Waiver of VA Compensation to Receive Military Pay – VA Form 21-8951

Members of the Guard or Reserves are eligible to serve if they have a VA service-connected disability, provided they are physically cleared. However, there is one big caveat: they are not able to receive VA compensation on the same day they receive military pay. To serve again, you will be required to waive either your VA pay or your military compensation.

VA Form 21-8951 - Waive VA Compensation to Receive Military Pay

How the pay works: The law states you cannot receive both forms of payment for the same day or work. However, both payments are actually made at the same time. You will receive your VA disability payment around the first of the month, and you will receive your drill pay at the normal payment schedule.

At the beginning of the year (usually around February), you should receive VA Form 21-8951, Notice of Waiver of VA Compensation or Pension to Receive Military Pay and Allowances (pdf). You will use this form to elect which pay you want to waive – your VA pay, or your military pay.

We’re going to cover the information on this form, what it means, and how to fill it out.

Notice: Annual Waiver Required. This form is now an annual requirement. The VA previously offered a one-time waiver of disability benefits that was to remain in effect until your Guard or Reserve status changed or you withdrew the waiver. That form is no longer valid.

Information Found on Form 21-8951

Your form 21-8951 will show the fiscal year and the number of training days you performed during the year. A normal drill year would be approximately 63 military training days: 48 drill days (12 months times 4 drill periods per month), and 15 active training days.

Your form 21-8951 will also include information on:

  • Instructions on how to complete the form,
  • your VA File number & Social Security Number,
  • a check box to verify the information is correct, or
  • a check box to mark that the information is incorrect and a space to mark the correct number of days served.
  • a section to elect which pay to waive (note: waiving military pay and allowances will most often result in LESS money for you; this is clearly marked on the form),
  • a section to verify the information and sign it,
  • a section for your unit Commander to sign the form.

Filling out Form 21-8951

There are only three sections where you can take any action. If the information on your form is correct, then check the first box in the first section. Next determine which pay to waive (see below section), then sign and date.

According to the VA, M21-1MRIII_v_4_secC (Word Doc):

  • The Veteran must always sign VA Form 21-8951.
  • The Veteran’s unit commander must sign VA Form 21-8951 only if the Veteran reports fewer training days than the Hines ITC printed on the form.

If your information is correct, then you do not need to have your unit Commander sign it. However, the veteran is always required to sign and return the form.

Should you get your Commander to sign the form if there are no errors on your form? I’m not going to tell you to do it or not to do it. But think of it this way: most Commanders are very busy. Do you want to interrupt their schedule to sign something that isn’t necessary? And do you want to call attention to yourself for having a service-connected disability? I’ll let you answer those questions.

Note on VA Form 21-8951-2. This form is essentially a blank version of Form 21-8951. It will not have the number of training days listed and you will need to self-report the number of days for which you received pay. The VA always requires both the Veteran and the Veteran’s unit commander to sign VA Form 21-8951-2.

What if there are Errors on Your Form 21-8951?

If there are errors on your form 21-8951, you need to get the correct information from your unit personnel or finance department. Then you will need to write in the corrected information in the section on the back.

Important: If there are errors on your form, you will need to get your Unit Commander or Designee to verify the correct number of training days, and sign your form.

How to Decide Which Pay to Waive

In most cases, you will be better off keeping your military pay and waiving your VA pay for the time period involved. But you should always run the numbers to verify. Start with looking up your VA service-connected disability compensation rate. Then compare it to your Drill Pay using the Drill Pay Calculator.

Tips for calculating pay: Each day counts as 1/30th of a month’s rate. So if your VA disability compensation were $300 a month, each day of VA disability compensation is worth $10 per day. Determine your daily rate, then multiply it by the number of training days listed on your Form 21-8951. Then compare that to how much military compensation you received for the year. You can do this by using the Drill calculator or looking at your W-2 from myPay.

It should be quick and easy to determine which pay is better to waive. All you need to do is determine which pay is lower, then opt to waive that pay. (Hint: it will almost always be your VA pay). The only time your VA pay will be higher than your military pay is if you have a very high VA disability rating, and you are a low or mid ranking military member.

What Happens After You Waive Your Pay?

The government will simply withhold future payments. So if you have 63 days of military pay and elect to waive your VA compensation, then you would have roughly the next two months of disability payments withheld. You can run the numbers to determine exactly how much will be withheld. Remember, each day counts as 1/30th of a month’s rate. So if your VA disability compensation were $300 a month, each day of VA disability compensation is worth $10. If you have 63 days of military pay and waive your VA compensation, you would have $630 withheld, $300 in each of the first two months, then $30 from the next month. After that, your full compensation payments would resume.

Final Notes

Form 21-8951 includes the following statement: “If we do not receive a waiver from you, we will assume that you wish to waive VA compensation or pension for the number of days printed on the front of the form. However, we will not adjust your award until we have advised you of the specific changes we propose to make.”

That said, everything I have read states completing this form is a requirement if you receive both VA disability compensation and payment from the military. Training days can include all forms of military service while in the Guard or Reserves, including Inactive Duty Training (IDT), Active Training (AT), Active Duty Special Work (ADSW), Readiness Management Assemblies (RMA), activation for training, mobilization, etc. However, you should also note that if you are called to active duty for an extended period of time, you should contact the VA to suspend your VA compensation payments until you return to inactive status.

Reserve IDT Travel Reimbursements

It’s not uncommon for many Guard and Reserve members travel long distances to perform their drill duty, or Inactive Duty Training (IDT). I counted license plates from about 7 neighboring states at my last drill. I have friends in different units who tell me there are some members who regularly fly to and from their monthly drills. Talk about dedication!

The good news is if you live outside the normal commuting distance, your unit should provide Lodging-in-Kind, and may even reimburse you for your travel expenses (up to a certain amount). So don’t let the cost of travel be a reason no to join the Guard or Reserves. However, the rules here are very broad, and are not standardized between the services. Reimbursements may even depend on your pay grade or your AFSC or MOS. Let’s take a deeper look at what’s available.

Reserve IDT Travel Reimbursements

For the purposes of this article, we will separate the Guard and Reserves because the Reserves follow a national standard, while the rules for Guard units vary by state. This first section will cover the Reserves.

Reserve IDT travel reimbursements: The service secretary for each branch of the Reserves is allowed to authorize travel reimbursements for members who live more than 150 miles from their base. However, not all branches currently reimburse Reserve members for travel. Here are some basic rules of thumb (but be sure to verify with your unit, as some units may have unique rules):

US Air Force Reserve CommandUS Air Force Reserves: According to the Air Force Reserve Command, IDT Travel Reimbursement is available to Airmen in select DAFSCs who live more than 150 miles from their duty location.Travel Reimbursement will not exceed $300.00 per IDT round trip travel. However, the Air Force Reserve website states that reimbursement is up to individual units. Contact your unit to verify participation. Source. (last updated FY 2015)

US Army ReserveUS Army Reserves: The USAR will pay up to $300 in travel expenses to attend Battle Assembly (drill). This is in addition to Lodging-in-Kind. Previous rules limited this to select MOSs and ranks. However, I have heard these limitations were removed and reimbursements are now available to all ranks and job codes. However, I have not been able to find this in writing. I will update this when I can find a reference. (last updated FY 2015)

US Marine Forces Reserves InsigniaUSMC Reserves: Travel reimbursement open to select grades and MOS’s. When Commercial transportation is used, Reimbursement is authorized for the actual cost of transportation incurred between the member’s home and assigned RTC, not to exceed 300 dollars.  When personally owned conveyance (POC) is used, reimbursement is authorized for traveled mileage for the official distance to and from the IDT location as per Ref A Paragraph U2600 (other mileage rate). Tolls, parking fees, and other necessary expenses incurred incident to POC travel are reimbursable. Reimbursement is limited to eleven (11) round trips per marine per fiscal year.  Source. (last updated FY 2015)

US Navy ReserveUS Navy Reserves: No travel reimbursement for (IDT). Reserve Component members, regardless of paygrade, will not be paid to travel to their normal drill site per reference (e) Appendix 0, paragraph T4 045, which states, “A Reserve Component member commits an obligation to participate in a finite number of scheduled training periods annually. Inherent to this obligation is the travel between the member’s home and the location at which the member normally performs drills. The member receives no reimbursement for that travel.” Unit COs will ensure all cross assigned unit members meet and comply with reference (e). Source. (last updated FY 2014).

US Coast Guard Reserve SealUS Coast Guard: The following excerpt is from USCG Reserve Policy Manual COMDTINST M1001.28B.

Travel While on Inactive Duty. Members are not authorized to receive reimbursement for travel between their place of residence and their normal drill site when under inactive duty orders.

  1. Commands must establish normal drill sites that are validated by the District RFRS staff. If the normal drill site is different than the unit’s location, the District RFRS staff must be notified by the member’s command and noted along with the member’s PAL assignment. This is necessary to provide a legal means of determining eligibility for medical and other entitlements when members travel from their homes to the normal drill site, and for determining entitlements associated with travel between the normal drill site and the unit.
  2. Reservists who are ordered to locations other than their normal drill site must be placed on Temporary Duty (TDY) orders and receive entitlements in accordance with U4000 of reference (n), The Joint Federal Travel Regulations (JFTR). TDY orders are normally issued and funded by the member’s assigned unit, with the exception of duty such as RMPs performed for RSWE participation or medical readiness, which may be issued and funded by the District RFRS staff’s reserve appropriations manager. TDY orders shall specify the member’s normal drill site. When the member travels directly from home to the TDY station, reimbursement is limited to the lesser entitlement from either the member’s home or the normal drill site to the point at which TDY inactive duty is performed.

