Academic journal article Journal of Legal Economics

Primer on Military Retirement

Academic journal article Journal of Legal Economics

Primer on Military Retirement

Article excerpt

Abstract: Valuing loss of pay and retirement benefits for current and former military personnel has a significant potential impact on the work of forensic economists. Cases involving personal injury, wrongful death, and divorce necessitate an understanding of the determination of military pay and retirement benefits. There are approximately 2.5 million members on either active duty or in the ready reserve from all branches of the military. Another 2 million are classified as Department of Defense retirees. These include those who retired from active duty or from the reserves, those entitled to survivor benefits, and those who receive disability benefits.

This paper provides a source of information for military pay and retirement benefits. Each is discussed by rank and date of initial entry into the military. Benefits for current and ex-spouse(s) and other dependents are discussed, as are coordinated disability benefits between the Department of Veterans Affairs and the Department of Defense.

I. Introduction

The military retirement system applies to members of the Army, Navy, Marine Corps, and Air Force, and most of the provisions apply to members of the Coast Guard, Public Health Service, and National Oceanic and Atmospheric Administration. It is a funded, noncontributory, defined benefit plan that includes (1) active duty retirement, (2) disability retirement, (3) reserve retirement, and (4) survivor benefits. It is easily confused with but does not include compensation paid through the Department of Veterans Affairs (VA) for disabilities to veterans.

It is to be expected that forensic economists will have frequent need to value the loss of military retirement benefits in personal injury, wrongful death, and divorce cases. Active duty military personnel and reservists who are injured and are discharged early will lose retirement benefits. So too, will divorced spouses of military personnel and survivors of those who are wrongfully killed. More than two million military retirees and survivors currently receive annuities, and there is a larger pool of active duty and reserve personnel who may potentially retire, as shown in Table 1.

Moreover, the loss of retirement is a very valuable component of total economic loss due to personal injury or wrongful death and a significant portion of family assets in a divorce proceeding. The Department of Defense Actuary estimates and reports the lump sum equivalent value of retirement pay, which varies with pay grade and years of service. Table 2 illustrates the range of values1 (DoD Actuary 2011. pp. 269 & 271). Clearly, forensic economists need to be conversant with the military retirement system in order to calculate economic losses in these cases.

II. Literature Review

For fifty-two years a private company, Uniformed Services Almanac, Inc., published four almanacs each January which provided up-to-date information on pay, benefits, and entitlements for military personnel. During 2011 their web site was closed and telephone numbers were no longer in service. There is no indication that they will resume publication. Although their information was highly reliable, they were not an official government agency, and they seldom cited sources. This paper cites extensive references to official sources, such as public laws, the U.S. Code, implementing regulations, and Government websites.

Determining Economic Damages contains a brief discussion of the basic elements for determining retirement pay for active duty members, reservists, and survivors. There are two numerical examples and references to military websites for more details, but there are no references to the basic legal foundations for military retirement (Martin 2010).

Williams (1996) identifies the various fringe benefits for military personnel which must be evaluated in a full analysis of economic loss resulting from a personal injury or wrongful death. However, the paper states that increases in military basic pay are granted by Congress and are not related to any inflationary index. …

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