Ask The Readers: What Law Allows An Officer To Be Retired On Enlisted Pay?

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[January 2015 update:  this inequity has been resolved.  The Army O-3s affected by the 2014 Officer Separation Board will remain eligible for officer pensions instead of reverting to an enlisted pension.  This happened because people spoke up and drew attention to the problem.  If you have a similar issue, let us know how we can help.]

 

A reader writes:

I was selected by the latest reduction in force board with a mandatory retirement date when I will have seven years of service as an officer and 13 prior enlisted years. (I was commissioned from the rank of E-7.) According to the latest release message, officers who serve eight years can retire as an officer. I will be 12 months short of that requirement because my service is forcing me to retire. Not only I am not being afforded the chance to fulfill the eight years, but according to my base retirement services they will reduce me to my last enlisted grade and retire me at that pay scale.

After a follow up with my base retirement office it was confirmed that the pension will be based on E-7 pay, as I will have to resign my commission. My pension’s pay base will be calculated from the last 36 months at E-7 base pay, despite the fact that I actually earned O-3E pay during that time.

Our base lawyer won’t help. Can you refer me to a civilian lawyer?

 

As the reader said, my first suggestion in these situations is to contact a military lawyer at the base legal service office. If that lawyer isn’t a good fit (or doesn’t want to help) then ask for a referral to a civilian lawyer who has experience with military retirement litigation. The LSO usually keeps a list of lawyers who have agreed to work with military clients, and the staff just recommends the next name in rotation on that list.

This retirement doesn’t appear to comply with the law, and I’d like to ask you readers for help. Can you refer me to a federal law, or a DoD policy, or a service’s instruction that allows this reduction in rank?

I’m surprised that the military would forcibly retire an officer at an enlisted paygrade. In this case, the officer was commissioned at a time when the service desperately needed experienced officers. Federal law Title 10 U.S. Code section 1370 says that an officer will “be retired in the highest grade in which he served on active duty satisfactorily, as determined by the Secretary of the military department concerned, for not less than six months.” Officers in the rank of O-4 and above have additional requirements for time in grade, but this officer is an O-3.

The federal law of Title 10 U.S. Code section 3911 goes on to say that “the Secretary of the Army may, upon the officer’s request, retire a regular or reserve commissioned officer of the Army who has at least 20 years of service computed under section 3926 of this title, at least 10 years of which have been active service as a commissioned officer.” That law was recently amended from 10 years to eight years. (Equivalent laws for the other services are in section 6323 and section 8911.) If Congress has amended the law to eight years for a drawdown, it seems reasonable for them to reduce it to seven years for special situations– like a tailored reduction in force at a particular rank. Another option would be for the service to continue this officer on active duty for another year to meet the eight-year minimum.

The service asked this officer to step up and make a commitment. It seems grossly unfair to change the rules before the servicemember has the opportunity to comply with all the terms of the commitment.

Let me make this clear: the officer is not just being reduced to the enlisted rank of E-7 on their retirement certificate. They’re also being forced to retire at the enlisted rank’s pay base.

The military’s High Three pension is based on the highest 36 months of pay received during at least 20 years of service. That’s in Title 10 U.S. Code section 1407(c): “… the total amount of monthly basic pay to which the member was entitled for the 36 months (whether or not consecutive) out of all the months of active service of the member for which the monthly basic pay to which the member was entitled was the highest, divided by […] 36.”

This O-3 has been serving as an officer for over six years and has a solid 36 months of O-3E pay. (The O-3E pay scale gives a higher base pay than O-3 to reward over four years of previous enlisted service. Otherwise an E-7 commissioning to O-1 would actually take a pay cut.) However this officer didn’t meet the minimum eight years of service to retire as an officer, so the day before they retired they’re considered to have resigned their commission and will retire as an E-7. Then Title 10 U.S. Code section 1407(e) says: Limitation for Enlisted Members Retiring With Less Than 30 Years’ Service.— In the case of a member who is retired under section 3914 or 8914 of this title or who is transferred to the Fleet Reserve or Fleet Marine Corps Reserve under section 6330 of this title, the member’s high-36 average shall be computed using only rates of basic pay applicable to months of active duty of the member as an enlisted member.”

In other words, the base retirement seems to be claiming that if the O-3 has to retire as an E-7, then all those years of officer pay never really happened. The servicemember’s pension is calculated from the highest three years of E-7 pay, not the O-3E pay that they’ve actually earned.

 

What’s the pension difference?

This officer’s retirement pay calculation is based on their pay earned during 2012 through 2014, but we can make a quick percentage estimate of the difference from the Defense Finance and Accounting Service military pay tables. The actual amount of the pension can be calculated manually from the DoD Financial Management Regulation at this post or using the retirement calculator on your service’s website (the non-public site behind the login). I can’t link to those non-public service retirement calculators from here, and the outdated public DoD military compensation High-36 calculator still uses the 2010 pay tables to project an estimate. (It’s not even worth the effort.) The pay tables give the most accurate answer for readers who can’t login behind their service’s firewall.

