Tagged: military pay

SECDEF: Cutbacks Could Force Promotion Freeze In FY 2014

Posted by Jason Van Steenwyk

militaryauthority.com SECDEF cutbacksAs deep cuts in defense spending continue to take hold, the Secretary of Defense has notified Congress that the DoD will be forced to take some draconian measures come fiscal year 2014.

With an ongoing war in Afghanistan, the Secretary of Defense must find an additional $52 billion in cuts to make, hopefully without harming the war effort. As part of that plan, the Secretary of Defense told Congress, through a letter, that the combination of cutbacks could include some items that are deeply painful for military servicemembers and their families. For example, the Secretary said cuts could include:

  • A freeze on all promotions
  • A freeze on permanent-change-of-station moves
  • A continued freeze on civilian hiring
  • Halting all discretionary bonuses, such as reenlistment bonuses
  • Stop taking in recruits
  • 20 percent reductions in procurement, construction and R&D

Secretary Hagel sent the letter to Senators Carl Levin (D-Michigan) and James Inhofe (R – Oklahoma). The Senators had asked the Secretary to lay out the effects that planned budget rollbacks and sequestration measures would have on military personnel and readiness.

Hagel also said the DoD would be forced to make deep cuts to weapons programs and put off needed facilities and infrastructure maintenance. However, the law does not allow the DoD to shut down unneeded posts.

Hagel also called for caps on military pay increases, and increases in TRICARE fees for retirees.

The Secretary also said that if sequestration remains in effect as it currently stands, there would possibly be a round of involuntary discharges. 

All told, unless Congress takes action, the Department of Defense must find over half a trillion dollars in savings vis. Previously planned baseline spending over the next 10 years – while at the same time successfully prosecuting the Afghanistan war and satisfying its normal peacetime missions such as guarding key shipping lanes and deterring aggression from rival nations such as China, Russia, Iran and North Korea.

However, the funds specifically allocated to support the Afghanistan warfighing mission have thus far been protected from sequester.

Secretary Hagel would also like to eliminate unneeded bases, ships and weapons. However, this is always an uphill battle for the Department of Defense, because every unneeded program is all too often some Congressperson’s pet project. 

Congress, DoD Lock Horns in Battle Over Your Next Pay Raise

Posted by Jason Van Steenwyk

military pay raiseThe Obama Administration would like to cap your base pay increase at 1 percent next year. That’s the pay increase the Secretary of Defense has proposed for fiscal year 2014 – the smallest military pay increase in half a century.

‘That’s not high enough,’ say members of the Republican-controlled House Armed Services Committee on Personnel. The committee voted to advance a proposal from Representative Joe Wilson (R – North Carolina) calling for a minimum 1.8 percent pay raise for troops across the board.

Troops received a base pay increase of 1.7 percent for 2013, effective January 1. But the increase was not enough to offset the 2 percentage point increase in Social Security tax withholding – resulting in a net loss to base pay for any servicemember who did not get promoted or get a pay increase based on time in service this year.

Some active duty troops came out ahead with adjustments to BAH, or basic allowance for housing, depending on rank and location. Reserve component troops don’t normally qualify for housing allowances, though, so Guardsmen and Reservists actually had to make do with a net pay cut, on an after-tax basis, for 2013.

Currently, the law links military pay increases to the Bureau of Labor Statistics Employment Cost Index. This would call for the same 1.8 percent increase that Wilson and Congressional Republicans are calling for. 

The Administration is trying to cut spending in order to bring budgets in line with sequestration provisions. They estimate that holding the pay increase to 1 percent rather than 1.8 percent will save $540 million. They are also trying to increase TRICARE fees, which would reduce net federal outlays by $1 billion – at the expense of the troops. The Congressional subcommittee also firmly rejected this idea.

Some Democrats point out that they have been pushed into a corner by irresponsible Congressional appropriations and earmarks on unwanted or outdated weapons systems. For example, Congress has mandated more spending on weapons systems the military does not even want, over $400 million in more M1A2 Abrams main battle tanks – even though the last tanks have left Europe and the Army is down to just one armored division and one cavalry division.

