Can you lose your military retirement pay?
There are several reasons you could experience a suspension of military retirement pay, which can be either temporary or indefinite. Let's review the ways you could use your military pension and how you can prevent them.
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Qualifying for a military retirement pension takes time and hard work. Service members must accrue at least 20 qualifying years of service, and Reserve Component members aren’t eligible to start receiving benefits until age 60.
Considering those factors, military retirement pay is obviously not a benefit to take for granted. However, several reasons could suspend your military retirement pay, either temporarily or indefinitely.
Let’s discuss possible ways retirees can lose their military retirement pay so you can avoid unnecessary suspensions.
How can a military retiree lose their pension?
Losing your pension sounds like a punishment, but not every reason for suspending military retirement pay results from wrongdoing. But every suspension results from an action (or inaction) on the retiree’s part.
Here are 5 situations that could cause you to experience a temporary or indefinite suspension of your military retirement pay:
1. You Waive Retirement Pay
The most obvious reason you would lose your military retirement pay is if you intentionally waived it altogether. This often comes into play when you must choose between a military retirement pension and a civilian pension or another retirement benefits program.
For example, you might have to waive a portion of your military retirement pay to receive VA disability compensation. You cannot receive both types of pay unless you qualify for concurrent receipt (CRSC or CRDP).
You may also waive your pension if you participate in the federal service Military Buyback Program. In this program, federal employees who have served in the military can “buy back” their military service time to count toward their civilian federal retirement benefits. However, your active military time can only count toward an active duty pension or a federal pension, not both. Reserve Component members are an exception and can buy back their active service time to count toward both a military reserve retirement and a federal pension.
Active duty retirees who join federal employment must decide whether to waive their military pension to include their military service time when calculating their federal civilian retirement. This decision affects those eligible for pensions and benefits through the military and the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS).
2. You Are Incarcerated
Imprisonment for more than 60 days will reduce or stop your military retirement pay and benefits. They will usually resume after you are released.
However, the severity of the crime matters. While misdemeanors usually aren’t a lasting concern, felonies and crimes against the US can have an extremely negative effect and could even permanently cancel your military pension and benefits.
If your pension payments and retirement benefits were paused during your sentence, immediately inform the Defense Finance and Accounting Service (DFAS) and the VA upon your release. You may need to provide documentation such as a release order or a certificate of discharge from the correctional facility. Your military pension and benefits should be reinstated if you’re still eligible.
3. You Owe Alimony Payments
The Uniformed Services Former Spouses’ Protection Act (USFSPA) is a federal law that allows state courts to treat military retirement pay as divisible property in divorce proceedings. This law allows your military pension to be divided between the service member and the ex-spouse as part of the divorce settlement. Child support payments can also factor in.
The amount of the military pension that can be divided and used to pay alimony is known as “disposable retired pay.” This is the gross retired pay minus certain deductions, like VA disability compensation. The amount owed to the ex-spouse can be up to 50% of the disposable retired pay for property division alone, though this cap can rise to 65% when combined with child support or alimony garnishment.
If a military retiree is ordered to pay alimony and fails to do so, a court can direct DFAS to garnish the retiree’s retirement pay to satisfy alimony obligations. Garnishment is a legal process where a portion of the retiree’s pay is withheld and directed to the ex-spouse to fulfill alimony obligations.
To avoid losing a large portion of your military pension, comply with state and federal laws, pay any owed alimony, and seek legal counsel.
4. You Spend Time on the Temporary Disability Retired List
Spending time on the Temporary Disability Retired List (TDRL) generally does not decrease your military retirement pay. Still, circumstances can affect the amount of retirement pay you ultimately receive.
TDRL is used for service members who are found unfit for duty due to a disability that is not considered stable and requires periodic reevaluation. Service members on TDRL must undergo medical reevaluations at least once every 18 months to determine if their condition has improved, worsened, or stabilized.
If found fit for duty, you may return to service. However, if your condition worsens or stabilizes, you may be transferred to the Permanent Disability Retired List (PDRL) with recalculated retirement pay based on the final disability rating or years of service.
If your disability rating decreases upon reevaluation, this could reduce the percentage used to calculate your permanent retirement pay. For instance, if your disability rating is initially 60% and drops to 40% after reevaluation, your retirement pay will be based on the lower percentage.
If you disagree with the reevaluation results, you can request reconsideration or appeal the decision with the Physical Evaluation Board. This involves formally contesting the new disability rating assigned during the TDRL reevaluation process, with a detailed explanation of why you are contesting the new rating and all supporting medical evidence.
5. You Owe Readjustment Pay or Involuntary Separation Pay
Readjustment pay and Involuntary Separation Pay (ISP) are financial benefits provided to active duty service members and members of the Reserve Component (RC) who are involuntarily separated from military service under certain conditions. These programs are intended to help eligible RC members transition back to civilian life.
Readjustment Pay: Financial benefit provided to Reserve Component (RC) members who are involuntarily separated from the Selected Reserve and Ready Reserve. Generally, you do not need to agree to future service in the reserve component to receive this pay, since it is for those already serving in a reserve capacity.
Involuntary Separation Pay (ISP): Financial benefit provided to both active duty servicemembers and members of the RC due to involuntary separation. While servicemembers separated from active duty who receive ISP typically must agree to serve three years in the RC, RC members usually do not have this requirement.
Repayment rules can vary, but generally, if a servicemember who received ISP or readjustment pay re-enters military service and later earns a military pension, they may be obligated to repay the amount they received. Separation pay is given to service members in lieu of retirement benefits. Once a member retires, federal law requires repayment.
If a service member avoids attempts from the military to recoup readjustment pay or ISP, the amount owed may be withdrawn from retirement pensions if the member later rejoins the military and earns retirement.
Repaying money you received because of hardship may feel uncomfortable, but complete the process so your pension remains intact.
Don’t Lose Your Military Pension
Military retirement pay is a hard-earned benefit. Understanding what could suspend your pay is crucial to safeguarding your financial security and ensuring your well-deserved military pension continues uninterrupted. Act with caution and seek legal counsel if you feel you are at risk.
