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1 [1] (May 12, 2026)

handle is hein.crs/goveubr0001 and id is 1 raw text is: Congressional Research Servic~ informing the legislative debate since 1914 Updated May 12, 2026 Defense Primer: Military Separation and Severance Pay Congress has authorized separation or severance pay for involuntarily and voluntarily discharged servicemembers throughout most of the military's history (see Table 1). The purposes for these authorities have been three-fold: (1) to ease the transition to civilian life for servicemembers with minor physical disabilities; (2) to compensate servicemembers for an unplanned (non-disability) end to their military career before they are eligible to retire; and (3) to aid the military departments in managing force size. Dsab ty Severance Pay The Military Compensation Background Papers (8 Edition) describes disability severance pay (DSP) as [A] special lump-sum payment to be made to members of the armed forces separated from active military service because of minor physical disabilities that, while substantial enough to adversely affect their ability to perform the military duties of their respective offices or grades, are not so severe as to seriously impair their civilian earning capacity, in order to assist such personnel in their transitions back to civilian life. While forms of disability severance for military veterans have existed since the founding of the United States, the modern system was adopted in the Career Compensation Act of 1949 (P.L. 81-351, §403). This law standardized the benefit across all services, components, and pay grades. Servicemembers who develop a medical condition affecting their fitness to serve may be referred to a medical evaluation board. If the board determines that the disability is permanent, stable, and rated at 30% or greater, then the member may receive a disability retirement and is eligible for retired pay. Those with temporary disabilities may be placed on the disability retired list and later re-evaluated for fitness to serve. Those with service-connected disabilities rated less than 30% are not eligible for disability retirement, but may be discharged with DSP. Amount of Disability Severance Pay The amount of DSP is computed by multiplying the member's years of service (YOS) by two months of the basic pay to which the member is entitled at the time of separation or placement on the temporary disability retired list. The member is credited with a minimum of three YOS for this calculation. If the disability is combat-related, the member is credited with a minimum of six YOS. The maximum creditable YOS is nineteen. DSP is distributed as a one-time, lump-sum payment and is taxable, unless related to a combat injury or the member is entitled to disability compensation from the Department of Veterans Affairs (VA). involuntary Separation Pay Involuntary Separation Pay (ISP), was authorized as part of the Defense Officer Personnel Management Act (DOPMA) of 1980. DOPMA repealed prior legislation authorizing severance or readjustment pay for military officers involuntarily separated from service. Among other changes to the officer personnel system, DOPMA standardized what is often referred to as an up or out policy for officers across all of the services. Under this provision, an officer may be involuntarily discharged for having twice failed in selection for promotion. This had the potential to impose an unplanned career end for that officer and factored into the design of the involuntary separation benefit. According to the House Armed Services Committee report to accompany the bill, The separation pay is a contingency payment for an officer who is career committed but to whom a full military career may be denied. It is designed to encourage him to pursue his service ambition, knowing that if he is denied a full career under the competitive system, he can count on an adequate readjustment pay to ease his reentry into civilian life. (H. Rpt. 96-1462, 1980) In 1990, during a period of force drawdowns, Congress expanded this authority to enlisted servicemembers (P.L. 101-510). Servicemembers involuntarily discharged under honorable conditions after six years but before twenty years of active service may be eligible to receive ISP as a lump sum. A condition for ISP receipt is an agreement to serve a minimum of three years in the Ready Reserve following discharge or release from active duty. Amount of involuntary Separation Pay 10 U.S.C. §1174 authorizes two mechanisms to calculate ISP: (1) full payment: 10% of the product of the YOS and 12 times the servicemember's monthly pay at the time of separation; or (2) half payment of the prior amount. Full payment or half payment is at the discretion of the Secretary of the Military Department concerned. Military policies prescribe half payment under circumstances where members are deemed not fully qualified for retention or continuation (e.g., weight control failures, failure to meet standards, or other conditions not constituting a disability). Vountary Separaton Pay During the force drawdown in the 1990s, Congress authorized two types of voluntary separation incentives, the Special Separation Bonus (SSB) and Voluntary Separation Incentive (VSI). These separation incentives were designed to help the services reduce over-manning in certain active component pay grades or occupational specialties.