Can you lose your military retirement pay?

Qualifying for a military retirement pension takes a lot of time and hard work. Servicemembers need to accrue at least 20 qualifying years of service, and members of the Reserve Component aren’t eligible to start receiving benefits until age 60. 

Considering those factors, military retirement pay is obviously not a benefit to take for granted. However, there are several reasons you could experience a suspension of military retirement pay, which can be either temporary or indefinite.

Let’s discuss possible ways retirees can lose their military retirement pay so you can avoid unnecessary suspensions. 

How can a military retiree lose their pension?

Losing your pension sounds like a punishment, but not every reason for suspending military retirement pay is a result of wrongdoing. But all suspensions result from an action (or inaction) on the retirees’ part. 

Here are 5 situations that could cause you to experience a temporary or indefinite suspension of your military retirement pay:

1. You Waive Retirement Pay

The most obvious reason you would lose your military retirement pay is if you intentionally waived it altogether. This often comes into play when you are forced to choose between a military retirement pension and a civilian pension or another retirement benefits program.

For example, you might have to waive a portion of your military retirement pay to receive VA disability compensation. You cannot receive both types of pay unless you qualify for concurrent receipt (CRSC or CRDP). 

You may also waive your pension if you participate in the federal service Military Buyback Program. In this program, federal employees who have served in the military can “buy back” their military service time to count towards their civilian federal retirement benefits. However, your active military time can only count toward an active duty pension or a federal pension, not both. There is an exception for Reserve Component members, who can buy back their active service time and have it count toward both a military reserve retirement and federal pension.

Active duty retirees who join federal employment must decide whether to waive their military pension in favor of including their military service time in calculating their federal civilian retirement. This decision affects those eligible for pensions and benefits through the military and the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS).

2. You Are Incarcerated

Being imprisoned for longer than 60 days will reduce or stop your military retirement pay and benefits. They will usually resume after you are released. 

However, the severity of the crime is taken into account. While misdemeanors are usually not a lasting cause for concern, felonies, and crimes against the US will have an extremely negative effect and could even cause a permanent cancellation of your military pension and benefits.

If your pension payments and retirement benefits were paused during your sentence, immediately inform the Defense Finance and Accounting Service (DFAS) and the VA upon your release. You may need to provide documentation such as a release order or a certificate of discharge from the correctional facility. Your military pension and benefits should be reinstated if you’re still eligible.

3. You Owe Alimony Payments

The Uniformed Services Former Spouses’ Protection Act (USFSPA) is a federal law that allows state courts to treat military retirement pay as divisible property in divorce proceedings. This law allows your military pension to be divided between the service member and the ex-spouse as part of the divorce settlement. Child support payments can also come into play here.

The amount of the military pension that can be divided and used to pay alimony is known as “disposable retired pay.” This is the gross retired pay minus certain deductions, like VA disability compensation. The amount owed to the ex-spouse can be up to 50% of the disposable retired pay.

If a military retiree is ordered to pay alimony and fails to do so, DFAS can be directed by a court to garnish the retiree’s retirement pay to satisfy alimony obligations. Garnishment is a legal process where a portion of the retiree’s pay is withheld and directed to the ex-spouse to fulfill alimony obligations.

To avoid losing a large portion of your military pension, comply with state and federal laws, pay any owed alimony, and seek legal counsel. 

4. You Spend Time on the Temporary Disability Retired List

Spending time on the Temporary Disability Retired List (TDRL) generally does not decrease your military retirement pay. Still, there are circumstances where it can affect the amount of retirement pay you ultimately receive.

TDRL is used for servicemembers who are found unfit for duty due to a disability that is not considered stable and requires periodic reevaluation. Service members on TDRL must undergo medical reevaluations at least once every 18 months to determine if their condition has improved, worsened, or stabilized. 

If found fit for duty, you may return to service. However, if your condition worsens or stabilizes, you may be transferred to the Permanent Disability Retired List (PDRL) with recalculated retirement pay based on the final disability rating or years of service.

If your disability rating decreases upon reevaluation, this could reduce the percentage used to calculate your permanent retirement pay. For instance, if your disability rating is initially 60% and drops to 40% after reevaluation, your retirement pay will be based on the lower percentage.

If you disagree with the results of your reevaluation, you can request a reconsideration or appeal the decision with the Physical Evaluation Board. This involves formally contesting the new disability rating assigned during the TDRL reevaluation process with a detailed explanation of why the new rating is contested and all supporting medical evidence.

5. You Owe Readjustment Pay or Involuntary Separation Pay

Readjustment pay and Involuntary Separation Pay (ISP) are financial benefits provided to active duty servicemembers and members of the Reserve Component (RC) who are involuntarily separated from military service under certain conditions. These programs are intended to assist eligible RC members in transitioning back to civilian life.

Readjustment Pay: Financial benefit provided to Reserve Component (RC) members who are involuntarily separated from the Selected Reserve and Ready Reserve. There is generally no requirement to agree to future service in the reserve component to receive this pay since it is for those already serving in a reserve capacity.

Involuntary Separation Pay (ISP): Financial benefit provided to both active duty servicemembers and members of the RC due to involuntary separation. While servicemembers separated from active duty who are receiving ISP typically must agree to serve three years in the RC, members of the RC usually do not have this requirement.

The rules for repayment can vary, but generally, if a servicemember who received ISP or readjustment pay re-enters military service and later earns a military pension, they may be obligated to repay the amount they received. Separation pay is given to servicemembers in lieu of retirement benefits. Once a member retires, federal law requires the money to be repaid..

If a servicemember avoids attempts from the military to recoup readjustment pay or ISP, the amount owed may be withdrawn from retirement pensions if the member later rejoins the military and earns retirement. 

While it may feel uncomfortable to repay money that was once given to you due to hardship, make sure that you complete the process so that your pension remains intact.

Don’t Lose Your Military Pension

Military retirement pay is a hard-earned benefit. Understanding the events that could cause a suspension of pay is crucial for you to safeguard your financial security and ensure the uninterrupted delivery of your well-deserved military pensions. Act with caution and seek legal counsel if you feel you are at risk.

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