Other pay: Career Status Bonus - Military Pay & Allowances - Military Times

Other pay: Career Status Bonus

Those who entered the military after Aug. 1, 1986, may take a one-time bonus of $30,000, payable in a lump sum or annual installments, when they reach their 15th anniversary of service, in return for agreeing to serve at least five more years. However, by accepting the bonus, they agree to receive reduced lifetime retirement benefits.

The bonus is part of the “Redux” retirement system. By choosing the bonus, service members commit to completing at least 20 years of active-duty service. If they choose to retire at 20 years, they receive 40 percent of their average basic pay over their three highest earning years in uniform as retired pay, instead of the traditional 50 percent.

If they serve beyond 20 years, however, the value of their retirement pay increases until at 30 years of service, their retirement pay would be 75 percent of average basic pay over the three highest earning years, the same as for those who don’t accept the bonus. A limited number of senior members who will now be allowed to serve until 40 years will earn 100 percent of average basic pay over their three highest earning years when they retire.

However, annual cost-of-living adjustments for Redux bonus-takers are 1 percentage point less than the adjustment made for those in the traditional retirement plan, which makes the lifetime value of Redux less than traditional retirement. At age 62, there is a one-time “catch-up” adjustment that brings both the Redux and traditional pensions back to parity — but only for that one year, after which Redux again begins to lag by 1 percentage point per year.

The Redux bonus is taxable unless earned while serving in a designated tax-free combat zone. It may be paid in two to five equal annual installments (ranging from $6,000 to $15,000), so that all or some of the bonus can be invested in the tax-deferred Thrift Savings Plan.