{"id":31113,"date":"2012-07-28T11:24:32","date_gmt":"2012-07-28T15:24:32","guid":{"rendered":"http:\/\/valorguardians.com\/blog\/?p=31113"},"modified":"2015-02-07T12:44:18","modified_gmt":"2015-02-07T17:44:18","slug":"about-that-qrmc-reserve-drill-pay-proposal","status":"publish","type":"post","link":"https:\/\/www.azuse.cloud\/?p=31113","title":{"rendered":"About that QRMC Reserve Drill Pay Proposal . . . ."},"content":{"rendered":"

Jonn\u2019s recent article<\/a> about the recent QRMC proposal concerning military reserve compensation got me thinking. So I guess you should consider this fair warning that I’m about to go down another rabbit hole. (smile)<\/p>\n

Introduction<\/strong><\/p>\n

The 11th Quadrennial Review of Military Compensation (QRMC)<\/a> has proposed a significant change in the way Reserve Component personnel are compensated, both while serving in the reserves and during retirement. In a nutshell, this proposal would reduce drill compensation significantly, and would reduce overall retirement credit (and thus retirement pay) less dramatically. In exchange, the QRMC proposes to allow a Reservist to begin receiving retirement pay substantially earlier \u2013 for many, between 7 and 13 years earlier \u2013 than allowed by current law (age 60 unless one qualifies for retirement under Active Component rules, for disability retirement, or for early receipt of Reserve retired pay due to contingency service) .<\/p>\n

The obvious question arises: is this a good deal or not? And if it\u2019s a good deal, for whom: the government, the Reservist, both \u2013 or neither?<\/p>\n

What I\u2019m going to attempt below is to come up with some numbers for a few representative scenarios. The first involve Reservists who are pure Reservists (no prior active duty) and serve 20, 25, and 30 year careers under each system. The second set of scenarios involve Reservists who have 4 years active duty prior to going into the reserves, then complete a 20, 25, or 30 year career in the reserves.<\/p>\n

Background \u2013 Reserve Pay<\/strong><\/p>\n

Many Active Component soldiers (and many if most civilians) do not understand how reserve pay is calculated. However, such an understanding is necessary to understand the effect of the QRMC recommendations on reserve pay. What follows is a short primer, restricted to a discussion of base pay only (allowances are somewhat more complex and are outside the scope of this article).<\/p>\n

1. Service on active duty. For pay purposes, a Reservist serving on active duty receives the same basic pay as an Active Component troop. One day\u2019s active duty yields one day\u2019s base pay. If eligible, housing allowances (not necessarily the same as for active duty), special pays for which qualified, and BAS\/Sep Rats are also paid.<\/p>\n

2. Paid inactive duty for training (drills). For a Reservist, a \u201cdrill\u201d is a 4-hour block of training\/instruction\/duty. It may be paid or unpaid. If paid, a Reservist receives 1\/30th of one month\u2019s base pay for a drill \u2013 or one normalized day\u2019s pay. (I believe special pays for which qualified are also paid on a similarly pro-rated and normalized basis). No more than two drills may be held in the same calendar day. A Reservist thus receives 4 days base pay for a typical drill weekend (4 drills, 2 each on Sat and Sun). Generally, no allowances are paid, so that\u2019s it. No reimbursement for travel expenses, BAS\/Sep Rats, housing allowance, etc . . . is mandated, though I\u2019ve heard that on occasion some units will offer travel reimbursement and\/or allow drilling Reservists to sack out in the Armory or Reserve Center.<\/p>\n

As far as Reserve Pay goes, that’s pretty much it. Anything else a Reservist does is on their dime – and on their time.<\/p>\n

Background \u2013 Reserve Retirement<\/strong><\/p>\n

Similarly, many Active Component soldiers (and most civilians) do not understand how Reserve retirement pay is calculated. However, such an understanding is also necessary to understand the effect of the QRMC recommendations on Reserve retirement pay. What follows is a short primer.<\/p>\n

