Military Update: New military pay table inspires longer careers
When he read last fall that Congress had approved a new 40-year military pay table, Capt. Mark P. Larson, a Navy dentist with 36 years’ service, tagged the report, he said, as “too good to be true.”
Recently Larson learned it is true, and significant. If he retires in May, when he reaches 37 years of service, the new pay table will boost his retired pay by almost $21,000 a year, from $81,321 to $102,300.
Suddenly, he says, other Navy dentists are asking how they might extend their careers past the traditional 30-year ceiling.
Bill Carr, deputy undersecretary of defense for military personnel policy, said the reshaped table “clearly invites longer careers” which complements “the department’s personnel strategies.”
He added that new table also ensures “that those E-9s who asked to stay on for the war saw their pay rise, as they should.”
Congress raised lifetime compensation for longer-serving members in several ways when it passed the 2007 defense authorization act last fall.
Here are details as explained by Defense pay officials.
Retired pay multiplierServicemembers with longer than 30-year careers through last year saw retired pay capped at 75 percent of basic pay. That is, their retired pay multiplier of 2.5 percent of basic pay for each year served maxed out after 30 years.
Effective Jan. 1, members serving beyond 30 years see their 75 percent multiplier continue to grow at 2.5 percent a year. So Larson, if he retires at the 37-year mark, would receive retired pay equal to 92.5 percent of basic pay. It climbs to 100 percent if he stays for 40.
The change applies to all “initial” retirements on or after Jan. 1. Those who retired earlier can only avoid the 75 percent cap if they are recalled to active duty and serve for at least two more years. But the recall period must have lasted past Jan. 1, 2007.
A servicemember who does serve two or more years on recall and retirees again after Jan. 1, will have their retired pay multiplier recalculated to include all time served. But a member recalled for less than two years will have their multiplier recalculated to include their initial period, capped at 75 percent, plus 2.5 percent a year for additional recall time.
The change in law did not remove of the 75-percent cap on the multiplier for disability retirements, said officials.
40-year pay tableOn April 1, a 40-year pay table goes into effect. It adds new “longevity” steps for basic pay of officers in the ranks O-6 through O-10, warrant officers in grades 4 and 5, and enlisted E-8s and E-9.s All others continue to see longevity raises top out at 26 years.
For E-8s, W-4s, O-6s and O-7s, the table provides only one new longevity raise, at 30 years of service. The extra increase April 1 will range from $95 a month for the E-8 up to $206 a month for the O-7.
Longer-serving O-8s will see two new longevity raises, at 30 and 34 years. E-9s, W-5s, O-9s and O-10s will see three new raise points, at 30, 34 and 38 years of service.
For example, an E-9 who reaches 38 years will draw basic pay starting in April of $6,382 a month, $869 more than paid under the current table. A four-star officer (O-10) with 38 years will begin receiving $16,796 a month, $2287 more than the current pay table provides.
When these long careers end in retirement, the combination of higher multiplier and higher basic pay will produce far more generous retirements.
An E-9 who served 40 years and retired last year received 75 percent of $5,394 a month or an annual retirement of $48,546. If that same E-9 were to retire April 1 this year, his retired pay would be $76,572 a year, a difference of $28,026.
Officers see an even bigger jump because of the following third factor.
Executive cap liftedThrough 2006, basic pay for generals and admirals could not exceed Executive Level III federal civilian pay. In 2006, that pay cap was $12,667 a month. It dampened retired pay too because the 75 percent multiplier was applied only to capped basic pay.
Congress raised that cap to Executive Level II on Jan. 1, which lifted monthly basic pay for senior officers to a maximum of $14,000.
But lawmakers did them one more favor. It changed the law so the executive level pay cap is ignored when calculating flag officer retired pay.
The effect of all these changes is huge. A four-star officer who retires after April 1 will get an annuity equal to 100 percent — not 75 percent — of final basic pay. And basic pay will be much higher. An O-10 who retirees at 40 years April 1 will get 100 percent of $201,546 versus 75 percent of $151,999. The difference a year makes: $87,547 a year in retired pay.
Impact on reservistsThe pay changes above apply to long-serving Reserve and Guard personnel, too, including gray-area reservists who will reach age 60 and begin drawing retirement on or after April 1.
As for Capt. (Dr.) Larson, he had retired in July 2002 on a Friday and returned to the same office Monday in the status of “retired, retained on active duty.” The Navy uses that authority because it needs experienced dentists. Up to 25 are retained this way, agreeing to delay retirement while they draw full pay and allowances.
Larson last week provided crowns, bridges and dental implants to help get another 3,500 Marines ready to deploy to war. He doesn’t plan now to retire until July 2009, when he is 62. If this is a trend, he favors it.
The revised pay table, he said, “is almost too good to be true.”
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