These tanks are manufactured in Lima, Ohio – by union employees, and in the districts of two key Republicans, Senator Rob Portman and Jim Jordan – as well as Democratic Senator Sherrod Brown. Cancelling the project would clear the decks of most of the 1.8 percent pay increase that servicemembers would normally expect by law. But that would mean the loss of thousands of factory jobs concentrated in this one key district. The plant is operated by General Dynamics, which spent $11 million on lobbying last year according to the Center for Responsive Politics. 

Overlooked Military Tax Deductions

Posted by Jason Van Steenwyk

Military tax deductionsIt’s that time of year again! Military members, as W-2 employees, don’t have all that many options when it comes to sidestepping a tax bite. Uncle Sam knows everything you make from the military, and except for certain pay earned in a combat zone and some special allowances like BAH, it’s nearly all taxable.

But there are some deductions and exemptions available to you – some applicable to routine work-related expenses that any employee can claim, and some only available to the military. 

Unreimbursed Employee Expenses

First of all, get familiar with this concept. Unreimbursed employee expenses are any ordinary and necessary expenses that are incurred for the convenience of an employer, for which you are not reimbursed. For it to be classified as ‘ordinary,’ it means that the expense is routine and commonly accepted in your profession, trade or business – whether formally required by an employer or not.

Generally, you can deduct these expenses to the extent they exceed 2 percent of your adjusted gross income (AGI).

Some examples:

Trade publications. Do you subscribe to military and defense-related trade journals or professional journals? These deductions are typically deductible if, combined with other unreimbursed employee expenses, they exceed 2 percent of your AGI.

Military uniforms for Guard and Reserve personnel. If you buy uniforms and you do not receive a uniform allowance, you can generally deduct the cost of these uniforms if local regulations restrict you from wearing the uniform off duty. You can’t deduct uniform costs if you are on active duty.

  • Military battle dress uniforms and utility uniforms that you cannot wear when off duty
  • Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords
  • Reservists’ uniforms if you can wear the uniform only while performing duties as a reservist

This is a curious rule, because civilian workers whose employers impose a specific uniform can generally deduct the cost of their uniforms. The rules that apply to the military are less favorable than those that apply to civilian employees..

The cost of obtaining a passport for work-related travel – to the extent you are not reimbursed.

Home office and storage. Is there an area of your home used exclusively for a home office and for storing your military gear? Some commanders and first sergeants in the reserve components have to maintain home offices just to keep up with the daily demands of running a unit that may be 50 miles or more from their homes. If you have a home office, or you have a significant amount of your home square footage devoted exclusively to storing gear and planning military activities (and to services provided for other employers, if any), you may be able to claim a deduction for the business use of your home. For example, if you have a 3,000 square foot home, and you have 150 square feet dedicated solely to a home office or storage, that’s 5 percent of your house payment or rent payment, plus a like percentage of utilities, that you may be able to claim. 

Legal expenses. If you have legal expenses that arise wholly out of the exercise of your job, and you pay out of your pocket rather than have a JAG attorney take care of it, that is generally a deductible unreimbursed employee business expense. Personal legal expenses are not normally deductible (unless they are related to preparing and filing income tax returns), but professional expenses are. However, if an attorney advises you on tax planning as part of a divorce, that portion of your lawyer’s fees attributable to tax advice is generally deductible.

Debt Repayments. Did you get a debt letter from DFAS on a Form 705? Did you owe the government money? Keep your records – you can generally deduct the amount you paid back to Uncle Sam. The methodology you can use depends on the amount of debt repaid: If it was $3,000 or less, you deduct the amount repaid from your income in the year in which you repaid it. It’s a miscellaneous itemized deduction, so it’s still subject to the 2 percent of AGI threshold. Use Schedule A to IRS Form 1040. You can’t use 1040EZ.

If the amount repaid is more than $3,000, on the other hand, you have a choice: You can choose to deduct the amount repaid in the year in which you paid it back, or you can have the loss deducted from your earnings in the tax year in which the loss occurred, and take a tax credit against this year’s liability. For best results, calculate your net taxes under both methods, and pick the method that works best for you. Note: You probably won’t find this functionality in the cheap, over-the-counter tax prep forms and free services. You may want to see a tax professional and explain the situation. For more information, see IRS Publication 525.

