9154 / What is the legacy retirement system for reserve servicemembers?

The Reserve’s legacy retirement benefits qualification works off a combination of years to qualify for the pension and a points-based system to determine the amount of defined pension benefit.¹ As with active duty retirement, a reserve retirement requires 20 years of qualifying service to be eligible for retirement. Generally, reserve retirement benefits begin when the retiree reaches the age of 60. Active duty service after January 28, 2018 can reduce the beginning age by three months for each cumulative period of 90 days of active service in a fiscal year. There are two retirement pay plan options under the legacy system for reservists, the Final Pay or the High-36.

Generally, the formula to calculate the defined benefit pension payment is Retired Base Pay times the multiplier percent. The multiplier percent is calculated as 2.5 percent times the years of creditable service. Years of creditable service in the reserve system is where the points system comes into play. In calculating years of creditable service for retirement pay purposes, the servicemember’s total points at retirement are divided by 360 to calculate the years for the multiplier. Reservists earn points in one of three ways during each year and may earn up to 365 points each year.² Reservists receive one retirement point for each day they serve on an active duty status, one point for each attendance at a drill period, one point each day for performing funeral honors, and 15 points each year for membership in a reserve component (unless on an active duty status).

The 20 years of creditable service for reserve servicemembers is also calculated differently than their active duty counterparts. A retirement point year in the reserve component begins on the month and day anniversary that the servicemember joined the reserve component and ends 12 months later. This is wholly unrelated to fiscal or calendar years and is another year calculation that reserve servicemember must track. It is entirely possible for a reservist to have served in the reserve component for over 20 years but not have enough creditable years to qualify for retirement benefits. This happens when the servicemember is satisfactorily excused from attendance at a monthly assembly or annual training and fails to earn the requisite 50 points in his or her retirement point year.

Conversely, it is possible for a reserve servicemember to accumulate far more retirement points than his or her contemporary yet have fewer creditable years for retirement purposes. One way this could occur is when one reserve servicemember served on active duty for several years prior to joining the reserve component. He or she would get credited 365 points for each year of active service. His or her reserve counterpart may take five years to earn 365 points while still completing creditable years for retirement.

For a reservist, a qualifying year for retirement occurs when the servicemember has earned at least 50 points by his or her retirement point year end date. As mentioned above, points are earned by participating in the reserve component by serving on an active duty status (e.g. active duty for operational support, contingency operations - active duty for operational support, annual training, or active duty for training), inactive duty training such as monthly unit training assemblies, and performing funeral honors. In a given fiscal year, every reserve servicemember is entitled to 48-unit training assemblies (which equates to two days per month with one-unit training assembly equaling four hours of training), 14 days of annual training, and 15 membership points. If a reservist attended all unit training assemblies and completed annual training, which is the expectation of the reserve component, then he or she would earn 77 points toward retirement and complete a qualifying year. At the end of a 20-year career, the reservist would earn 1,540 points by completing the minimum requirements.

Once the reserve servicemember completes 20 years of creditable service, he or she receives a letter from their component advising them that the criteria for retirement benefits has been met. After that, the servicemember no longer is concerned with creditable years for retirement purposes, but the servicemember does continue to add retirement points onto the total for retirement pay purposes. Retirement points are earned by reservists until they request and receive retirement orders.

One last decision that reserve component servicemembers must make pertains to their status in retirement. Reservists can opt to be discharged entirely from the military in retirement. Choosing the option means that the retiree’s final base pay is calculated as of the day he or she separates from the service without cost of living adjustments or longevity increases in pay in the future.³ Alternatively, the retiree can choose to be placed in the Retired Reserve. This option means that the retired servicemember can be called back to service in the event of a national emergency such as the attacks of 9/11, the war in Iraq, or the COVID-19 pandemic. While that is likely the last thing that a retired reservist would like to do, it does keep the final base pay calculation increasing with cost of living adjustments and longevity pay increases until age 60. Depending on the age at which the servicemember retires, it could provide 15 to 20 years of increases in Final Base Pay for retirement pay calculations. This is not an insignificant swing in the defined benefit pension plan nor is it an insignificant commitment on behalf of the retiree who has seen a material uptick in events that warrant recall from the retired reserve in the past several years.