TC 6 Entitlement to Continuation Pay Agenda Continuation
- Slides: 19
TC 6 Entitlement to Continuation Pay
Agenda • Continuation Pay Basics • Application Process • Financial Implications • Resources Entitlement to Continuation Pay Counselee Checklist Available
Continuation Pay Basics • What is Continuation Pay? • Who is eligible to receive it? • When can you receive it? • Why is it being offered? • How is it calculated and disbursed?
What Is Continuation Pay? • Part of the Blended Retirement System (BRS) • One-time, mid-career bonus at 12 -year mark • Paid in exchange for 4 years of additional service • In addition to other career incentives and bonuses • A retention tool Military Retirement and Continuation Pay Handouts Available
Who Is Eligible to Receive It? • Active Duty or Active Reserve • BRS participant • Complete between 8 and 12 years of service, based on Pay Entry Base Date (PEBD) • Agree to 4 years of additional service
When Can a Member Receive It? • Can request at 11 years and 6 months • Must elect before your 12 th year and is an irrevocable election • Paid on the 12 th anniversary of Pay Entry Base Date (PEBD)
How Is It Calculated? • Active-duty multiplier is 2. 5 times basic pay • Reserve multiplier is 0. 5 times basic pay • Pay-rate multipliers may be based on: üService-specific retention needs üSpecialty skills and hard-to-fill positions üSimilar to career field incentives and re-enlistment bonuses X = Monthly Basic Pay 1 0. 52 or 2. 53 Gross CP = Tax Witholding 4 Net CP 5 1 Amount over 12 years; 2 RC. Service members in man-day orders or Voluntary Limited Period of Duty (VLPAD) receive the RC amount; 3 AC or AGR. Active Guard/Reserve (AGR) Service members receive the Active Component (AC) amount for CP; 4 CP is eligible for Combat Zone Tax Exclusion (CZTE); 5 What you take home.
How Is It Disbursed? You can choose to receive a one-time payment or spread your payments to potentially save on taxes One Installment Must elect before your 12 th year and is an irrevocable election Paid the first pay period after you start your 12 th year of service Two Equal Installments First installment is paid the first pay period after you start your 12 th year of service and the next installment is paid the following year Four Equal Installments First installment is paid the first pay period after you start your 12 th year of service and remainder in three equal annual installments Pick your installment plan Remember, CP is subject to tax withholding! Your payment choice may affect taxes owed. Review the IRS Tax Withholding Estimator.
Why Is It Being Offered? • Part of BRS benefit package • Retention tool Military Retirement Handout Available
Two Ways to Apply for Continuation Pay Complete NAVPERS 1070/613 with your command career counselor Elect it through NSIPS
Applying Through NSIPS 1 • Verify Continuation Pay eligibility in NSIPS (Continuation Pay Tab) ü First day to elect is 11 years 6 months after PEBD ü Election must be made prior to entering the first day of the 12 th year of service 2 • View / Print Continuation Pay Notification Letter 3 Indicate CP Election (Yes or No) 4 • If elected, select payment option ü Single Lump-sum Payment ü Two Annual Payments (50%) ü Four Annual Payments (25%) 5 • Save Note: If a Sailor is unsure of the amount of Continuation Pay they will be paid at 12 YOS, it is recommended they contact their Command Career Counselor or Command Financial Specialist.
Financial Implications • What are the tax considerations? • What are the conditions / limitations of investing CP into the TSP? • What can you do with your CP? • What if you don’t meet your service obligations?
What Are the Tax Considerations? • CP is EARNED income and will be taxed accordingly ü Federal ü State ü Local • More income may push you into a higher tax bracket ü If so, consider 2 or 4 installments ü Set aside funds to cover increased taxes • Combat Zone Tax Exclusion • Review IRS Publication 3, The Armed Forces Tax Guide
What Are the Conditions / Limitations of Investing CP into the TSP? • Considered a special pay (bonus) • Can be invested into TSP ü There are no matching funds • Annual limits still apply ($19, 500 for 2020) ü Maxing out early loses match on future contributions ü Matching contributions stop until January 1 • Combat Zone Tax Exclusion allows up to $57, 000 for 2020
What Can You Do With Your CP? • Take a thoughtful approach ü Update your spending plan ü Revisit your financial goals o Pay down debt o Make a major purchase o Save for emergencies o Gift it o Invest for the future • Beware of misleading consumer practices ü Review Sources of Help for Military Consumers ü Protect yourself against identity theft, scams and frauds Basic Investing, Spending Plan Worksheet, Sources of Help for Military Consumers, and Military Consumer Protection Handouts Available
What if You Don’t Meet Your Service Obligations? • You must repay all or part of your Continuation Pay • Installment options can help alleviate this financial burden
Summary Congratulations on reaching this important milestone! Let’s recap what you learned to help in decision making as you approach eligibility for Continuation Pay: ü Continuation Pay Basics ü Application Process ü Financial Implications
Resources • Checklist and Handouts • Financial Education and Support ü Command Financial Specialists (CFS) ü Personal Financial Managers (PFM) ü Installation Family Support Center or Health, Safety, Work-Life (HSWL) Regional Practice ü Relief Societies ü Military One. Source or CG SUPRT • Financial Literacy Mobile Apps ü My. Navy Financial Literacy ü Sen$e
Thank You! The appearance of U. S. Department of Defense (Do. D) visual information does not imply or constitute Do. D endorsement.
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