Unreimbursed Travel Expenses. If you have work-related travel expenses that require you to be away from home for more than a day or so, you can generally deduct the cost of lodging expenses, transportation and half of your meals. If you take your own car, you can either deduct the standard federal mileage rate (55½ cents per mile, as of this writing in March of 2013), or you can deduct actual expenses. You can also deduct rental car fees. However, if the military reimburses you for the use of your POV or provides or reimburses you for the rental car, you can’t take this deduction. You can also deduct for parking fees and tolls. 

Note: If you live more than 100 miles away from your armory or duty station and you are traveling to attend Guard or Reserve drills, you can deduct the cost of your hotel. These hotel costs are ‘above the line’ deductions, so you don’t need to meet the 2 percent of AGI threshold that normally applies to miscellaneous itemized deductions, including unreimbursed employee business expenses. 

Reporting: If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21.

You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21.

Meals. Meals are deductible if you have to get them away from your home in order to do your job, or if they are a business-related entertainment expense. You can deduct half of the cost of your meals, or if you don’t want to keep a lot of records, you can base your deduction on the standard meal allowance for federal workers, which is $46 per day, as of tax year 2012. Special rates may apply for exceptionally expensive areas. For days you travel on, and days you return, you can base a pro-rated deduction on 3/4ths of the federal rate.

Trade Association Meetings and Conventions. Per IRS Publication 525, you can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. 

Trips to the Armory. Ok, this can be an important one – especially for reserve unit commanders and first sergeants and other key personnel who have day jobs but are constantly going back and forth to the armory or duty station to take care of business. If you have a regular place of business during the week, and you have to go to the armory for whatever work-related reason on a day on which you are working your regular job, the IRS considers the armory a second place of business. So you can deduct miles going from one work place to another. But you can’t deduct those miles if you aren’t working your regular job that day.

You can also deduct travel expenses to meetings if they occur somewhere other than your main duty station.

Normally, for non-military, non-PCS moves, your new principal workplace must be at least 50 miles farther from your old home than your old workplace was. For example, if your old workplace was 3 miles from your old home, your new workplace must be at least 53 miles from that home. If you did not have an old workplace, your new workplace must be at least 50 miles from your old home. The distance between the two points is the shortest of the more commonly traveled routes between them.

However, members of the military who are moving on PCS orders do not have to meet the distance and time tests listed above.

Unreimbursed Moving Expenses. If you have to relocate because of a PCS, nearly any ordinary and necessary moving out-of-pocket expense that is not reimbursed by the government is deductible. File a Form 3903 to claim moving expenses. See IRS Publication 521 – Moving Expenses.

IRA Contributions – if you meet the income requirements for deductible contributions to a traditional IRA, you can claim these contributions as an adjustment to income. If you are active duty, or if you are a reservist on orders for more than 90 days, you are considered to be covered by a workplace retirement plan for the purpose of calculating your allowable deduction. Otherwise, your individual work arrangements or those of your spouse govern which table to use.

Dues. You can deduct professional dues, such as dues to the Reserve Officers Association, Military Officers Association of America, or Association of the United States Army. You can also deduct dues paid to medical, legal, engineering or other associations as long as your membership is work related. You can’t deduct officers’ club or NCO club dues, alas. 

Educational Expenses. You can usually deduct educational expenses if they do not qualify you for a new career or job, but can be reasonably construed to help you improve your performance in your current job. For example, if you are assigned as a forward ordering officer or you are in charge of planning and executing post maintenance and construction activities, you might take some classes in project management. However, this expense is not deductible if it provides you with a license or certificate that qualifies you to launch a new career. Education must be for THIS career, and not for future careers.

Military Families Can File Taxes Free Online

Posted by Jason Van Steenwyk

tax timeYou should have your W-2s in hand from DFAS and any other civilian or government employer today. The same applies if you have self-employment or independent contractor income on a 1099.

If you are active military, Reserve, Guard or a dependent filing jointly with your spouse, you can file your income taxes online free of charge, via the MilitaryOneSource website, www.militaryonesource.com.

MilitaryOneSource has partnered with H&R Block to provide this service free of charge to military members and their families. The service allows you to file your federal taxes free, as well as personal income tax returns for up to three states.

