Involuntary Separation Pay

Joe Wallace

1 year ago

If you are a service member facing involuntary separation from the military, you may be entitled to separation pay if you meet time in service requirements and other rules. Why is separation pay necessary, and who does it affect?

Who Is Eligible for Involuntary Separation Pay?

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For this article, we’re discussing the type of separation pay offered as a lump sum to active duy and Reserve members who are either involuntarily separated or denied reenlistment before reaching enough time in service to earn a military retirement.

Specifically, this applies to those who have a minimum of six but fewer than twenty years of active service. This is often referred to as Involuntary Separation Pay or ISP.

Why Are Service Members Involuntarily Separated?

There are a number of factors that may make you eligible for ISP. The government may deny your reenlistment due to failure to earn a promotion within a specific time. You may be involuntarily separated because of a federal Reduction in Force (RIF), a drawdown, or other factors.

Some are involuntarily separated due to medical issues, and some are separated because personal circumstances warrant (hardship discharges). Not all involuntary separations are punitive, and not all qualify for ISP.

Qualifying for Separation Pay

To qualify for ISP, the following must apply:

The service member received an involuntary separation.
That separation is Honorable or General (Under Honorable Conditions).
The service member agrees to a three-year term of service in the Ready Reserve (Selected Reserve or Individual Ready Reserve) following discharge or release from active duty or active service (AD/AS).
This requirement is “in addition to any other service obligation of the Service member,” according to the DoD.

Other considerations may also apply depending on the branch of military service, changes in federal policy, or other variables.

Those who are involuntarily separated and paid ISP but later qualify for military retirement pay or military disability retirement pay may have that pay reduced “until the total amount deducted is equal to the total amount of ISP received,” according to the DoD, which adds there are no waivers for this rule.

How Involuntary Separation Pay Is Calculated

The DoD calculates “full ISP” at “10 percent of the product of the number of years of active service and 12 times the monthly basic pay to which the Service member was entitled at the time of discharge or release from AD/AS” according to Defense.gov. Half ISP is 50% of the calculated amount of full separation pay.

Who Is Eligible for Full ISP?

To qualify, all the below must apply:

The Service member has completed at least 6 years but fewer than 20 years of active service. Reserve Service members may qualify with 6 years of continuous active service, which “must have preceded immediately before separation,” according to Defense.gov.
The Service member is involuntarily separated through “denial of reenlistment,” or “denial of continuation on active duty” or in active service status.
The Service member agrees in writing to serve in the Ready Reserve for 3 years following the separation from active service.

Half ISP Eligibility

Half payment of non-disability ISP is permitted under similar circumstances with added considerations, including the nature of the separation. Half ISP may be paid when the service member is “deemed not fully qualified” for reenlistment.

This can include circumstances where the separation is due to a variety of issues described by Defense.gov. The following list is in the DoD’s terminology, not ours::

Weight control failures
Family care plan deficiencies
Security clearance issues
Mental/physical conditions that do not constitute a disability
Alcohol or drug abuse rehabilitation failure

Restrictions on ISP Eligibility

Some circumstances do NOT qualify for any level of ISP. They include when the service member initiates separation and situations where the member does not agree to a Reserve service commitment (see above) at separation. Other restrictions include no ISP for those who:

have not finished an Initial Term of Enlistment or an Initial Period of Obligated Service
are released from duty for training purposes;
collect or are eligible to collect retirement pay or retainer pay;
received a punitive discharge
Were separated via a service-specific program featuring a “no payment” level

If you need more information on qualifying for Involuntary Separation Pay, contact your base finance office, unit orderly room, Command First Sergeant, or Detailer.