National Guard IDT Travel Reimbursements

The National Guard is a completely different beast when it comes to determining whether IDT travel reimbursements are available. The short answer is: ask your unit.

I know that sounds like a cop-out, but it’s the easiest way to determine the availability of travel funds. Because Guard members work for their respective state, there may be differing policies. I have seen on some forums that some units offer travel reimbursements, but I’ve heard from many individuals that it is not available at their units. Please let me know if you have any specific information or references and I will update the site accordingly.

No Reimbursements? Deduct Your Travel Expenses

Even if you aren’t able to receive a reimbursement for your travel expenses, you may be eligible claim mileage and other travel expenses on your taxes if you have to travel more than 100 miles for drill duty. You can also claim half the cost of your meals on your taxes. Those benefits don’t negate the cost of travel, but it certainly helps when you file your taxes.

What Type of Travel is Covered

Lodging. If you live outside the normal commuting distance, your unit will usually provide Lodging-in-Kind. They will either put you up in base lodging (if available), or pay for a hotel room in town. You may or may not be required to share a room, depending on your unit, your rank, and room availability. I’m not going to try and provide a standard set of rules for this, as they vary by unit.

However, most units only cover lodging for certain days, usually the night before training (if you live outside the commuting area), and after the first drill day. They may only cover one night of lodging if you live within a certain distance. They usually do not provide Lodging-in-Kind for the second day of a two day drill, or for your return trip.

If you need lodging outside of the days that are normally covered, you will need to work it out with your unit or claim a tax deduction the following year. Save your receipts!

Transportation: There are many types of transportation that qualify, including planes, trains, and automobiles. Rental cars are not normally authorized. Mileage is typically charged at the standard IRS rate, which is $0.575 per mile in 2015. Servicemembers can also claim incidental expenses such as parking, tolls, and related travel expenses.

When in Doubt, Go to the Source

Standard disclaimer – this is a topic that gets complicated quickly. Each branch has different rules, there are different rules for Guard and Reserves, and there are even different rules within certain branches, depending on your unit, AFSC/Rating/MOS, pay grade, etc.

The best place to find specific answers for your situation is through your unit. Your recruiter will be able to help you if you are considering joining a unit. Otherwise, contact the finance or travel department.

US Code. Here is the official code as written in 37 U.S. Code § 478a – Travel and transportation allowances: inactive duty training outside of normal commuting distances.

Note: Special thanks to LT. Josué Román, USCG, for sending the information on Coast Guard travel while on inactive duty.

2015 Military Compensation and Retirement Modernization Commission Recommendations – Big Benefits Changes Coming? (Podcast 013)

Every few years, the military takes a deep look at the pay, benefits, and other forms of compensation given to military members and their families. On January 29, 2015, the Military Compensation and Retirement Modernization Commission released their recommendations for changing military pay and compensation. The report was two years in the making, is approximately 300 pages long, and is filled with reports, studies, and recommendations from a nine member panel.

There were 15 recommendations made, along with background information on the recommendations, why they make the recommendations, and the impact these recommendations will have on servicemembers and their families.

Big Proposals: Change Military Retirement Benefits, Dismantle TRICARE and replace it with a commercial health care program, only allow Tuition Assistance Benefits for Professional Development Courses, and more.

2015 Military Compensation and Retirement Modernization Commission Recommendations

2015 Military Compensation and Retirement Modernization Commission Recommendations

What you need to know about this report: First of all, this report is not a change in the law, or even a proposal for a new law. This is simply a proposal made to our Congressional leaders. It is up to our lawmakers to decide if, and when, they will propose any of the changes as new laws. As with all proposals for changes to military and retiree benefits, we can expect there to be some time before anything happens (if it does), and in some cases, there may be backlash from some of the military lobbying groups. That said, most of these proposals seem to be fairly even-handed and well-balanced.

Will your benefits be grandfathered in? When it comes to retirement pay, your benefits should be grandfathered in, so they likely wouldn’t change. Congress tried to change retirement benefits last year, but there was a huge backlash. The change never happened. Other benefits, such as health care, base-level benefits, and other benefits may be subject to change.

About the MCRMC Proposed Changes

As mentioned, there are 15 proposed changes to military and retiree benefits. They were broken down into three categories in the report:

  • Pay & Retirement Recommendations
  • Health Benefits Recommendations
  • Quality of Life Recommendations

We will walk you through these recommendations and provide a little commentary on them. Keep in mind, these haven’t even been proposed as law at this time. So there is no impending action on these items at the time of publication.

Download the 2015 MCRMC Report

You can download the report here, or you can view the full report below. A summary of the major points is below the viewer.

Report of the Military Compensation and Retirement Modernization Commission

Pay and Retirement Recommendations

What follows are the recommendations from the committee (in bold and italics, with page reference). The text below the recommendations is a deeper explanation, or some of my thoughts on the recommendations.

  • Recommendation 1: Help more Service members save for retirement earlier in their careers, leverage the retention power of traditional Uniformed Services retirement, and give the Services greater flexibility to retain quality people in demanding career fields by implementing a modernized retirement system. 19
  • Recommendation 2: Provide more options for Service members to protect their pay for their survivors by offering new Survivor Benefit Plan coverage without Dependency and Indemnity Compensation offset. Page – 42
  • Recommendation 3: Promote Service members’ financial literacy by implementing a more robust financial and health benefit training program. Page – 46
  • Recommendation 4: Increase efficiency within the Reserve Component by consolidating 30 Reserve Component duty statuses into 6 broader statuses. Page 52

Recommendation 1 – Pay and Retirement Recommendations: There were no recommendations made for changing base pay. So for now, we can accept the base pay system as the status quo. However, there may be some other benefits changes, which we will address later.

Big changes coming for retirement pay? Recommendation 1 is perhaps the biggest game-changer listed. Unfortunately, you don’t get much of an idea what a “modernized retirement system” is unless you dive into the report. Several years ago, the Defense Business Board released a plan for a modernized retirement plan, which is similar to the plan proposed by the MCRMC.

The MCRMC plan calls for changing the 20-year fully-vested pension to a hybrid retirement system that uses the Thrift Savings Plan, a Career Continuation Bonus, and a pension. Retirees under the new plan would also have a choice on how they receive their retirement pay.

  • TSP Contributions: Under the plan, military members would be automatically enrolled in the Thrift Savings Plan (they can opt-out, but would have to do so annually). They would begin receiving matching contributions from the military starting at year 2, and would receive matching contributions up to 5% of their pay.
  • Continuation Pay Bonus: Members would receive a bonus for reenlisting (or re-upping) at their 12 year mark. This would be equal to 2.5x their monthly pay.
  • Reduced Pension: The pension would be reduced to 2% per year of service, instead of the 2.5% per year of service under the current High-3 retirement system. The difference is a 40% pension at 20 years as opposed to a 50% pension.
  • A choice in how and when retirement pay is taken: Retiring troops would be able to choose one of three retirement payment plans: they can take the immediate monthly annuity, similar to the current plan; they could take a lump sum payment with a smaller monthly annuity, or they could take a larger lump sum with no immediate annuity. Those who take the lump sum payment would be eligible to receive the full annuity they would have had once they become eligible for Social Security Benefits.

Pros & cons to retirement proposal: There are a lot of pros and cons to this hybrid plan. The big benefit is that over 8 in 10 military members leave the service with no military retirement benefits (only what they have saved through their own TSP account). The proposed plan would give the military the funding to contribute to TSP accounts for all military members over 2 years in service, and give members something to take with them when they leave the service (TSP accounts can be transferred when you leave the military).

Current servicemembers and retirees would be grandfathered into their current retirement plans under the proposal. However, current servicemembers would be able to move to the new plan if they chose to do so. The proposal was more detailed than I can cover in this section, so I encourage you to read the full proposal for more information. I did not see any mention changes to the Guard or Reserves retirement plans, but it’s possible I might have missed it.

Recommendation 2 – Survivor Benefit Plan: This is going to be a very case-specific situation, and is more detailed than I can go into in this article. But basically, the recommendation gives retirees the option of keeping their current survivor benefit program plan, or paying more into the SBP plan to avoid the Dependency and Indemnity Compensation offset. You would need to see if this applies to you, then run the numbers to see if it is a good deal or not.

Recommendation 3 – Financial and Health Literacy: I love this idea – financial literacy is not taught well in the US in most school systems. And many military members struggle with their finances. The same goes for more in-depth health training. I support this idea 100%.

Recommendation 4 – Consolidate Reserve Component Duty Statuses: I was shocked when I learned there were 30 duty statuses for members of the Reserve Component. Seriously? Streamlining this from 30 to 6 seems like a great idea (at least on the surface). I’m sure there will be growing pains, but the long-term benefits should be found through fewer pay and benefits problems, reduced paperwork, etc.

