SECTION VI SUMMARY OF PRINCIPAL FEATURES OF THE MILITARY RETIREMENT SYSTEM 1. Nondisability retirement-Conditions for eligibility.-Any Regular or Reserve commissioned officer or warrant officer may be retired upon application and approval by the Service Secretary after 20 years of active service, at least 10 of which are commissioned service for commissioned officers. Enlisted members may request retirement after 20 years of service. Reserve personnel can retire at age 60 if they have 20 years of service, either active or inactive. Regular officers, except for a portion of those serving in flag or general officer rank, are subject to mandatory retirement based on the principle of "up or out". The mandatory retirement points vary by service and rank. There are also special provisions which eliminate regular officers prior to the time they would normally have been eliminated under the permanent provisions. Amount of benefit.-The amount of retired pay is equal to the basic pay of the retired grade of the member multiplied by 2% times the number of years of credited service. Maximum benefit is 75% of such basic pay. Credited service for enlisted men is active service only. Officers are credited with all active service and may receive credit for inactive or constructive service according to the branch of service, and depending on whether retirement was voluntary or mandatory. The retired grade of the member is generally the grade, whether temporary or permanent, in which he is serving on the date of retirement. An enlisted man or warrant officer retiring with less than 30 years of service who held a temporary higher grade than the grade in which he retired receives retired pay in the grade held at time of retirement until his total service (active plus retired) reaches 30 years. At that time he is advanced to the next higher grade and his retired pay is based on the higher grade. An enlisted man or a warrant officer holding a Reserve commission who completes 20 years of active service, of which 10 years is commissioned, may retire and receive retired pay on the basis of the commissioned rank. 2. Disability retirement-Conditions for eligibility.-A member who has completed 20 years of service or has a disability of 30% or more by Veterans' Administration rating may be retired for permanent disability if he is physically unfit to perform the duties of his grade and the disabiltiy is service incurred. If disability may not be permanent, the member is placed on the temporary disability retired list and subject to physical examination no less than once every 18 months. After 5 years he must either be retired for permanent disability or removed from disability list if disability is less than 30% and he has less than 20 years of service. Amount of benefit. The benefit is determined by multiplying basic pay of the member's retired grade by the greater of: (1) the % of disability; or (2) 22% multiplied by years of active service. Maximum benefit is 75% of such basic pay; minimum benefit is 30% ; however, minimum is 50% while on temporary disability retired list. A member has the option of receiving disability compensation from the Veterans' Administration rather than disability retired pay. 3. Disability severance pay-Conditions for eligibility.-A member found unfit for further service but not eligible for disability retired pay may receive disability severance pay in a lump sum. Amount of benefit. The amount of this pay is two months basic pay for each year of service, but not to exceed 2 years of basic pay. 4. Deferred retirement (vesting).—Not applicable. 65-066-72-No. 38-7 5. Annuities to dependents upon death in active service.-No provision under military retirement system; however, members are covered under Serviceman's Dependency and Indemnity Compensation. Condition for eligibility.—Payable to survivors of members who die in line of active duty, or following service if death is result of service connected disability. Amount of benefit.-Widow--varies by member's pay grade from $184 for widow of an E-1 to $469 for widow of an O-10. Payable until death or remarriage. (See table of monthly dependency and indemnity benefits, p. 7532.) Children (when widow is dead or remarried).-One child, $92 per month; 2 children, $133 per month; 3 children, $172 per month; more than 3 children, $172 plus $34 for each child in excess of 3. Payable until age 18 or age 23 if a student. Children (when widow receiving benefits).—Widow's benefit is increased by $22 for each child. Payable until age 18 or age 23 if a student (see section (b), Table 1, p. 7532). Additional benefits provided through social security. 6. Annuities to dependents upon death in retired status. (a) None from the military retired pay system unless the member had participated in the retired serviceman's family protection plan and had voluntarily accepted a reduced amount of monthly retired pay. Under the retired serviceman's family protection plan a member may elect to receive in lieu of his regular benefit an actuarially reduced benefit payable during his life, with amounts between one-half and one-eighth of his retired pay continued to his surviving designated beneficiaries. Payments to surviving widow terminate upon her death or remarriage. Payments to an eligible child cease at age 18 or at age 23 if a student. Such an election must be made prior to completing 19 years of service or at least 2 years prior to receiving retired pay, if after the 19th year of service. The program is designed to be self-financing. (b) When death of retired member is determined by Veterans' Administration to have been a result of a service connected disability, the widow is eligible for monthly dependency and indemnity compensation benefits (see 5 above). 