Military Involuntary Separation Pay Rules & Eligibility

With the current military drawdown, involuntary separations will be a way of life for military members for the foreseeable future. Unfortunately, being informed you will be involuntarily separated from the military usually comes with little notice. You will likely go through a range of emotions as you come to terms with the fact that your military career is ending, whether you want it to or not. We covered this topic recently in a podcast about Force Shaping and involuntary separations. The podcast covers some of your options, including the benefits that will be made available to you, the option of joining the Guard or Reserves, early retirement, or in some situations, being eligible to receive separation pay.

This article covers separation pay in more detail, including an overview of the eligibility requirements, types of separation pay, how to calculate involuntary separation pay, and more.

Involuntary Separation Pay Rules & Eligibility

Military Separation Pay Eligibility (Non-Disability)

Military separation pay is comparable to the severance pay you might find in the civilian world. However, not all servicemembers who are involuntarily separated from the military are eligible to receive separation pay benefits. There is also two types of pay, (1) Full Separation Pay, and (2) Half Separation Pay. (for the purpose of this article, we are not considering separation pay for a disability).

Full Pay Eligibility: You must have served at least 6 years on active duty, but less than 20 years* to be eligible to receive involuntary separation pay. In addition to the service time requirements, you need to be fully qualified for retention at the time you are let go, and your service must be characterized as “Honorable.”





Common reasons for being eligible to receive involuntary separation pay include separated under Force Shaping, or Reduction in Force measures, or exceeding high-year tenure for your rank.

To qualify for Full Separation Pay, the service member must agree to serve in the Ready Reserve or similar Reserve Component for a minimum of 3 years following release from active duty service.

Half Pay Eligibility: Half Pay also requires a minimum of 6 years of active service, and less than 20. However, servicemembers can get by with an “Honorable,” or “General” discharge. Some common examples include involuntary separation due to failure to meet fitness/weight standards, loss of security clearance, involuntary discharge due to parenthood, etc. Be sure to check with your personnel department to verify you will be eligible for separation pay.

*Service of more than 15 years, but less than 20: In some cases, those who have served at least 15 years on active duty may be eligible to retire under TERA rules. However, TERA is only offered on a case by case basis, and is not guaranteed to everyone with 15 years of service. You need to apply for TERA and it needs to be approved by your branch of service. Hopefully those who have served at least 15 years will be eligible to retire under TERA, as the retirement benefit is substantially more valuable than the one time, lump-sum payment that comes from involuntary separation pay.

How to Calculate Involuntary Separation Pay

Here is how to calculate full military separation pay:

  • 10% x Years of Active Duty Service x 12 x Most Recent Monthly Base Pay.
  • Months of service are counted as 1/12 of a year.

You can express this in words as, “10% of your annual base pay, multiplied by the number of years you served.”

Let’s work through an example of an E-5 receiving involuntary separation pay at 6 years:




$2,734.50 base pay x 12 = $32,814.00

$32,814.00 x 6 (number of years served) = $196,884.00

$196,884.00 x 10% = $19,688.40 = Full Separation Pay.

To determine the separation pay you may be eligible to receive, simply plug in your base pay, number of years (including fractions), and multiple by 10%. The longer you have served and the higher your rank, the greater the value of your separation payment.

Important Things to Know About Separation Pay

Taxes: Taxes will be withheld from your separation pay, usually at a rate of 20% or 25%. So far as I know, you cannot change the withholding rate. If you overpay your taxes, you will receive a refund when you file your tax return the following year. Taxes will be handled in a similar manner to taxes on a military bonus.

Separation Pay & Joining the Guard or Reserves: You may be eligible to join the Guard or Reserves after leaving active duty military service, even if you receive separation pay. However, if you go on to retire from the Guard or Reserves, you will be required to pay back your separation pay. DFAS will withhold 40% of your retirement pay until you have paid back the separation pay you received. There is no option for repaying the balance in a lump sum, but you can request that DFAS increase your withholding to speed up your repayment of the separation pay. Here is more information about paying back separation pay upon retirement.

Don’t let the possibility of repaying the separation pay prevent you from joining the Guard or Reserves, as this can be a great way to continue your military career and continue earning important benefits for yourself and your family.

Additional notes: Separation pay benefits can be complicated and each situation is unique. The DoD Reg for separation pay is over 60 pages long (DoDFMR 7000.14R, Chapter 35, Section 3502, Separation Pay (Nondisability) – pdf) and includes many exclusions and other information. The goal is to give you a rough idea of how the benefit works, so you can run some calculations on your own. It’s up to you to ensure you double-check your status with your finance or personnel office to verify your situation.

You can also read the law as written in 10 U.S. Code § 1174 – Separation pay upon involuntary discharge or release from active duty.

Print Friendly
Date published: August 5, 2014.

Article by

Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.

Comments

  1. I was medically discharged from the Army in 2009 and received severance pay. I did physical therapy for two years and was cleared to join the Army Reserves in 2011. I am now being medboarded again for the same condition as active along with others. Is there separation pay for reservists in my situation or not?

    • Jeff, To be honest, I’m not certain. And your situation may be complicated due to the fact that you have already received severance pay once. You need to contact your personnel department and ask them to look at this for your specific situation.

  2. Involuntary separated on Oct 1 2014 and still waiting for my separation pay its been over 30 days and no pay as of yet. Who should I talk to about getting my pay as some of my friends have already been paid?

    • Casper, Thanks for contacting me. To be honest, I’m not sure how long it takes to be processed. Contact your local base finance office and see if they can tell you how long it should take. You may also try contacting DFAS.

  3. Ryan, will 1 NJP have any impact on the involuntary separation pay? How do I apply for the involuntary separation pay?