Health Benefits Recommendations

Health care is a hot topic both in and out of the military. And the changes proposed by the Military Compensation and Retirement Modernization Commission are big—affecting active duty, family members, Guard & Reserve, and Retirees. Here are the recommendations, with my thoughts below:

  • Recommendation 5: Ensure Service members receive the best possible combat casualty care by creating a joint readiness command, new standards for essential medical capabilities, and innovative tools to attract readiness-related medical cases to military hospitals. Page – 57
  • Recommendation 6: Increase access, choice, and value of health care for active-duty family members, Reserve Component members, and retirees by allowing beneficiaries to choose from a selection of commercial insurance plans offered through a Department of Defense health benefit program. Page 79
  • Recommendation 7: Improve support for Service members’ dependents with special needs by aligning services offered under the Extended Care Health Option to those of state Medicaid waiver programs. Page 120
  • Recommendation 8: Improve collaboration between the Departments of Defense and Veterans Affairs by enforcing coordination on electronic medical records, a uniform formulary for transitioning Service members, common services, and reimbursements. Page 127

Recommendation 5 – Medical Readiness: Recommendations to improve health and combat-casualty care. Topics include, training, facilities improvement, joint medical operations, and more. There is an emphasis on joint training and standardized procedures, as well as maintaining proficiency in treating battlefield injuries. Overall, these appear to be positive recommendations, but they lead to the next recommendation, which is a big one.

Recommendation 6 – Dismantle TRICARE as we Know it: Told you it was big. The report basically states TRICARE has become inefficient, it’s too expensive, and the quality has deteriorated. The Panel recommends giving military members and dependents access to commercial insurance health insurance programs. The proposal would keep TRICARE in place for active duty servicemembers, but give access to commercial health insurance plans to family members, members of the Guard / Reserves, and retirees (except TRICARE for Life recipients, who would remain on TFL).

The new proposed health care plan would be similar to the health care plans in place for federal employees and would be managed by the Office of Personnel Management rather than the Department of Defense. Military members would receive a Basic Allowance for Health Care (BAHC), to pay for the new health insurance options. The goal would be to cover all medical expenses, and BAHC rates would be based on locality and the cost of the available options. The process would be interesting, as the proposal calls to pay a portion of the BAHC to the insurance provider, and the rest to the family member to cover copays and out of pocket expenses.

Recommendation 7 – Improve Special Needs Care: This would provide additional medical coverage to servicemembers with family members who have special needs.

Recommendation 8 – Improve Collaboration between DoD and VA: The DoD and the VA don’t coordinate very well right now, so any mandates to do so seem like they would be in the best interest of servicemembers. Standardizing the flow of information, using a standard formulary, and improving coordination should reduce expenses, errors, and frustration.

Quality of Life Recommendations

Almost half of the recommendations are for quality of life. Some of these could be game changers for many military members, retirees, and their families. Let’s jump in.

  • Recommendation 9: Protect both access to and savings at Department of Defense commissaries and exchanges by consolidating these activities into a single defense resale organization. Page 141
  • Recommendation 10: Improve access to child care on military installations by ensuring the Department of Defense has the information and budgeting tools to provide child care within 90 days of need. Page 152
  • Recommendation 11: Safeguard education benefits for Service members by reducing redundancy and ensuring the fiscal sustainability of education programs Page 161
  • Recommendation 12: Better prepare Service members for transition to civilian life by expanding education and granting states more flexibility to administer the Jobs for Veterans State Grants Program. Page 173
  • Recommendation 13: Ensure Service members receive financial assistance to cover nutritional needs by providing them cost-effective supplemental benefits. Page 180
  • Recommendation 14: Expand Space-Available travel to more dependents of Service members by allowing travel by dependents of Service members deployed for 30 days or more. Page 189
  • Recommendation 15: Measure how the challenges of military life affect children’s school work by implementing a national military dependent student identifier. Page 192

Recommendation 9 – Combine the Commissary and Exchanges: This is another big recommendation. The Commissary currently sells items at cost, plus 5%. This makes food and other good very inexpensive compared to many civilian stores. The Exchanges are a for-profit organization, but they funnel much of the profits back to the bases for Moral, Welfare, and Recreation activities. This proposal would combine the two agencies to help achieve cost savings. There are pros and cons to this proposal. By law, Commissaries can only sell groceries. Under a combined umbrella, Commissaries could still sell groceries at cost-plus 5%, but they could also sell non-grocery items they could resell at a profit (for example, things like plates, silverware, baby items, alcohol, and more). There are a lot of unknown details in this proposal, but there has been a push for this over the last couple years. So we may see something happen here.

Recommendation 10 – Increase On-Base Child Care Options: Child care has been a big problem on many installations, primarily due to unavailability and long waiting lists. The DoD doesn’t have a good way of tracking the number of people on wait-lists, or the average time they are on the wait-list. Couple that with a hiring freeze on many installations, and many military families aren’t able to get access to on-base child care (which can often be substantially less expensive and more flexible than off-base options).

Recommendation 11 – Education Benefits: This proposal calls for consolidation of the available education plans, changing the Post-9/11 GI Bill Transfer Rules, limiting Tuition Assistance use to professional development courses only, and preventing veterans from receiving unemployment benefits while also receiving Post-9/11 GI Bill benefits (which is currently allowed).

  • The proposal calls for the sunsetting of the Montgomery GI Bill and REAP programs, which have been superseded by the Post-9/11 GI Bill, which is a more valuable benefit, and doesn’t require members to pay into the program.
  • The proposal also calls for changing the minimum service requirements for transferring the GI Bill to dependents from 6 years of service to 10 years of service, and no longer allowing dependents to receive BAH (after October 1, 2017, to allow for current dependents to finish their schooling based on their current budgets).
  • The proposal calls for limiting Tuition Assistance benefits for professional development only, because servicemembers have access to the GI Bill for taking college classes. There are several more highlights, but these are the biggest in this section.

Recommendation 12 – Military Transition Programs: The military to civilian transition is difficult for many veterans (I know it was for me!). Anything that makes it easier for transitioning veterans is a win in my book!

Recommendation 13 – Food Stamps and Supplemental Nutrition Benefits: The Panel recommends getting rid of the Family Subsistence Supplemental Allowance (FSSA), for military members stationed stateside. FSSA is similar to food stamps (also known as Supplemental Nutrition Assistance Program (SNAP)). FSSA is only available to military members. Why ditch it? It was used by fewer than 300 people last year. The recommendation is to replace it with the SNAP for those based in the US, and replace it with something else for those stationed overseas. It is also easier for servicemembers to qualify for SNAP than FSSA, making FSSA a redundant program. Servicemembers would still be cared for, it would just come through a different program.

Recommendation 14 – Expand Space-A Travel: Right now, family members must travel Space-A with the servicemember unless the servicemember has been deployed 120 days or longer. This proposal would reduce the deployment time frame to 30 days, making it easier for family members to travel Space-A. Sounds good to me!

Recommendation 15 – Measure military children’s schooling: The concern is that being a military dependent makes school more difficult for students. This proposal would place an identifier on each student in DoD schools and track their progress through the system.

Overall Thoughts on the MCRMC Recommendations

All too frequently we hear proposals for changes to military pay and compensation and the knee jerk reaction is to throw our hands in the air and cry foul. But the Military Compensation and Retirement Modernization Commission took a very balanced view of many aspects of military life, including pay, benefits, retirement, health care, education, dependent issues such as day care and education, transition programs and more. Overall, the recommendations make sense.

Will all the recommendations be enacted? Almost certainly not. Congress rarely works that way. But we could certainly see some changes from this report. And some of them could be beneficial. And some might have a prolonged adjustment period. But at the end of the day, the Panel appears to have made recommendations with the best interests of servicemembers, their families, and the military in mind. It will be interesting to see what comes of these recommendations.

National Guard and Reserves Retirement Benefits Guide (Podcast 011)

The Military Wallet Podcast on iTunesToday’s article and podcast both cover National Guard and Reserve retirement benefits. Retiring from the Guard or Reserves has some similarities to an active duty retirement, but there are some very important differences, including when you will receive your military pension, how much you will receive, when you will receive health care coverage under TRICARE, and a few other important differences.

National Guard and Reserves Retirement Benefits GuideThe podcast and this guide both feature excellent information for current members of the National Guard or Reserves, Gray Area Retirees (members of the Guard or Reserves who have reached retirement, but haven’t reached age 60), and active duty servicemembers who aren’t sure if they will remain on active duty through a full retirement. Military retirements can complicated, so you might even learn something if you already a retired Reservist or Guard member!

Note: If you haven’t considered joining the Guard or Reserves, we have a previous podcast that discusses Joining the Guard or Reserves. There is a lot of great information in both that podcast and article, and this podcast and article.

In our interview, and in this guide, you will learn more about:

  • How to qualify for retirement from the Guard or Reserves
  • Why age 60 is an important birthday for Guard and Reserve retirees
  • Earning Retirement Points
  • Military retirement pension plans – 3 Types
  • How to calculate a Guard or Reserve pension
  • How your Guard or Reserve pay base can grow, even after you retire
  • The power of Cost of Living Adjustments (this is much more valuable than you think!)
  • Health care options through TRICARE
  • Base access, shopping, & activities
  • and other valuable retirement benefits.

