Understanding Military Pay

Military pay can be hard to understand-at first. There are several types of compensation that may affect a military member’s total pay; some of them are considered “special pay” for duty or qualifications that warrant additional pay in the eyes of the Department of Defense, while other pay may be added for all servicemembers on a yearly basis, or as the result of re-enlisting. There are also allowances, incentive pay, and more.

Basic Pay

Basic pay is the standard, taxable baseline amount a service member earns every month. Basic pay varies depending on three factors: the amount of time spent in the service to date, the time spent in the member’s current rank, and whether or not the military member is an officer or enlisted person. The lowest ranking enlisted member who has served the shortest amount of time in uniform will earn (at the time of this writing) just under $1,500 per month. The highest ranking and longest serving enlisted member will earn just under $8,000 per month.

It’s important to note that Active Duty pay differs from Guard/Reserve pay, and that serving full time offers different terms for pay, allowances, and entitlements than for those in the Guard and Reserve.

For Basic Pay, there is an annual cost-of-living increase that is determined by a variety of factors including Congressional approval.

Military Allowances

According to the Department of Veterans Affairs official site (VA.gov), military allowances are the second most important type of pay available to the service member. Part of the reasoning for this is that allowances are not taxed, and some allowances are quite substantial.

According to the VA, “Allowances are monies provided for specific needs, such as food or housing. Monetary allowances are provided when the government does not provide for that specific need. For example, the quantity of government housing is not sufficient to house all military members and their families. Those who live in government housing do not receive full housing allowances. Those who do not live in government housing receive allowances to assist them in obtaining commercial housing.”

Military allowances include money for housing, uniforms, and meals, depending on rank. The housing allowance is determined in part based on zip code and the rental averages calculated for that area. Uniform allowances are paid annually in most cases. The first clothing allowance is paid to the member during basic training, and other clothing allowances apply beyond that.

When a military member gets orders to a new duty station, a moving truck is usually involved and all the expenses that go with that type of relocation. To help offset the costs of moving, whether overseas or stateside, the Department of Defense provides a dislocation allowance that is approximately $740 for the lowest ranking military member (without dependents). The amount of this allowance is based on the service member’s rank and “with dependents” or “without dependents” status.

Another type of military allowance is the Cost Of Living Allowance, or COLA. In the past, COLA applied mainly to overseas military assignments, but in 1995 new rules allowed those serving at stateside bases to begin receiving COLA based on location. COLA is also calculated based on rank and “with dependents” or “without dependents”.

Incentive, Bonus & Special Pay

There are other types of military pay that are important to get familiar with including special duty pay, incentive pay, sea pay, drill pay, family separation allowance, family subsistence and hazardous duty pay.

 

Military Pay Allotments

An allotment is a designated amount of money that is automatically distributed for you, from your pay. There are many reasons to have an allotment, including setting aside funds for family, paying off a loan from the military, or paying for your life insurance premiums. The following summarizes what you need to know about allotments:

There are two types of allotments: discretionary and non-discretionary. You can have up to six discretionary allotments per month, and any number of non-discretionary allotments, as long as the total allotments per month is 15 or less.

Your allotment is evenly divided between your semimonthly paychecks. For example: If you have an allotment of $100 it will reduce your take-home pay on the 1st and 15th by $50.

All active duty service members, midshipmen, cadets, and reservists on EAD are eligible to make allotments from their pay. In addition, to help servicemembers transition from active duty to retired status, retirees are eligible to continue all existing authorized allotments.

Discretionary Allotments

A discretionary allotment is a voluntary allotment that is setup by a member and may be stopped, started or adjusted at will. Members are authorized no more than six discretionary allotments.

Examples include, but are not restricted to, the following:

  • Payment of premiums for commercial life insurance on the member, the member’s spouse or children.
    • Eligible allotters are:
      • U.S. Government Life Insurance and National Service Life Insurance
      • Commercial insurers
      • Navy Mutual Aid
  • Voluntary payment to a dependent or other relatives.
  • Deposits to a financial institution, mutual fund company, or investment firm.
  • Payment of mortgage or rent.
  • Deposits into the DoD Savings Deposit Program.
  • Payments to the Air Force Enlisted Members Widow’s Home for Air Force members only.

Non-Discretionary Allotments

Non-discretionary allotments may be voluntary or involuntary and they cannot be started or stopped at the member’s will. Non-discretionary allotments of military pay and allowances by members in active military service are limited to the following:

  • Government Indebtedness
    • Voluntary liquidation of indebtedness to the U.S. including those incurred due to defaulted notes insured by the FHA or guaranteed by the VA or payment of amounts due under the Retired Serviceman’s Family Protection Plan.
    • Any other indebtedness to any department or agency of the U.S. Government (except to the military departments that pays the member).
    • Any repayment of debts owed to an organization for funds administered on behalf of the U.S. Government and any such debts assigned to a collection agency.
  • Purchase of U.S. savings bonds
    • The purchase of U.S. savings bonds is by Class B allotment. One year bond purchases cannot exceed $15,000. Series EE and I bonds are available.
  • Relief Repayments
    • Repayment of loans to the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, and American Red Cross.
  • Charity
    • Members are authorized to make charitable contributions by allotment to the Army Emergency Relief, Navy and Marine Corps Relief Society, or affiliates of the Air Force Assistance Fund.
  • Child and Spousal Support
    • When the member on extended active duty has failed to make support payments, a cognizant DFAS site with proper notification will start a statutorily-required child or child and spousal support allotment from the members pay and allowance.
  • Debts for Non-Discretionary Allotments
    • Payment of delinquent federal, state or local income or employment taxes.
    • Commercial Debt -When a member fails to pay debts owed to a commercial creditor, the creditor can make application for recovery of this debt.
    • Delinquent Travel Charge Card Debt -When a member fails to pay debts due on their charge card, the heads of agencies have authority, upon written request of a federal contractor, to collect the debt.
  • Assistance Funds
    • The Post-Vietnam Era Veteran’s Educational Assistance Program provides education assistance on a contributory basis to those eligible members entering the Armed Forces on or after January 1, 1977, and before July 1, 1985, who might otherwise be unable to obtain a higher education.

