Articles by Ryan Guina

Ryan is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years in the USAF and also writes about money management, small business, and career topics at Cash Money Life.

You can find him around the web at, Ryan Guina on Twitter, The Military Wallet on Twitter, and on Google.

MyCAA – Military Spouse Career Advancement Accounts – What You Need to Know

Are you aware the military has a Tuition Assistance program for military spouses? Though some refer to it as the Spouse Tuition Assistance Program, it is officially known as the Military Spouse Career Advancement Account, or MyCAA. This program began in 2010 and is run through the Department of Defense. It is designed to help military spouses have better opportunities for employment – something that can be tricky when dealing with frequent deployments and relocations.

MyCAA Eligibility & Benefits

MyCAA Scholarship Military Spouse Tuition AssistanceUnfortunately, the MyCAA program is not open to every military spouse. It is only open to spouses of active duty servicemembers who are in the pay grades of E-1 through E-5, W-1 and W-2, and O-1 and O-2. Spouses of activated Guard members and reservists are also eligible for the program, provided the servicemember is on Titte-10 orders and the spouse will finish their sponsored courses before the service member is off Title-10 orders. Note: Spouses within all branches of the military are eligible, with the exception of Coast Guard spouses (this is a DoD program; the Coast Guard is covered under the Department of Homeland Security).

Here are some key points to the benefits:

  • $4,000 Max benefit: MyCAA participants are eligible to receive up to $4,000 in Tuition Assistance benefits, with a maximum of $2,000 per fiscal year.
  • Eligible Programs for Study: Participants are eligible to receive Tuition Assistance benefits for associate degrees, certifications, and licensures. These benefits cannot be used for advanced degrees or the completion of a bachelor’s degree.
  • 3 Year Limit: There is a requirement that the student must complete their study program within three years from the start date.

What is covered: The MyCAA benefits can be used for tuition for education and training courses, and licensing fees, to include certifications for teachers, medical professionals, and other professional certifications; licensing exams and preparatory courses; Continuing Education Units through professional associations; and degree programs leading to employment in a portable career field. MyCAA can also be used for GED tests, English as a Second Language, and some other classes.

What is not covered: The MyCAA program does not cover application or enrollment fees, lab fees, student ID cards, computer and technology fees, and many other associated education fees commonly found on college campuses.  Reimbursement for courses is not offered, so please ensure you have your MyCAA Financial Assistance (FA) document before enrolling in any courses.

Purpose of these limitations: There is a limited amount of funds to go around, so there have to be some limitations in place. The goal of the program is to help spouses of those servicemembers who likely need it the most. The program is limited to spouses of enlisted members through E-5, and junior officers. These are the folks who are generally younger and more likely to need a dual income household. The goal is to help make military spouses more employable. This is accomplished by limiting the TA benefits to programs that will result in an associate degree, certification, or an accredited license (there are many licenses which qualify; check with your education office for more information about available programs).

MyCAA Application Process

Eligible military spouses can begin the application process at the official MyCAA website. Spouses will need to create a profile, and their eligibility will be confirmed by linking their account with DEERS.  Once eligibility has been established, the spouse can then create a Career and Training Plan, which will need approval. As previously noted, the student must enroll in an education plan that will lead to a portable career (list of approved programs). The student can then request their Financial Assistance document within 30 days of the first class date. Spouses are required to apply to the school and enroll in the courses on their own.

You can also contact your school academic advisor for assistance. If they are unfamiliar with the program or you need additional assistance, then try contacting a Career and Education Consultant at Military OneSource. They can be reached at 1-800-342-9647 and can help you find a portable career that interests you, help you develop your Career and Training Plan, and help you navigate through the process.

Overall, this is a good plan to help spouses of junior military members get started on their degree plan or to obtain a license that can be used to help further their career.

Tax Deadline Extension for Deployed Military Members

Did Tax Day come a little quickly for you this year? If so, you can file for a free extension on your taxes. Filing an extension gives you until October 15th to file your tax return. It’s important to know that while anyone can file for a tax extension, you are still required to pay any taxes to the government by April 15th, even if you filed for a tax deadline extension. You will need to pay a minimum of 90% of your total tax bill to avoid late fees or penalties. If you are expecting a refund, there are no fees or penalties for filing your return late. This makes sense – the government is in a hurry to get your money, but not in a hurry to give it back!

Deployed Military Tax Deadline Extension

If you are deployed, you have an extension to file your tax return.

The above rules apply to almost everyone. However, some military members and civilians are eligible for a tax extension without being required to pay the minimum estimated taxes – provided they are serving overseas in direct support of a combat operation. Let’s take a look at the rules for these tax deadline extensions.

Tax Deadline Extension for Deployed Military Members

Military members who served overseas in a tax free zone in the previous or current tax year are eligible to apply for an extension to file and pay their taxes. In many cases they will not have to pay estimated taxes before April 15th if they will owe taxes this year. This is a nice way for he IRS to recognize your duties in serving our country. The tax return deadline for those who file extensions is normally October 15th. However, if you deployed to a combat zone, your deadline for filing taxes will depend on when you were deployed, and when you returned from your deployment.

When is your tax return due if you were deployed? If you are or were deployed, your tax return deadline is determined by taking into account the start and end date of your deployment, and doing a little simple math.

Let’s begin with your deploy start date. You count the number of days to the normal tax filing deadline (normally April 15th unless it falls on a holiday or weekend; then the next business day). Take this number, then add 180 days. This is the total number of days you have until your tax return is due. You add this number to your redeployment date; this gives you your tax return due date.

Let’s look at a simple example: Let’s say you deployed on April 1, 2014 and the tax return deadline is April 15th. This gives you 15 days. Add this to 180 for a total of 195. You have 195 days from the day you redeploy to your non-combat zone role. If you returned on October 1, 2014 your 2013 tax return would be due April 15, 2015. This is coincidentally the same day as your 2014 tax return is due.

You will have until the new due date to file your tax return and make any payments without penalties or interest. If you are owed money, you may actually be entitled to an interest payment from the IRS, provided you file your tax return by your new deadline.

Tax Extensions Can Be Added on Top of Each Other

It is possible for these extensions to stack on top of each other. Let’s use the above example and assume the military member was deployed from April 1, 2014 through Oct. 1, 2014. As we mentioned, the new tax filing deadline would be April 15, 2015, the same day as this member’s 2014 taxes would be due. However, if the service member deployed to the AOR again before the April 15th deadline, he would be able to extend the deadline one more time, and any time would carry over with the same formula.