The Military GuideFeatured Guest – Doug Nordman. Our guest for this episode is Doug Nordman, military retiree and author of The Military Guide to Financial Independence and Retirement. This book had a large impact on me and helped push me toward joining the Air National Guard after an 8 year break in service. Doug also runs a blog called The Military Guide where he writes about a variety of topics related to military benefits, veterans topics, retirement, and personal finance.

Doug retired from active duty, but his wife retired from the Reserves, giving Doug a good overview of how retirement works from both active duty, and the Guard and Reserves. He offers tips on how to maximize those benefits.

About this guide: The following article covers many of the facts in the podcast, but due to space constraints, leaves out some of the personal anecdotes, specific examples, and additional information. I recommend listening to the podcast if you have the time, and bookmarking this as a resource for future reference.

How to Qualify for Retirement from the Guard or Reserves

In general, you need to serve 20 years to be eligible for military retirement benefits. This is true for those who serve on active duty, or in the National Guard or Reserves. Members of the Guard and Reserves need 20 “Good” years, or “Satisfactory” years to qualify for a military retirement. A Good Year is defined as earning 50 or more points in a year. We will cover earning points in just a moment.

Exceptions to the 20 year rule: There are some situations when you may be eligible to retire a little early. One example is the Temporary Early Retirement Authority, or TERA, which is often used during periods of Force Shaping and Reductions in Force (RIF). Under TERA, some servicemembers are eligible to retire with as few as 15 years of active duty service. However, they also receive a smaller pension, both based on years served, and because there is a multiplier used that decreases the final pension calculation. Other exceptions for early retirement can be made for medical reasons, or under some other limitations. But in general, we are working with the assumption that it takes 20 or more years of service to be eligible for a military retirement.

The Importance of Reaching Age 60

Turning 60 is an important birthday for Guard and Reserve retirees. This is the age when Reserve Component retirees become eligible for all military retirement benefits, including pay and health care. Prior to age 60, retired Guard and Reserve members are only eligible for certain retirement benefits, including base access, shopping at the Commissary and Exchanges, and certain other benefits. These retirees are often referred to as “Gray Area” Retirees. You will hear this term often.

Here are some important age-based notes for National Guard and Reserve retirees:

  • Gray Area Retirees – Under Age 60. Retired members of the Guard or Reserves who are not yet eligible for full military retirement benefits, most notably the pension and health care benefits.
  • Full retirement benefits – Age 60+. Once you reach age 60, you are eligible for all retirement benefits. This includes the military pension and health care benefits.
  • Early Guard or Reserve Retirement Pay. Some members of the Guard or Reserves are eligible to receive their retirement pay earlier than age 60. However, they still have to wait until age 60 to begin receiving health care benefits through TRICARE Prime (see below for more information about health care in retirement).
  • Early Retirement Eligibility. Early retirement pay can be earned by serving at least 90 days on active duty during a fiscal year after January 28, 2008. You can receive your retirement pay 90 days early for each qualifying 90 day activation (but no earlier than age 55). Here is an article that explains early retirement benefits in more detail.

Earning Retirement Points

As mentioned in the previous section, members of the Reserve Corps need 50 Points in a year to earn a Good Year toward retirement.

Members of the Guard and Reserves earn 15 participation points each year and they earn points for serving: 1 Point per Drill Period, and 1 Point for each day on active duty. Each Drill Weekend actually has 4 Drill Periods. Guard and Reserve members have a morning drill, and an afternoon drill, each 4 hours long. So a typical Drill Weekend is worth 4 Points toward retirement.

Points can also be earned through AT days (two week required annual training), being called to active duty for training, being mobilized, deploying, serving in the Honor Guard for military funerals, and by completing correspondence courses. Not all activities that earn Retirement Points also earn pay at the time you earn the points. For example, completing correspondence courses might be required to progress in your career and they earn you points toward retirement, but you may or may not be paid for completing the course. However, doing so is in the best interest of your career.

In any given year, a member of the Guard or Reserves can expect to earn around 75 points or more, depending on Drill participation, annual training participation, whether you were activated, and other factors. While there is no such thing as a “normal year” in the Guard or Reserves, a “base” year might look something like this:

  • 15 Points – Annual Participation
  • 48 Points – 12 Monthly Drills (4 Drill Periods per month)
  • 15 Points – Annual Training (this can vary based on your unit)
  • Additional Points as earned (training, correspondence courses, Honor Guard, mobilizations, etc.).

All your points are maintained by your parent service and work toward calculating your retirement pension. We will cover this in a moment. First, let’s look at how types of military pension plans and other factors used in your retirement calculations.

Military Retirement Pension Plan Types

National Guard and Reserve retirement pay is almost always referred to as “Reserve Retirement Pay” regardless of whether you served in the Guard or Reserves. It is also sometimes referred to as “Non-Regular Retirement Pay. That said, the Reserves use the same retirement plans as active duty servicemembers. The only difference is how the pay is computed. Let’s look through the different types of retirement plans, then discuss how to calculate a Guard or Reserve pension.

There are 3 Main Types of Military Retirement Pay Plans:

  • Final Pay / High Pay – for servicemembers who entered the military before Sep. 8, 1980. Final Pay uses your last pay grade to calculate your retirement pension.
  • High 3 – for servicemembers who entered the military after Sep. 8, 1980. High 3 pay takes the average of your highest three years of base pay.
  • REDUX – an elective retirement option for servicemembers who entered the military after Sep. 8, 1980. REDUX offers servicemembers a $30,000 Career Status Bonus at year 15, in exchange for a lower retirement multiple and lower COLA.

We focus almost exclusively on the High 3 Retirement Plan in the podcast because most current servicemembers and recent retirees are eligible for this plan. REDUX is not discussed other than to say not to take it (REDUX is almost never a good idea).

Military Pensions are from Your Base Pay Only

Military pensions are calculated only from your base pay. This is important to know, because military paychecks often include benefits such as BAH and BAS, and may include other incentive or bonus pay such as flight pay, sea pay, danger pay, or other special duty pays or benefits.

This can cause some sticker shock for many active duty members when they first enter retirement because their pension checks are often much smaller than they anticipated. The sticker shock may not be as large for members of the Guard or Reserves, because they are used to seeing Drill Pay checks, which don’t usually include these other benefits at the full monthly rate, and it can often be years, or even decades before the members begin receiving their pension payments.

Calculating a Natioanl Guard or Reserve Pension

Guard and Reserve pensions are calculated slightly differently than active duty pensions. Active duty pensions are calculated by multiplying the total years of service by a multiplier of 2.5% (High-3 plan). Then you multiply that by your pay base. In the High-3 pension plan, your pay base is the average of your highest 3 years of pay (rough rule of thumb – that will equal about 95% of your final pay).

Guard and Reserve pensions are calculated in a similar manner, but there is an intermediate step that must be completed before you can calculate the final pension. We must first convert Points into years served. To do this, add up all your Points, then divide by 360. This gives you the total number of years served (the military calculates a month as 30 days to make the math easy; so each year served is 12 months at 30 days each, for a total of 360 days).

So take your total number of days served, and divide by 360, then multiply that by 2.5%. Here is a quick example: Say you have 3,150 points. Divide that by 360, then multiply by 2.5%. You get (3,150/360) * 2.5% = 21.875%. Now multiply that by your pay base (average of your high 3 years of salary).

Get a More Precise Estimate of Your Pension: Every service has an online retirement calculator that allows you to put in very granular information, including your Date of Initial Entry Into Military Service (DIEMS), your estimated retirement date, and other factors. It’s important to note that these calculators are often password protected and you need to login to your branch website get this information.

Your Guard and Reserve Pay Base Continues to Grow After Retirement

There is a little known fact about National Guard and Reserve retirement pay. Depending on how you retire from the Guard or Reserves, you can continue earning time in grade and longevity toward retirement. That means the value of your retirement can keep pace with military pay raises and inflation while you await retirement pay. But only if you choose to retire under the right classification.

Congress gives you the option of retiring awaiting pay, or resigning from the military.

Retired Awaiting Pay: Retiring Awaiting Pay is the better option from a financial perspective, but it comes with a (slight) risk. Technically, you are still eligible to be recalled to active duty in the even of a full mobilization. However, it would take a full mobilization of the entire military for you to be recalled from retirement. This is extremely rare, and didn’t even happen post-9/11.

Here is the pay off – while you are retired awaiting pay, your clock is still running on your longevity and time in service. So if you retire awaiting pay as an E-7 at 20 years, your clock keeps running to the maximum for that rank, which is 26 years of service. So you get pay increases for 6 more years in service, just for being on call. To top it off, you will receive the pay scale in effect when you turn 60, not the pay scale when you retire. So your pay has the potential to increase substantially while you wait to turn age 60.

Resigning from the Guard or Reserves: This has no risk of being recalled, however, resigning from the military will lock in your retirement check with the years of service and the pay scale in effect the year you retired. This can have a hugely negative impact on your pension, especially if you have a couple decades to wait before turning age 60!

Retired Awaiting Pay is the Way to Go! Retired members of the Reserve Corps haven’t been involuntarily recalled to active duty since WWII. Yes, it is possible to be recalled, but the odds are very small. And the financial gains can be huge.