7. Other retirement and survivor benefits. Available to military personnel through the social security system. Military personnel are covered by social security system. 8. Contributions to retirement. The military retirement system is not funded. Congress makes annual appropriations sufficient to meet current benefit payments. Military members therefore make no direct payment towards retirement. 9. Adjustments of retired/retainer pay for uniformed services (10 USC 1401a). Prior to 1 June 1958 retired pay of military personnel was computed on the basic pay of a member on active duty of equal grade and service. When basic pay was increased retired pay was correspondingly increased. P.L. 85-422 departed from this practice and on 1 June 1958 increased retired pay for all personnel by 6%. P.L. 88-132, 2 October 1963 established the principle of adjusting retired pay based on the Consumer Price Index (CPI). Under that law when the average CPI for a calendar year had increased by 3% or more above the CPI at the time of the last adjustment, retired pay would be increased by that percentage (rounded to the nearest tenth of one percent) effective 1 April of the following year. P.L. 89-132, 21 August 1965 modified that formula to provide that when the monthly CPI increased by 3% over the CPI at the last adjustment and sustained that level for three consecutive months, retired pay would be adjusted to the highest percent of increase in that three month period, effective on the first day of the third month following that period. P.L. 89-132 increased retired pay by 4.4% based on the CPI for September 1965. P.L. 90-207, 16 December 1967. further refined the retired pay adjustment formula (a) to insure that persons with the same grade, length of service and basic pay at the time of retirement received the same retired pay; (b) persons retired after an increase in basic pay rates will, at the first ensuing retired pay increase, receive an increase equal to the percent of increase in the CPI between the month preceding that basic pay increase and the month which was the basis for the retired pay increase (Base Index month). P.L. 91-179 which was effective 1 November 1969 adds 1% to retired pay adjustments under the CPI formula. The legislation does not apply to partial adjustments. The purpose of P.L. 91-179 was to offset the erosion of retired pay resulting from the time lag in the adjustment formula. Summary The preceding historical summary reflects the progressive effort made by both the Executive Branch and the Congress to develop an automatic mechanism which would, in the last analysis, guarantee every military retiree that the purchasing power of the retired pay to which he was entitled at the time of retirement would not, at any time in the future, be eroded by subsequent increases in consumer prices. The pertinent monthly CPI's and percentage increases above the Base Index are as follows: Rounded to 4.3 percent. Rounded to 4.6 percent. Effective Jan. 1, 1971, the Bureau of Labor Statistics converted the Consumer Price Index from a 1957-59 base period to a 1967 base period. The May 1970 base, adjusted to the new CPI, was 115.7. + Bounded to 3.5 percent. ADJUSTMENTS IN RETIRED PAY SINCE 1958 The following table shows the percentage increases in military retired pay beginning with the increase in 1958: Numbers in parentheses are the percentage increases in retired pay referred to in (b) above. For those in 1963 who were allowed to recompute their retired pay at the 1958 rates, the average increases were: 'Cumulative increase applies to retirees who retired before June 1, 1958. 2 In 1963 certain members who retired before June 1, 1958, were given the option of adjusting their retired pay by 5 percent or recomputing their retired pay on the basis of the June 1, 1958, basic pay rates. TABLE 1.-MONTHLY PAYMENT TO A WIDOW UNDER DEPENDENCY AND INDEMNITY COMPENSATION EFFECTIVE 1 JANUARY 1972 (P.L. 92-197)* *See sec. 411 of title 38, U.S. Code. 1 If the veteran served as Sergeant Major of the Army, Master Chief Petty Officer of the Navy, Chief Master Sergeant of the Air Force, or Sergeant Major of the Marine Corps, at the applicable time designated by sec. 402 of this title, the widow's rate shall be $270. 2 If the veteran served as Chairman of the Joint Chiefs of Staff, Chief of Staff of the Army, Chief of Naval Operations. Chief of Staff of the Air Force, or Commandant of the Marine Corps, at the applicable time designated by sec. 402 of this title, the widow's rate shall be $503. (a) Dependency and indemnity compensation is paid to a widow, based on the pay grade of her deceased husband, at monthly rates set forth in the table above. (b) If there is a widow with one or more children below the age of eighteen of a deceased veteran, the dependency and indemnity compensation paid monthly to the widow shall be increased by $22 for each such child. (c) Whenever there is no widow of a deceased veteran entitled to dependency and indemnity compensation, dependency and indemnity compensation shall be paid in equal shares to the children of the deceased veteran at the following monthly rates: (1) One child, $92. (2) Two children, $133. (3) Three children, $172. (4) More than three children, $172, plus $34 for each child in excess of three. (d) The monthly rate of dependency and indemnity compensation payable to a widow shall be increased by $55 if she is (1) a patient in a nursing home or (2) helpless or blind, or so nearly helpless or blind as to need or require the regular aid and attendance of another person. (e) Payments from the Veterans' Administration are made after establishing eligibility of widow. Eligible are widows whose husbands either died while in an active duty status or of a service connected disability. |