“Difficulties strengthen the mind, as labor does the body.” –Seneca
If your military record triggers an OGD you will go through the lengthy process of an Officer Grade Determination (OGD). You will face the stress of not knowing if you will retire in grade, the date of your retirement and if it will need to be adjusted, your post-military employment and what you may have to tell future employers who hired you believing you would be a retired Colonel, Lieutenant Colonel or Major, if you end up retiring at a lower grade.
In speaking to military officers, I have learned that there is some confusion on how a reduction in rank affects retirement pay.
BLUF: Retirement at a Lower Grade Does result in a loss of pay upon retirement. After reading this article, you will understand the applicable rules that cause a reduction in pay upon retirement, if the Secretary of your Service (or designee) determines that you did not serve satisfactorily in grade IAW 10 USC §1370(a), Commissioned Officers, Rule for Retirement in Highest Held Satisfactorily. While this article cites a bunch of statutes and regulations, for something this important, the references will be useful for those who like to do research.
Let’s start with the statute: 10 USC § 1407 (c) Retired pay base for members who first became members after September 7, 1980: high-36 month average. This statute discusses the retired base pay calculations for members who entered the armed force after September 7, 1980.
It states that the retired base pay of a person who entered the armed forces after September 7, 1980 is the person’s high-three average, which is the total amount of monthly basic pay to which a member was entitled for the 36 months (whether or not consecutive) out of all the months of active service of the member for which the monthly basic pay to which the member was entitled was the highest, divided by 36. But, for every rule, there is an exception.
The exception: 10 USC §1407 (f): Exception for Reduced in and Who Do not Serve Satisfactorily in Highest Held.
This statute states that for those officers who did not serve satisfactorily, the retired pay base is determined under section 1406 of this title in the same manner as if the member became a member of the armed forces before September 8, 1980, which is discussed in 10 USC §1406.
10 USC §1406. Retired pay base for members who first became members before September 8, 1980: final basic pay.
- General Rule—The retired pay of an officer who became a member of the armed forces before September 8, 1980 is the monthly basic pay of the member’s retired grade.
Thus, for officers who are retired in a lower grade due to a determination of unsatisfactory service, the High-3 calculation is not applicable. The determination is based upon the pay for the rank to which they were reduced based upon their OGD.
The DoD Financial Regulations also discusses this issue.
DoD 7000.14-R, Financial Management Regulation, Volume 7B, Military Pay Policy and Procedures – Retired Pay, Chapter 3,
Paragraph 030212 of DoD 7000.14-R discusses the Exception to the High-36 Month Retired Pay Computation for Members Retired Following a Disciplinary Reduction in Grade.
Members or former members who entered the uniformed services on or after September 8, 1980 will have their retired pay base computed using the high-36 month average, except for the members described as follows, whose retired pay base is based on the final basic pay of the grade prescribed under 10 U.S.C. §1406, rather than the highest-36 month average of basic pay.
Paragraph 010603 of DoD 7000.14-R discusses Satisfactory Service. The determination as to what constitutes satisfactory service for the purpose of retirement in the highest grade is within the discretionary power of the Secretary of the Military Department concerned (or designee). These are officers who retired in a grade lower than the highest grade in which the officer served by reason of denial of a determination under 10 U.S.C. §1370 Commissioned Officer, general rule; exceptions, (a) Rule for Retirement in Highest Grade Held Satisfactorily.
10 U.S.C. §1370 (b)(3) states in part: …”If the retired grade of an officer is reduced, the retired pay of the officer under Chapter 71 of this title shall be recalculated, and any modification of the retired pay of the officer shall go into effect on the effective date of the reduction in retired grade.” This means that the reduced pay will go into effect with the officer’s first retirement payment.
The Service Regulations also discuss retired pay pertaining to officers who do not retire in grade.
AFI 36-3203, Service Retirements, Table 8.1, General Rules for Estimating Retired Pay of Members also discusses the rule for officers who do not retire in grade.
Table 8.1, Final Pay, Note 5 states: Officers who retire and do not meet the requirements to retire in their highest grade (10 USC §1370) will be paid based on the retired grade (10 USC §1407f). Officers retiring in an enlisted grade will have their pay calculated as determined by DFAS.”
As mentioned above, 10 USC §1407f states that an officer who did not serve satisfactorily will receive retired base pay consistent with 10 USC §1406, which states that an officer will generally receive retired pay based on the monthly basic pay of the member’s retired grade.
Hopefully this article dispels the myth that some officers have that even if reduced in rank, they will be paid based upon their highest 36-month average.
DoD’s website offers various retirement pay calculators based on the different retirement pay systems. To receive an estimate on how retiring in a lower grade based on an OGD could affect retirement income, a member can input their current rank and years of service into the High-3 Calculator and then input their lower rank with the same years of service into the Final Pay Calculator. The difference in the two shows the affects an OGD can have on retirement income over the long term.
In addition to the tangible loss that occurs with a reduction in rank, how about intangible losses? An intangible loss may be your inability to state that you are a retired Colonel or retired Lieutenant Colonel or retired Major. You will always have to state your retired rank—the rank to which you were reduced as a result of an OGD, not the rank you attained while on active duty. If you plan to work for a defense contractor or do other work where your retired rank may be important to your role, this may be significant. For some of you, the intangible loss may not be as important as the tangible loss of hundreds of thousands of dollars over the course of the next 30-40 years of your life.
You should to take the OGD process seriously and do everything you can to show why you served satisfactorily in your current grade. Rushing through this process now could have life long effects. Don’t give up. No matter what happens, you should be proud of your service to your country. No one can take that away from you. Your nation will always be grateful for your service. Stay strong. “Difficulties strengthen the mind, as labor does the body.” –Seneca