COLA Adjustments

Your military pension is indexed for inflation through Cost of Living Adjustments (COLA). Military pensions are tied to an annual COLA based on the Consumer Price Index, or the average cost of inflation over a variety of consumer goods. This varies from year to year. In some years there is no COLA increase to retirement pay, and in other years it could 1%, 2%, or even higher.

Many people underestimate the value of these pay raises. While 1% or 2% seems like a small pay increase, these are cumulative, and they add up quickly. For example, Doug shared that his military pension has increased 27% over the last 12 years, just from COLA increases. 27% is huge!

It’s important to understand that while your pension will increase over time, it should be enough to roughly keep pace with inflation. So while the dollar amount is a lot larger, the purchasing power should be similar as when you retired. However, this is an incredibly powerful benefit, because most civilian pensions plans aren’t indexed to inflation.

Guard and Reserve Health Care in Retirement

Retired Guard and Reserve Health Care OptionsMembers of the Guard and Reserves have different health care options than active duty servicemembers and active duty retirees. While still serving in the National Guard and Reserves, members are eligible for TRICARE Reserve Select (TRS), which is a premium based health insurance program. It’s cost is very affordable, coming in at roughly $50/mo for a member, or around $205/mo for a family plan. However, you lose TRS eligibility when you retire or otherwise leave the Guard or Reserves.

Your health care options in retirement depend upon your age (Gray Area Retirees are not eligible for TRICARE Prime or Standard), where you live, and other factors. Here are the basics (and we have a full-length article listed at the end of this section which gives much more information).

  • Retiree health care options – under age 60. Gray Area Retirees are eligible for TRICARE Retired Reserve (TRR), which is similar to TRICARE Reserve Select, without any subsidies. The retiree must pay 100% of the premiums if they wish to participate in the plan. TRR premiums are roughly $361/mo for the individual, and about $961/mo for a family plan. Other health care options include employer-sponsored health care plans, or an individual health care plan, such as those you might find on the health insurance exchanges. eHealthInsurance.com has a lot of great options.
  • Retiree health care options – age 60-65. Guard and Reserve retirees become eligible for TRICARE Prime at age 60. This is the same health insurance plan open to active duty military members and retirees. However, retirees are only eligible for TRICARE Prime if they live within a certain distance of a military installation or regional health care center. If the retiree lives out of the area, they would only be eligible to receive TRICARE Standard.
  • Retiree health care options – age 65+. At age 65, Reserve Corps retirees are eligible to receive TRICARE for Life, which is a Medicare Supplemental Insurance Program. There are no monthly premiums for this plan.

Which plan is the best? This is where it’s a good idea to listen to the Podcast episode. Doug goes into each of these plans in more detail, and explains the associated pros and cons of each plan. Additionally, you can contact a TRICARE Ombudsman who can help you decide which plan is best for your situation. There should be one at each Military Treatment Facility, or you can contact TRICARE, and they will have someone explain things to you and help you choose. Finally, we have a full-length article discussing Retired Guard and Reserve health care options.

Additional Health Care Info Covered in the Podcast:

  • Health care for dependents
  • What if you don’t live near a Military Health Care Facility?

Other Retirement Benefits

Doug and I discuss other military retiree benefits, including access to base facilities such as the:

  • Commissary
  • Base Exchanges
  • Gyms
  • Hobby activities where available, such as the Auto Hobby Shop, Woodworking Shop, MWR facilities, movie theater, etc.

These base activities can be a great way to save money, participate in hobbies, and continue to be a part of the military community.

Military Hops – Space-A Travel: Military hops and Space-A travel are another topic we discussed. These can be a great way to see the world on the cheap. Basically, flying Space-A allows you to jump onto a military transport if there are available seats. You pay a nominal fee (usually only a few dollars). You can often find trips going all over the world, and many of the flights go out on a regular basis. There are some downsides, however. Because you are flying on a space-available basis, you may not be able to get the flight at the day or time you want. Flexibility is the key if you use Space-A travel!

There are a few differences for Space-A availability for Guard and Reserve retirees. The member is eligible to fly Space-A if they are a Gray Area retiree, but their dependents may not be eligible until the servicemember reaches age 60, which is when their retirement is on par with an active duty retirement.

Benefits for Spouses & Dependents

Benefits for your dependents, including your spouse and children, are similar going to be similar to when you were on active duty, with the exception of your health care which will depend upon your specific situation (whether you are eligible to use TRICARE Prime, or are required to use Standard). Spouses and Dependents still maintain base access and access to the Commissary, Exchanges, MWR facilities, and other base activities.

Did we miss anything? Military retirement is a huge topic, and we tried to cover as much as we could in the 40 minutes or so that we talked. I also did my best to get the main points down on paper for those who prefer to read. Please leave a note in the comments if we missed anything and we’ll address it. Thanks!

Retired Guard and Reserve Health Care Options – TRICARE & Private Health Insurance

Retired Guard and Reserve Health Care OptionsMembers of the Guard and Reserves have different health care options than active duty servicemembers and active duty retirees. While still serving in the Guard and Reserves, members are eligible for TRICARE Reserve Select, which is a premium based health insurance program. It’s cost is very affordable, coming in at roughly $50/mo for a member, or around $205/mo for a family plan.

There are very reasonable annual deductibles, coming in at $150 for an individual, and $300 for a family. The maximum out of pocket cost (also referred to as the Catastrophic Cap) is also very reasonable, coming in at $1,000 per family, per fiscal year. These rates are much more affordable than many plans you will find through an employer, and are much lower than what you would find on one of the health care exchanges (the maximum out of pocket expenses for plans on the exchanges often range from around $6,000 for an individual, up around $12,600 for a family plan).

Unfortunately, once you retire from the Guard or Reserves, you lose access to TRICARE Reserve Select. You can still participate in a TRICARE health care plan, but you would have to transfer to another plan. Let’s take a look at some of your health care options once you retire from the Guard or Reserves.

Note: Click here to learn about your health care options after leaving active duty.

Guard and Reserve Health Care Options in Retirement

Retired members of the Guard and Reserves have several retirement plans available to them, depending upon their age, and believe it or not, where they live. Let’s break this down by age, because it isn’t until age 60 that retired members of the Reserve Corps are eligible to receive TRICARE Prime, the same military health care offered to active duty retirees. Prior to age 60, retired members of the Reserve Component are referred to as “Gray Area Retirees” because they are eligible for some military retirement benefits, but not all of them (notably the pension and TRICARE Prime).

Retiree health care options – under age 60. Once a member retires from the Reserve Component, he or she loses access to the subsidized TRICARE Reserve Select plan. They become eligible to participate in the TRICARE Retired Reserve plan, which is similar to TRICARE Reserve Select, but without any subsidies, and a higher Catastrophic Cap. The retiree must pay 100% of the premiums if they wish to participate in the plan. And it’s fairly expensive, at least compared to what you may be used to. Without subsidies, TRICARE Retired Reserve comes in at roughly $361/mo for the individual, and about $961/mo for a family plan. The Catastrophic Cap for TRICARE Retired Reserve is $3,000 per family, per fiscal year. This is more expensive than TRICARE Reserve Select, but it may or may not be more affordable than anything you can find through an employer or on one of the health insurance exchanges.

Non-military health care options – under age 60. It may pay to shop around for less-expensive health insurance if you find the premiums for TRICARE Retired Reserve to be too expensive. The obvious choice is to check with your employer if they offer health insurance. You may be also able to find a less-expensive health care option on the Health Care Exchanges. eHealthInsurance.com has a lot of great options on the Exchanges (this is where I go to find my health insurance).

Instant Health Insurance Quotes

Retiree health care options – age 60-65. Guard and Reserve retirees generally aren’t eligible to receive health care benefits until they turn age 60, at which time they would be eligible for TRICARE Prime, which is the same health insurance plan open to active duty military members and retirees. This includes access to health care at a Military Treatment Facility on a space-available basis. However, retirees are only eligible for TRICARE Prime if they live within a certain distance of a military installation or regional health care center. If the retiree lives out of the area, they would only be eligible to receive TRICARE Standard. TRICARE Prime and Standard both have monthly premiums, and associated copays, but there are some important differences.

Retiree health care options – age 65+. At age 65, Reserve Corps retirees are eligible to receive TRICARE for Life, which is a Medicare Supplemental Insurance Program. There are no monthly premiums for this plan.

*Retirees living overseas. I recommend you contact the TRICARE customer service line to find the best option for you. There are different rules and programs for retirees living overseas, and each situation is unique.

Finding the Right Plan for You

Your choice can almost be made for you, depending on your age, and where you live. The biggest question mark for most people is how to handle health insurance coverage as a Gray Area Retiree. If you find yourself in this situation, I would sit down and compare TRICARE Retired Reserve with the options available through your employer, or through one of the health care exchanges (eHealthInsurance.com lists everything you will find on the exchanges, but in my opinion has a more user-friendly interface and better tutorials that explain your options).

Once you reach age 60, it makes sense to go with TRICARE Prime or Standard. Once you reach age 65, you are no longer eligible for Prime or Standard, and must move to TRICARE for Life if you wish to continue receiving health care through the military.

