calculated by adding up your highest 36 months of base pay and dividing the total by 36. The number resulting from that calculation is then subject to the Retired Pay Multiplier.
Active and reserve members can calculate their entitlement under the High-36 Plan using the U.S. military pension calculator provided by the DOD's Military Compensation department. Note: The online calculator refers to the High-36 plan as the High-3 Plan, but it's the same thing.
REDUX (Regular Members): The REDUX Plan is an optional retirement plan available only to active-duty members who entered service after July 31, 1986, but before January 1, 2018. The REDUX Plan includes a $30,000 lump sum Career Status Bonus on your 15th year of service, subject to an obligation to continue to serve through your 20th year of service. Note: Eligibility to elect the Career Service Bonus terminated as of December 31, 2017.
Additionally, the REDUX plan determines your Retired Base Pay using the high-36 month average method. It also uses the same Retired Pay Multiplier as the High-36 Plan — but with one important exception. The Retired Pay Multiplier is decreased by one percentage point for each year of service less than 30 years that you had accumulated at retirement. However, the deduction of the Retired Service Multiplier for years of service less than 30 years only applies prior to age 62; at age 62 and after, no deduction is applied.
Active and reserve members can calculate their entitlement under the REDUX Plan using the U.S. military pension calculator provided by the DOD's Military Compensation department.
Blended Retirement System: The Uniform Services Blended Retirement System (BRS) is another option, but the opt-in period for most members closed on December 31, 2018. BRS is an optional plan for members who entered the service on or before December 30, 2017, and is dependent on the length of service or accumulated reserve points as of December 31, 2017. Because that opt-in window is closed, this likely impacts less folks, but you can still learn more about the BRS plan at the DOD's Military Compensation website.
Disability Retirement Plan
The DOD also provides a disability retirement plan to members who are determined "medically unfit" for continued service based on a disability rating of at least 30%. For more information about the Integrated Disability Evaluation System, visit the Military Health System's website.
Under the Disability Plan, your Retired Base Pay is calculated under the Final Pay, High-36 or Blended Retirement System (BRS). Your Retired Pay Multiplier will be either your percentage of disability, or your years of creditable service times 2.5% or 2% — depending on if you were participating in the Final Pay, High-36 or BRS plans prior to disability. Note: In either case, the Retired Pay Multiplier is capped at 75% under the Disability Plan.
Source: https://www.reference.com/business-finance/guide-calculating-military-retirement-pay?utm_content=params%3Ao%3D740005%26ad%3DdirN%26qo%3DserpIndex&ueid=e1cb5ec4-7d39-4c76-9e5e-82fe66929d92
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