Which Retired Pay Plan Are You Under?
Prepared by Department of the Army Retirement Services, Alexandria, VA
There are three retired pay plans for computing length-of-service retired pay. The “date of initial entry into military service,” also called the DIEMS date, determines the plan that you fall under. The DIEMS date isn’t used to calculate your retired pay. Retired pay is calculated using your basic active service date (BASD) and pay entry basic date (PEBD).
A DIEMS date is the earliest date of enlistment, induction, or appointment in a regular or Reserve component of an uniformed service as a commissioned officer, warrant officer, or enlisted member. It is rarely the same as the BASD and often earlier than the PEBD.
Soldiers can view their OMPF online at https://www.perscomonline.army.mil or through the AKO web site http://www.us.army.mil to determine if their first contract/appointment in on file, regardless of what branch of service it was. If that contract/appointment is not in the OMPF but available, send document to:
ATTN: AHRC-MSR (DIEMS)
200 STOVALL STREET
ALEXANDRIA, VA 22332-0444
FAX: DSN 221-5204, CML: 703-325-5204
ATTN: Personnel Actions Branch
8899 E. 56TH STREET
INDIANAPOLIS, IN 46249.
FAX: DSN 699-3704, CML: 317-510-3704
Point of contact for Officers is Ms. Diane Mitchell, Officer Records Branch, PERSCOM, DSN 221-8114, CML: 703-325-8114.
Point of contact for Enlisted Soldiers is Ms. Sylvia Davis, Chief, Records Services Division, EREC, DSN 699-3683, CML: 317-510-3683.
Service creditable for percentage purposes - All three retired pay plans use “service creditable for percentage purposes” in their formulas. In addition to percentage credit for your active duty service, you may receive percentage credit for certain inactive Reserve points and, for officers, medical or dental school. Before receiving credit for the additional time, you must first qualify for retirement by completing 20 years of active duty. For a complete explanation of service creditable for percentage purposes, see para 0103 of DOD 7000.14-R. Medical and dental officers must also read para 010202 of DOD 7000.14-R.
Service for basic pay purposes: All three retired pay plans give you a percentage of a “basic pay base.” You do not receive a percentage of other compensation such as housing allowance, subsistence allowance, or federal tax advantages. This can make a significant difference in dollar amounts when computing your potential retired pay. The basic pay base for those with DIEMS dates before 8 Sep 80 is the final basic pay. In most cases, the basic pay base for those with DIEMS dates on or after 8 Sep 80 is the average of their highest 36 months of basic pay, referred to as “high-3.”
THE THREE RETIRED PAY PLANS ARE:
DIEMS before 8 Sep 80
FINAL BASIC PAY PLAN
Years of service creditable for percentage purposes X 2-1/2% (not to exceed 75%) X final basic pay of retired grade = Retired pay
These soldiers receive a percentage of the final basic pay of their retired grade; therefore, they should take care not to retire just before an increase in their basic pay such as those applied at the 20-, 22-, 24-, or 26-year points.
Officers who retire under the Final Basic Pay plan with less than 10 years of commissioned service retire in their highest enlisted or warrant officer grade. They receive a percentage of the final basic pay that corresponds to the retired grade and years of service at retirement.
Officers who have 10 years of commissioned service, but who retire before completing the required time in their current officer grade without an approved waiver, will retire at the next lower grade and receive a percentage of the final basic pay that corresponds to the lower grade and years of service at retirement.
Soldiers under the Final Basic Pay plan, who retire on the same day as a basic pay rate change (e.g., retire 1 January with last day of active duty on 31 December; or 1 July with last day of active duty on 30 June), may be eligible to have their retired pay calculated on the new pay scale. Officers who retire voluntarily use the new pay scale as long as they qualify for retirement at least one day before their retirement date. Enlisted soldiers use the new pay scale. Warrant officers can’t use the new pay scale. See para 0104 of DOD 7000-14.R for details on mandatory and disability retirements.