More help is available: You can always contact a TRICARE Ombudsman who can help you decide which plan is best for your situation. There should be one at each Military Treatment Facility, or you can contact TRICARE, and they will have someone explain things to you and help you choose.

Here are some plan details, and links to the website:

TRICARE Reserve Select – Premiums (~$50/ mo for member; ~$205 for family plan):

TRICARE Retired Reserve – Premiums (~$391/ mo for member; ~$961 for family plan):

  • Available to Retired members or the Guard or Reserves
  • Equivalent to TRICARE Reserve Select, however, there are no premium subsidies, so you pay entire cost of premiums.
  • Available until age 60, at which time you are eligible to TRICARE Prime or Standard
  • Link to TRICARE Retired Reserve website.

TRICARE Prime – Premiums ($50/ mo for member & dependent):

  • $12 copay off-base
  • MTF – space available, but no Copay
  • Prescriptions
    • Formulary – free
    • Local pharmacy – variable
  • Only available until age
  • Only available within 40 miles or 30 minutes from a military base (cost-cutting measure) There are waivers for this.
  • Link to TRICARE Prime website.

TRICARE Standard:

TRICARE for Life age 65:

Hopefully this helps you understand your options and points you in the right direction!

2015 Military Pay Dates – Active Duty, Guard, and Reserves

One of the first steps in creating a budget is knowing how much money you have coming in, and when. That’s why it’s important to know when you get paid. In general, military pay dates are easy to remember: you usually get paid on the 1st and 15th of each month.

Military Pay DatesThere are exceptions when those dates fall on a weekend or holiday. In those cases, you would get paid on the weekday preceding that weekend or holiday. So if your pay date would be on Sunday the 15th, you would actually receive your pay on Friday the 13th. (I guess sometimes Friday the 13th can be lucky!).

Pay Periods: You get paid for the previous work period. In this case, you get paid on the 15th for work from the 1st – 15th of the month. The pay on the 1st of the following month is for work done from the 16th – the end of the month.

What about partial months? The military considers a month to be 30 days long – this makes it easier for calculating pay and benefits for a partial month of service. So each day of pay is worth 1/30th of your monthly pay and benefits. If you only work part of a pay period you would receive 1/30th of your normal pay and benefits for this period. This is important to know for those times when you PCS, are away on an extended TDY or deployment, or when you separate or retire from the military.

Tracking Your Pay and Benefits:

The military gives service members two forms to track and understand their pay and benefits: Leave and Earnings Statements (LES) and Net Pay Advice (NPA). These can be viewed or downloaded from your myPay account. It’s not a bad idea to keep a copy of these forms to ensure accuracy of your pay and benefits.

Here is the information found on these forms:

  • LES: Everything you need to know about your pay and benefits should be found on your LES. It includes your end of month pay information, including gross pay, net pay, state and federal taxes paid, Thrift Savings Plan contributions, other pay & benefits (including BAH, BAS, Per Diem, tax-free pay, Family Separation Pay, Hazardous Pay, bonuses, and other pay and benefits), Days of Leave, and more.
  • NPA: Mid-month pay information.

2015 Military Pay Dates

Here are the military pay dates for 2015, including the day you should receive your pay, and the dates your Leave and Earnings Statements (LES) and Net Pay Advice (NPA) should be available through myPay.

Pay PeriodMid-Month Pay DayNPA AvailableEnd-of-Month Pay DayLES Available
January 2015Jan. 15Jan. 8Jan. 30Jan. 23
February 2015Feb. 13Feb. 6Feb. 27Feb. 20
March 2015Mar. 13Mar. 6Apr. 1Mar. 25
April 2015Apr. 15Apr. 8May 1Apr. 24
May 2015May 15May 8June 1May 25
June 2015June 15June 8July 1June 24
July 2015July 15July 8July 31July 24
August 2015Aug. 14Aug. 7Sep. 1Aug. 25
September 2015Sep. 15Sep. 8Oct. 1Sep. 24
October 2015Oct. 15Oct. 8Oct. 30Oct. 23
November 2015Nov. 13Nov. 6Dec. 1Nov. 20
December 2015Dec. 15Dec. 8Dec. 31Dec. 18

The above military pay dates are applicable to all branches of the military, including the Air Force, Air Force Reserves, Air National Guard, Army, Army National Guard, Army Reserves, Marine Corps, Marine Corps Reserves, Navy, Navy Reserves, Coast Guard, Coast Guard Reserves, and the Public Health Service.

The Guard and Reserves are listed with the same pay dates: this only applies to those who are serving in the active Guard or active Reserves. Those who serve as Traditional members of the Reserve Corps may have different pay dates for their drill duty or their AT days.

When Will I Receive My Military Paycheck?

Your Military paycheck will normally be available on your payday. However, it may be available a day or two earlier or later, depending on your financial institution. For example, some Military Banks offer military deposits a day or two earlier than the actual pay date. This is common with Navy Federal Credit Union (if you use the Active Duty Checking Account) and USAA Federal Savings, among others. Here is the pdf with the NFCU pay days. Here are the dates military paychecks are available through USAA.

Top Military Banks: Here is our list of the top military banks and credit unions. You may consider choosing to bank with one of these financial institutions if receiving your pay earlier is important to you.

BAH Rate Cuts: 99% BAH – The New Reality & The Future of BAH

BAH Rate CutsThe DoD recently announced the there would be BAH Rate cuts in the 2015 budget. Instead of the 100% BAH rate which has been the norm since 2005, the Department of Defense announced they would reduce BAH to 99% of expected costs. This is part of a larger, long-term goal of implementing BAH Rate cuts to cover only 95% of expected costs.

Don’t fret about this change yet. BAH Rate Protection protects your BAH Rates, so you shouldn’t see an immediate decrease in your BAH check each month, except under a few circumstances, which will will cover in a bit. Let’s take a look at the new 99% policy, why it has come to be, and discuss BAH Rate Protection.

Why Move to 99% BAH?

The DoD, along with the rest of the government, is hurting for money. They are looking for places to cut back spending. And since BAH affects majority of the military population, it is a prime target for cuts. This 1% cut is expected to save the government approximately $200 million per year.

The 2015 defense budget called for plans to cut BAH to 95% of expected costs over the next several years. So this is only the first step. While many servicemembers and their families will start seeing more money out of pocket in the coming years, this is still a much better situation than the 1990’s, when BAH only covered 80% of expected housing costs.

BAH Rate Protection

We have a full-length article covering BAH Rate Protection, but here are the basics. Your BAH Rate is protected from the time you arrive on your installation, until you leave, with the exception of three circumstances:

  • Permanent Change of Station (PCS)
  • Reduction in paygrade
  • Change in dependent status

In other words, your BAH rates can only increase, not decrease, unless you move to another base via a PCS, you receive a reduction in paygrade, or your dependent status changes from with dependents to without, or vice-versa. For the rest of your assignment, your BAH will be the higher of the published BAH Rate on January 1, or the BAH Rate you held on December 31 of the previous year.

I will say it again: Your BAH Rate will not drop during the middle of your assignment, even if the rates for your location decrease in any given year.

Note about a PCS moves: If you live in an area with two bases close to each other and you receive a permanent change of station assignment to the other base, you could possibly remain in the same home, but still face a decreased BAH because it would officially be a PCS move.

How Much Will This Cost Me When I Move?

At the time of this publication, the DoD hasn’t announced exactly how the cuts will take place. They could do one of several actions, including decreasing BAH 1% across the board, calculating the total cuts across the entire DoD and applying an average cut to everyone who receives BAH, or some other calculation.

Andrew Tilghman of the MilitaryTimes reported,

“Military officials do not want to create a new incentive for troops to prefer rural areas over costly urban ones, so it is likely that the Pentagon will calculate some sort of single across-the-board cut for all BAH checks.

For example, they might take the average of all 1 percent reductions nationwide and use that to determine a single dollar amount to shave from every BAH check. For example, regardless of the location and actual BAH rates, each service member may face a reduction of about $200 a year.”

Let’s look at an example: We’ll look at two different BAH rates for an E-5 with dependents. The first is the rate used for the Post-9/11 GI Bill when you take classes exclusively offered online (in-residence classes are based on the ZIP code for your school). The other BAH Rate is an E-5 in Chicago, chosen to illustrate the difference in a high-cost of living location:

  • E-5 with Dependents Rate (non-location, used for Post-9/11 GI Bill): $714.50, *99% = New Rate of $707.36, a difference of $7.14/month, or $85.68/year
  • E-5 with Dependents Rate (Chicago): Current Rate: $1,977.00, * 99%, New Rate = $1,957.23. Difference of: $19.77/month, or $237.24/year.

When put in the context of a monthly cut, $7 – $20 is noticeable, but not a massive cut. Especially if you don’t see it due to BAH Rate Protection. When you PCS to your next base, you should have a good idea of the BAH in your new area and can use that BAH when setting your budget for your new location.

