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.

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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. Nicholaus Curphey says

    I got out 3 months ago under the RCP rules. I have received my separation pay, but I have been waiting for my final pay check for about 3 months. I contacted financed, and they told me that I was in the hole for 20 days of un authorized leave. I was granted 20 days permissive TDY for house/job hunting. I was approved by my commander and finance, and I have found every regulation that states that I can be granted that PTDY. But…..Finance is telling me that my DD214 states that I am a regular discharge. It clearly states JBK in the separation code. Then…..Completion of Required Active Service in the “Narrative Reason for Separation” . Because of this….I am out of $2,400. This feels wrong. Should it say “Reduction of Force” for the reason? Or maybe something else? When I looked up the code JBK…..there were two categories for it. One for “Expiration of Term Service”, and the other “Involuntary discharge at end of active obligated service”.

    I know that the PTDY is not an entitlement, but a privilege…..but that privilege has been granted to me, and now taken away.

    • says

      Nicholaus, Thank you for sharing your situation. I don’t have a firm course of action here, other than to contact DFAS with the documentation you have that proves you were granted permissive TDY, and a statement from your Commander stating that the reason for your separation was “Involuntary discharge at end of active obligated service”. I think you will have a compelling case if you can provide documentation proving both of those situations. Best of luck, and thanks for your service!

  2. Anon says

    I do not understand why the separation pay has to be repayed if the service member retires from Guard or Reserves. My spouse did not asked to be separated from the military and is only continuing in the Reserves because he has to. It’s a horrible Catch 22. Could you possibly email me as to why this money will have to be repayed?

    • says

      Anon, Involuntary separation pay is awarded to those the military separates from service against their will. It is a cash award given to those who would not be eligible to remain in the service until they reach retirement, and thus cannot earn a pension. If the member later comes back into service and earns a pension, then the military will withhold the amount they previously gave the member to prevent them from double-dipping on the same entitlement. You can bet a more thorough explanation and the actual legal reference from DFAS.

  3. Mike says

    Ryan, I have just over 10 years active duty in the Army. I received my ETS orders and it states I am elegible for one half separation pay. My question to you is, do I still need to sign with the reserves in order to receive my separation pay.? I have fulfilled my reserve time with more than 8 years of active duty service.

    • says

      Mike, Thank you for contacting me. You may be good if you have already passed 8 years, provided you don’t have any time left on your contract, and your separation papers don’t specific that you need to go into the Guard or Reserves in order to receive the separation pay. That said, I would verify with your personnel section just to be sure. Best of luck with your transition, and thank you for your service!

    • Tim santiago says

      Yes you will have to sign a three year contractual Agreement in the inactive ready reserves in order to receive your severance pay is the new navy way. You should obtain a dd 214 worksheet from separations and you will sign a page 13 with your command career counselor to submit to pers. You will receive a contract take it to psd separations and you will get your severance pay

  4. Nicolas says

    I will be involuntary discharge under the QMP. I’ve served 13 years Active duty and will receive an Honorable discharge. Am I allowed to receive separation pay?

  5. Michael says

    i am coming to end of my contract after 12 years and yes still an SPC. i can’t re-up due to RCP they said so im being forced out with out seperation pay. at the same time i tore my groin bad enough i cant run anymore and the reserves dont want me because my unit wont give me a perminit profile for no running. so can’t do reserves and cant do the army any more so heres the door with no money on your way out…….. why am i not elidgeable for severance pay?

    • Tim santiago says

      You must submit a request to reenlist through your chain of command if you’re request is denied you can take the denied chit to separations and ask for severance pay due to perform to serve denial.

  6. Brad says

    Hi Ryan,

    Do to a recent change in the Navy PT standards I find myself being Admin Seperated. I began reading up on it, and because of “wieght issues” it says I can still be released honorable with 1/2 severance pay. Would I be eligable for reserves? I asked my chain of command and all theyve really said was…yeah probably.

    • Tim santiago says

      You will receive half severance pay, joining the reserves though is going to require approval from navpers though and you will have to go through the reservist side to get the paperwork through. After the active side separates you they have nothing to do worth joining the reserves. Contact you local reserve recruiter when you have your dd 214 and see what they can do.

  7. Marie Patterson says

    My question is… We received full separation pay because of joining the National Guard. My husband just got is VA rating and how much compensation he will receive. Will the money from the VA (the back pay and monthly compensation) be used to pay back the full separation pay or will they suspend that and when he retires they take the retirement pay to pay back the Separation pay?

    • andy says

      I have a question? I did 9 yrs in army never be trouble I always early for my formation. I get chapter 13 for PT failure but I got Honorable only I received my GI Bill no separate pay at all.