Reserve retirement is not paid immediately on retirement. Rather, it generally starts between ages 55 and 60 – and only before 60 if one has qualifying contingency support service on or after 28 January 2008, retires under Active Component rules (20+ years of active duty), or receives a disability retirement. It’s also calculated differently than Active Component retired pay.<\/p>\n

Reserve retirement is calculated on a point basis. The total number of \u201cretirement points\u201d accumulated during a career is divided by a particular number (under the current system, 360) to determine an equivalent number of years of service. That number is then multiplied by 2.5 percent to determine the percentage of one\u2019s high-three average base pay will be paid as a retirement pension.\u00a0\u00a0 This will typically be the average of the base-pay scales in effect for the individual’s retired grade during an individual’s last three years of service – but not always.\u00a0 (I’m ignoring the older “final pay” system as not too many folks are still out there who qualify under that system.)<\/p>\n

Retirement points are earned from various sources. Each Reservist gets 15 points annually gratis (\u201cmembership\u201d points). One point is earned for each day of active duty. One point is earned for each drill, paid or unpaid (yes, a fair number of Reservists do indeed drill for points only). One point is earned for each 3 hrs of military correspondence course work. These are the primary ways a Reservist earns retirement credit. (There are a few other ways, but they\u2019re rather uncommon.)<\/p>\n

In order to be eligible to receive retired pay, a Reservist must have 20 qualifying years of reserve service. A qualifying year is one in which 50 or more retirement points are earned.<\/p>\n

The maximum number of points a Reservist can earn in any case is the number of days in his retirement year (it\u2019s not aligned on calendar or fiscal year boundaries) \u2013 either 365 or 366, depending on whether that year contains 29 Feb of a leap year or not. However, there is a separate annual limit for points from inactive sources – basically, that’s anything except service on active duty (annual training is considered active duty). The current annual limit for retirement points from inactive sources since late 2007 is 130; earlier years had lower limits ranging from 50 to 90. In theory, that means the maximum number of points a Reservist can earn in a given year is between about 144 (14 days annual training plus 130) and 365 (the number of days in a year; for leap years, 366). In practice, not that many Reservists approach 144 points in a given year unless they have a substantial amount of active duty during the year.<\/p>\n

Finally, as noted above current law mandates a Reservist generally wait until at or near age 60 to receive Reserve retired pay. Exceptions are for those who retire after serving 20 years of active-duty service or for disability (these individuals generally qualify for retirement under Active Component rules) or who qualify for early receipt of retired pay (3 months early receipt is authorized for each 90 days of contingency service in the same fiscal year in support of designated contingency operations served on or after 28 January 2008; 55 is the earliest age at which early Reserve retired pay may be received).<\/p>\n

The bottom line is that many Reservists qualify for retired pay in their late 30s or early\/mid-40s. However, they then must wait literally decades to receive the retired pay they earned – these are the \u201cgrey area\u201d retirees you may have heard about. In the meantime, the “grey area” retiree gets commissary, PX, and (if local conditions allow) MWR privileges. That\u2019s about it (the other privileges authorized aren\u2019t generally all that commonly used – or particularly useful, IMO). TRICARE coverage? Unless they qualified by virtue of 20 years of active duty service or were retired due to disability – not until age 60, amigo.<\/p>\n

Current QRMC Proposal<\/strong><\/p>\n

The current QRMC proposal is to revamp the way Reserve drill pay and retirement points associated with same are calculated. In a nutshell, the proposal redefines a drill as one duty day vice a 4-hour block of duty. The effect of this is to reduce drill pay and retirement credit (but not annual training or other active duty pay or retirement credit associated with active duty) by 50% for members of the Reserves by 50%. It also changes the normalized year used to compute an equivalent year from 360 to 365 days. In exchange, members of the Reserves would be allowed to receive their earned retirement pay on the 30th anniversary of their entry into the military \u2013 theoretically, as early as age 47 \u2013 provided they had the required 20 qualifying years of service. It\u2019s unclear if this proposal includes full retirement (e.g., \u201cblue\u201d ID card and TRICARE eligibility) or not at this point. My guess would be no, it\u2019s only early receipt of pay. But I\u2019ve been told I\u2019m a cynical and pessimistic old fella.<\/p>\n