BAH Rates Can and Do Change for Other Reasons

It’s also important to note that BAH Rates change when cost of living in a local area changes. In general, the BAH should increase as the cost of living increases, and the BAH may decrease when the cost of living in an area decreases. Falling BAH Rates were common after the real estate markets crashed in 2007-2009. This is when BAH Rate Protection was helpful for many servicemembers. It’s also possible that you may see increased BAH payments, even with BAH paid out at 99% of the calculated rate. The important thing to remember is that your BAH Rates should not decrease, regardless of what happens to the published rates. Your rates should only increase throughout the duration of your tour.

What is the Future of BAH?

Right now, we can only go from the information we have at hand, which is from the recent budget talks. The DoD wants to decrease BAH to 95% of the actual cost of housing, but Congress limited to cut to 1%. This 1% decrease could just be the first step. Right now we don’t even have the full picture on the implementation. But going forward I would expect the decreases to continue on an annual basis for the near future. The DoD won’t implement the full 5% overnight, and the BAH Rate Protection should protect a large portion of servicemembers over the next few years. The largest impact to most servicemembers probably won’t be felt for the next couple years.

BAH Rate Protection – What You Need to Know About BAH Changes

Each year the DoD adjust BAH Rates across the board. They use a host of information to calculate how much they should provide servicemembers. In some locations BAH Rates increase, and in others they decrease.

BAH Rate Protection RulesThankfully, the BAH Rate Protection policy ensures your BAH rate won’t decrease in the middle of your assignment, even if BAH Rates for your location decrease. This is important to know, with the recent news that the DoD is decreasing BAH to 99% of the expected cost of housing in your area.

Let’s take a look at BAH Rates and how the BAH Rate Protection policy maintains your BAH rates, even if they decrease in your area.

How BAH Rates Are Calculated

Determining BAH Rates is actually a fairly complicated process, so we will simplify it to the basics here. You really need to know two things: how the data is collected, and how it is processed.

BAH data is based on rental prices, the cost of utilities, and the price of renter’s insurance. Rental costs are collected on apartments, townhouses/duplexes, and single-family rental units of varying bedroom sizes. This information is then mashed into a complex formula that is designed to give service members housing based on their pay grade and dependent status.

The process is a bit complicated and is repeated each year. Sometimes the BAH rates increase, other times they decrease.

You can learn more about BAH Rates in the DoD BAH Primer, a 13 page pdf which explains everything in detail.

BAH Rate Protection

The good news is you shouldn’t see your BAH Rate drop during the middle of your assignment, even if the rates for your location decrease in any given year. There are certain exceptions to this rule, which we’ll cover in just a moment.

Individual BAH Rate Protection: This prevents decreases in your housing allowance, as long as your status doesn’t change. Servicemembers are entitled to the greater of the published BAH rate on January 1, or the BAH they were paid on December 31 of the previous year. This rate protection is in place from the time a servicemember arrives on an installation until the status of the servicemember changes due to:

  • Permanent Change of Station (PCS)
  • Reduction in paygrade
  • Change in dependent status

Two important notes: The Change in dependent status on means “with dependents” or without dependents,” not the number of dependents. So you won’t see a BAH decrease if you have another child or if one of your children moves out of your home (provided you still have dependents).

Receiving a promotion also doesn’t hurt your BAH, only a reduction in pay grade will potentially decrease your BAH. So if you are promoted in a given year, you should be eligible for an increased BAH, again using the higher of the BAH Rate on January 1 of the given year, or the previous protected rate.

Summing Up BAH Rate Protection

To sum it up, BAH Rate Protection ensures that servicemembers will receive published increases in BAH Rates, but not decreases, unless any of the 3 previously mentioned conditions apply. Decreased BAH Rates should only affect servicemembers who PCS into a new area, have a change in dependency status (change from with dependents to without, or vice-versa), or to those who receive a reduction in pay grade.

Should You Join the National Guard or Reserves? (Podcast 009)

The Military Wallet Podcast on iTunesWhen I separated from active duty, I was burned out. I served for 6.5 years, during which I completed 5 deployments and a year long special duty assignment with no fixed base (I lived out of a suitcase for a full year). During my career, I literally spent more time away from home station than at home station. I needed a break, and joining the Guard or Reserves was the last thing on my mind.

Several years after leaving the military, I came around to the idea of serving again.  Earlier this summer, after an 8.5 year break in service, I joined the Air National Guard. And I love it. And I’ve learned that joining after a long break in service isn’t that uncommon.

Join Guard or Reserves

Should you join the National Guard or Reserves?

In today’s podcast we discuss joining the National Guard or Reserves. Joining the Guard or Reserves certainly isn’t for everyone. But there are many benefits to joining, including pay, access to affordable health care, education benefits, working toward a retirement pension, and one of the most important for me – being part of the military mission again.

Rob AeschbachJoining us in our podcast is a special guest, Rob Aeschbach. He is a retired Marine officer (12 years on active duty, and 10 years in the Reserves). Rob is a financial planner in the VA area. His financial planning practice focuses on helping military members and their families. If you wish to learn more about Rob, or get in touch with him, you can find him at the following online locations:

Rob was also our guest for podcast #3 – Podcast 003: Force Shaping and Involuntary Separations – How to Handle Being Laid Off from the Military.

Should You Join the Guard or Reserves?

I’ll start this off by saying this podcast and article aren’t trying to recruit you. I’m excited about the Guard and Reserves because I recently joined the Guard. But I’m also excited because I had many misconceptions about the Guard and Reserves. And to be honest, I think many active duty members do. Our goal is to help you look at the option of joining the Guard or Reserves in a different light. I was someone who dismissed the Guard and Reserves without a second thought – primarily because I was burned out from active duty. Today, I’m grateful I gave the idea a second chance.

Let’s discuss some of the benefits, pros & cons, and misconceptions about serving in the Guard and Reserves.

What Are the Guard and Reserves?

In short, the National Guard and Reserves are a reserve component designed to back up the active duty military. Members of the Reserve Corps typically work on a part-time basis in order to maintain proficiency in their career field.

Both the Guard and Reserves are very similar, but members of the National Guard and Air National Guard can be called upon by their state governor for civil relief actions, such as natural disaster relief, to help with terrorism threats, riots, etc. Guard and Reserve members can also be called upon by the Federal government to relieve active duty members, fulfill deployment needs, and more.

Similarities of Guard and Reserves:

  • Both serve in reserve capacity for active duty
  • Typical service requirement = One Weekend a Month, Two Weeks a Year

Difference between Guard and Reserves:

  • Guard = State Mission that can be called to both state and federal missions, depending on the orders.
  • Reserves = Federal Mission.

Your Commitment: 1 Weekend a Month, Two Weeks a Year

This is more or less your commitment when you join the Guard or Reserves. But you may find that your requirements may vary by unit. If you are prior service you may be able to join for as short a time period as 1 year. Or you can join for up to 6 years, or longer, depending on your contract.

Most Guard and Reserve units drill the first full weekend of the month, and have a two week Active Training (AT) period each year in which the entire unit drills. Some Guard units have a little more flexibility. For example, my unit has two 3 day drill weekends during the year, and we take one month off in the summer. This is a little more friendly for vacation time.

Individual Mobilized Augmentees (IMA) in Reserves: The Reserves also have IMA slots in which members are able to backfill active duty slots on an as-needed, volunteer basis. IMAs typically don’t have the traditional one weekend a month, two week a year schedule. The benefit is a little more flexibility, and ability to write your own ticket.

You’ll hear more about this in the podcast, where Rob discusses some of the benefits of having an IMA slot.

Guard & Reserve Drill Pay

Members receive Drill Pay based on the days they serve. Pay is based on the active duty pay scale. However, pay is based on the time you serve. Let’s break down the pay for Guard and Reserve members that works the “one weekend a month, two weeks a year” schedule.

For each Drill weekend, you actually get paid for 4 drills, or 4 days of work, even though you only work 2 days. The pay for each drill is 1/30th of the base pay for your rank and years of service. The reason you get paid for two days of work, even though you only work one day is because you don’t receive pay for BAH and BAS when you are on Drill Duty.

You do receive BAH and BAS on the days you serve your annual AT days (your two weeks of annual training). However, you will receive Reserve Component BAH (or Non-Locality BAH), not BAH for your location. You can find this here.

How much will you get paid?  It depends on your rank and time in service, of course, but you should make several thousand dollars per year. Many servicemembers volunteer for extra days and can easily bring in over 5-figures per year in additional income. Here is a list of Guard and Reserve Drill Pay charts, or you can use the NationalGuard.com Drill Pay calculator.

Guard & Reserve Retirement Benefits

Retirement is based on earning 20 good years of service. Your active duty time will count toward a good year of service. And if you served a partial year of active duty, it may give you an additional year of service. For example, I extended 6 months on my active duty contract, finishing with 6.5 years on active duty. I immediately transferred into the Individual Ready Reserve (IRR) to finish my 8-year commitment. That half a year of active duty, plus the other 6 months in the IRR gave me a good year of service toward retirement. So I have 7 good years already.

What is a Good Year of Service? A good year of service equals 50 points. You will earn 1 point for each drill served (remember, you earn 4 drills per drill weekend, so 12 drill weekend per year is 48 points). You also earn 15 participation points per year, and 1 point for each day of AT time (your annual training, which is usually around 12 or 13 days per year). So you can easily earn about 75 points per year with regular service (48+15+12 = 75).