To use the service, gather your W-2s, 1099s, and records from your tax-deductible expenses, and log onto the MilitaryOneSource website. If you don’t have a login already, you will need to create one.

Should I do my own taxes?

Free and low-cost file-at-home sites are not always the best solution. The H&R Block program via MilitaryOneSource should work for you, though, if your tax situation is simple and straightforward.

Consider the free filing offer if the following conditions apply:

  • All your income is documented on one or more W-2 forms.
  • You do not plan to itemize, because you don’t have anywhere near the standard deduction in itemized deductions. For individuals, that threshold is $5,950 if you are filing as an individual, and double that figure for spouses. If you qualify as a head of household, your standard deduction is $8,700. These numbers apply specifically for tax year 2012.
  • You do not have a mortgage, or the mortgage and some retirement plan contributions are your only deductions.
  • You are not subject to the alternative minimum tax.
  • You do not own a small business.
  • You do not on investment real estate.
  • You have no capital gains or losses from the sale of assets.
  • You do not have more than $400 in self-employment income.

If your tax situation is more complicated, it’s usually beneficial to form a relationship with a tax professional – a CPA, enrolled agent or qualified tax attorney, depending on your situation. While there is not a lot they can do to offset their fees if you are a straight-ahead W-2 worker, such as active duty military with no outside interests or investments, they are often more than worth their fees for those with more complex issues:

  • Small Business owners
  • Homeowners
  • Real estate investors
  • College expenses
  • Travel and relocation
  • Business use of home or personal automobile
  • Capital gains and losses
  • Annuity or pension income
  • Gift taxes
  • Unreimbursed employee expenses

For ‘plain vanilla’ returns for those with enough time to sit down themselves and do the paperwork, however, the MilitaryOneSource is a great resource.

If you are somewhere in between these two types of taxpayers, though, try calling a MilitaryOneSource tax counselor. They can provide general tax information and help steer you in the right direction, though they do not provide definitive advice.

According to MilitaryOneSource, their counselors can provide the following services:

  • Review IRS regulations/state tax regulations and forms to locate the definition or information related to your questions.
  • Locate and reference military-specific tax information.
  • Help you figure out which numbers should be entered into which fields of particular form(s).
  • Provide electronic copies of needed IRS or state tax forms.
  • Explain additional tax services available to the military community such as VITA Clinics on base and H&R Block at Home®
  • Review options for utilizing a refund—savings, paying down debt.
  • Connect you to other MilitaryOneSource provided non-medical counseling or work-life services.

Alternatively, TurboTax has published a free resource of their own – TurboTax Military Edition, which is free for anyone in grades E-1 through E-5, and just $24.99 for E-6s and up.

Volunteer Tax Assistance Programs

Many military posts have volunteers come to help members of the military prepare their tax returns, under the IRS VITA program, or Volunteer Income Tax Assistance program. Check with your installation community centers to see if there will be any such program for your area. If you aren’t on or near a large installation, or you simply want to go elsewhere, you use the IRS VITA Locator tool, or call the IRS at 1-800-906-9887.

For Retirees

VITA volunteers are generally happy to work with retirees, though the VITA program is funded by grants to non-profits and their programs are generally designed to serve those with incomes below $51,000 per year.

If you are over 60, however, you can also get assistance from the American Association of Retired Persons (AARP.org), or via the IRS’s TCE program.

What to Bring

According to the IRS, “to have your tax return(s) prepared at a VITA or TCE site you need to bring the following information with you:

  • Proof of identification – Picture ID
  • Social Security Cards for you, your spouse and dependents or a Social Security Number verification letter issued by the Social Security Administration or
  • Individual Taxpayer Identification Number (ITIN) assignment letter for you, your spouse and dependents
  • Proof of foreign status, if applying for an ITIN
  • Birth dates for you, your spouse and dependents on the tax returnWage and earning statement(s) Form W-2, W-2G, 1099-R, 1099-Misc from all employers
  • Interest and dividend statements from banks (Forms 1099)
  • A copy of last year’s federal and state returns if available
  • Proof of bank account routing numbers and account numbers for Direct Deposit, such as a blank check
  • Total paid for daycare provider and the daycare provider’s tax identifying number (the provider’s Social Security Number or the provider’s business Employer Identification Number) if appropriate
  • To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms.                 

