Mixed Plate: Military Sanctuary, Disability, And Civilian Pensions

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Here’s a post of topics that are too small for individual posts. These leftovers won’t make a financial independence meal on their own, but together they’re a 1400-calorie luau.

Image of Hawaii mixed plate meal | The-Military-Guide.com

Eh, you like more?


Sanctuary for Reserves and National Guard

First up is the Navy’s sanctuary instruction. (Even if you’re not in the Navy, keep reading to see why you care.)This instruction helps answer the questions I get about Reserves and National Guard who are mobilized and possibly eligible for an active-duty retirement, not just a non-regular retirement.

Federal law protects military servicemembers from being discharged if they’re within two years of retirement. Once they retire, they’re off the payroll of their service and their pension is paid from DoD funds. An unintended side effect of the law is that a Reserve or National Guard servicemember with a very high point count could reach this same two-year sanctuary if they’re mobilized on active-duty orders. Instead of demobilizing when their orders are finished they’d be required to stay on active duty until eligible for retirement, and then they’d immediately start collecting an active-duty pension. Even worse (from the service’s perspective) their active-duty pension would have to be paid from service personnel funds, not DoD pension funds, and this might happen more than two decades before their Reserve/Guard pension would have normally started.

To avoid this “financial catastrophe” to their personnel budgets, each service monitors their Reserve/Guard member’s point counts to keep them from inadvertently reaching sanctuary. In the Navy’s case, any Reserve member with over 16 years of points (5760 points, not just 16 good years) requires a waiver by personnel headquarters for active-duty orders. (Drills and training orders are still authorized, but not active duty.) Mobilizing after 16 years of points requires demobilizing before reaching 18 years of points, and reaching sanctuary requires the approval of the service chief. In the Navy, once a servicemember reaches 17.5 years of points then they’re limited to routine drills and up to 29 days per year of training.

Each service has a similar sanctuary instruction:

Please let me know if you have a better (or more recent) public link, and I’ll post it here.


Medical Evaluation Boards and Physical Evaluation Boards

Next, I’m getting a number of disability evaluation questions. I have zero experience with the military disability system and I can use the help of you experts. This “basic” overview has requirements and flowcharts for both the Medical Evaluation Board and the Physical Evaluation Board. DoD is partnering with the Veterans Administration on this system, but of course there’s plenty of overlap and conflicting guidance. The best site I’ve found for sorting through the details is the Veterans Benefits Network.


No IRS net disability exclusion!

That brings me to my next topic: the IRS net disability exclusion. It’s tax season again, and this urban legend is regularly trotted out to give military veterans the incorrect impression that they’re allowed to take extra deductions for their disability rating. When you receive your disability rating from the VA then you may have to amend a return or two back to the date that you filed your claim, but the net disability exclusion only applies to servicemembers who have a medical retirement (unfit for duty). If you have a typical military retirement (based on years of service) then this is not for you. There are no “hidden benefits” or “secret deductions”. The IRS is much more familiar with this law than the typical military retiree, and any attempt to take a net disability exclusion is highly likely to flag the IRS computers to trigger an audit.


Do you have a six-figure pension?

Finally, here’s an interesting reader comment on an old post:

Glad I got out after four years. The military ‘pension’ plan only gives you poverty wages after 20 years of service. Working for a private company my pension will be over six figures annually. Plus I never get shot at, a MUCH better deal if you ask me.

I can agree with these sentiments (especially the last sentence!) but I’m not so sure about the “poverty wages” claim.

If you’re in a bridge career that offers a six-figure pension, then I’d appreciate (anonymous) details so that we can compare a 20-year military career to your civilian pension.

We’ll have to look at the risk/reward options. On the reward side is the military pension’s vesting date and starting date (and its COLA) compared to the private company pension’s equivalents. On the risk side, a pension from a private company also involves a small chance of bankruptcy– as many airline pilots have learned over the years.


Bonus paragraph: a midshipman pointed me to the JO Rules blog. It’s written by a submarine officer who commissioned from the enlisted ranks, and it gives the perspective of a very junior officer or a mid-grade enlisted member of any of the services. It’s packed with advice for starting your career: reporting aboard, asking questions, learning how to get qualified, dealing with the division (squad) daily business, and solving problems. It has extremely practical explanations and suggestions for handling leadership questions. I wish I’d read this advice over 30 years ago, and a lot of my troops probably wish that I’d seen it too. If you’re a junior officer then get over to that link and read a post every day or two until you’ve finished them. If you’re a senior enlisted servicemember, then tactfully use this blog to train your clueless fearless leader on how to level up their game. And if you’re a junior enlisted wondering what the heck the chain of command is thinking, this blog will give you an idea. It might even help you develop your leadership skills. My favorite post (so far) is “Bring Me A Rock”.



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Related articles:
Military Reserve sanctuary and active-duty retirement
Sanctuary and military retirement during a Reserve career
Military Reserve sanctuary, retirement, and time in grade
Sanctuary and Military Mobilization
‘Legal Presumption’ Of Disability for Vets, Former POWs
IRS denies military retirement “net disability exclusion”
A “net disability exclusion” story
“Present value” estimate of a military pension
Can I Count On A Military Pension?
Tailor your investments to your military pay and your pension
Retiring without a military 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.

  1. Great, Mel, now I’m hungry again!

    Sanctuary was practically unheard of during the Cold War, although it’s been more common during the last 12+ years of war. I still get that question a couple of times a month, but I think sanctuary will disappear during the next few years of the drawdown.

    Thanks for the update on pension plans. The reader who left that comment never responded, and apparently nobody else has been able to find a better inflation-adjusted annuity. There are still plenty of paths to financial independence, but that particular route may not be heavily traveled.

    I’m very impressed with JO Rules. My daughter came across it on SailorBob.com (a forum for Navy officers) and that submariner has written a whole new division officer’s guide!

  2. Nords,
    Thanks for the mixed plate…looks yummy though I prefer ‘Nalo greens over mac salad nowadays.

    That was an interesting post about Reserve retirement and who is on the hook for paying their pensions. I had no idea that each service bears responsibility for paying Reservists’ pensions when they stay on active duty until retirement. No wonder each service scrutinizes a Reservist’s service time/points in detail and no wonder the Reservists I know track this stuff meticulously. I always tune them out when they talk to me about points and sanctuary…all I could think of is Superman’s Fortress of Solitude when I hear sanctuary. Now I have a better understanding why it matters a great deal…but it doesn’t mean I won’t tune them out again.

    I found the post about a six-figure pension interesting, if not slightly amusing. A quick search indicates that only about 9% of private companies still offer defined benefit pension plans, although as late as 2010, 17 of Fortune 100 companies still offer pensions (thought it would be much lower). For civilian companies still offering pensions, the trend has been to scale back benefits…so I wonder who is still offering six-figure pensions out there except possibly for the highest ranking executives.

    Finally, appreciate the link to JO Rules. I passed this along to my 1LT daughter…especially found the entry “Some Advice for the Ladies” interesting and shared that with her as well. I think, between her mother and I, we were able to adequately educate her on certain expectations as well as do’s and don’ts for female officers in the Army (and would imagine other services as well)…but it is always good to receive reinforcement from another junior female officer who was a guest poster on JO Rules.

    Comment? Question? What's on your mind?