  4. Casper I also separated the same date you have and also have still not received my separation pay. I keep getting the run around. I called DFAS and they told me that my finance office has to release the “hold pay” status so the can pay me. I talked to my local finance and they tell me that DFAS has to do their audit and tell my finance they are good to go and then my finance will issue the pay. I call back to DFAS a few days later and again I get told it’s my local finance. On top of that my MPF never issued me my DD214. I went to ebenefits to try to get it but no such record exists, however everything that I gave to my separations office came up on my OMPF except my DD 214.

    • Jz17, Thanks for sharing an update on your situation. I hope it gets resolved soon.

      Regarding your DD214 – you should call your local MPF and ask them if they can send you a copy of your DD214. If they don’t have one on file, you need to ask them to issue you one. Politely take this up the chain of command if they try to give you the run around. Your DD214 is the most important military paperwork you have because it shows your proof of service, discharge type, when and where you served, and other information. It is required to get certain veterans benefits including the GI Bill and the VA Loan.

  5. Well just an update, spoke with my finance yesterday and I guess since I nagged them enough they went ahead and processed an 80/20 payout where I’d get 80% sometime next week and the rest they will hold until my audit/hold pay is released in which to me is better than finding out that I may still have to wait another 15+ days. Just thought I might let you all know to see if this result works for you guys.

  6. kingofcleveland says:

    If I am meb and I get 75% disability will I have to repay my separation pay

  7. It’s sad that my husband did 2 tours of deployment, served almost 6 years (being released end of January & his 6TH YEAR MARK IS IN APRIL) and we’re left to start from square one. I definitely feel like we been punched in the gut by the military considering my husband is being release (involuntary separation) 3 months before his 6th year of active duty. Not receiving nothing to help us get by & wish we could of get half pay at least to help us get back up. Thank goodness for family because our situation is so unfair.

  8. Dm229,

    Your husband should’ve been authorized to gain retainability up to his 6 year mark, allowing him to get separation pay. They should’ve pushed his separation date to the 6 year mark. There’s fine writing somewhere about this, the same with E-5’s and HYT.

  9. Hey Ryan,

    I just received my DD-214 I think my separation pay is wrong. I tried to contact the number they gave me on my package, stated my pay might be wrong. My base pay was a 700 dollars different, bah was 300 dollars different base on my LES. My last day of the navy was on November 22,2014. She said my separation pay is base on my last month. I work 22 day in November that’s how i get paid base on my last month. I then ask her, so if i worked 5 day in November i would have only got paid for 5 days. She couldn’t answer me, can you please give me some information what can i do to get my full pay. It’s like they’re only giving me half.

    • Trey, Are you referring to your final paycheck, or involuntary separation pay? If you are referring to your final paycheck, you would receive 1/30th of your pay for each day served (the military counts each month as 30 days). So if you served 22 days in the month, you would multiply your base pay by 22/30. The same for your BAH and BAS.

      Involuntary separation pay is based on your years of service and why you separated. There is a half separation pay – this would include if you are separated under honorable or general conditions, for some of the following reasons: failure to meet fitness/weight standards, loss of security clearance, involuntary discharge due to parenthood, etc. If none of those apply and you were separated under Honorable conditions, you may be eligible for full separation pay.

      Unfortunately, I don’t know enough about the service requirements for each of these conditions. You will need to contact your local unit and ask them to specifically outline your situation. I hope this points you in the right direction.

  10. I was hon discharged after being seperated with lump sum payment for a seizure disorder….my question..I have been rated at 50% by the va…different disability. Will I still have to payback my separation payment?

    • USMC1962, I’m sorry to hear about your medical issues. To be honest, I don’t have an answer for you here. I would contact your local base personnel office and ask them (they may have to research this question). You could try the following forums, which may be helpful: Physical Evaluation Board Forum, or the MEB Forum. Both of these forums specialize in medical evaluation boards, physical evaluation boards, and VA disability. Hopefully someone there will have the answer. Best of luck, and thanks for your service!

  11. leosindians says:

    I was discharged in 2012 under honorable conditions with the Perform To Serve program, but I was told that I did not qualify for the involuntary seperation pay because I was a FC Fire Controlman. They said that because my first two years of the navy were Navy “A” and “C” school that I did not qualify. Is this true? I found a document from my old ship saying that I was qualified for it but never given the pay. What should I do?

    • Hi leosindians, Thank you for contacting me. I’m not sure we have enough information here. Typically, you need at least 6 years of service to be eligible for involuntary separation pay. Did you have longer than 6 years of service? Also, there may be other issues that can prevent one from being eligible to receive involuntary separation pay, including type of discharge or other factors. It sounds like more information is needed in your situation, and this is something that only someone from the Navy can give you (they will need to access your personnel files to give you a full determination). I recommend you contact someone from BUPERS and ask for more information. Best of luck, and thanks for your service!

  12. dawgsfan0532 says:

    I have a question? will they hold my last paycheck as well? Or will that be included with my seperation pay?

    • dawgsfan0532, You should receive your final paycheck on your normal pay date (1st and 15th). Your separation pay may come slightly later, depending on the circumstances of your separation. You will need to contact your finance department for more information.

  13. David West says:

    Hello Ryan, I was recently notified that I am being considered for denial of continued service, under the Army’s QMP program. THe board is convening in Feburary, and from all of the research I have done, if I am considered for denial of continued service, it will automatilcally be an honorable discharge, and involuntary separation. Does QMP fall under reduction of force, and still qualify me for separation pay? I am an E-7, with over 13 1/2 years in. Thanks for the help!,

    V/R,
    David West

Speak Your Mind

*