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Congressional Research Service
nforming the legislative debate since 1914
Updated December 6, 2024
Defense Primer: Military Separation and Severance Pay
Congress has authorized separation or severance pay for
involuntarily and voluntarily discharged servicemembers
throughout most of the military's history (see Table 1). The
purposes for these authorities has been three-fold: (1) to
ease the transition to civilian life for servicemembers with
minor physical disabilities; (2) to compensate
servicemembers for an unplanned (non-disability) end to
their military career before they are eligible to retire; and
(3) to aid the Department of Defense (DOD) in managing
force size.
Dsabilty Severance Pay
The Military Compensation Background Papers (8
Edition) describes disability severance pay (DSP) as
[A] special lump-sum payment to be made to
members of the armed forces separated from active
military service because of minor physical
disabilities that, while substantial enough to
adversely affect their ability to perform the military
duties of their respective offices or grades, are not
so severe as to seriously impair their civilian
earning capacity, in order to assist such personnel
in their transitions back to civilian life.
While forms of disability severance for military veterans
have existed since the founding of the United States, the
modern system was adopted in the Career Compensation
Act of 1949 (P.L. 81-351, §403). This law standardized the
benefit across all services, components, and pay grades.
Servicemembers who develop a medical condition affecting
their fitness to serve may be referred to a medical
evaluation board. If the board determines that the disability
is permanent, stable, and rated at 30% or greater, then the
member may receive a disability retirement and is eligible
for retired pay. Those with temporary disabilities may be
placed on the disability retired list and later re-evaluated for
fitness to serve. Those with service-connected disabilities
rated less than 30% are not eligible for disability retirement,
but may be discharged with DSP.
Amount of Disab ty Severance Pay
The amount of DSP is computed by multiplying the
member's years of service (YOS) by two months of the
basic pay to which the member is entitled at the time of
separation or placement on the temporary disability retired
list. The member is credited with a minimum of three YOS
for this calculation. If the disability is combat-related, the
member is credited with a minimum of six YOS. The
maximum creditable YOS is nineteen. DSP is distributed as
a one-time, lump-sum payment and is taxable, unless
related to a combat injury or the member is entitled to
disability compensation from the Department of Veterans
Affairs (VA).
Involuntary Separation Pay
Involuntary Separation Pay (ISP), was authorized as part of
the Defense Officer Personnel Management Act (DOPMA)
of 1980. DOPMA repealed prior legislation authorizing
severance or readjustmenf pay for military officers
involuntarily separated from service. Among other changes
to the officer personnel system, DOPMA standardized what
is often referred to as an up or out policy for officers
across all of the services. Under this provision, an officer
may be involuntarily discharged for having twice failed in
selection for promotion. This had the potential to impose an
unplanned career end for that officer and factored into the
design of the involuntary separation benefit. According to
the House Armed Services Committee report to accompany
the bill,
The separation pay is a contingency payment for an
officer who is career committed but to whom a full
military career may be denied. It is designed to
encourage him to pursue his service ambition,
knowing that if he is denied a full career under the
competitive system, he can count on an adequate
readjustment pay to ease his reentry into civilian
life. (H. Rpt. 96-1462, 1980)
In 1990, during a period of force drawdowns, Congress
expanded this authority to enlisted servicemembers (P.L.
101-510). Servicemembers involuntarily discharged under
honorable conditions after six years but before twenty years
of active service may be eligible to receive ISP as a lump
sum. A condition for ISP receipt is an agreement to serve a
minimum of three years in the Ready Reserve following
discharge or release from active duty.
Amount of Involuntary Separation Pay
10 U.S.C. §1174 authorizes two mechanisms to calculate
ISP: (1) full payment: 10% of the product of the YOS and
12 times the servicemember's monthly pay at the time of
separation; or (2) half payment of the prior amount. Full
payment or half payment is at the discretion of the
Secretary of the Military Department concerned. DOD
policies prescribe half payment under circumstances where
members are deemed not fully qualified for retention or
continuation (e.g., weight control failures, failure to meet
standards, or other conditions not constituting a disability).
Voluntary Separation Pay
During the force drawdown in the 1990s, Congress
authorized two types of voluntary separation incentives, the
Special Separation Bonus (SSB) and Voluntary Separation
Incentive (VSI). These separation incentives were designed
to help the services reduce over-manning in certain active
component pay grades or occupational specialties.](ViewImageLocal?handle=hein.crs/governz0001&div=1&collection=&method=preview&ext=.png&size=3)
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