Word of advice: don’t let things go that far. I know taxes aren’t fun, but you don’t want to extend them indefinitely. It will make your bookkeeping much more difficult in the long run, and increase the odds of you or the IRS making errors in your return. This could be costly in terms of dollars or time spent. My recommendation is to get your taxes done as soon as you can so you can avoid any unnecessary delays or problems.

Which locations are eligible for a tax deadline extension?

According to the IRS,

“You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone.”


Military service outside a combat zone is considered to be performed in a combat zone if:

  • The Department of Defense designates that the service is in direct support of military operations in the combat zone, and
  • The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records.

Source – IRS Publication 3, Armed Forces Tax Guide.

Deadline Extensions Also Apply to Non-Military In Direct Support of Combat Ops

This deadline extension applies to certain civilian members who are serving in a combat zone in support of military operations. This includes career fields such as Merchant Marines, Red Cross workers, civil service members, accredited correspondents, and civilian contractors. The hey here is the duties must be in direct support of military operations. Simply being a civilian in the country and working a civilian job not related to military service is not enough to qualify for the extension.

Installment Payments to IRS Can Be Deferred

If you are deployed to a combat zone while making installment payments on an IRS debt then you can defer your payments without penalty or interest. You can defer payments for the duration of your deployment, plus 180 days. This can give you a breather and hopefully a chance to catch up with your financial obligations. That said, you may be able to continue your payments without as much financial problems due to the increased pay you will receive while deployed (tax free pay, hostile fire pay, per diem, and possible other pay). To defer your payments, you will need to contact the IRS office you are making payments to and work with them to set up the new plan.

Need More Info? See the IRS Regs or Speak with a Tax Pro

Tax returns can get more complicated if you have a family and file a joint tax return with your spouse. In most cases, your spouse will get the same extension as you. The deadline only applies to individual taxes and income from a small business when taxed as a sole proprietor. These extensions do not apply to you if you have a business taxed as an LLC, S-Corp, Corporation, and some other small business entities.

Each case is unique, so you want to use this page for general guidelines. Always do your own research and consult with the IRS regulations (see IRS pub 3, linked above). The IRS also has a dedicated military tax extension page on their website with FAQs. Finally, if in doubt, consult with a CPA, IRS Registered Agent, or other tax pro. Taxes are one area where it is worth it to pay for professional advice.

Additional military tax resources

The military pay system is full of rules that are specific to military members and many of them can have an affect on your taxes. When in doubt, contact a tax professional for more information regarding your specific situation!

Can the VA Reduce Your Disability Benefits?

When you are awarded a VA Service-Connected Disability rating, the VA retains the right to reexamine you to determine if your disability is still present and warrants the original rating. In short, it is possible for the VA to increase, reduce, or terminate, disability benefits based on a reexamination. But don’t let this scare you: not every veteran’s disability rating is scheduled for a reexamination, and not every rating will change.

For example, some service-connected disability ratings are considered protected, and will not be changed. Veterans with a P&T Rating (Permanent and Total) will usually not be scheduled for a reexamination. The same thing goes for injuries that are considered permanent or static. These include injuries that will never change, such as a missing limb.

Let’s take a look at VA Reexaminations to better understand the details of why, when, and how, the VA reexamines disability ratings, and whether or not your rating will be reviewed in the future. And if your VA disability rating is reviewed, keep in mind reviews work both ways: they can increase or decrease your rating, depending on supporting evidence and documentation.

Why the VA Reexamines Veterans with a Service-Connected Disability Rating

The why is easy to answer. Not all medical conditions are permanent. Some injuries heal over time, at least to some degree. The VA wants to ensure they are compensating you for your injuries at an appropriate rate. When you are assigned a disability rating, the VA also determines if they will want to reexamine you in the future. This typically only happens for injuries that have a reasonable expectation of improving over time. Reexaminations are usually scheduled within two to five years after the initial examinations, or they can take place any time there is material evidence in your change of condition. You will receive a Reexamination Letter detailing what will take place, and when.

Notice of Reexamination

The VA must send you a reexamination letter before they can change your service-connected disability rating. It’s essential that you attend this appointment, or work to reschedule it for a better time. If you don’t attend the appointment or provide supporting evidence for your case, the VA can reduce or terminate your benefits. The Notice of Reexamination should include contact information where you can reschedule your appointment if necessary.

The VA may send a Notice of Reexamination at  pre-scheduled interval (such as the aforementioned two to five years), or when they have material evidence there has been a change in your medical condition. This could be evidence that your situation has improved or disappeared. You have 30 days to request a hearing if you wish to contest the VA decision, and you have up to 60 days to submit evidence that a reduction in your rating is not warranted.

Keep in mind, the VA cannot reduce your service-connected disability rating without first sending you notice. Failure to do so on their end should result in a full reinstatement of your benefits.

When the VA Will Not Schedule You for a Reexamination

The VA will typically not request to reexamine your rating under the following conditions:

  • The veteran is over age 55.
  • The disability is static (such as a loss of limb).
  • The disability is considered permanent and is not expected to improve (e.g. blindness, deafness).
  • The disability is already at a minimum rating for that particular disability.
  • Reducing an individual rating would not affect the total combined disability rating.

These conditions are significant. The VA will not schedule are reexamination for permanent and static disabilities, so you can safely assume those ratings will remain the same. Age 55 is significant because it represents an age at which the VA assumes the veteran is too old to reasonably reenter the workforce (keep in mind VA disability ratings represent your ability to perform work at the level you were able to before you had the injury while you were serving in the military).

Finally, the VA will not look to reduce your VA disability rating when reducing one rating wouldn’t have a material impact on your overall disability rating. This applies to veterans with multiple medical conditions and disability ratings.

If you have been contacted by the VA to have your case reexamined and you meet any of the above criteria, then contact them with the phone number listed on your Notice of Reexamination and explain why you do not believe you should be reexamined. You may be able to have the reexamination canceled. The VA will not usually be able to reduce your disability rating without a reexamination, so your rating should be safe if you meet any of the above criteria.

Protected VA Disability Ratings

Certain VA disability benefits are considered Protected Ratings, according to the VA (though others say the term “protected” is a misnomer). This is where it helps to be able to find and read the appropriate regulations, or find an expert who can help you through the task. Here is a document that quotes some of the ratings protections for the 10 and 20 year rules (Word doc on VA site).

