What is Military Separation Pay?
You likely have many questions if you recently learned that the United States military has involuntarily separated you from service. While millions of Americans lose their job and receive severance pay every year, the process of providing involuntary separation pay looks different in the military. As nationwide disability attorneys , we at Hill & Ponton urge all military personnel to research and understand their rights when it comes to receiving involuntary separation pay. The benefits apply to military service members without a disability.
Non-Disabled Military Separation Pay Eligibility Criteria
The United States military defines involuntary separation as a release or discharge from active duty not requested by the service member. Military separation pay is not available to any service member denied reenlistment or who has requested an extension of active duty.
Military separation pay comes with some important distinctions. First, not every service member facing involuntary discharge from the military is eligible for payments. Secondly, the United States military offers full separation pay or half separation pay based on years of service and other factors. To be eligible for either type of military separation pay, you must have served in one of the armed forces for a minimum of six years but no more than 20 years.
Full Separation Pay
Besides years of service requirements, active duty military personnel facing involuntary separation must meet these requirements to qualify for full separation pay:
- Military service noted as honorable
- Qualified for retention at the time of separation
- Agree to serve in the Ready Reserve or a similar unit for up to three years after leaving active duty military service
Some examples of involuntary discharge considered honorable include exceeding your rank’s high tenure and a military reduction in force measure.
Half Separation Pay
Half separation pay has the same years of service requirements as full separation pay. The standards for discharge are more relaxed and can occur for honorable or general reasons. Some of the most common situations related to half separation pay and involuntary separation include:
- Inability to meet weight and fitness standards
- Losing security clearance
- Involuntary discharge for family or personal reasons
- Members of the Reserve who volunteered for an additional tour of active military service but did not receive approval
- Disability present prior to enrollment in military service that prevents further active duty
- Physical or mental health conditions not considered a disability
- Failure to complete drug or alcohol rehabilitation successfully
- Inability to meet the minimum retention standards as part of a service obligation
Military separation pay involves a one-time lump sum payment based on your rank and grade. For 2020, the lowest payment is for E-3 Grade 6 rank at $16,580 while the highest payment is for E-9 Grade 18 at $132,257.
If you have 15 to 20 years of active military service, you may be eligible for the Temporary Early Retirement Authority (TERA) program. You must apply to your branch of service for TERA benefits, which it then evaluates on an individual basis. This benefit offers ongoing payments that can be significantly more than the one-time payment available under military separation pay rules.
Military Members Not Eligible for Separation Pay
Even if you meet the years of service requirement, you would not be eligible for military separation pay if any of the following apply to you:
- Voluntary separation of service request
- Release from active duty to military training
- Service member eligible for retainer or retirement pay as described above
- Chief Warrant Officer with a terminated appointment during the three-year probationary period and who chooses military reenlistment
- Chief Warrant Officer who does not receive two consecutive promotions to the next applicable grade currently serving active duty at a grade of CWO-4 and who opts to retain their active duty status in their current rank.
- Permanent or temporary officers performing limited duty at O-4 level or higher while complying with an active duty career objective.
- O-3 or O-4 active duty officers who fail to achieve promotion to the next highest grade two consecutive times and who plan to retire within two years of eligibility for retirement.
- Service members released due to a court-martial sentence, discharge, or dismissal
- Service members who separated without honorable conditions
- Enlisted service members involuntary separated due to unsatisfactory job performance or misconduct
- Involuntary separation of service members completing an obligated service period
How to Calculate Involuntary Separation Pay
The Department of Veterans Affairs (VA) uses a formula to determine the lump sum payout for every active duty military service member eligible to receive involuntary separation pay. Each month of service is 1/12 of a year if you did not serve a full calendar year. To determine your payout, take 10 percent, multiply it by years of active duty service, multiply that by 12, and multiply that by the monthly basic pay you received most recently.
Special Considerations Regarding Military Separation Pay
Before seeking military separation pay, it’s important to understand the complete rules and obligations you agree to upon acceptance. Some terms to keep in mind include:
- If you qualify for retainer or retirement pay later under Title 10 or Title 14 of the United States constitution, the military will deduct what it has issued you in separation pay or require you to pay a monthly retainer to recover its costs.
- If you receive military separation pay and also qualify for disability pay, you must repay the Department of Veterans Affairs an amount that equals the total amount you received in separation pay. The VA does not deduct separation pay from disability compensation based on any military service you performed after receiving the separation pay.
- The Internal Revenue Service (IRS) will tax your military separation pay at a rate of 20 to 25 percent. No option currently exists to change your deduction percentage, but you would receive a tax refund next year if you overpaid.
- Joining the National Guard or Reserves after receiving military separation pay is possible. However, you will need to repay the separation pay if you retire from the National Guard or Reserves. The Department of Defense Finance and Accounting Service (DFAS) withholds 40 percent of your separation pay upon retirement until you remit the full balance of your lump sum payment. You have the option to request the DFAS withhold a higher amount from each payment to fulfill your obligation faster. The organization currently does not accept lump sum payments from retired National Guard or Reserves service members.
- If you also receive disability compensation related to military service, the VA must withhold compensation for readjustment pay, severance pay, and veterans separation pay less federal taxes you have already paid. The VA must follow this rule for both voluntary and involuntary separation pay.
You should also be aware of a separate benefit called payment of family separation allowance. The DFAS authorizes payment of up to $250 per month when your dependent family members cannot live with you or near you while on active duty. This also applies if the United States military must evacuate your family members and relocate them in a temporary safe haven until the threat passes.