Restrictions:

  1. Power of Attorney – A general power of attorney is not allowed to establish, change or stop an allotment. A member must specifically designate a special power of attorney to make changes to allotments.
  2. Minors – Allotments (except bonds) are not made payable to children under 16.
  3. Mentally Incompetent Persons – Appointed guardians or the institution can receive an allotment where the mentally incompetent person is confined.
  4. Member Awaiting Trial by Court-Martial – Members cannot register allotments between the date that a court-martial is ordered and the date of the approval or disapproval of the sentence. Standing allotments are discontinued when it is necessary to permit the collection of the forfeiture in the monthly amount specified and the time limitation stated by the court-martial, or if the member is sentenced to forfeit all pay and allowances. Prisoners are able to register allotments if the amount of the pay and allowances not forfeited is sufficient to cover the deductions.
  5. Returned Absentee, Deserter, and Prisoner – Allotments are not registered for a returned absentee or deserter unless DFAS has verified the member’s pay status.
  6. Fraudulent Enlistment – Pay and allowances are not allotted when pay is suspended pending final action on determination of fraudulent enlistment.
  7. You cannot have discretionary allotments to purchase, lease, or rent personal property. Personal property includes vehicles, appliance, household goods, electronics, and all other consumer items that are tangible and movable.
  8. Reduced Pay of Allotter – Allotments are discontinued when a reduction in grade or stoppage of pay does not leave sufficient funds for allotments in force.

If you have an allotment question or problem, you should visit your local pay office with the question first. If your pay office can’t resolve the problem, it should officially refer your question to DFAS.

Troops Get Another Big Pay Raise in 2021 Budget Request

The proposed military pay raise for fiscal 2021 in the Defense Department’s budget request, released Monday, is 3%, the second-highest pay raise for troops since 2010.

The 3% raise, following 2020’s 3.1% bump, ensures that the troops will be “well compensated” and underlines DoD’s recognition that military and civilian personnel “are our most valuable resource” in carrying out the 2018 National Defense Strategy to counter China and Russia, according to the Pentagon’s budget overview. The total Pentagon budget request for fiscal 2021 totals $705.4 billion, part of a defense spending package with a $740 billion topline.

The overview said the raise is aimed at giving the military a “competitive compensation package” to offset the drain of highly-trained personnel to the civilian sector “even as the Department prioritizes funds toward the NDS.”

The raise is part of an $8.7 billion increase over the fiscal 2020 budget for wages and benefits, DoD said, and is expected to survive protracted and heated negotiations on the overall budget between Congress and the White House. If passed, the raise would go into effect next Jan. 1.

Although one-tenth of a percentage point below the 3.1% raise in fiscal 2020, the 2021 proposed raised still ranks as the second-highest pay increase since the 3.4% hike in 2010. Other pay increases since 2010 have ranged from 1% to 2.6%.

The bump is also in line with the 2.9% increase for civilian workers indicated by the latest quarterly report on the U.S. Employment Cost Index (ECI), put out by the Labor Department’s Bureau of Labor Statistics.

That figure does not limit the president, Congress and DoD in the final military pay raise proposal, but has traditionally served as a major factor in the final decision.

Last year’s pay raise meant about $815 more a year for junior enlisted troops. For senior enlisted and junior officers, the raise was about $1,500 more. For an O-4 with 12 years of service, the raise meant about $2,800 more.

The 2021 proposed raise would bring with it similar paycheck increases.

However, the latest pay raise could signal the last of the big pay increases as overall defense budgets are expected to enter a phase of leveling off or even declining, as Defense Secretary Mark Esper and other top DoD officials have warned.

“We have to brace ourselves that at best, defense spending will be level” in future years, Esper said last Thursday at the Johns Hopkins School for Advanced International Studies.

The requested increase would keep the pay for military personnel in line with increases in the civilian sector and serve to aid retention, said retired Air Force Col. Dan Merry, vice president of government relations at the Military Officers Association of America.

“Whatever the baseline increase” for the military, “it should be no less than that of the civilian population,” Merry said.

The raise would send a positive message to troops thinking of making a career of the military, and also to troops retiring next year, Merry said.

Retirement pay is based on the last year of service, and Cost of Living Increases (COLA) increases for retired personnel are then based on the Consumer Price Index, Merry said.

Here are the basic military pay raises going back to 2007, according to the Defense Department:

  • Jan. 2007: 2.2%
  • April 2007: 0.5%
  • 2008: 3.5%
  • 2009: 3.9%
  • 2010: 3.4%
  • 2011: 1.4%
  • 2012: 1.6%
  • 2013: 1.7%
  • 2014: 1%
  • 2015: 1%
  • 2016: 1.3%
  • 2017: 2.1%
  • 2018: 2.4%
  • 2019: 2.6%
  • 2020: 3.1%
  • 2021: 3%