  • 5 year rule: If the rating has been in effect for 5 years, it cannot be reduced unless your condition has improved on a sustained basis (The VA must have documentation supporting this is a permanent improvement).
  • 10 year rule: A service connected disability rating cannot be terminated if it has been in effect for 10 years. Compensation can be reduced if evidence exists that the condition has improved. The sole exception is if the VA can prove fraud, in which case the VA can terminate the benefits.
  • 20 year rule: If the rating has been in effect for 20 years, it cannot be reduced below the lowest rating it has held for the previous 20 years. The only exception is if the VA can prove fraud.
  • 100% rule: The VA must prove your medical situation has materially improved and as a result, you are able to perform substantial work.

What do these protected ratings mean? Basically, if you have had a VA service-connected disability rating for 5 years or more, the VA must prove your condition has improved on a sustained basis before they can reduce or  terminate your disability rating. After 10 years, the VA can only reduce your rating; they cannot terminate it (absent proof of fraud). After 20 years, your rating cannot be reduced below the lowest rating you have held for the last 20 years. These distinctions are important, because some ratings can vary over the years, based on the medical condition.

For example, let’s say you have a knee injury that warrants a 30% disability rating when you complete your initial VA evaluation. After 5 years, the VA cannot reduce this rating below 30% unless they can prove the injury has healed on a sustained basis. If it has improved to the point the injury warrants a lower rating, or the injury no longer exists, the benefit can be reduced or terminated. After 10 years, the benefit can no longer be terminated, but it can be reduced if the VA can document substantial sustained health improvements. After 20 years at that rating, your benefit can no longer be reduced below its lowest rating or terminated (unless there is proof of fraud).

The 100% rule is much more difficult to have decreased. The VA must prove your health has materially improved, and you are now able to perform substantial work. If all of your injuries still leave you unemployable, then it is likely your benefit will not be reduced. Most veterans with a 100% rating have one or more major service-connected medical conditions, and possibly additional multiple less-severe injuries. The VA must prove the veteran is able to perform substantial work even with this assortment of medical conditions.

Reducing Your Disability Rating – VA Must Prove Change in Condition

The VA needs to establish substantial evidence of a change in condition before any change can occur to your service-connected disability rating. This puts the onus of the work on them. But you still need to be proactive to protect your rating. If the VA sends you a Notice of Reexamination, you need to show up for your scheduled appointment, or reschedule it, if possible. If you miss your scheduled appointment, the VA can reduce or terminate your rating without additional warning. Reestablishing your rating could take some time, or may be impossible, barring a legitimate reason for missing the appointment.

You can also request a hearing if the VA wishes to reduce your rating. You may find it helpful to enlist the help of a lawyer or your own medical professionals. You will want to ensure you have sufficient documentation to support your claims – whether you believe the rating should remain the same, or if it should be increased.

A Reexamination is Not the End of the World

A Notice of Reexamination can actually result in an increased disability rating if the situation warrants it. The VA will not go out of their way to increase your benefits rating for you. However, if the situation is warranted by your examination, then they will increase your disability rating. Keep this in mind if you are scheduled for a reexamination. It’s also important to understand that requesting an increase in disability ratings can result in a decrease if the VA can prove your medical condition has improved over time.

Bottom line: A VA disability rating is not always a static rating that will remain unchanged over the course of your lifetime. Your rating may remain unchanged, but it could also increase or decrease, depending on circumstances. If you feel there is a problem with your rating, it is best to find someone who specializes in VA disability claims and see if you can get them to help you with your claim.

2015 DoD Budget Consolidates TRICARE Plans, Increases Fees

The proposed 2015 military budget contains a few major changes that would replace the current TRICARE system with a consolidated system. The plan would basically eliminate the three current TRICARE programs (Prime, Extra, and Standard), and replace them with a single TRICARE plan that closely resembles TRICARE Standard. If passed, this new consolidated plan would include higher enrollment fees and more out of pocket expenses for many TRICARE beneficiaries. The government says these changes would also offer TRICARE recipients more choices regarding where they can receive their health care.

Here is an overview of the proposed changes:

  • Active duty: No change to benefits. Active duty members would continue to receive priority access to health care without any cost sharing. Active duty members would still require approval for off-base or civilian health care.
  • New Enrollment Fees (now called Participation Fees): Retirees, their families, and survivors or retirees would have a new participation fee of $286 for an individual, or $572 for a family. Electing not to pay the enrollment fee would result in forfeiting coverage for the plan year. Service members who are medically retired, and survivors of those who died while serving on active duty would be exempt from the participation fees, and would have reduced cost sharing.
  • Increased Catastrophic Caps: The enrollment fee would no longer count toward the catastrophic cap, and the cap for a family would be increased to $3,000 per person, or $5,000 per family.
  • New Cost Sharing: Cost shares will depend on several factors, including category of beneficiary (active, retired, medically retired, etc.), and where the beneficiary receives care. Costs will be lowest at military treatment facilities, higher in-network, and highest out-of-network.
  • Open Season Enrollment: Participants must choose to enroll for a 1-year benefits period or lose the opportunity for coverage.
  • Increased Co-pays for Prescriptions: Co-pays for brand-name prescription medications will cost $26 in 2015, and increase annually. They are expected to reach $45 by 2014. Generic medications would cost $14 by 2024. There would be no change for active duty members.
  • TRICARE for Life Enrollment Fees: TRICARE for Life participants would see enrollment fees based on their gross military retired pay. The fees would work out to 1% of base retirement pay in 2016; capped out at $300 per year, and $400 for Generals officers. By 2018 the enrollment fee would increase to 2% of retirement pay, capped at $600 and $800, respectively. Further increases will be based on inflation. Current TFL recipients would be grandfathered into the current system and will not pay enrollment fees.

Will TRICARE be Consolidated?

So far this is only a section of the 2015 budget proposal. But there is a good possibility some, or all of these proposals could be accepted. The bottom line is that the Department of Defense is faced with many tough decisions regarding the budget due to the Sequestration and pressure from Congress. Changes need to happen and they are looking at every possible avenue, including cutting weapons systems, reducing new weapon system acquisitions, Reductions In Force measures, cutting retirement benefits, and more.

Right now the best thing we can do is contact our lobbying groups and Congressional representatives to let them know how we feel about these proposals.

Sources: DoD 2015 Budget Overview,

Modernizing Military Retirement Pay – Hybrid Military Retirement Plan

The military retirement system is one of the most generous pension plans to be found almost anywhere. But the days of retiring at half pay after 20 years of service may be numbered. The DoD and Congress have been investigating opportunities to cut military retirement costs. It’s a delicate balance. The government needs to trim expenses across the board (thanks to the Sequestration), but the military needs to balance cuts with retention. Slice too deep, and too many service members will leave the service before they qualify for retirement benefits, leaving the military short on experience and leadership.

