I got an email back in April from someone wanting to know if a veteran was yanking his chain about being retired with only 16 years of Active Duty service. As it turns out, there was no chain yanking.
It is possible to retire with less than 20 years of service, and not have it be a medical retirement.
Background on TERA
In 1993, a program was put into effect – the Temporary Early Retirement Authority, known simply as TERA. Under the program, authorized members with over 15, but less than 20 years of total active duty service were allowed to apply for early retirement. It allowed the military to help in the drawdown following the end of the Cold War. The opportunity to retire under this TERA program ended in September 2002.
In the National Defense Authorization Act for Fiscal Year 2012, TERA was again reinstated, still allowing authorized members with over 15, but less than 20 years of total active duty service to apply for early retirement. The opportunity to retire under this TERA program still ongoing, and is expected to end by December 31, 2018. For the Coast Guard, TERA is established in the Coast Guard and Maritime Transportation Act of 2012.
Who's Eligible for TERA?
TERA is a discretionary authority and not an entitlement. TERA, in general, applies to both officers and enlisted. While each branch has their own instructions governing who may use the program (and they review the program annually), in general, early retirement under TERA is limited to Active Duty Personnel who are denied continued active duty service to 20 years. “Traditional” Reserve Component service members aren't eligible for TERA, though reservists with sufficient Active Duty service may be eligible.
The Military elects to use TERA as part of a comprehensive force management strategy to shape the force.
In 2014, the Air Force announced it was not planning to offer TERA in 2015, having hit the goals needed to size and shape the Air Force.
The Coast Guard elected not to implement TERA for enlisted personnel in 2013-2014, though it was implemented for officers – though only for officers that completed at least 17 years of Active Duty service.
Members who retire under TERA incurs no Reserve obligation (note: Navy personnel will still belong to the Fleet Reserve, and Marine Corps personnel to the Fleet Marine Corps Reserve until they are eligible to transfer to the Retired List at their scheduled 30-year mark).
Benefits and Pay
Members retired under the TERA program receive the same retirement benefits as those that retire under the 20-year program – complete with TRICARE and TRICARE for Life, starting immediately upon retirement, the same COLA adjustments, base access, ID Card, etc. - the only difference is their retirement pay is reduced.
TERA retired pay is initially computed using the length of service retirement formula [check out the featured article Understanding Military Retirement Pay]. It is then multiplied by a reduction factor based on the number of months the retiree is short of 20 years (meaning the individual would receive less than 50% of their base pay).
Active duty pay x Percent Multiple x Reduction Factor = TERA Retired Pay
An Example of TERA Pay
So, let’s put forth the scenario that a service member is retiring at 15 years under TERA – here’s what they are going to be looking at:
15 (Years of Service) x 2.5 (the traditional retirement factor) x 0.95 (TERA penalty*) = 35.625 percent retirement factor.
The 0.95 penalty applies to those who choose to retire at 15 years – the closer the individual is to the 20-year mark, the lower the penalty – in essence, the penalty table reduces retired pay by 1 percent for each year short of 20. As well, the service member gets credit for each full month of service - days of service less than a month are truncated; one day of service is zero months, and so is 29 days.
So, this service member who’s chosen to retire with 15 years of service will receive a little more than 35 percent of his / her basic pay over the lifetime of their retirement. It is about 14 percent less than those who get the 50 percent for serving the full 20 years.
And just as with a 20-year retirement, TERA gross retired pay is also rounded down to the nearest dollar.
Additional Calculation for CSB/REDUX
An additional calculation/complication that some may have is if they retired under Career Status Bonus/REDUX (CSB/REDUX) - their gross retired pay may be further reduced by the REDUX multiplier. For a full explanation of the pay issue(s), refer to DoD 7000.14-R – the Department of Defense Financial Management Regulation (DoD FMR)