It is extremely important that each person use the correct Social Security Number. The most accurate information is usually located on your original Social Security card. If you do not have an SSN for you or a dependent, you should complete Form SS-5, Social Security Number Application. This form should be submitted to the nearest Social Security Administration Office.”

Military, Veteran Pay Held Hostage in Debt-Ceiling Fight

Posted by Jason Van Steenwyk

military pay at riskWhite House to GOP: Let us increase the debt or the troops get it.

That’s the message Obama had for Congress during a press conference last week, in which reporters asked about the ongoing negotiations over the debt ceiling – a Congressionally-imposed cap on the amount of debt the federal government is authorized.

“If congressional Republicans refuse to pay Americans bills on time, Social Security benefits and veterans’ checks will be delayed,” stated President Obama. “We might not be able to pay our troops or honor our contract for small business owners.”

A Republican representative and War on Terror veteran Duncan Hunter of San Diego, California, has introduced legislation that authorizes the federal government to pay military salaries regardless of the debt limit.

“America’s military men and women fight to defend our freedom without asking for much in return,” said Hunter, a veteran of the wars in Iraq and Afghanistan. “Whether they are fighting in Afghanistan or supporting operations elsewhere, servicemembers deserve assurance that they will not be denied a paycheck. And if paychecks are withheld, it’s because the President, as commander in chief, made a decision not to pay them.

“Especially for those who are serving overseas while their families are at home, the threat of not getting paid can create unnecessary distractions. Removing the threat that paychecks might be withheld or delayed will provide a sense of relief and allow our servicemembers to stay focused on their duties.”

Duncan is currently a major in the U.S. Marine Corps Reserve.

About the Debt Ceiling

The Constitution of the United States gives Congress overall responsibility for determining the fiscal policy of the United States. That is, it is Congress, not the President, who primarily decides major tax and spending issues. Constitutionally, the President cannot direct the government to borrow without the approval of Congress.

At the same time, the President cannot refuse to spend money as directed by Congress. He must, by law, operate all the departments and programs he is directed to by Congress – which puts the President on the horns of a dilemma: For years, the amount of money Congress has ordered the government to spend has been greater than the amount coming in. The U.S. government has been forced to borrow the difference by selling bonds, which the government must eventually repay, with interest. The total amount financed by borrowing increases every year.

Meanwhile, though, Congress has also established an overall cap on borrowing, beyond which the President cannot go without getting further authorization from Congress.

This discussion is separate from the “sequestration” cuts that will slash about 10 percent from federal department funding across the board. Military pay and VA benefits will generally continue under sequestration, should it come to pass. The debt ceiling, on the other hand, is a separate argument.

Currently, the Congressional Budget Office projects that we will hit the borrowing limit next month – currently set at $16.4 trillion. Divided equally among every resident of the United States, the per capita national debt is over $52,000 for every man, woman and child.

Once that happens, the President must cease borrowing. The government must then, technically, limit its spending to current revenues coming in, minus those committed to paying existing interest payments. When that happens, the government will begin bouncing checks.

Congress has been extending the debt limit to allow Presidents to finance the operation of government routinely since WWII, including 18 times under President Reagan.

In recent years, however, under pressure from fiscal conservatives and Tea Party representatives in Congress, the legislative branch has been driving a harder bargain. The government almost came to a halt in 2011, for example, when Democrats and Republicans crafted a deal at the last minute that allowed for the increase of the debt limit to today’s level of $16.4 trillion.

The government also shut down, briefly, from November 13 through November 19, 1995, and from December 15, 1995 through January 5, 1996. This occurred after Republicans swept into power in the 1994 Congressional mid-terms and elected Newt Gingrich, a representative from Georgia, as the Speaker of the House. The GOP Congress and Clinton Administration were unable to come to an agreement on the debt ceiling and forced the government to suspend much of its operations and furlough hundreds of thousands of federal workers. Congress was successful in forcing a balanced budget for four years in a row, though revenues were artificially buoyed in the late 1990s by the Internet revolution and inflated equity prices.

Troops continued to be paid during that 21-day shutdown, though, because the defense spending law had already been passed.