Effect on Reservist’s Annual Base Pay <\/strong><\/p>\n

There is no effect of the QRMC proposals for Reservists while serving on active duty regarding annual pay and allowances. However, the QRMC recommendations dramatically affect the amount of annual and career base pay received by drilling Reservists while not serving on active duty.<\/p>\n

A Reservist assigned to a drilling position who makes all scheduled drills and attends his\/her Annual Training will generally receive 62 days base pay per year (12 mo x 4 drills\/mo plus 14 days annual training). Under the QRMC proposal, this would be reduced to 38 days base pay (12 mo x 2 drills\/month plus 14 days annual training). This is a 38.71% reduction in annual base pay. Even though allowances received while at Annual Training won\u2019t be affected, that\u2019s still one helluva \u201chit\u201d in pay.<\/p>\n

Effect on Reservist’s Career Base Pay<\/strong><\/p>\n

The effect on total career pay depends on how much active duty time the Reservist has, as pay received by a Reservist while serving on active duty is not affected by the QRMC recommendations; however, the effect on base pay received while drilling is substantial. Therefore, to calculate the career impact I\u2019ve set up a spreadsheet that calculates two scenarios<\/a>. Format is MicroSoft Excel 97-2003, so you\u2019ll need something that reads that format to view\/use it.<\/p>\n

The first scenario is that of a \u201ccareer\u201d reservist (1 year training plus 1 year active duty each 5 years). I\u2019ve assumed that this individual (1) attends all drills and Annual Training periods; (2) earns 10 retirement points per year from correspondence course sources, (3) spends a total of 1 year during their career in various schools (for convenience, I\u2019ve placed this as their first year of service, though it would likely be spread out over their career), and (4) serves 1 year in 5 on active duty throughout the remainder of his\/her career (this is current guidance of what to expect, at least in the Army Reserve). This should be a relatively decent approximation for the classical \u201creserve-only\u201d careerist.<\/p>\n

The second scenario assumes the individual has 4 years Active Component service, then joins a Reserve Component unit and completes his\/her career. This career pattern is representative of many in the Reserves (thought the precise amount of Active Component service will obviously vary by individual). The same assumptions are made for drill, Annual Training, and correspondence course points in this scenario.<\/p>\n

The spreadsheet calculates both the total number of days of base pay and total retirement points the individual would receive under each scenario if they retire from the Reserve Components at 20, 25, and 30 years. The number of retired points is then used to calculate the percentage of high-3 average pay the individual will receive as their Reserve retirement pay for each scenario. Finally, the reductions in career base pay and annual retirement pay caused by the QRMC recommendations are calculated in percentage terms<\/p>\n

For a career Reservist, the following is total number of days base pay expected over their career under current and QRMC proposals, plus the percentage reduction expected under the latter.<\/p>\n

20 Year Career
\nCurrent, 2756
\nQRMC, 2396
\nReduction, 13.06%<\/p>\n

25 Year Career
\nCurrent, 3370
\nQRMC, 2914
\nReduction, 13.53%<\/p>\n

30 Year Career
\nCurrent, 3983
\nQRMC, 3431
\nReduction, 13.86%<\/p>\n

The numbers for those with 4 years prior Active Component service show smaller reductions due to the relatively larger fraction of active-duty service (unaffected under the QRMC recommendations).<\/p>\n

20 Year Career
\nCurrent, 3363
\nQRMC, 3051
\nReduction, 9.28%<\/p>\n

25 Year Career
\nCurrent, 3975
\nQRMC, 3567
\nReduction, 10.26%<\/p>\n

30 Year Career
\nCurrent, 4589
\nQRMC, 4085
\nReduction, 10.98%<\/p>\n

Impact on Reserve Retirement Pay<\/strong><\/p>\n

For a Reservist, the QRMC proposals impact retired pay calculations two ways. First, the years-of-service calculation formula is changed to use 365 vice 360 to calculate the equivalent number of years of service. Second, the proposal only allows earning 1 retirement point per drill day vice the 2 earned currently.\u00a0 Each reduces the number of equivalent years earned during a Reserve career.<\/p>\n