Modernizing military retirement benefits

Will retirement be as rewarding in the future?

The latest study, called Concepts for Modernizing Military Retirement (pdf), aims to meet that balance by offering a hybrid pension plan that combines a 401(k) style defined contribution benefit with a traditional pension. The basics work like this: all troops who serve at least 6 years will receive a contribution on their Thrift Savings Plan, a cash retention bonus will be paid at 12 years of service, and a larger lump-sum payment will be made after retiring after 20 or more years of service.

These new TSP contributions and cash payments come at a price, however. Military retirees would either receive a reduced retirement benefit multiplier, or a reduced pension while they are still working age (until around age 62).

Let’s take a look at what this may mean for future military retirees.

Hybrid Military Retirement Plan

There are three main components of the new potential retirement plan*. Here are the basics of each:

Matching Contributions in the Thrift Savings Plan: All service members would have a Thrift Savings Plan account opened on their behalf. Starting at year 2, the DoD would automatically contribute 5% of the service member’s base pay to the account, with no requirement for military members to make any contributions to receive the full 5%. Service members would be able to make their own contributions to the account if they wish. However, full ownership of the DoD contributions would not pass to the servicemember until they reach 6 years of service. A vesting period like this is a common retention tool in the civilian world.

Mid-career retention pay: The next benefit would be a lump-sum mid-career retention pay made to the servicemember around year 12. The proposal is around 2 months pay for enlisted members, and 6 months pay for officers. However, these payments would be controlled by each branch of service, so these numbers may be variable if the retention pay is used as a reenlistment incentive for undermanned or critical career fields.

Transition Pay at Retirement: There would also be a “transition pay” given upon military retirement at 20 years of service. This could be anywhere from one year of basic pay, up to three years of basic pay, depending on which option is chosen (see below for the immediate vesting, or the delayed vesting option).

Two Proposals:

There are two options currently under proposal regarding how much military retirees would receive for their military pension, and when they would receive it.

Proposal  1 – Immediate Vesting: This proposal would be similar to the current retirement system in which retirees would begin receiving full retirement checks and standard Cost of Living Adjustments for life.

Proposal  2 – Partial Payments While Still Working Age: The second proposal would enact a dual-tiered pension plan with reduced monthly payments to working age retirees, with payments beginning immediately upon separate from the military. The reduced pension would probably be around 25% of base pay. The retiree would then begin receiving full retirement pension at a more traditional retirement age of around age 62.

New Retirement Multiplier

The current military retirement multiplier is 2.5% pf pay for each year served. If you serve the minimum 20 years to qualify for military retirement benefits, you will have earned 50% of your base pay (actually, the average of your highest three years of pay for most military members still serving). Serving 30 years would earn a retiree 75% of their pay, and so on. This proposal would change the retirement multiplier, depending on which of the above options is chosen, the immediate vesting option, or the delayed vesting option.

Multiplier for Immediate Vesting: The immediate vesting option would place the multiplier at 1.75% of base pay. This would equate to a 35% benefit at 20 years of service. Serving for 30 years would net a retiree 52.5% of their pay.

Multiplier for Delayed Vesting: If the option for delayed vesting is chosen, the multiplier would likely remain at 2.5%, or possibly be reduced to 2.0%. The 2.5% multiplier would have no impact on the retiree, with the exception of the retiree receiving reduced pension payments until they reach retirement age. A 2% multiplier would pay 40% at 20 years, and 60% at 30 years (after reaching traditional retirement age).

How Much Will This Cost Retirees?

The DoD numbers show this will cost most retirees around 10% of their lifetime benefits compared to current retirement plans, depending on various factors, such as the rank and time in service of the retiree, age at retirement, market conditions for the TSP contributions, and which of the two options are chosen, the immediate or delayed vesting.

Who Wins & Who Loses Under This Proposal?

There are always pros and cons to every change. Lets take a deeper look at how this impacts military members.

Non-Retirees Benefit the Most. There are some people on the other side of the table (lawmakers and policy makers) who often quote that the military retirement system isn’t fair because fewer than 20% of service members remain on active duty long enough to qualify for a 20 year retirement. Many of the servicemembers who leave before serving 20 years walk away with nothing. This plan would change that. Anyone who serves at least 6 years would walk away with vested contributions in their Thrift Savings Plan account. The mid-career cash bonus at 12 years would also benefit many servicemembers, especially if they have the option of contributing the amount to their TSP. These Thrift Savings Plan contributions belong to the servicemember when they leave the military. This has the potential to be worth tens of thousands of dollars in the future, depending on how much the member received from the DoD, market conditions, and more importantly, whether the troops left the money in their TSP until retirement age.

Retirees See the Biggest Change. These two plans are different enough to warrant an individual response. Under the immediate vesting option, retirees would see a much reduced multiplier, substantially reducing their retirement pay. This would virtually guarantee every military retiree would have to work again after they reach military retirement. Currently, many retirees are able to plan in advance and may be able to retiree for good on a military pension. The added TSP contributions would make up for some of the pension shortfall, but this moves the responsibility to the servicemember, and would require them to leave their funds in the TSP until they are able to withdraw it (currently age 59½).

The delayed vesting option would cap military pensions at 25% until the retiree reaches a traditional retirement age (age 62), at which point they would receive their full pension. The delayed vesting option has either the same multiplier, or a slightly reduced multiplier. The primary difference is a larger cash payout for the career transition bonus paid out when the servicemember retires. How the servicemember uses the transition pay would have a large impact on how the numbers work out in the long run.

Does the government win? Either of these plans would save the government money in the long run, but they wouldn’t bring immediate cash savings. The Pentagon would grandfather in all current servicemembers to their current retirement plan, and the DoD would have to begin making large lump sum payments in the mean time to all servicemembers who meet the benchmarks for cash payments. The real savings by the Pentagon wouldn’t be seen for a few decades at least. After that, the savings would grow.

Will The DoD Move Toward a Hybrid Retirement Plan?

About two years ago, the Defense Business Board proposed some radical changes to the retirement system that would move almost the entire military retirement system to a 401(k)-like retirement plan. The plan would eventually shift 100% the responsibility for retirement from the government to the troops. The proposal was wildly unpopular, and the DoD feared the military would have a hard time meeting retention goals. This new proposal is somewhere in the middle.

One thing is clear: changes are coming to the military retirement system. It’s not really a question of if. It’s a question of when, and to what degree the changes will take place. We have already seen the previous proposal to shift all of the retirement to a 401(k) type plan. And this year we have seen Congress pass a law to reduce Cost of Living Adjustments for working age retirees. That law was repealed almost in its entirety shortly after it was passed. The law was changed to grandfather in all servicemembers who were in the military prior to 2014. Those who entered the service in 2014 or later will still have a reduced military pension.