Earning additional points toward retirement. You can also earn more points for each day you serve, for performing burial duty and certain Honor Guard functions, and for completing correspondence courses, including Professional Military Education, or even non-military courses.

Retirement Benefits Start at Age 60

In most cases, retirement benefits start at age 60, including the Pension, and health care benefits. There are a couple of important points to note: you will be a Gray Area retiree until you reach age 60. During this time you will have base access, can use base facilities, and can shop at the BX, PX, NEX, Commissary, etc. You just won’t receive pay or health care until age 60.

Receive early retirement pay: In some cases you can receive your pension before age 60, provided you were activated for at least 90 days during a fiscal year after January 2008. The details are case specific, so I recommend reading more about early retirement to get all the details.

Health Care & Related Benefits

Members of the Guard and Reserves are eligible for affordable health care through the TRICARE Reserve Select program. You must be in a drilling status to be eligible for this program (not in the IRR). There is also a Dental program. Here are the rates and more information:

TRICARE Retired Reserve: You can also sign up for TRICARE Retired Reserve while you are awaiting full health care coverage when you turn age 60. These rates are unsubsidized and run approximately $390 for an individual and $961 for a family. You can learn more here.

TRICARE Prime & Standard. When you turn age 60 you will be eligible for either TRICARE Prime, or TRICARE Standard. You will be required to transition to TRICARE for Life when you turn age 65.

Education Benefits in Guard & Reserves

The Guard and Reserves offer Education benefits, including the Montgomery GI Selected Reserve (MGIB-SR). The rates for the MGIB-SR are lower than what you would earn on active duty, so you may want to look into the MGIB if you are prior service. You may also earn access to the Post-9/11 GI Bill if you are activated.

Some states have their own benefit for Guard Members: I happen to live in Illinois, which is one of the few states that offer free college tuition at a state college for members of their state Guard units. I believe there are only 5 states with a similar benefit. However, many other states offer scholarships, tuition reductions, or other benefits. Be sure to look into your state’s benefits.

Career Options in the Guard and Reserves

More often than not, you have more career flexibility in the Guard and Reserves than you do in the active duty military. I was able to change career fields when I joined the Air National Guard. It’s also not uncommon for Guard and Reserve members to work in multiple career fields during their career. Availability is dependent upon your base mission and the needs of your unit.

My recommendation is to contact the recruiter at your local unit(s) to ask which jobs are available, and what kind of promotion opportunity is there.

You may also find that you are able to fill a billet with promotion potential. Some units will allow you to serve in a billet either one pay grade above or below your current pay grade. But other units may allow you to fill a billet two grades above your current pay grade. This gives you an immediate opportunity for career advancement, provided you meet the time in grade requirements and other qualifications for promotion.

Travel Requirements

You might be surprised to know that many Guard and Reserve members travel long distances to perform their drill duty. I counted license plates from about 7 neighboring states at my last drill. This isn’t uncommon. The good news is your unit may put you up in a hotel room if you live outside of commuting distance. You may even be eligible for reimbursements when traveling to Drill Duty, depending on your unit’s policies.

IDT travel reimbursements: The service secretary for each branch of the Reserves is allowed to authorize travel reimbursements for members who live more than 150 miles from their base, however, not all branches currently reimburse Reserve members for travel. Rules also vary for National Guard Units. We have some general rules for IDT Travel Reimbursements, but recommend contacting your unit for more specific information regarding unit participation and availability.

You may be able to deduct travel on your taxes: Even if you aren’t able to receive a reimbursement for your travel expenses, you may be eligible claim mileage and other travel expenses on your taxes if you have to travel more than 100 miles for drill duty. You can also claim half the cost of your meals on your taxes. Those benefits don’t negate the cost of travel, but it certainly helps when you file your taxes.

Miscellaneous Benefits

Other benefits include base access, ability to shop on base, use base facilities, military discounts, etc. And for me, the biggest benefit is being part of the military again. I missed being part of something bigger than myself. Being part of a unit and a mission and that satisfaction that comes from a job well done.

There is a lot more covered in the podcast, so I hope you give it a listen.

To subscribe you can visit our podcast on iTunes and Stitcher Radio:

Military Forcing Some Officers to Retire with Enlisted Pay

Update: Rep. Glenn Thompson (R-Penn.) is stepping up to introduce the Proudly Restoring Officers of Prior Enlistment Retirement (PROPER) Act. The bill would modify existing discharge authority to allow military officers appointed from the enlisted ranks with at least 20 years of service to retire as an officer with only four years of service as a commissioned officer. Source: MOAA.

Very few military members remain on active duty long enough to earn a military pension. The latest numbers show that only about 17% of servicemembers reach the full 20 years required for an active duty pension. It’s a wonderful achievement and a testament to the hard work and dedication it takes to make a career of the military.

That’s why it’s disheartening to read about certain service members who are being forced out of the military due to Force Shaping. It’s difficult for anyone who is forced out of the military, particularly when they have chosen to make it a career.

Officers forced to retire with enlisted pay

Some officers are being forced to retire before reaching enough service time to retire as an officer.

Some military members are being forced to retire early under the TERA program. This is unfortunate, as many retirees under TERA wish to complete their full 20 years of service and receive their full pension (retirees under TERA take a reduced pension equal to the number of years served * 2.5%, times a reduction factor based on the number of years they retired early).

But there is one class of servicemembers who arguably have it worse than others: some officers are being forced to retire from the military, but they don’t have the minimum service time to retire as an officer.

Rules for Retiring as an Officer

The normal rules require military members to serve 10 years as an officer to be able to retire as an officer. However, due to Force Shaping, there is currently an exception written into Title 10 of the US Code (the law that governs military pay and benefits), that allows service members with only 8 years of service as an officer to retire as an officer. Here are the applicable laws (note: these showcase the Army laws, as this is affecting more Army members than other services; the laws for the other services are similar):

  • Title 10 U.S. Code section 1370: “a commissioned officer […] will “be retired in the highest grade in which he served on active duty satisfactorily, as determined by the Secretary of the military department concerned, for not less than six months.”
  • Title 10 U.S. Code section 3911: “the Secretary of the Army may, upon the officer’s request, retire a regular or reserve commissioned officer of the Army who has at least 20 years of service computed under section 3926 of this title, at least 10 years of which have been active service as a commissioned officer.”
  • Title 10 U.S. Code section 3911: “The Secretary of Defense may authorize the Secretary of the Army, during the period specified in paragraph (2), to reduce the requirement under subsection (a) for at least 10 years of active service as a commissioned officer to a period (determined by the Secretary of the Army) of not less than eight years.”

But there are many officers being let go just shy of the required 8 years. In some cases, officers are allowed to get a waiver to extend their service up to 60 days or so to reach the required service time. But others aren’t so lucky, and are being forced from the service just short of reaching the requirement time served to retire as an officer. In fact, some of them are  just months shy of reaching the required 8 years.

And the difference is huge.

Impact on Retirement

There are two major impacts on retirement. The first, is these servicemembers retire as enlisted members, not officers. Their paperwork and retiree cards will be in the enlisted ranks. The other impact is to retirement pay.

The immediate impact on the pension is obvious – these soon-to-be-retirees will be earning substantially less in their retirement checks than they would have had they been able to serve an additional year or two. I’ll give an example in just a moment. But here is the worst part: these servicemembers’ pensions will be paid based on their previous enlisted pay.

Using High-3 rules, you have to go back to their highest three years of pay at their enlisted ranks. So not only do you have to take away their Officer Pay as though it never happened, these servicemembers’ pensions will be based on old pay scales at their previous rank. To add insult to injury, these servicemembers are artificially held at their last pay grade. So someone who served as an E-7 is forever an E-7 for pay and retirement purposes, even if they became a Captain.

Let that sink in a moment. These servicemembers didn’t have the same opportunities for promotion through the enlisted ranks. Its very possible many of these officers would have been able to promote one or two times as an enlisted member. Some of them may have been able to max out their pay scale and become E-9’s.  But they weren’t given that opportunity.

Reduced Pension for Enlisted Vs. Officer:

Here is a sample based on an E-7 pay grade and O-3E at 20 years service (7 as an officer)*.

  • Enlisted Base Pay (E-7, 18-20 years service): $4,323.90
  • Enlisted Retirement: $2,161.95
  • Officer Base Pay (O3-E, 18-20 years service): $6,726.00
  • Officer Retirement: $3,363.00
  • Difference: $1,201.05 per month

As you can see, there is a large difference – an approximate cut of 35%.

*These numbers are actually rough estimates. High-3 rules average the pay for the last 3 years of service at the highest grade held. So it would be an average of these salaries and the preceding two years.

The primary benefit these servicemembers received for being officers was increased pay while they were officers (increased base pay and BAH, however they had reduced BAS and were required to pay for all uniforms out of pocket).

Additional Reading on This Topic

Being forced out of the military is difficult for anyone, regardless of how long you served. There are many who are lucky, and are simply able to retire with full benefits, even if they were forced to retire earlier than they wished. Others may have to retire with a reduced pension under TERA rules. And then there are the unlucky few who rose from the enlisted ranks, answered the call to become an officer, and were later forced out before they could retire as an officer. This is an unfortunate situation, and unfortunately, one I don’t have answers for.

Here are some additional articles about this topic: