Understanding Continuation Pay in Military - Eligibility, Calculation, and Disbursement

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Explore the details of Continuation Pay for military personnel, including eligibility criteria, timing of payments, calculation methods, and options for disbursement. Learn about this vital component of the Blended Retirement System that offers midcareer bonuses in exchange for additional service.

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TC 6 Entitlement to Continuation Pay Internal

Agenda Continuation Pay basics Application process Financial implications Entitlement to Continuation Pay Member Checklist Available Internal

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? Internal

What Is Continuation Pay? Part of the Blended Retirement System (BRS) One-time, midcareer bonus payable between 8 to 12 years of service Currently, Coast Guard awards CP at 12 years of service which is subject to change 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 Internal

Who Is Eligible to Receive It? Active Duty or Active Reserve BRS participant Payable between 8 and 12 years of service, based on Pay Entry Base Date (PEBD) Agree to 4 years of additional service Internal

When Can a Member Receive It? Can request at 11 years and 6 months Must elect before your 12th year and is an irrevocable election Paid on the 12th anniversary of Pay Entry Base Date (PEBD) Money paid first pay period following 12th anniversary Internal

How Is It Calculated? Active Duty multiplier is 2.5 up to 13 times basic pay Reserve multiplier is 0.5 up to 6 times basic pay Pay-rate multipliers may be based on: Service-specific retention needs Specialty skills and hard-to-fill positions Multipliers are subject to change Monthly Basic Pay1 (X)0.52 or 2.53 (=)Gross CP (-) Tax Witholding4 (=)Net CP5 1Amount over 12 years; 2Reserve Component (RC) Service members receive the RC amount ; 3Active Component (AC) and Full Time Support (FTS) Service members receive the AC amount for CP; 4CP is eligible for Combat Zone Tax Exclusion (CZTE); 5What you take home. Internal

How Is It Disbursed? You can choose to receive a one-time payment or spread your payments to potentially save on taxes One Installment Paid the first pay period after you start your 12th year of service Pick your installment plan Remember, CP is subject to tax withholding! Two Equal Installments First installment is paid the first pay period after you start your 12th year of service and the next installment is paid the following year Your payment choice may affect taxes owed. Three Equal Installments First installment of 33.34% is paid the first pay period after you start your 12th year of service and the remainder in 2 equal annual installments of 33.33% Review the IRS Tax Withholding Estimator. Four Equal Installments First installment is paid the first pay period after you start your 12th year of service and remainder in three equal annual installments Internal

Why Is It Being Offered? Part of BRS benefit package Retention tool Internal

How to Apply for Continuation Pay USCG Complete CG Form 7430A with your Command & Pay Personnel Command (PPC) representatives Email or mail completed form to PPC Internal

Instructions for Completing CG 7430A PPC Officials: Complete Sections I and III as appropriate to member being notified 1 Member: Complete only Section II as appropriate to your situation Read the instructions carefully before completing the form. Have your signature witnessed by your commanding officer or his/her designee (E5 or above). This form will record your election to receive Continuation Pay. Your election will carry a Service Commitment based on your current policy. 2 Form can be located at media.defense.gov/2017/Dec/21/2001860344/- 1/1/0/CG_7430A.PDF Continuation Pay election obligates the Member to additional years of service and is an irrevocable election. Internal

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? Internal

What Are the Tax Considerations? CP is EARNED income and will be taxed accordingly Federal State Local One installment may push you into a higher tax bracket If so, consider 2, 3 or 4 installments Set aside funds to cover increased taxes Combat Zone Tax Exclusion Review IRS Publication 3, The Armed Forces Tax Guide Internal

What Are the Conditions/Limitations of Investing CP into the TSP? Considered a bonus Can be invested into TSP There are no matching funds Annual limits still apply ($19,500 for 2021) Maxing out early loses match on future contributions Matching contributions stop until January 1 Combat Zone Tax Exclusion allows up to $58,000 for 2021 Annual limits still apply ($19,500 for 2021) Roth contributions cannot exceed annual limit ($19,500 for 2021) Internal

What Can You Do With Your CP? Take a thoughtful approach Update your spending plan Revisit your financial goals o Pay down debt o Save for emergencies o Invest for the future o Make a major purchase o Gift it Beware of misleading consumer practices Review Sources of Help for Military Consumers Protect yourself against identity theft, scams and frauds Basic Investing, Spending Plan Worksheet, Sources of Help for Military Consumers, Military Consumer Protection, and Servicemembers Civil Relief Act Handouts Available Internal

What if You Dont Meet Your Service Obligations? You must repay all or part of your Continuation Pay Installment options can help reduce this financial burden Internal

Summary Congratulations on reaching this important milestone! Let s recap what you learned: Continuation pay basics Application process Financial implications Internal

Resources Checklist and Handouts Financial Education and Support Command Financial Specialists (CFS) Personal Financial Managers (PFM) Health, Safety and Work-Life (HSWL) Regional Practice CG SUPRT Coast Guard Mutual Assistance (CGMA) Financial Literacy Mobile Apps Coast Guard Work-Life mobile app DoD FINRED Sen$e mobile app Internal