The writing is on the wall. Changes will happen. It’s just a matter of the government finding a happy medium that will work for the lawmakers and lobbyists, and that won’t hurt retention too much.

The good news is the DoD has stated current servicemembers would be grandfathered into their current retirement plan. Hopefully this will be the case, and any changes that happen in the future will happen when servicemembers join the military under the assumption of the new rules.

* To be clear, the Pentagon is not calling this a proposal or recommendation at this time, simply an option the military could choose in the future.


Image credit: General Frank Grass.

Proposed 2015 Military Budget: 1% Pay Raise, 6% Decrease in BAH, Other Cuts

The Department of Defense recently released a proposed military budget for 2015 (DoD). The results are along the lines of what we have come to expect lately: there will be budget cuts in order to reign in the DoD and federal budget. In the proposal, the strength of force will be reduced, weapon systems will be cut, and military pay raises will be capped at 1%, as they were in 2014. There is also an expected reduction of 6% for Basic Allowance for Housing. Other proposed cuts include consolidating health care plans and reducing commissary subsidies. Keep in mind everything that follows is still a proposal until signed into law.

Proposed Pay Raise – Just 1% for the Next 3 Years

The proposed 1% pay raise looks like it will be standard for the next few years, as the proposed 2015 military budget intends to extend a 1% pay raise for each of the next three years. Military pay has always been, and will likely always be, a contentious issue. Military members received larger than normal pay raises through the first decade of the 2000′s. The goal was to bring military pay closer to civilian pay. Now, the government wants to slow down the rate of the pay raises. While a 1% pay raise isn’t much, it is better than no raise, which is what federal employees received for three years, from 2011 – 2013 (source). Hopefully the era of small pay raises will be short lived.

Expect to Pay More Out of Pocket for Your Housing

The 6% decrease in BAH is a bit of a misnomer as it isn’t a direct cut, and it won’t happen overnight. However, the proposed cuts are real, and are expected to take place over the next few years. The goal is to shift 6% of housing expenses to service members over the course of the next several years. Part of this will be accomplished by slowing down the cost of living increases. So it’s likely that BAH wouldn’t be decreased as much as it wouldn’t be increased to keep up with inflation. BAH Rates are protected through a Rate-Protection plan, which freezes BAH rates for military members who already live in a location. When the government reduces BAH rates, they are locked in for members who currently live in the area. BAH is only changed for new members who move to the area. So it is likely people wouldn’t see an actual decrease in their BAH until they PCS to another location.

The proposal also changes how BAH benefits are calculated. The current method includes the cost of renter’s insurance in the calculation. The new method will remove renter’s insurance from the calculations.

Proposed Commissary Cuts

The Commissary has been a hot topic lately, and cuts have been discussed at many levels, including the possible closure of US Commissaries. The 2015 budget proposal includes a $1 billion reduction in commissary subsidies over the next 3 years. To put this in perspective, that will leave the Commissary with less than 1/3 of their current budget of $1.4 billion. The Commissary offers shoppers savings of close to 30% on their purchases (By law Commissaries are required to sell items at cost, plus a 5% surcharge). Several proposals have been made to reduce the proposed subsidies and increase the Commissary surcharge in order to reduce the amount of subsidies required to keep the Commissaries open. This would shift some of the cost to shoppers, but would result in keeping the Commissary doors open.

Reduction in Force & Weapon Systems

The Army is considering reducing their strength of force by roughly 13% – from close to 520,000 today, to around 440,000 to 450,000 Soldiers. Sequestration could further reduce that number to 420,000. To put this in perspective, this would be the smallest the Army has been since before World War II. Defense Secretary Chuck Hagel cites budget constraints and changing warfare strategies as the reasons for cutting such as large number of troops. The cuts, if approved, wouldn’t happen overnight. They would be phased in through 2019, and would take into account retirements, normal separations, and other factors.

The DoD is also considering retiring the A-10 and U-2 aircraft, citing changes in how air wars are fought. The missions these aircraft support can also be handled by other aircraft, at least to a satisfactory degree. The Navy could also see to half their current cruiser fleet retired. The Marines could see a Reduction in Force.

Budget Cuts Are the New Reality

The cuts we are seeing today are reminiscent of the Reduction in Force that occurred at the end of the Cold War in the late 1980s and 1990s (though the Cold War cuts were much larger). But that doesn’t make things easier for those who are experiencing cuts today. The fact of the matter is the military is adjusting to the current environment. Cuts are part of today’s military environment, and will continue to be an issue in the foreseeable future.

Concurrent Receipt Rules – Concurrent Retirement Disability Pay (CRDP)

Concurrent Retirement and Disability Pay (CRDP), also known as Concurrent Receipt, allows military retirees to receive both a full military retirement pension and full VA Disability compensation benefits, provided they meet eligibility requirements (listed below).

concurrent receipt military retirement pay

Are you eligible for Concurrent Receipt?

The CRDP program, which began on January 1, 2004, replaces the VA disability offset, which was previously required by law (and still is for some retirees). There is a 10 year phase in period in which military retirement pay was increased 10% each year until the recipient began receiving full military retirement pay (there was no phase-in period for retirees with a VA disability rating of 100%). The phase-in period lasted until January 2014.

Concurrent Receipt Replaces the VA Disability Offset

The VA disability offset requires military members to waive part of their military retirement pay in order to receive VA disability compensation benefits. Retirees are required to waive retirement pay up to the amount of VA Disability compensation they received (for retirees who have a VA disability rating of 40% or lower). The exception is retirees who have a VA disability rating of 50% or higher, in which case they are eligible for Concurrent Receipt, in which they can receive full military retirement pay and full VA disability pay. Retirees can elect not to waive military retirement pay and forgo receiving VA disability pay. However, waiving military retirement pay makes sense because the VA disability benefit is a non-taxable benefit, and military pensions are taxable income. Receiving VA disability pay will help retirees receive a larger net income.

Concurrent Receipt Eligibility

Military retirees qualify for concurrent receipt under the following conditions:

  • You are a regular military retiree with a VA disability rating of 50 percent or greater.
  • You are a retiree of the Guard or Reserves with 20 or more Good Years, have a 50% VA disability rating, and have met retirement age (60 in most cases, but some Reservists are eligible for early retirement).
  • You are retired under Temporary Early Retirement Act (TERA) and have a VA disability rating of 50 percent or greater.
  • You are medically retired under Chapter 61 with 20 years or more and a 50% or greater VA disability rating.
  • You are a disability retiree who earned entitlement to retired pay under any provision of law other than solely by disability, and you have a VA disability rating of 50 percent or greater. You might become eligible for CRDP at the time you would have become eligible for retired pay.