Some Congressional Representatives, including Pat Toomey, have also proposed legislation directing the Treasury Department to keep paying active duty military pay and debt service, which is prioritized to ensure that the full faith and credit of the United States Government shall not be questioned. Failing to do so would potentially result in a default on U.S. bonds, which would cause interest rates to spike and make it much more expensive for the government to raise new debt.

Attempts to direct the Treasury Department to prioritize certain payments over others encounter a significant technical hurdle, however: The Treasury Department’s computer systems just aren’t designed to identify and prioritize millions of separate payments every day. It would take time and money to create a new system to do that.

So even if Congress does pass an eleventh-hour law exempting military pay, VA benefits, or other electoral sacred cows from interruptions as a result of the government hitting the debt ceiling, it is far from clear that the Treasury Department will be able to execute the measure.

This document from the Congressional Research Service details the processes by which some DoD functions can continue and some can be curtailed. Essential functions necessary to protect life and property can likely continue, but the troops and civilian workers actually executing the President’s orders (at Congress’s direction) would not be paid until Congress authorizes new borrowing or otherwise appropriates funds that need not be borrowed.

As a result, military pay, veterans’ benefits and contractual payments to defense contractors are all very much at risk of disruption if Congress and the President do not reach an agreement to lift the debt ceiling.

And each party to the conflict will do its best to blame the other.

Tax Increases Will More Than Cancel Your Base Pay Raise This Year, Ho Ho Ho!

Posted by Jason Van Steenwyk

describe the imageEveryone who has good plans to spend, save or invest your 1.7 percent increase in base pay taking effect this month, take one step forward.

Not so fast, soldier.

Yes, Congress approved a 1.7 percent increase in base pay this year. But the entire pay raise – and then some – is cancelled out by the expiration of the so-called “payroll tax holiday.” That’s going to result in a 2 percent increase in tax withholding, courtesy of your friendly local MILPERS office.

Here’s what happened.

What are payroll taxes, anyway?

The payroll tax, in a nutshell, is money your employer sends to the Social Security Administration, where it goes to fund old-age pensions and disability pensions under Social Security, and Medicare benefits for current beneficiaries. Any surpluses buy treasury bonds – that is, government debt. (The real answer: Congress spends every dime and replaces it with an IOU.)

Until 2010, the payroll tax for the Social Security portion of the tax was 12.4 percent. Of that amount, employers would kick in half and withhold half from employees’ paychecks as well. So both sides paid 6.2 percent each, up to a cap which was set at $110,100 per year in 2012, and $113,700 for 2013.  In addition, both employer and employee pay an additional 1.45 percent for Hospital Insurance, or Medicare. If you are an employee, that comes right out of your check before you even see it.

Self-employed people get to pay both halves of both taxes.

In late 2010, though, Congress was looking for ways to stimulate the economy, which was then mired in a nasty recession. So they looked for ways to boost consumer spending power. Among their solutions: Cut payroll taxes. Not for employers, but for employees. So Congress passed a law that cut payroll tax withholding from 6.2 to 4.2 percent of wages. That is, a 2 percent cut.

All other things being equal, paychecks – military paychecks included – went up by 2 percent of total wages.

Originally, the measure was only supposed to last a year. But Congress renewed it to keep juicing the economy. Until this year. The latest tax deal that ostensibly avoids the fiscal cliff does not renew the payroll tax holiday. Wage earner taxes are going up.

And you thought only millionaires and billionaires were going to be affected.

Why not extend it?

Why not simply extend the payroll tax cut indefinitely? Because there is a price to be paid for the lower tax level: The taxes go to pay current Social Security benefits. If the payroll tax holiday continued, the reduced revenue coming into the program would start eating into Social Security benefits. Seniors are, of course, a powerful lobby. And they themselves paid into the system their entire working lives, expecting to receive their full benefit. If payroll taxes are too low, Congress would either have to lower benefits, raise the retirement age, or raise revenue somewhere else in order to pay benefits. Continuing this payroll tax was undercutting the actuarial basis for maintaining Social Security. As the baby boomers reach retirement age, the strain on the Social Security System, combined with lower revenues from payroll tax withholding coming in, would push Social Security to the breaking point.

As it stands now, those days are over. So you’ll get your 1.7 percent increase in base pay. But you’ll also see withholding increase by even more than that. So military members will not see an increase in take home base pay. Instead, base pay will decrease by 0.3 percent, all other things being equal.

