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OVERVIEW
One of the many benefits of serving in the National Guard or Reserve is the opportunity to qualify for a non-regular (or Reserve) retirement. The basic requirements to qualify for a Reserve retirement are: (1) attaining 20 qualifying years of service (a qualifying year of service is credited for each year in which the member has earned at least 50 points during his or her anniversary year), and (2) serving the last six years in a Reserve Component. Upon reaching age 60, a Reserve retiree may begin receiving retired pay.
Many changes have occurred in the military retirement system since it was first introduced. While much has been written about changes in the active duty retirement system, few articles have been devoted to explaining the Reserve retirement system. The purpose of this article is to explain, in detail, the Reserve retirement system, the choices available upon receiving notice of eligibility to receive retired pay at age 60, and how those choices impact benefits for the individual member.
RESERVE RETIREMENT SYSTEM
Reserve and National Guard officers, warrant officers and enlisted members who complete a minimum of 20 years of qualified service (creditable retirement years) become eligible for retired pay to begin at age 60. Although eligible, the member must submit an application, in accordance with service regulations, prior to receiving pay.
A retirement year is defined as the 365 or 366-day period starting when the member first joins the military. For example—the member first joins the military on July 17. The retirement year begins July 17 of one year and runs through July 16 the following year. The retirement year does not change unless the member has a break in service.
A creditable retirement year, under the Reserve retirement system, is a year in which the Reservist or member of the National Guard earns at least 50 retirement points during their retirement year. Inactive point credit is earned for inactive duty training, Reserve membership, equivalent instruction, and correspondence courses. By law, members may receive credit for up to 60 inactive points for retirement years that ended before September 23, 1996, up to 75 inactive points for retirement years ending on or after September 23, 1996 and before October 30, 2000, and up to 90 points in the retirement year that includes October 30, 2000 and in any subsequent year of service. Points from these sources may be added to points earned from active duty and active duty for training for a maximum total of 365 or 366 points per retirement year. Points are credited on the following basis:
1. One point for each day of active service (active duty or active duty for training).
2. 15 points for each year of membership in a Reserve Component.
3. One point for each period of inactive duty training (or drill/unit training assembly).
4. One point for each day in which a member is in a funeral honors duty status.
5. Satisfactory completion of accredited correspondence courses at one point for each three credit hours earned.
There are currently two Reserve retirement systems that parallel the systems for active duty: the Final Basic Pay system and the High-Three system. To determine which retirement system a Reserve Component member is under, we must look at the same criteria that determines the retirement system for the active force - the Date of Initial Entry to Military Service (DIEMS). Again, that is the date an individual first became a member of a uniformed service. There is one Reserve retirement system for members with a DIEMS date before September 8, 1980 and one Reserve retirement system for those individuals with a DIEMS date of September 8, 1980 and later.
A member who retires under either system receives longevity credit for those years while a member of the Retired Reserve awaiting pay at age 60. However, this does not apply to a former member who is entitled to retired pay under either the Final Basic Pay System or the High-Three System. A former member is defined as an individual who elected discharge rather than transfer to the Retired Reserve anytime after receiving notification of eligibility to receive Reserve retired pay at age 60. In the case of a former member, regardless of the system under which the individual will receive Reserve retired pay, longevity credit ceases on the date the former member was discharged.
Final Basic Pay System
The first system, the Final Basic Pay system, is used for members with a DIEMS date before September 8, 1980. Reserve retired pay is computed using the following method:
1. Dividing all points credited in all years by 360 to convert the points into years of service, including fractions;
2. using the pay table in effect on the date that the member or former member reaches 60 years of age, taking the monthly basic pay rate for the member’s highest grade satisfactorily held and length of service at the time the member reaches age 60; or in the case of a former member, the length of service as determined when the former member was discharged;
3. multiplying that rate by 2.5 percent of the years of service (up to a maximum of 30 years of service) computed in (1) above.
High-Three System
The second system, the High-Three retirement system, is used for members with a DIEMS date of September 8, 1980 or later. Within this second system, there are two ways to determine Reserve retired pay. The first computation is for members who, at any point after receiving notification of eligibility to receive retired pay at age 60, transfer to the Retired Reserve while waiting age 60 (Retired Reserve Computation). The second computation is for members who choose to separate from the Reserve Components after receiving notification of eligibility to receive retired pay at age 60 (Former Member Computation).
RETIRED RESERVE COMPUTATION
The retired pay for a member who elects transfer to the Retired Reserve is computed using the average monthly basic pay rate to which the member would have been entitled at the highest grade satisfactorily held, had the member been on active duty during the entire period of the member’s high 36 months. In most cases, this would be the average basic pay rate in effect for the member at ages 57, 58, and 59. The formula to compute the retired pay is as follows:
1. Divide all points credited in all years by 360 to convert the points into years of service, including fractions;
2. take the average of the last 36 months of monthly basic pay for the member’s grade and length of service at the time the member becomes entitled to receive retired pay - age 60 (remember to include longevity increases while a member of the Retired Reserve);
3. multiply that rate by 2.5 percent of the years of service (up to a maximum of 30 years of service) computed in (1) above.
FORMER MEMBER COMPUTATION
An individual with a DIEMS date of September 8, 1980, or later, who elected discharge rather than transfer to the Retired Reserve, will have retired pay computed under the High-Three system using the average of the monthly basic pay in effect for his or her 36 months of service immediately preceding the date of discharge, or the highest 36 months of basic pay to which entitled based on a higher grade satisfactorily held while a member of the uniformed services. The formula to compute the retired pay is as follows:
1. Divide all points credited in all years by 360 to convert the points into years of service, including fractions;
2. take the average of the monthly basic pay in effect for the 36 months immediately preceding the date of discharge, or the highest 36 months of basic pay to which entitled while a member of the uniformed services.
3. multiply that rate by 2.5 percent of the years of service (up to a maximum of 30 years of service) computed in (1) above.