The Disability rating of 50% or greater is the primary qualifier for retirees. If you have a disability rating that is lower than 50%, then you will not qualify for the Concurrent Receipt benefit. However, there are other programs which you may qualify for, including the Combat-Related Special Compensation (CRSC) program, which also replaces the VA disability offset program. The primary requirement for the CRSC program is having a 10% or higher combat related disability. Examples of qualifying disabilities for the CRSC program include training that simulates war, hazardous duty, armed conflict, and instrumentality of war (weapons, combat vehicles, Agent Orange, etc.).

Individual Unemployability & Concurrent Receipt

You are eligible for full concurrent receipt of both your VA disability compensation and your retired pay if you are a military retiree who meets all of the above eligibility requirements in addition to both of the following:

  •     You are rated by the VA as unemployable, generally referred to as Individual Unemployability (IU)
  •     You are in receipt of VA disability compensation as a result of IU

This is effective October 1, 2008 and is retroactive to January 1, 2005.

Applying for Concurrent Receipt

In most cases, you do not need to apply for Concurrent Receipt. It should be automatically applied to your paychecks. However, there may be times when your situation changes and the system doesn’t automatically take this into account. In most cases, you will be eligible for retroactive back pay. Determining back pay will require an audit from DFAS and the VA. DFAS states they will pay any retroactive benefits within 30-60 days of receipt of you’re your first CRDP monthly payment. If their audit determines you should be eligible for a retroactive payment for the VA then they will forward the results  of their audit to the VA, which is responsible for making the VA disability benefits payment.

Retroactive pay limitations: Your retroactive pay can only go back to January 1, 2004, which is the first day concurrent receipt was available. However, DFAS will only go back to the day you first received a 50% disability rating. If your 50% disability rating was made retroactive, then your eligibility will extend to that date, provided it isn’t before January 1, 2004.

Example: The VA has begun extensive reviews of disability benefits ratings for military personnel from the Vietnam Era. Many veterans have begun receiving retroactive disability benefits for Agent Orange exposure and related illnesses, and PTSD. If you are a military retiree who received retroactive disability compensation, then you may be eligible for retroactive back pay for the Concurrent Receipt program.

Other examples of retroactive pay would be someone who retired and began receiving VA disability compensation some months later, after their disability compensation package was approved. In many cases, this can take some months.

Value of Concurrent Receipt Pay

Under the VA disability offset program, you must waive a portion of your retirement pay if you wish to receive VA disability compensation. This is usually a smart move, because VA disability compensation is considered non-taxable income, whereas military retirement pay is taxable income. You are required to make this decision if you are a retiree with a VA disability compensation rating of 40% or less.

Those who qualify for concurrent receipt are eligible to receive both benefits in full. The value of this is enormous.

Simplified example: Let’s make a simple example of a retired  E-7 with 20 years service. The base pay for an E-7, according to the 2014 pay scale, would be $4,372. At 50%, the retirement pay would be $2,186. The following chart shows how valuable this benefit is (assuming the retiree elects to waive a portion of his or her retirement pay in order to receive the VA disability pay, which is tax exempt):

  • 0% disability: Base pay = $2,186
  • 10% Disability: $2,055 Base Pay, $131 VA Disability Pay; $2,186 Total
  • 20% Disability: $1,927 Base Pay, $259 VA Disability Pay; $2,186 Total
  • 30% Disability: $1,785 Base Pay, $401 VA Disability Pay; $2,186 Total
  • 40% Disability: $1,610 Base Pay, $576 VA Disability Pay; $2,186 Total
  • 50% Disability: $2,186 + $822 = $3,008
  • 60% Disability: $2,186 + $1,041 = $3,227
  • 70% Disability: $2,186 + $1,302 = $3,488
  • 80% Disability: $2,186 + $1,526 = $3,712
  • 90% Disability: $2,186 + $1,714 = $3,900
  • 100% Disability: $2,186 + $2,858 = $5,044

Notes about these assumptions:

  • All military retirement benefits are considered taxable income (some states may not tax retirement benefits or other income, but the federal government does).
  • All VA Disability Compensation Benefits are non-taxable income at all levels
  • The disability benefits are for a retiree with no dependents. The Concurrent Retirement and Disability Pay benefit is worth much more when the retiree has dependents.

Takeaway: having a VA disability rating is valuable for your retirement. A disability rating of 40% or less will off set taxable income with non-taxable income, which will result in a large tax savings. A VA disability rating of 50% or larger is worth considerably more over the long run. You can run a similar scenario with your own situation to get an idea of what concurrent receipt would be worth for your specific situation, based on your retirement pay, years of service, and VA disability rating.

The Future of Concurrent Retirement and Disability Pay

There has been talk of extending the Concurrent Retirement and Disability Pay benefit to all military retirees with a VA Disability compensation rating of 10% or higher. Unfortunately, the recent budget problems have shelved those talks, and it doesn’t look like that will happen any time soon. In fact, there has been discussion of doing away with the benefit.

As we have seen in recent months, military retirement pay and other military and veterans benefits are under fire. Congress even went so far as to reduce military retirement benefits for some retirees, then later backtrack and restore those same benefits. Concurrent Receipt has been targeted as an area for cutting fixed expenses for retirees. Concurrent Receipt is a relatively new law, having first been approved in mid-2003, and implemented beginning in January, 2004. It wouldn’t be a surprise to see this law come under more pressure in the near future. That said, Concurrent Receipt made it through the most recent round of benefits cuts. So let’s hope Congress leaves this benefit alone.

Where to go for additional information: If you have any questions regarding your CRDP payment from DFAS, call 800-321-1080. For questions concerning disability ratings or disability compensation, please contact the VA at 800-827-1000.

Photo credit: orangejack.

VA Loan Eligibility for Members of the Guard and Reserves

Members of the National Guard, Air National Guard, and Reserves have special VA loan eligibility requirements before they can use the VA Loan to buy a home. But there is much more to actually qualifying for a VA Loan than simply being eligible. Let’s look at the VA Loan eligibility requirements, including the necessary forms and paperwork you will need before you can apply for a VA Loan.