From 2014 the pay tables, an O-3E with over 18 years of service in 2014 is paid $6726.00 per month. An E-7 with over 18 years of service is paid $4323.90/month. The complete High-Three pension calculations are more complicated than these two numbers, but this estimate is close enough: the officer is being told that they’re going to lose 35% of their pension.

That may be legal according to the narrow interpretation of two separate sections of federal law, but the whole process just seems wrong. If that’s the military’s policy (ethical or not) then it appears to lack the “covenant leadership” required from both sides of a commitment.

 

Now what?

This O-3’s service has decided that all those years of officer pay were just a “bonus” and not actually a retirement benefit. That’s according to their interpretation of the law, but this situation is not explicitly covered in the law. The fact is that the O-3 earned over three years of O-3 pay and should earn a pension based on that pay, no matter what rank is printed on their retirement certificate. A creative interpretation of the law should not be permitted to change the facts.

I’m not a lawyer, but I think that the law needs to be changed to address what happens if an officer is not permitted to reach the full length of service required to retire at that rank.

I’m not holding my breath for that change.

What can this O-3 do while the retirement process is grinding away?

First, they can apply for a waiver of the eight years. They’re being forced to retire by their service, so they can request that their service obtain Congressional approval to waive the federal law requiring a minimum of eight years. In other words, the DoD would need to ask Congress to approve a waiver for the officers subject to this issue. I don’t think the officer should count on that, but they have to request it.

Second, they can apply for continuation on active duty for the additional year needed to reach eight years of commissioned service. Their service wants them out of uniform to meet their manpower limit by the end of the next fiscal year, but in this situation they’re actually punishing the officer with a seemingly arbitrary deadline. Simply extending the officer’s retirement date past the fiscal year deadline by only six months will give the officer a total of eight years of commissioned service and an O-3 retirement. Does DoD really need to hammer a servicemember’s pension by 35% just to meet an arbitrary personnel headcount deadline? More importantly, do they want to read about this on the front pages of Military.com or Military Times?

This isn’t just an isolated incident. This O-3 is being forced to leave active duty because the Army is drawing down 1100 captains. This O-3 just happens to have enough years of service to file for retirement, but the linked article includes a quote from the Army’s Vice Chief of Staff:

“Just think, if you’re a young captain… you’ve been in the army four to eight years, you could be a company commander who commanded in combat, and now somebody’s going to come up and say, ‘Hey, thanks for your service,’ ” he said. “It’s going to be a shock.”

The article continues on:

Most of the captains who receive notice this week will receive separation pay, while a few have accumulated enough time in the service to qualify for early retirement.

The Army hopes to move many into the Army Reserve ranks.

“We think about two-thirds of those who are selected would be great candidates to go into the Reserve component,” said [the] director of Army personnel management. “The Reserve component shortages are actually captains and midgrade NCOs, so it would improve readiness in the Reserve forces.”

Maybe a third option would be for this officer to apply (for yet another waiver) to transfer to the Reserve forces for a year. They’d no longer be part of the active-duty forces, so they would not count against fiscal year end strength. When they’ve reached their eight years of commissioned service, they could apply to retire as an O-3, with an O-3 pension calculated on O-3E pay.

I’ve never heard of that happening. But then I’ve never heard of the military cutting a servicemember’s pension by 35% before either– so this third option sounds just as achievable, and a lot more equitable.

The Army is separating 1100 captains because of the drawdown. Nobody has collected the data on how many of these officers are facing pension cuts, but this is not an isolated incident– this is potentially a class-action lawsuit.

Again, let me ask the readers: Can you refer me to a federal law, or a DoD policy, or a service’s instruction that would allows this officer to keep their high-three pension based on the O-3E pay that they’ve actually earned?

Let’s hear it in the comments, or contact me, or send me an e-mail.

 

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[mybooktable author=”doug-nordman”]

Related articles:
Military Retirement With Enlisted And Officer Service
The regulation for calculating an active-duty pension



WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

13 Comments
  1. […] Related articles: TheMilitaryWallet.com:   Military Involuntary Separation Pay Rules & Eligibility What Law Allows An Officer To Be Retired On Enlisted Pay? […]

  2. Reply
    Michael December 4, 2014 at 5:13 AM

    I would like to address a part of the law that everyone else seems to have missed. The affected officers are being told that they have to retire at their highest enlisted grade because they are not eligible to retire as officers under Title 10 Section 3911. In Title 10 Section 638a (the law authorizing early retirements) it states:

    (C)Officers, other than those described in subparagraphs (A) and (B), holding a regular grade below the grade of colonel, or in the case of the Navy, captain, WHO ARE ELIGIBLE FOR RETIREMENT UNDER SECTION 3911, 6323, or 8911 of this title, or who after two additional years or less of active service would be eligible for retirement under one of those sections and whose names are not on a list of officers recommended for promotion.