  8. Matthew says

    I got denied reenlistment in the Marines with full seperation pay under re code of 1c. You talk about joining guard or reserve but what about switching branches on active duty? I’m a recruiter and know there are programs to request a service to release you from the IRR early to enlist. Is this possible after accepting separation pay?

    • says

      Matthew, There are programs that allow you to switch branches of service, but they are limited and may have further limitations based on rank, years of service, career field, or other factors. I’m not sure where to get information on these programs, but being a recruiter, you should be able to find someone who can point you in the right direction. Regarding the separation pay, that would make things more difficult, and I’m not sure if it would prohibit you from being able to make the move. If you are able to change services after receiving Separation Pay, the most likely scenario is having to repay the amount you received.

      The first thing I would look at is contacting your main personnel center and ask if they know anything about changing services, what the process would be, and if you are qualified. Then take it from there.

      If that doesn’t work out, then you can certainly consider the Guard or Reserves, either in the Marine Corps Reserves, or in the Guard or Reserves for another branch of service. In the event you join the Guard or Reserves, you would only have to repay your Separation Pay if you reach retirement and begin receiving a pension. At that point, DFAS would deduct a percentage of your retirement pay until your Separation Pay has been recouped. But they only recoup the amount you received (less taxes, I believe). So you could look at the Separation Pay as a long-term interest-free loan.

      I hope this helps. Best of luck, and thanks for your service!

  9. says

    Hello,
    I am about 10 1/2 months from my RCP (if I do not get promoted before then). My question is, in the event I do get separated, go to the Guard or Reserves, can I submit a Warrant Officer Packet while in the G/R and come back active?

  10. andrew says

    i served over 14 years and 7 mts, i got the booth for HYT,, i am e5, i received the 52k payoff…i was transferred to the IRR for 3 yrs, i was told i was in good standing and needed to do nothing,,,my contract ended, 90 days prior i submitted reenlistment request, it was disapproved…called NRPC, they told me i was discharged and its done, there goes my 14 yrs and 7mts..
    Backup, i went to VA and filed a claim back in 2012, IT TOOK 18 mts, i got a fair rating, however i had to pay back every cent of that 52k, i just got out of the red and started getting monthly VA checks,
    i am taking the navy to court, here in SC an attorney named George Sink is famous for military cases, i really love the Navy but this is a plain care os robbert and cheatery to a poor humble honest sailor…
    replies are welcome..thank u

    • says

      Andrew, Thank you for sharing your story. The military recouping the Separation Pay is written into law – your lawyer will be able to find the references (I believe it is in Title 10 of the US code; but he should be able to get that info from DFAS).

      You haven’t lost your 14 years and 7 months of time. You have access to a variety of military and veteran’s benefits, such as the GI Bill, VA Loan, etc. You also had the option of transferring to the Regular Reserves after separating from active duty (or into the Guard if you wanted to change branches of service). That time would have carried over and you would have been eligible to receive a retirement pension after 20 good years of service. Simply serving in the IRR is not good enough to earn a retirement pension – you have to earn a sufficient number of Points per year in order to earn a Good Year toward retirement.

      It still may be possible to join the Guard or Reserves, depending on the severity of your service-connected disability. You would most likely need to get a medical waiver to join the military.

      And you can continue receiving your VA disability compensation while serving in the Guard or Reserves.

      As it stands, it sounds like the Navy worked within the boundaries of the law. But it’s possible there is more to the story I am not aware of. Your lawyer will help you sort through all of that. I wish you the best with your back and your health, and wish you the best with your post-military career. Thank you for your service.

  11. Heather says

    I served in the Navy for 13 year, I got separated for PRT, honorable RE3 code. With in a month I received my 1/2 separation pay. When I field my VA claim they said that I would not get a check until I paid back my separation pay. Why is this and was it correct? If it was not correct can I get the money back?

  12. Ryan says

    I served 17 yrs thus far and I am under consideration for QMP and my question is that under a QMP – is that qualified for full separation pay or half separation pay? Additionally, do we know how they are coding for the DD214 on this?

    • says

      Hi Ryan, based on what I have read, a QMP qualifies the servicemember for half-separation pay. I wasn’t able to find any info regarding the codes for the D 214. Your base personnel section should be able to give you that information, as well as possible advice on how to appeal the QMP, which should be an option. Best of luck!

  13. Brian Morales says

    Hello Ryan, I was reading the article as well as the comments and I did not see a clear answer for the qualification for RCP separation pay. If I RCP, would I get the full pay or half pay? for a little more background, I am a SGT (P) and I will have to extend for 1 month to hit my RCP. thanks for your time.

