Military Forcing Some Officers to Retire with Enlisted Pay

Update: This article was originally published in Nov. 2014 and covered involuntary retirements for a select group of military officers. Due to the way the law was written, many of these officers were scheduled to retire with enlisted pay. That is, until their story was made public and resulted in a Congressional inquiry. The Army…
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Update: This article was originally published in Nov. 2014 and covered involuntary retirements for a select group of military officers. Due to the way the law was written, many of these officers were scheduled to retire with enlisted pay. That is, until their story was made public and resulted in a Congressional inquiry. The Army reversed course and allowed these members to remain on duty and retire as commissioned officers. Read more about the aftermath on The Military Guide, which helped break this story. Or continue reading to see what happened, and why.

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 service members who arguably have it worse than others: some commissioned officers are being forced to retire from the military, but they don’t have the minimum service time to retire as an officer. And unfortunately, they are being retired as enlisted members.

Rules for Retiring as an Officer

The rules that govern military retirement are written into  Title 10 of the US Code (the law that governs military pay and benefits). This can get a bit complicated, so I wrote a full guide that covers the service requirements for retiring as an officer.

This next section is a synopsis of the general rules.

Retiring from Active Duty

Military members to have 20 years of active duty service to be eligible for active duty retirement benefits, unless they qualify under TERA rules, which require the member to have at least 15 years of service.

To retire as an officer, the service member must have served at least 10 years as a commissioned officer. However, the Secretary of Defense can authorize the Secretaries of each service to allow members with only 8 years of commissioned service to retire as an officer.

Here are the applicable laws for officers retiring from active duty (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 7311: “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 7236 of this title, at least 10 years of which have been active service as a commissioned officer.”
  • Title 10 U.S. Code section 7311: “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.”

In other words, you need the following to retire as an officer from active duty:

  • 20 years of active duty service (waiverable to 15 or more under TERA)
  • 10 years of commissioned service (waiverable to 8 years if authorized by the SecDef).

Retiring from the Reserve Component

Retiring from the Reserve Component (Guard or Reserves) requires members to have 20 good years of service.

There is no service time requirement to retire as an officer in the Reserve Component.

Here are the applicable laws for officers retiring from the Reserve Component (Guard or Reserves):

(a)Except as provided in subsection (c), a person is entitled, upon application, to retired pay computed under section 12739 of this title, if the person—

  • (1) has attained the eligibility age applicable under subsection (f) to that person;
  • (2) has performed at least 20 years of service computed under section 12732 of this title;
  • (3) in the case of a person who completed the service requirements of paragraph (2) before April 25, 2005, performed the last six years of qualifying service while a member of any category named in section 12732(a)(1) of this title, but not while a member of a regular component, the Fleet Reserve, or the Fleet Marine Corps Reserve, except that in the case of a person who completed the service requirements of paragraph (2) before October 5, 1994, the number of years of such qualifying service under this paragraph shall be eight; and
  • (4) is not entitled, under any other provision of law, to retired pay from an armed force or retainer pay as a member of the Fleet Reserve or the Fleet Marine Corps Reserve.

Notice there is no language regarding time in service as a commissioned officer.

The Impact on Officers Being Forced to Retire Early

At the time this article was originally written in 2014, the Army was forcing many officers to retire under Force Shaping. Unfortunately, some of the officers who were forced to retire were 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 were just months shy of reaching the required 8 years.

And the difference is huge.

Impact on Retirement Pay

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 on 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 service members 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 earned the rank of 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 and potentially extend their service well beyond 20 years. 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 years as an officer)*. (Note: the numbers referenced utilize the 2014 pay scale, which was when this article was originally published).

  • 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 rates 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:

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About Ryan Guina

Ryan Guina is the founder and editor of The Military Wallet. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

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  1. Mark says

    I’m retired US Army Enlisted during the drawdown in 90’s I took early retirement at 18 years. I was looking at medical board. The SGM said stay in. My CO said if I was you I would retire. I had great respected for my CO who was a SGT when he commisioned as a 2nd LT. No regrets. I had a few months over 18. The Army gave me 19 for retirement. It’s ashame that those falling short are loosing so much.

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