Savings Program Allows Deployed Troops to Earn Extra Cash

Under the Savings Deposit Program, troops deployed in combat zones, qualified hazardous duty areas or certain contingency operations may deposit all or part of their unallotted pay into a DoD savings account. Military members can deposit up to $10,000 during a single deployment; interest compounds quarterly.

The program is open to all active duty and reserve component members supporting Joint Guard in Bosnia-Herzegovina, Croatia, Hungary, Macedonia, Montenegro, Serbia and Slovenia. It also includes air space over those seven areas and naval vessels stationed in the Adriatic Sea, north of 40 degrees north latitude.

"The average service member deployed in Bosnia is earning between $200 and $1,000 extra per month in allowances and tax-free income," said Air Force Lt. Col. David Pronchick, executive secretary of the Armed Forces Tax Counsel. "By using this program, service members can take the extra money they've earned while deployed and earn even more."

Pronchick said the savings program is not new -- it provided Vietnam veterans a way to earn extra money while on their Southeast Asia tours. DoD reopened the program to Desert Storm troops in 1991, and it is available to military personnel still serving in the Persian Gulf region.

Joint Endeavor troops became eligible last spring when President Clinton signed legislation granting service members in certain areas of Bosnia tax relief status "as if they were in a combat zone." However, only about 3,000 service members established accounts.

Last February, Deputy Defense Secretary John White approved continuing the Savings Deposit Program to troops moving from Joint Endeavor to Joint Guard. Fred Pang, assistant defense secretary for force management policy, then signed a memorandum outlining eligibility and promoting the program to field commanders.

Currently, troops supporting Joint Guard receive a variety of allowances, based on their duty location. Service members in Bosnia, Croatia and Macedonia do not pay federal taxes. While each state has its own requirements, most exclude combat zone compensation.

Most service members receive imminent danger pay ($150 per month) and a $75 monthly family separation allowance. Enlisted members also earn a "certain places pay," ranging from $8 to $22.50 per month. "Members should consider putting this extra pay into a savings deposit program," said Pronchick.

Although all federal income earned in hazardous duty zones is tax free, Pronchick said interest accrued on earnings deposited into the Savings Deposit Program is taxable.

Pronchick said troops wishing to enroll must do so once they arrive in the operations area and meet eligibility requirements. They cannot enroll before they deploy. He said units should have the forms necessary to start allotments.

To enroll, service members must have 30 consecutive days in the designated danger zone or spend one day per month for three consecutive months in those areas. Once eligible, troops can designate the allotment amount -- in five-dollar increments -- for deposit into the savings program.

Once service members complete their deployment, the Savings Deposit Program allotment stops. Upon their return, personnel can apply through their finance channels to withdraw their deposits and the interest earned. Pronchick said DoD will pay within 90 days. Early withdrawal is authorized if the money is needed for a medical emergency.