Retirement
Retirement is one of the most important decisions made during a Commissioned Officer's career. PHS officers are fortunate to have an excellent retirement plan. The purpose of this summary is to describe the basic features of the retirement annuity, to describe the retirement process, and to identify some of the important resources.
Retirement Plans
There are 3 different retirement plans for individuals who are on active duty with the USPHS. They are defined by the date when you first entered on active duty with any uniformed service. All three retirement plans require that you serve a minimum of 20 years in order to qualify.
Plan 1 (FINAL PAY): for those individuals who first joined a uniformed service on or before September 7, 1980. An officer receives 2.5% for each full year of service and additional fractional percentage for each full month of any partial year. After 20 years you would receive 50% of your highest monthly basic pay (usually your current basic pay). After 30 years you would receive 75% of your highest pay.
Cost of Living Adjustments (COLAs) are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under the Final Pay System, the annual COLA is equal to CPI. This is a different index than the one used for active duty annual pay raises. The index used for active duty pay raises are based upon average civilian wage increases. Thus, retirement pay COLAs and annual active duty pay raises will differ.
Plan 2 (HIGH-3): for those individuals who first joined a uniformed service 1) after September 7, 1980 but before August 1, 1986 or 2) Entered on or after August 1, 1986 AND did not choose the Career Status Bonus and REDUX retirement system (Plan 3 below). An officer receives 2.5% for each full year of service and additional percentage for each full month of any partial year. After 20 years you would receive 50% of your RETIRED PAY BASE, which is the average of your highest 36 months of basic pay. After 30 years you would receive 75% of your RETIRED PAY BASE (the average of your highest 36 months of basic pay).
Cost of Living Adjustments (COLAs) are given annually, determined in the same manner as Plan 1 above.
Plan 3 (REDUX): for those individuals who first joined a uniformed service on or after August 1, 1986 AND elected to receive the Career Status Bonus (if you do not elect to receive the Career Status Bonus, you will be under the High-3 retirement system (Plan 2 above). An officer receives 2% for each full year of service for the first 20 years. After 20 years you would receive 40% of your RETIRED PAY BASE, which is the average of your highest 36 months of basic pay. Between 20 and 30 years you accrue credit for retirement at the rate of 3.5% per year and additional percentage for each full month of any partial year. So after 30 years, you would receive 75% of your RETIRED PAY BASE (again, the average of your highest 36 months of basic pay). This Plan is called "REDUX" because your annuity after 20 years is reduced as compared to the other two plans. Retirees under this plan receive a smaller cost-of-living increase each year until you reach age 62.
One of the big choices for officers under Plan 3, who entered the Corps after July 31, 1986, is whether to remain under the redux retirement system or choose to be in the non-REDUX retirement system. At 15 years they will have the one-time option of choosing to stay under the "REDUX" retirement system and taking a one-time $30,000 bonus, or switching to the "high three" retirement system without the bonus. Officers will receive personnel orders from OCCO informing the officer about the retirement election.
A feature unique to REDUX is a re-computation of retirement pay at age 62. Two adjustments are made. The first adjusts the multiplier to what it would have been under High-3 (Plan 2). For example, a 20-year retiree's new multiplier would become 50%, a 24-year retiree's multiplier would become 60% but a 30-year retiree's would remain 75%. This new multiplier is applied against the individual's original average basic pay for his or her highest 36 months. Then the second adjustment is done. Full CPI for every retirement year is applied to this amount to compute a new base retirement salary. At age 62, the REDUX and High-3 retirement salaries are equal. But, REDUX COLAs for later years will again be set at CPI minus 1%.
Note 1: Basic Allowance for Subsistence (BAS), Basic Allowance for Housing (BAH), medical, dental, board-certified, or other special pays are not considered in the computation of your retired pay (plan 1) or in the computation of the RETIRED PAY BASE (plans 2 & 3). Only BASIC PAY is used.
Note 2: The Office of the Under
Secretary of Defense for Personnel and Readiness, DoD, maintains a
very useful web site
that provides a complete description of the three plans. There is a
calculator on the site that will help you make that choice for their
particular situation. It is at: Military
Compensation; Retirement.
Note 3: All three plans are non-contributory, but are considered
qualified pension plans by the Internal Revenue Service and as such will
impact on your ability to write off contributions to an IRA.
Note 4: Officers are always retired effective the 1st day of the month and receive retired pay starting the month of their retirement date, regardless of age. Regardless of the number of years worked, 75% is the maximum amount of retired pay .
Note 5: Medical Officers only – Four years of medical school and one year of internship may be creditable towards computation of retired pay.
Note 6: Dental Officers only – Four years of dental school may be creditable towards computation of retired pay.
Note 7: In order to receive a promotion to Flag grade (O-7 or above), the officer must agree to serve at least 3 additional years in the Corps after promotion before seeking to retire on a voluntary basis. Also, an officer who agrees to serve on a detail to an organization outside PHS must agree to return to a PHS assignment for at least 2 years following the detail agreement before they will be voluntarily retired.
Procedure to Retire
1. Prepare memorandum to Director, OCCO, through the officer’s supervisor, requesting permission to retire and specifying the desired retirement date. (MUST be the first day of a month)
2. Have supervisor prepare and/or sign a memo supporting retirement and indicating that it will not have an adverse effect on program.
3. Forward memos through CIO Commissioned Corps Personnel Contact to the CDC Office of Commissioned Corps Personnel.
4. Schedule an appointment for a retirement physical.
5. At least 30 days prior to the last day physically present at the duty station, submit PHS-1373 form to OCCO.
Voluntary Retirement- less than 30 years service
Officers who request voluntary retirement, less than 30 years, but more than 20 years, must formally request retirement through a memorandum to the Director, OCCO. The Officer’s request for retirement then will be considered by the bi-monthly OCCO Retirement Board. Once a request for retirement has been approved by the Board, the Officer may set their retirement date within six months of the Board action. However, the decision to retire is irrevocable once approved by the board.
Sample Memo - Voluntary Retirement – Officer Request (MS Word - 33 KB)
Sample Memo – Voluntary Retirement –
Supervisor Concurrence – No Rehire (MS Word - 35 KB)
Sample Memo – Voluntary Retirement –
Supervisor Concurrence – Rehire Same Program (MS Word - 34 KB)
Sample Memo – Voluntary Retirement –
Supervisor Concurrence – Rehire Change Program (MS Word - 34 KB)
30-year retirement
Officers, who do not hold flag rank, will be involuntarily retired at 30 years. Approximately 6 months prior to retirement, OCCO will send the Officer a letter notifying the Officer of their upcoming 30 year anniversary. The Officer must submit a PHS-1373 (PDF, 18 KB) at least 30 days prior to their last day they are physically present at their duty station. The Officer will be retired on the first of the month following the anniversary of the Officer’s 30 years.
Resources
PHS retirement pamphlet 24 (PDF, 153 KB)
Military retirement information
Retirement Checklist (MS Word, 111KB)