Guard and Reserve VA Loan Eligibility

National Guard and Reserves VA Loan EligibilityCurrent or former members of the National Guard, Air National Guard, and Reserves are eligible to apply for a VA Loan if they meet one of the following:

  • Served at least 90 consecutive days on active duty during wartime.
  • Served at least 181 consecutive days on active duty during peacetime.
  • Completed six years of in-service time with their Guard or Reserve Unit (These must be “Good Years” to qualify).

Note: These requirements are only to be eligible to apply for a VA loan; they do not guarantee your loan will be approved. You still must meet the financial requirements set by the lender.

Proof of Service

After meeting minimum service requirements to be eligible for a VA Loan, servicemembers and veterans must provide the VA with Proof of service so they can acquire a Certificate of Eligibility, which they will furnish to the actual lender.

Proof of Service: Members of the Guard and Reserves who have active duty time should have received a DD Form 214 when they were transitioned back to their Guard or Reserve status. Your DD Form 214 should state the total number of days they served on active duty. Here are instructions for getting a copy of your DD 214 if you do not currently have a copy.

If you are currently serving on active duty and have met the service requirements, you can also send a Statement of Service signed by your unit commander, his/her adjutant, or a personnel officer.

A Statement of Service must include the following information:

  • Full name, date of birth, and Social Security Number
  • Date entered into military service
  • Total number of Creditable Years of Service (also known in the Guard and Reserves as “Good Years”)
  • Duration of Lost Time
  • Unit Command information, including name, location, and contact information

Discharged Members of the Guard and Reserves: If you do not meet requirements for time served on active duty, and you are no longer in the Guard or Reserves, then you can send copies of your separation paperwork or other accepted forms. These include:

  • National Guard: NGB Form 22, Report of Separation and Record of Service, for each period of National Guard service, or, NGB Form 23, Retirement Points Accounting, and proof of the character of service
  • Reserves: Copy of your latest annual retirement points statement and evidence of honorable service.

Once you have your proof of service, you will provide this to the VA, which will issue you a Certificate of Eligibility.

Certificate of Eligibility

A Certificate of Eligibility (CoE) is a requirement for every VA Loan application. Many lenders can now process these forms for you if they have access to the VA Web LGY system. If the lender has access to the system, they may be able to obtain a Certificate of Eligibility in a few minutes. However, the VA may not have all servicemembers’ records in their system, and you may apply for the CoE through another method.

  • Apply online: To get your Certificate of Eligibility (COE) online, visit the eBenefits portal. If you already have login credentials, click the Login box, and if you need login credentials, please click the Register box and follow the directions on the screen.
  • Apply by Mail: Use VA Form 26-1880, Request for Certificate of Eligibility (pdf). Instructions and the mailing address are on the form.

The turnaround time for a manual request can take anywhere from a couple days, to a couple weeks, depending on whether your have your paperwork in order, how backed up the VA is, and other factors. The VA can often rush a CoE if you have the proper documentation. I believe it took less than a week for me to receive my Certificate of Eligibility when I applied for a VA Loan a few years ago.

Eligibility Does Not Guarantee a Loan

Meeting the above criteria will establish eligibility to apply for a VA Loan, but it will not guarantee your application will be approved. Lenders look at multiple factors before approving loans, including your income, credit score, debt to income ratio, and other factors. We cover these topics in the following article about getting approved for a VA Loan.

If you are planning on buying a home with a VA Loan, then check out our VA Loan interest rate page which lists current interest rates from a variety of lenders. This will give you an idea of what current interest rates are in your area.

Congress Restores Military Retirement Pay

President Obama recently signed a new law that reverses the Military Retirement Pay Cuts, which were set to cut military pension Cost of Living Adjustments (COLA) pay raises by 1% until military retirees reach age 62. This law was only recently passed as part of the Bipartisan Budget Act, in early 2014. The backlash from current and former military members, and lobbying groups representing them, was strong. In the end, Congress got the message, and reversed most of the cuts. They did not, however, repeal the law. They simply grandfathered in military members who were serving as of December 31, 2013. Let’s take a look at the impact this has on current and former military members.

The Original Military Pension Cuts

The Bipartisan Budget Bill reduced Cost of Living Adjustments (COLA) for military retirees by 1% until they reached age 62. COLA increases are based on the Consumer Price Index (CPI), which is a a measurement of inflation in the US. The CPI measures over 80,000 items to determine an average inflation measurement.

The resulting CPI rate is used by the government to determine cost of living adjustments for a variety of government benefits including Social Security Benefits, military and government pension plan raises, and VA Service-Connected Disability rates. These Cost of Living Adjustments help benefits recipients maintain purchasing power over time.

The decision to reduce military pensions for retirees under age 62 was based on veterans’ ability to continue working. The cuts would have saved $6 billion over the coming decade.

Impact of the Bipartisan Bill Act COLA Cuts

The Bipartisan Bill Act was passed before there was much opportunity to debate the topic of military pension cuts. And predictably, many military and veterans groups were upset with the bill when it passed. The bill was initially set to go into effect in 2015, then pushed back to January 2016.

The Military Officers Association of America estimated the retirement cuts would have had the following impact:

The cuts will have a devastating and long-lasting impact. By age 62, retirees who serve a 20 year career would lose nearly 20 percent of their retired pay.

For example, an E-7 retiring this year with 20 years of service would see an average loss of over $3,700 per year by the time he or she reaches age 62. For an O-5, the average annual loss would be over $6,200. An E-7 retiring at age 40 today would experience a loss of $83,000 in purchasing power – an O-5 would lose $124,000 (source).

Lobbying groups representing current and former military members voiced their opinions through a variety of means, and they were heard. Both the House of Representatives and Congress voted to retract the largest portion of the bill. However, it was not a full repeal of the bill.

Changes to the Bipartisan Bill Act COLA Cuts

Neither the House nor the Senate wrote bills that would repeal the original language of the law. Instead, they voted to rewrite the law to essentially grandfather in service members who joined before January 1, 2014. Under the new proposed laws, anyone who was serving in the military as of December 31, 2013, would still fall under the old retirement system (High-3 and REDUX, with the current COLA rules).

Anyone who joined the military on or after January 1, 2014, would fall under the COLA-minus 1% rule that was passed as part of the Bipartisan Budget Act.

Impact for Future Retirees

The Department of Defense has traditionally grandfathered military members when they make changes to pay and benefits. At this point it is too early to say what changes may happen between now and the time military members reach retirement. The hope is that the COLA reductions under the Bipartisan Budget Act will be repealed in their entirety, allowing military members who joined after January 1, 2014 to enjoy the same retirement benefits as current service members. If that is not the case, the next best outcome is Congress leaving retirement alone for everyone who is currently grandfathered into the current retirement plans.