    As you can see in order to be selected by the Early Retirement Board you have to be eligible to retire under 3911. Or are with in two years of becoming eligible, which all the officers selected by this board are. The Army needs to allow these officers the time to complete their eligibility NOT be retired as enlisted.

  3. Reply
    CPT or SFC December 2, 2014 at 2:52 PM

    I am affected by this as well and there is nothing I could find that says if you are involuntary retired before 8 years as an officer you have to retire enlisted. Everyone keeps bringing up the 8 year law but it clearly says voluntary. Since there is nothing to use for our situation that is all they have to go by. Hopefully congress or the secretary of the army will correct this injustice, but unfortunately for me nothing seems to be happening in congress quickly. Maybe the President could just do an executive order.

    • Reply
      Doug Nordman December 4, 2014 at 4:29 AM

      Thanks for the comment, and that’s exactly the problem the Army needs to resolve.

      The Army’s legal distinction is that you’re being forced to separate, but you’re requesting retirement. Even though the request is being forced by the separation, it’s still a request made before reaching eight years of commissioned service. Legal, but not ethical.

      The presentation slides in the followup post (http://the-military-guide.com/2014/08/05/leaked-statistics-army-officer-separation-board/) say that this issue is “under review” by the Army. Some officers have been allowed to request an extension to reach their eight years of commissioned service, and others are pushing for a similar extension or waiver. Congress will only get involved through Congressional inquiry letters submitted by Army officers, and possibly by public testimony through one of the Armed Services Committees.

  4. Reply
    Doug Nordman September 10, 2014 at 5:34 AM

    Thanks, Bruce.

    I agree that federal law is being mis-applied to those who are eligible to retire, yet do not want to retire because of the huge financial penalty for reverting to an enlisted pension.

    I also hope the Army reviews their personnel numbers and does the right thing for those affected by this decision.

  5. Reply
    Bruce September 9, 2014 at 8:40 AM

    I am in this boat as well. I am a little shorter than he is. I am 47 days short of the requisite 8 years of commisioned service to retire as an officer. I am applying for a 60-day extension to my manditory retirement date. One thing that I did want to add is that those selected under this redution that are between 18 and 20 years of service are being allowed to continue on until they reach the 20 year mark. I believe that this is a huge injustice to the ones that fall into the category referenced in this discussion, merely because they are over the 20 year mark

  6. Reply
    Doug Nordman August 30, 2014 at 7:05 PM

    Good point, Bill, thanks. I’ll pass that on to him, although I don’t know if it tracks with his officer promotions.

  7. Reply
    Bill Schmidt August 28, 2014 at 7:52 AM

    Somenting else to ask for is a retroactive promotion to E-* and maybe E-9. If he had stayed enlisted he would now be an E-8 or E-9 by now.

  8. Reply
    Doug Nordman August 15, 2014 at 5:44 AM

    Great suggestion, Ryan! I’ve been e-mailed by another O-3E in this position who’s not eligible for retirement (not even TERA), and he says the Reserves/Guard are happy to have him.

  9. Reply
    Ryan August 14, 2014 at 10:36 AM

    This is a terrible situation. I don’t think this individual was singled out. Rather, it’s probably a perfect storm of bad circumstances. I would immediately start looking into a Active Guard or Reserve billet, with the hopes of being able to meet the minimum requirements for retirement. I’m sure it would be difficult to find such a billet. But it’s at least worth looking into to preserve the value of the officer retirement. In the mean time, I would try everything else I could to find a possible waiver or extension.

  10. Reply
    Kate Horrell July 24, 2014 at 7:44 AM

    I’m super-impressed that you were aware of this possibility, Rob. I’d never heard of it, and I study this stuff every single day. I agree that this is an absolutely unacceptable way to treat folks!

  11. Reply
    Rob July 24, 2014 at 5:23 AM

    This is EXACTLY the situation we were preparing ourselves for over the last few months. I’m prior enlisted and have 6 years as an officer. I’m retirement eligible but hoping for early retirement, so staying in the Army was the best option to make this happen. If they had forced me to retire now, I would have been looking at a HUGE pension reduction. Thankfully, the stars aligned and this didn’t happen. Good luck with your situation. It sounds criminal to me that the service can kick you out and bail on their promise to you.

    • Reply
      Doug Nordman July 26, 2014 at 6:27 AM

      Thanks, Rob. Like Kate, I’m curious what documents the reversion to enlisted rank if you were forced to retire before eight years. Can you refer me to an acknowledgment you signed when you were commissioned, or an instruction?

      I’m trying to help those who were forced to retire before reaching the eight-year minimum, and part of that help is checking the laws. I can understand reverting to an enlisted rank if the servicemember requested retirement before reaching eight years of commissioned service, but I’d like to know what the law says (if anything) about being forced to retire before reaching the minimum years of commissioned service.

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