Reserve Military Pension for “Discharge” Instead of “Retired Awaiting Pay”

“Am I eligible for a military retirement?”

A reader writes:

“I hope you can answer my question, or point me to more information. After more than 20 years in the Army National Guard, including a year of deployment in Iraq and numerous temporary home-station full-time orders, I went into the IRR. I was caring for an elderly parent and could no longer serve. I had originally thought I might return to the Guard, but that turned out not to be possible, and I ETS’ed from the IRR. I received my “twenty-year letter” the year before I went into the IRR.”

“I had read about the process to apply for retirement, but I wasn’t sure if my situation in going into the IRR had made a difference. I didn’t receive any information from the Guard when I went into the IRR, and I didn’t get any information from the Reserves either. I didn’t really pursue it, either, as it was an incredibly stressful time for me – my parent’s final years of life were difficult, and the decision to leave the Guard was the most painful in my life. I had very little contact with the Reserve unit that I was assigned to for IRR – I never even got an ID card, and I have no “grey card” now – the person in charge of making ID cards always seemed to be gone when I went there. The Reserve unit is over 50 miles from my home, and I could not leave my parent at home alone for more than a short time without getting a home-care aide to come in, which was very expensive.”

“I wasn’t given any information about having a choice of retirement. I was given an honorable discharge when my ETS date came. It came in the mail. I didn’t get any package of information, from the Reserves or the Guard. I didn’t get any counseling of any kind.”

“Am I eligible for retirement pay? What do I have to do? Thanks for any help you can offer.”

First the good news: Yes, you’re eligible for a National Guard military retirement. You received your Notice of Eligibility (the 20-year letter) before you were discharged. Your pension will probably start at age 60 but there’s a remote chance that it could start up to a year earlier. Your Tricare benefits will start at age 60.

The “other” news is that you have some paperwork to catch up on. You may also need to make a decision about Survivor Benefit Plan insurance. Luckily most of this can be started online.

You say that you ETS’d from the IRR. That can take two forms: “retired awaiting pay” or “resign”. If you elected were handed the “resign” option then you’ll need to request a retirement pay application packet. That’s described at the Army National Guard G1 Personnel Gateway.  You could contact your nearest Army National Guard unit to start the process, or you could phone another unit in your state to discuss the retirement packet. The Army National Guard G1 staff doesn’t list their phone numbers or e-mail addresses, but you could start with the Army Human Resources Center. More links and forms are at the Army National Guard G1 Personnel Gateway website page on applying for non-regular retired pay.

You may be told that you should start this paperwork no more than nine months prior to the date at which you’ll be eligible for retired pay. However, you’ll probably still want to make sure that you understand what websites to use to start that process and who you could contact for help.

The discharge means that your retired pay will be calculated on the pay tables in effect at the date of your ETS and on the years of longevity in your rank at that time. In other words, your pension eligibility did not keep up with inflation. If that’s the case then don’t use a military retirement pay calculator— their numbers will be too high. You’ll need to manually calculate your retirement pay, or have it done by the National Guard or the Defense Finance & Accounting Service. Although you may have to wait until nine months before your retirement begins to request your retirement package, you can ask for the calculation now.

One other wrinkle: If you were deployed to a combat zone after 28 January 2008 then you may be eligible for retired pay a day earlier for each day of the deployment. You would have had to serve at least 90 days after the date of that legislation, and your retirement pay would start at least 90 days earlier. However, your Tricare medical benefits would still start at age 60.

I’ll put some pension amount numbers on a generic example that you can tailor to your specific rank and service dates. (I’m going to cherry-pick numbers that will avoid messy calculations & fractions, but in most cases, the math is carried out to three decimals and rounded to two.) Let’s assume that two E-8s complete 21 years of service with 5400 points by the end of 2002. One of them chooses to “retire awaiting pay” while the other (for personal reasons) elects to resign for a discharge. (Resigning means that they cannot be recalled to Reserve/Guard duty and cannot be mobilized.) They’ll both be age 60 on 1 January 2013 (10 years later) and will start drawing their retired pay then.

Because they both joined the service after 7 September 1980, they’re under the High Three retirement system. Their “base rate” for determining their retired pay will be the average of the highest 36 months of pay that they earned. However, here’s where the difference in their retirement decisions kicks in.

Calculating the Pension Difference

I don’t have a link to the Army Reserve instruction, but here’s the wording in the Navy’s Reserve instruction BUPERSINST 1001.39F (whose revision is nearly finished and should be back on the BUPERS website in a month or two*):

“Note that for purposes of entering the pay tables, a member’s longevity starts with the pay entry base date (PEBD) and continues to accrue as long as the member holds Retired status until the member starts to draw retired pay. Because of this standard, most reserve members will max out on the longevity scales by the time they reach age 60.

“Also note that should a member request and receive a discharge, instead of transferring to Retired Reserve status, at an age of less than 60 years, longevity would no longer accrue and base pay would be calculated on pay scales available at the discharge date.”

The E-8 who “retired awaiting pay” will receive their pension at the pay tables in effect when they turn age 60, and at the maximum longevity for that rank. (This is the reward earned for accepting the risk of being recalled to Reserve duty or even mobilized before age 60. Admittedly it’s a very small risk, but it’s a risk.) During the years before they file for retirement and actually start drawing their pension, the value of their pension will keep pace with the growth of the military pay tables. There’s no guarantee that military pay will keep up with any wage or price indexes, but Congress and the service chiefs know that they have to be willing to pay for military readiness.