If your DIEMS date is before 8 Sep 80, you will receive an annual cost-of-living adjustment (COLA) representing the difference between the Consumer Price Index (CPI) for the third quarter of one calendar year to the third quarter of the next. The COLA is normally effective 1 December and payable the first working day in January. The first COLA will be a partial one because you will not have been retired for the full COLA calculation period. Thereafter, you will receive a full COLA.
DIEMS between 8 Sep 80 and 31 Jul 86
HIGH-3 PAY PLAN
Years of service creditable for percentage purposes X 2-1/2% (not to exceed 75%) X average of highest 36 months of basic pay = Retired pay
In most cases (see exceptions below), under the High-3 formula, the basic pay base is the average of the monthly basic pay rates you received for the 36 months just before your retirement.
Commissioned officers who were formerly enlisted, who retire with less than 10 years of commissioned service and less than 30 years of total service, will use only enlisted basic pay in the calculation of their highest 36 months of basic pay (Section 1407, Title 10 USC). The enlisted basic pay corresponding to the member’s years of service for the 36 months before retirement will be used. Commissioned warrant officer time may be used to meet the 10-year commissioned service requirement.
Commissioned officers under the High-3 formula who retire with 10 or more years of commissioned service, but who fail to serve the required time to retire in their current grade, will retire at the next lower grade. However, both the officer and enlisted basic pay for the 36 months before retirement will be used to compute the average of the highest 36 months of basic pay.
If you serve on active duty for less than 36 months (e.g., disability retirement), the basic pay base is the amount of monthly basic pay you received during the period you were on active duty divided by the number of months, including any fraction, that you served on active duty.
For more information on calculating the average of the highest 36 months of basic pay, see para 0301 of DOD 7000.14-R.
COLA – If your DIEMS date is between 8 Sep 80 and 31 Jul 86, you will receive an annual COLA representing the difference between the Consumer Price Index (CPI) for the third quarter of one calendar year to the third quarter of the next. The COLA is normally effective 1 December and payable the first working day in January. The first COLA will be a partial one because you will not have been retired for the full COLA calculation period. Thereafter, you will receive the full COLA.
DIEMS on or after 1 Aug 86
HIGH-3 OR CSB/REDUX
If you are in this group, you are automatically covered under the High-3 formula discussed above. However, between your 14-1/2 and 15th year of active duty, you may be given an opportunity to elect to have your retired pay calculated under the REDUX formula discussed below. If you choose the REDUX formula, you receive a $30,000 career status bonus (CSB), payable immediately in a lump sum or incrementally in anywhere from two to five annual installments. This option is called CSB/REDUX. To be eligible to elect CSB/REDUX, you must qualify under your service’s regulations for retention to 20 years. You must also agree to serve continuously until you complete a total of 20 years. In most cases, failure to complete 20 years of service will result in the soldier having to pay back the full, before-tax bonus amount.
Under CSB/REDUX, retired pay is calculated as follows:
Years of service creditable for percentage purposes X 2-1/2% (not to exceed 75%), minus 1% for each year under 30, X the average of your highest 36 months of basic pay. In other words, you are credited with 2% per year through your 20th year and 3.5% for each year thereafter.
At age 62, retired pay will be recomputed under the High 3 formula discussed above; however, the recomputation will NOT be retroactive. Under CSB/REDUX, the longer an individual stays on active duty, the closer the retired pay percentage multiplier is to what it would have been under the High-3 retired pay plan, up to the 30-year point where the percentage multipliers are equal.
A soldier who accepts the $30,000 bonus and later retires for disability will use the High-3 formula for the length-of-service portion of retired pay.
Soldiers must be participating in the military thrift savings plan (TSP) on the effective date of their CSB/REDUX election to shelter/defer all or a portion of the CSB from taxes in the TSP. For more information on TSP, go to http://www.tsp.gov.
Soldiers have six months to return their CSB/REDUX elections from the date of official notification of eligibility. Elections returned before a soldier’s 15th year become effective and irrevocable at the 15th year. Elections returned after a soldier’s 15th year because of late notification will become effective on the date received.
For more information on retired pay, go to: http://www.armyg1.army.mil/retire and http://dod.mil/militarypay/.