The following is the percentage of high-three average salary expected as as retirement pay for the Career Reservist under current and QRMC proposals under the above scenario, plus the percentage reduction expected under the latter.<\/p>\n

20 Year Career
\nCurrent, 21.57% of high 3-average
\nQRMC, 18.1% of high 3-average
\nReduction, 12.80%<\/p>\n

25 Year Career
\nCurrent, 26.35% of high 3-average
\nQRMC, 22.87% of high 3-average
\nReduction, 13.22%<\/p>\n

30 Year Career
\nCurrent, 31.13% of high 3-average
\nQRMC, 26.92% of high 3-average
\nReduction, 13.51%<\/p>\n

The numbers for those with 4 years prior Active Component service show smaller reductions due to the relatively larger fraction of active-duty service (unaffected under the QRMC recommendations).<\/p>\n

20 Year Career
\nCurrent, 25.44%
\nQRMC, 22.95%
\nReduction, 9.77%<\/p>\n

25 Year Career
\nCurrent, 30.83%
\nQRMC, 27.17%
\nReduction, 10.57%<\/p>\n

30 Year Career
\nCurrent, 35.34%
\nQRMC, 31.40%
\nReduction, 11.14%<\/p>\n

However, the QRMC proposal also allows potential receipt of retired pay significantly earlier \u2013 as early as age 47 vice between ages 55 and 60 depending on the amount of contingency service performed. So that reduced pension is drawn for up to 13 years longer than today’s retired pay is drawn.<\/p>\n

One final point: calculation of Reserve retired pay \u201cfixes\u201d it to the pay scale used at time of calculation. Although COLAs are applied, if annual military pay raises are above CPI, that\u2019s a minus; if annual military pay raises are greater than CPI, that\u2019s a plus. Historically, the Federal government has treated the military somewhat better than CPI in terms of annual pay raises since at least the early 1970s. Whether that will continue or not in the future is unknown; my crystal ball is dirty today. (smile)<\/p>\n

Conclusion<\/strong><\/p>\n

For me, this is a very hard call. Is getting retired pay as much as 13 years earlier worth a permanent reduction of between 9.75% and 13.5% in retirement pay, plus a reduction in career base pay of between 9.25% and 14%? Dunno. My gut feel is no \u2013 but I\u2019ve been wrong before. Getting retired pay in the late 40s\/early 50s vice in one\u2019s late 50s to 60 is worth quite a bit.<\/p>\n

And who does this recommendation benefit? The government, which obviously wants to save money \u2013 but which might well lose good people and piss away any savings in increased training costs as a result? The Reservist, who gets his\/her earned retirement pay earlier \u2013 but sees a substantial reduction in same, plus a reduction in pay now? Both? Or neither?<\/p>\n

Thoughts?<\/p>\n

(Edited by author to correct from final-three to high-three average and to note that this is typically, but now always, the pay scales in effect during the three years preceding receipt of retired pay.)<\/p>\n","protected":false},"excerpt":{"rendered":"

Jonn\u2019s recent article about the recent QRMC proposal concerning military reserve compensation got me thinking. So … About that QRMC Reserve Drill Pay Proposal . . . .<\/span>Read more<\/a><\/p>\n","protected":false},"author":623,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[84,206],"tags":[],"class_list":["post-31113","post","type-post","status-publish","format-standard","hentry","category-military-issues","category-reserve-issues"],"_links":{"self":[{"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=\/wp\/v2\/posts\/31113","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=\/wp\/v2\/users\/623"}],"replies":[{"embeddable":true,"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31113"}],"version-history":[{"count":0,"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=\/wp\/v2\/posts\/31113\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31113"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.azuse.cloud\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}