Paycheck Chronicles

Blended Retirement: Continuation Pay

One of the four major changes in the military's new Blended Retirement System (BRS) is the introduction of continuation pay.  Continuation pay is a mid-career bonus payment given in exchange for an agreement to serve another three years.  From my search analytics, more people are wondering about continuation pay than any other aspect of the BRS.  While there are some details that will be announced by the individual services, we do know quite a lot.

Who Is Eligible for Continuation Pay?

Any serving military member, active duty or reserves.  Each branch gets to determine the exact timing of continuation pay, but it will be offered between years 8 and 12 of service.  You must commit to an additional 3 years of service to receive continuation pay.

This could be tricky for those who are opting-in to the BRS mid-career.  First, the timing is based upon your Pay Entry Base Date (PEBD.)  For most service members, PEBD is the same as the amount of time they've served, but special situations exist.  Second, those who currently have between 8 and 12 years of service, based upon PEBD, will need to see when their service is offering continuation pay.  It is possible that the service could offer continuation pay for those at 8 years of service, and members with more than 8 years of service but who are still eligible to opt-in may not get that continuation pay.

How Much Is Continuation Pay?

The amount of continuation pay will be determined by the individual service, and most experienced military benefits folks expect that it will ebb and flow with retention needs.   For active duty member, it will be at least 2.5 times monthly base pay and no more than 13 times monthly base pay.  For reserve members, it will be at least .5 times monthly base pay, based on active duty pay charts, and no more than 6 times monthly base pay.

How Will It Be Paid?

Continuation pay will be paid in either a lump sum, or in annual installments up to four.  Taking the installments may allow you to minimize the tax burden, or contribute more to your Thrift Savings Plan account.

Can I Receive Continuation Pay In Addition To Other Bonuses?

It looks like it. While the guidance is not 100% clear, it appears that the continuation pay will be paid simultaneously with other bonuses and special pays.  It is my suspicion that re-enlistment bonuses that would typically paid around this time period will be eliminated, either immediately or over time.

What Happens If I Take Continuation Pay But Don't Complete My Obligation?

If you do not complete the obligated service, you may be required to repay some or all of your bonus.  There will be exceptions for special situations where you are unable to complete your obligated service.  Many of these repayments will be determined on a case-by-case basis.

The possibility of receiving continuation pay is certainly a factor in deciding whether to switch to the military's new Blended Retirement System. Understanding the details will help you make a more informed decision.  For more information about the BRS, check out these articles:

Blended Retirement:  Government Contributions to TSP

Ten Things About The Military's New Blended Retirement System

From The Mailbag: New Military Retirement

I'm Opting Into the New Military Retirement

Don't Put Off Making Your Decision About The BRS

Latest Blended Retirement System Updates

Pros and Cons of the New Military Retirement Plan

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