Happy New Year!

Troops Win Legislative Victories With New Defense Budget Deal

Posted by Jason Van Steenwyk

2013 Defense Authorization BillCongress has struck a tentative deal on the 2013 Defense Authorization Bill, at least at the committee level, and lobbyists for veterans and servicemembers groups seem to have one some important victories, sources say.

According to the Military Officers Association of America – one of the key lobbying organizations in Washington for career military and retirees – the deal contains the following provisions:

A 1.7 percent increase in base pay

The defeat of a drastic increase in TRICARE pharmacy copays proposed by the Obama Administration: Copays are capped at $17 per brand-name medication for 2013, and future increases are pegged to retirement pay increases. The Administration wanted to raise the current copay from $12 to $26, and then to $34 per medication over the next four years.

The Obama Administration also wanted to eliminate access to medications not on the current TRICARE formulary altogether. The Defense deal Congress reached this week ensures they will continue to be available, though for a $44 copay. That is substantially more expensive than the current $25 per medication, but “better than not having them available at all,” say MOAA sources.

The co-pay for mail-order generic medications remains at zero. The Administration wanted to reinstate a $9 copay for generics by 2017, but was unsuccessful in getting this included.

The bill does impose new obligations among TRICARE for Life beneficiaries: They must try using cheaper military pharmacies or mail-order for refills for at least a year, beginning, most likely, in March in 2013. After one year, beneficiaries can opt to revert back to the retail pharmacy system. Congress hopes the savings from this arrangement will offset the cost of the lower copays to the taxpayer.

The law also makes it easier for wounded medically-retired veterans to collect Combat-Related Special Compensation for those with combat-related disabilities. Those affected will see an increase in CRSC payments effective 1 January 2013.

Additionally, active duty service members will be getting a 3.8 percent increase in their housing allowance next year, on average, though allowances at some locations will actually decline.

Active duty servicemembers are also receiving an increase in basic allowance for subsistence. The new rates:

Enlisted: $352.27 per month

Officers: $242.60 per month

In other developments, the new Defense Authorization Bill makes same-sex marriages legal on military bases if they are legal in their respective states. However, military chaplains cannot be required to participate in marrying same-sex couples.

The bill also authorizes TRICARE to pay for abortions, if the patient is a victim of rape or incest.

Furthermore, the law also requires the military to discharge convicted sex offenders, and requires military officials to retain closed reports of sexual assaults for up to 50 years, in order to support disability claims against the government and possible prosecution of perpetrators, subject to the statute of limitations.

Stop Loss Pay Deadline Looms

Posted by S.E. Davidson Parker

stop loss pay deadlineService members whose active duty was involuntarily extended beyond their original agreements are facing an October 21st, 2012 deadline to apply for stop loss pay benefits. The Department of Defense increased the use of stop loss after the advent of the terrorist attack of September 11th. It reached its highest use in 2005, and the policy is slated to discontinue in 2011 by a 2009 directive of the-Defense Secretary Robert Gates.

This is not an automatic benefit; those who experienced stop loss must apply to receive the funds. You must have served under stop loss between September 11th, 2001 and September 30th, 2009. For each month served under stop loss, veteran service members will receive a bonus of $500.

Your application must include:

  • DD 2944, Claim for Retroactive Stop Loss Payment; and from the DD2944 form
    • DD 214, Certificate of Release or Discharge from Active Duty and/or DD Form 215, Correction to DD Form 214;
    • Personnel record or enlistment or reenlistment document recording original expiration of service date;
    • Approved retirement memorandum or orders establishing retirement prior to actual date of retirement as stipulated on DD 214 or DD 215;
    • Approved resignation memorandum or transition orders establishing a separation date prior to actual date of separation as stipulated in DD 214 or DD 215; and
    • Signed documentation or affidavit from knowledgeable officials from the individual’s chain of command acknowledging separation/deployment, etc.

Your branch of service may request more information and documentation after receiving your application. Each branch of service processes its own stop loss claims; the address for each service’s claim processing is located on the DD2294.

Veterans who voluntarily reenlisted after being told they were to undergo a stop loss and received a bonus for that reenlistment are ineligible for this program.