    • says

      Brian, Thank you for contacting me. To be honest, I don’t have a concrete answer for you. I’m not Army, and I haven’t been able to track down a definitive answer. Based on what I’ve read, I believe it is 1/2 separation pay, but again, I’m not certain.

      Here is a forum thread that offers some references, but I’m not 100% certain they are up to date (though they appear to be). Click here.

      And this Department of Defense Instruction (I haven’t found a more recent version) – DODI 1332.29.

      This should give you a starting point, but I would verify with your personnel section. I wish you the best with your transition.

  14. steven says

    My security clearance expired and I dont have enough time left to get it renewed unless I somehow extend. I talked to the career counseler and was told I can not extend or reenlist because I am no longer qualified for my mos because it requires that clearance. He said I would need to be chaptered and if i am chosen to be retained I will undergo a mandatory reclass. But if I am not retained or decide I dont want to reclass, would I qualify for seperation pay?

    • says

      Steven, Thank you for contacting me. Unfortunately, I don’t have a good answer for you. This is something you will need to take up with your chain of command (the security clearance, or possible reclass). Then you’ll have to proceed from there. If your chain of command wants to keep you, they can usually fund a way to make the security clearance issue work if you get your package submitted ASAP.

      In terms of the separation pay, I’m not sure how this would be coded. I recommend calling your personnel section to see what they say. Sorry I don’t have a firm answer for you but I”m not always certain how to interpret the code, or how the policies work for each branch of the service. Best of luck, and thanks for your service!

  15. adam says

    Ryan, thanks for putting this information out there. Also glad to see this is a recent thread. I found out within the last few weeks that I am being involuntarily discharged from the AF reserves due to being passed over for promotion twice despite no notice that I was going up for promotion nor that I was passed over. I’ve served 55 months of total active duty time in a 12.5 year reserve/active duty career as an officer. because I do not meet the 6 year minimum total active duty time served, does this make me ineligible for sep pay either in full or partial? Thanks again.

    • says

      Adam, Thank you for contacting me. To be honest, I have no idea how this relates in the Guard/Reserves. My guess is they take your active time into consideration, but I don’t know if, or how, they count your drill and AT days. This isn’t something I’ve come across. The best I can recommend is contacting your unit personnel office and try to find out. I would certainly be happy to update this article if you get he information.

  16. Deion says

    Ryan,

    I was separated February 2015 under the Air Force HYT ( Higher Year Tenure) for not making rank in sufficient time. A few months later the VA granted me 90% disability compensation and said they have to recoup my Involuntary separation pay at 100%. Is that correct? Per “M21-1MR, Part III, Subpart v, Chapter 4, Section B” page 4-B-35 it says AF members at 90% should on pay %50 back monthly if any. does this sound correct to you?

    • says

      Deion, I don’t have a good answer for you. I read the “M21-1MR, Part III, Subpart v, Chapter 4, Section B” page 4-B-35and that specific page references voluntary separation.

      Do you know if high year tenure is considered voluntary separation, or if there is another page you should be looking at?

      My recommendation is to contact someone at the VA and ask them to show you the reg that states your compensation should be withheld at the 100% rate. They should either be able to give you the reference, or change it in the system if it should be at a lower rate and hasn’t been updated yet. Best of luck, and thanks for your service!

  17. Heather Scott says

    Ryan,
    I was involuntary separated and paid full separation pay, however I had to pay the full amount back prior to receiving my first VA disability paycheck. I was recently told that they changed that policy. Do you know if in fact this has been changed?

    • Deion says

      Heather, where did you hear or read that at? I am also in your situation with recoupment. Also can they tax us on something we were paid…but we paid back to the government?

  18. Brenton says

    Ryan,

    I was involuntarily separated due to the draw down of forces. My DD214 states my separation pay was of the “involuntary” variety. I received the 100% rating with a 3 year Army Reserve contract.

    I have recently been rated by the VA, and understand the why behind the recoupment of my separation pay. My question is as follows… Am I still REQUIRED to complete the three years with the Regular Reserves, or would I be able to bump myself down to Inactive Ready Reserves since I no longer have to worry about my pay being recouped, as it is already being done?

    • says

      Brenton, Thank you for contacting me. That is a great question, but that’s one I don’t have an answer to.

      I believe the official policy is members are required to sign on for 3 years into the Regular Reserve, but I don’t know what happens if there are medical conditions that would prevent the member from serving. My guess is you would go in front a a medical Performance Evaluation Board (PEB) and the Army would determine what to do from there. But that is only a guess.

      You will need to contact HRC or the Reserve unit they assign you to for further guidance. Sorry I don’t have a concrete answer for you. I wish you the best with your health and your transition, and above all, thank you for your service!

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