Starting in March, the Defense Finance and Accounting Service will phase in a new, more reliable and effective pay system for the military.

Called the Forward Compatible Payroll (FCP), it promises far fewer errors, an easy-to-understand Leave and Earnings Statement for servicemembers, and instantaneous adjustments to pay records.

FCP “should have a huge impact on our efficiency in providing pay services,” says Sue Schallenberg, director of what DFAS calls its Military Pay Operations Transition Group.

Phase-in of FCP will begin with the Army Reserve and National Guard in March, followed by the active-duty Army in July, the entire Air Force next November and the Navy Department, with its more complex shipboard environment, in March 2006.

That will mark the end of a problem-plagued pay system developed during the Vietnam War. DFAS officials suggest they’re as inclined as servicemembers to say “good riddance.”

The current military payroll scheme, called the Defense Joint Military Pay System (DJMS), actually is two systems, one for active duty and another for reserve component forces. The two are compatible only with enormous effort, say DFAS officials.

The reserve system was designed to pay members for weekend drills and two weeks’ active duty a year. Relying on it to provide accurate and timely pay to a few hundred thousand mobilized reservists has been difficult, requiring frequent manual intervention which raises the risk of errors.

Indeed, the Government Accountability Office blamed the reserve pay system in part for a plague of pay errors that hit Army Reserve and National Guard members mobilized since 9/11 to guard the nation and fight wars in Afghanistan and Iraq. GAO studied a sampling of mobilized units and estimated that more than 90 percent of activated soldiers suffered the frustration of significant errors in pay in 2002 and 2003. DFAS and the Army have taken aggressive measures since to ease the errors.

With FCP, permanent relief is on the way.

To spread that word, Schallenberg in Denver and Sylvia Hanneken, program manager for military pay system transition in Cleveland, discussed FCP and the system it will replace in a phone interview with Military Update.

The current system, DJMS, is written in a programming language developed in the late-1960s. So it is cumbersome, fragile and woefully inadequate to handle recent complex changes to military pay. With DJMS, if Congress approved a new pay feature, like Assignment Incentive Pay, it takes on average 12 to 18 months to automate such payments. Some pays, such as medical bonuses, can’t be programmed.

“The workforce within DFAS is actually computing and manually manipulating members’ pay to make sure that they are getting the right pay,” said Schallenberg.

FCP will end the need for 95 percent of current “workarounds” for reserve mobilization and new pays, said Schallenberg, and allow DFAS to shift workforce focus to “prevention rather than after-the-fact corrections.”

The process of moving reservists and National Guard members to activated status, with all appropriate pay and entitlement changes, “will be as simple as making a single change on the record,” she added. Pay specialists no longer will have to re-enter basic information on tax exemptions, marital status, numbers of dependents, allotments or what financial institutions should receive direct deposits of members’ pay.

“There will be no redundant data entries like we have today,” said Schallenberg.

Also to disappear will be confusing entries on Leave and Earnings Statement, such as the “Save Pay” field where any number of unnamed entitlements might now be listed. Instead, servicemembers will see a full and clear list of entitlements and the amounts paid, allowing them to better understand and manage their paychecks.

The revised LES “will be very specific … so they won’t feel like they have to go to another source to translate,” said Schallenberg.

With FCP, pay specialists will work in a friendly Windows-based application versus rigid “green screens” used with DJMS.

DJMS software is so old and inflexible that when states change their tax rates, DJMS has to be reprogrammed, which can take 12 to 18 months. That’s why a surprisingly high proportion of servicemembers every year receive corrected W-2s, or Wage and Earning Statements, from DFAS. During the first half of 2004, for example, 2.7 percent of servicemembers received corrected W-2s for their 2003 tax years, so thousands of early tax filers had to file corrected tax returns.

FCP, by contrast, will use existing commercial tax packages that contractors are obligated to keep up-to-date with the latest state tax laws to allow timely recalculations of member tax liabilities.

Another benefit to FCP will be round-the-clock pay record updates versus nightly batch updates under DJMS.

“This essentially means records are in a ‘pay ready’ status at all times,” said Schallenberg, whether updated by pay specialists or by members using the Web-based MyPay tool to change addresses, allotments or other pay features. With FCP, reservists activated longer than 30 days will be able to use MyPay to make payroll allotments.

FCP will restore member confidence in their pay system, particularly among those aware of pay problems suffered by mobilized reservists, said Hanneken. It will eliminate system challenges that led to operational problems, she added, and ultimately benefit all servicemembers.

To comment, write Military Update, P.O. Box 231111, Centreville, VA 20120-1111, e-mail or

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