The main takeaway is to understand that pay and benefits are under fire. There is only so much the federal budget can handle, and Congress will continue to look for ways to save money, whether that is through retirement benefits, TRICARE cuts, reductions in pay raises, cuts to current benefits, Reductions in Force, cuts to weapons systems acquisitions, or other means of reducing the impact of the military and retirees to the federal budget.

Now is the time to begin taking matters into your own hands and preparing for retirement as though cuts may happen. That means contributing to the Thrift Savings Plan if you are still serving, opening an IRA, contributing to a 401k if you have a post-retirement job, or looking for other ways to earn or save money for retirement. The extra planning can go a long way toward improving your quality of life during your retirement years.

2014 Thrift Savings Plan Contribution Limits

Thrift Savings Plan officials recently release the 2014 Thrift Savings Plan Contribution Limits, as stated by the TSP. Thrift Savings Plan contribution limits are calculated on an annual basis and can change based on rules set by the IRS. There is no change to the TSP contribution limits for employee deferrals or for catch-up contributions, which continue to be $17,500 and $5,500, respectively. (Catch-up contributions are only available to persons aged 50 and up).

Thrift Savings Plan Contribution LimitsThe following chart displays the 2014 Thrift Savings Plan contribution limits, with notes about each type of contribution. The combined maximum one can contribute, including all agency matching contributions or contributions from special pay and bonuses, is $52,000 ($57,500 for those who are eligible for catch-up contributions).

2014 Thrift Savings Plan Contribution Limits

2014 Thrift Savings Plan Limits
Max Contribution Notes
Elective Deferral Limit* $17,500 Elective deferral contributions only apply to regular employee contributions that are made in before-tax (i.e., tax-deferred) dollars. For members of the uniformed services, this includes all tax-deferred contributions from taxable basic pay, incentive pay, special pay, and bonus pay.
Max Annual Addition Limit $52,000 An additional limit imposed on the total amount of all contributions made on behalf of an employee in a calendar year. Uniformed service members become subject to this limit when tax-exempt contributions are made to their TSP accounts. This limit includes employee contributions (both tax-deferred and tax-exempt), Agency Automatic (1%), and Agency Matching Contributions.
Catch-up Contribution Limit $5,500 The maximum amount of catch-up contributions that can be contributed in a given year by participants age 50 and older. It is separate from the elective deferral and annual addition limit imposed on regular employee contributions.

Historic Thrift Savings Plan Contribution Limits

Year Annual Contribution Limit Max Catch-Up Contribution Limit Annual Addition Limit Annual Addition Limit w/ Catch-Up
2007 $15,500 $5,000 $46,000 $51,000
2008 $15,500 $5,000 $46,000 $51,000
2009 $16,500 $5,500 $49,000 $54,500
2010 $16,500 $5,500 $49,000 $54,500
2011 $16,500 $5,500 $49,000 $54,500
2012 $17,000 $5,500 $50,000 $55,500
2013 $17,500 $5,500 $51,000 $56,500
2014 $17,500 $5,500 $52,000 $57,500

Types of Thrift Savings Plan Contributions

There are two types of TSP contributions:

  • Regular employee contributions (including automatic enrollment contributions)
  • Catch-up contributions (for participants age 50 or older)

Regular contributions. Eligible TSP participants can begin making regular employee contributions at any time. These contributions are made from basic pay before taxes are withheld. Your contribution will remain in place until you elect to stop or change the contribution amount, reach the contribution limit, or take a Thrift Savings Plan financial hardship withdrawal.

Catch-up contributions. Catch-up contributions are only available to those age 50 and above. To make catch-up contributions, you must first contribute the maximum amount of regular employee contributions, for the year, the elect to make catch-up contributions. Your catch-up contributions will stop automatically when you reach the contribution limit or at the end of the calendar year. You will need to elect to make  catch-up contributions each calendar year.

Uniformed Services TSP Contributions

The Thrift Savings Plan is available to all military members. Military members are eligible to contribute any whole percentage of basic pay, as long as the annual total of the tax-deferred investment doesn’t exceed the maximum contribution limit. Military members also have the option of contributing any portion of their incentive pay, bonuses, or special pay so long as they contribute a portion of their basic pay.

Roth TSP Contributions for TSP members. Roth Thrift Savings Plan contributions are limited to the $17,500 elective deferral limit. All additional contributions toward the Annual Additions Limit must be made into a Traditional TSP account, even if the contributions come from tax-exempt pay.

Tax free combat zone contributions. Military members serving in tax-free combat zones are allowed to contribute up to $52,000. This total includes regular deferred contributions, tax-exempt combat zone contributions and special pay and bonuses.

Note regarding catch-up contributions and tax free pay: Military members who are receiving tax-exempt pay while serving in an eligible combat zone must make catch-up contributions into a Roth Thrift Savings Plan account.

TSP Federal Agency Contribution Chart

FERS Employees receive an automatic 1% contribution from the federal government, then a 100% match for the first 3% they contribute, followed by an additional 0.5%  match for the next 2% the contribute, bringing the maximum agency contribution to 5%. Federal employees can contribute as high of a percentage of their salary as they wish, so long as they don’t exceed total contribution limits, including the catch-up limits allowed for those age 50 and above.

The following chart can be used by Federal Employees to determine the total amount of their contributions including agency match.

TSP Agency Contribution Chart

TSP Agency Contribution Chart

Other notes about TSP contributions

The following information should help you determine how to allocate your TSP contributions:

  • Contributing by percentage of pay. If you elect to contribute a percentage of pay to the TSP and the amount is more than your remaining salary after mandatory deductions (e.g. Federal income tax, state taxes, TSP loan payments, etc.) and other voluntary deductions that are processed before TSP contributions, then the resulting pay will be the amount withheld and contributed to your TSP account.
  • Contributing by dollar amount. If you designate a whole dollar amount that is greater than your remaining salary, then no employee contributions will be made for that pay period, and if you are FERS you will not receive Agency Matching Contributions for that pay period. If this occurs, you will need to lower your contribution level by electing to contribute either a lower percentage or dollar amount. No TSP contributions will be withheld from your pay until your new election is effective. Neither the new election or any matching contributions will be applied retroactively.
  • Automatic contributions. The Thrift Savings Plan recently began Automatic TSP Contributions for New Employees.
  • Roth TSP. The Roth TSP account is on it’s way and should be here within a year. Here is more information about the Roth Thrift Savings Plan (TSP).

The Thrift Savings Plan is a great opportunity to save money for retirement and you should take advantage of it if you are eligible to participate. You can read more about the contribution rules at the TSP page.