This E-8 would use the military pay tables for the three years before they turn age 60: 2010, 2011, and 2012. Because their longevity continued to accrue while “retired awaiting pay”, they’d use the maximum longevity for their rank. Their E-8 monthly pay scales for these years are $5336.40, $5411.10, and $5497.80. The average of those 36 months is:

[12x$5336.40 + 12x$5411.10 + 12x$5497.80] / 36 = $5415.10.

The E-8 who was discharged would use the pay tables in effect at the date of their discharge and at the longevity held at discharge. Their E-8 monthly pay scale for their longevity was >18 years in 2000 ($2875.50) & 2001 ($3041.10) and >20 in 2002 ($3420.30). (Of course, if they went >18 or >20 during the year then you’d use some months in one longevity column and the rest of the year in the next longevity column.) The average of those 36 months is:

[12x$2875.50 + 12x$3041.10 + 12x$3420.30] / 36 = $3112.30

You can already see that for this particular example the Reserve/Guard member who was discharged instead of “retired awaiting pay” has suffered a heavy financial penalty for having no risk of recall or mobilization during those 10 years. Their pay base for the pension formula is only 57% of the amount for the “retired awaiting pay” servicemember.

Once the retirement High Three “pay base” has been determined, the Reserve/Guard retirement pension calculation is the same for each servicemember: their points are divided by 360 (12 30-day months in a year) and multiplied by 2.5%. In this case it’s 5400 / 360 x 2.5% = 37.5%.

The pay base is multiplied by the percentage and rounded down to the whole dollar to get the monthly pension amount.

E-8 retired awaiting pay: $5415.10 x 37.5% = $2030.

E-8 discharged: $3112.30 x 37.5% = $1167.

Back to the reader’s question: the Reserve unit discharged you without counseling, so they could be hypothetically be accused of negligence in their retirement processing. You may be entitled to appeal your discharge and have it revised to “retired awaiting pay”. It’s also possible that the Reserve unit decided that your need to care for your parent meant that you should not be at risk of recall, so they made the decision for you. In that case (whether or not the decision was made with your input) the appeals process may determine that the decision was the correct response to the situation.

Of course, your actual pension calculation will be different from this example. You’d use your actual rank and longevity pay table column at discharge as well as your final point count. Comparing your actual “discharge” pension to a “retired awaiting pay” pension may also require some speculation. If you’re younger than age 60 then you’d have to predict what the pay tables might look like at age 60. Only then could you estimate how much the Reserve unit’s actions cost you.

I can’t predict how an appeal would turn out, and you’d need to seek the advice of your own attorney. The difference between the two pensions in the example is $10,356/year. (In your case the difference might be less.) I don’t know how much a lawyer would charge for drafting the appeal and pursuing it, but it could easily be over $10,000. In addition, it could drag on for months or even years of processing and more appeals to higher authority. This is a very hard decision to make on your own, and a lawyer would help you frame the discussion. However, in this case, you may very well only receive the justice that you can afford to buy, and even then your appeal may be turned down.

Do any of you readers have any other advice? Have any of you ever processed an appeal of “retired awaiting pay” versus discharge? Contact me or send me an e-mail, and I’ll pass it on to this reader.

[* Thanks to Navy Reservist Mark Bell on Linkedin for updating me on the BUPERSINST 1001.39 status.]

Related articles:
Retiring from the Reserves and National Guard
Calculating a Reserve retirement
Comparing an E-7 active-duty pension to an E-7 Reserve pension
Military Reserve and National Guard retirement calculators
Reserves and National Guard: Tricare Reserve Select and Tricare Retired Reserve health insurance
Reader questions on Reserve retirement Tricare and points
Guest Post Wednesday: “My Road to a Reserve Retirement”

About Doug Nordman

Author of "The Military Guide to Financial Independence and Retirement" and co-author of "Raising Your Money-Savvy Family For Next Generation Financial Independence."
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4 Responses to Reserve Military Pension for “Discharge” Instead of “Retired Awaiting Pay”

  1. donald lynch says:

    Im about to ETS in Aug 2020 and I have not received my 20 year letter yet. Do I need to extend so that I can receive my letter and retirement? I did check, I have 20 years and some months, but I have not received my letter yet and I dont think I will receive it by the time I ETs in August.

    • Doug Nordman says:

      Great question, Donald, and it’s all too common across the Reserve & Guard services.

      Talk with your chain of command and your personnel office, but I’d do everything possible to get that NOE in your hands before ETS. If it takes an extension request to get your service moving on your NOE, then it’s worth asking for that too.

      You want to verify your 20 good years (and confirm the point counts with your service) so that you can file for retired awaiting pay instead of dealing with ETS paperwork.

  2. Robert Avey says:

    I retired from the Air Force Reserves back in 2003 with 21 good years. I am turning 60 in the third quarter of this year and I am trying to get everything ready so I can request my retirement at the earliest time. Having learned the difference between retiring-awaiting pay an retiring-resigning, what do I look for in my paperwork that states which way I retired? I do not remember being given a choice or getting an explanation.

    • Doug Nordman says:

      I’m not familiar with the forms of the individual services, Robert, yet you’re probably retired awaiting pay.

      If you had opted for discharge/resigning in 2003 then you would have seen an even thicker stack of paperwork with disclosures and acknowledgments.

      In the 20 years I’ve written about military personal finance, I’ve only heard from one vet who elected to resign instead of retiring awaiting pay. That was due to being a family caregiver and wanting zero risk of being involuntarily mobilized.

      Since you’re within nine months of turning age 60, I’d check the Reserve Personnel Center’s website. All of the Reserves have been left shorthanded and backlogged due to civil-service retirements and pandemic disruptions. You will get your pension funds backdated to your 60th birthday, but it’s not certain that you’ll get your first deposit on time.

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