PPC Military Accounts Support (MAS)

Career Status Bonus Facts

Introduction

Career Status Bonuses (CSB) are available to personnel who entered uniformed service on or after 1 August 1986. The CSB gives personnel the option to receive at the 15-year active duty point a $30,000 lump sum payment and in return agree to remain on active duty for 20 years and become subject to the REDUX retirement plan (Retired Pay multiplier reduced by one percentage point for each year less than 30 year retirement and lifetime reduction in annual Retired Pay COLA increases). Those members who do not elect to take the CSB lump sum payment remain in the full high 36-month Basic Pay average system (known as the High-3) retirement plan currently available to personnel who entered a uniformed service on or after 8 September 1980. The CSB is governed by U.S. Code, Title 37, Section 322. Active duty personnel who first entered a uniformed service prior to 8 September 1980 are not eligible for either of the aforementioned retirement plans. Reservists eligible for non-regular (Reserve) retirement are not eligible for the CSB/REDUX retirement plan.

CSB Determination

Each individual's unique circumstance will determine which retirement option is better. The CSB/REDUX option should be carefully considered for individuals who are planning longer careers. The multiplier under CSB/REDUX comes closer to the High-3 percent retirement plan multiplier the longer the individual stays in beyond 20 years, and finally the multipliers become equal at 30 years. Also, everyone that invests the bonus would have 5 to 15 years of compounded savings accumulated at their retirement point. Personnel must decide on making a CSB election between 14 years, 6 months and 15 years of active service. Another consideration concerning CSB/REDUX election is that the annual COLA for the REDUX retirement method is reduced by one percentage point below the increase in the Consumer Price Index (CPI) with a one-time rate correction at age 62; under the High-3 retirement system the Retired Pay COLA is equal to the annual CPI percentage.

CSB $30,000 Lump Sum Tax Rates

The CSB is taxed at your federal and, if applicable, state tax rate. Upon receipt, the portion not placed into the Thrift Savings Plan (TSP) will be subject to normal withholding rules. Should this exceed your tax rate, you would have excess returned in your federal tax refund. You also may shelter up to the Internal Revenue Service (IRS) maximum by placing the lump sum into a TSP account. Other rules and limits may apply to those in receipt of non-taxable pays in a Combat Zone or Qualified Hazardous Duty Area. For more information, go online to the Thrift Savings Plan web site.

CSB Cancellation

You cannot change your CSB election, even if you return the career status bonus money. Your election is not considered a final decision until you complete your 15th year of active service.

Separation after CSB

Generally speaking, if you fail to complete 20 years, by law, you are required to return a pro-rated share (unearned portion) of the CSB for the time you did not complete the agreed upon service. The pro-rated amount would be forgiven in cases of death, disability retirement, or separation under a service program where you requested to separate or retire early under a special voluntary strength reduction program such as Temporary Early Retirement Authority (TERA). Other involuntary separations, such as failure to meet weight standards, alcohol rehabilitation failure, non-medical behavioral disorders, disciplinary or conduct action, or failure to make high-year tenure promotion points will result in recoupment of the unearned portion of the CSB.

CSB Application

PPC (MAS) sends the CSB Election Form, CG-2426 for Eligible Career Status Bonus members to an active duty member's unit six months prior to the member's fifteenth active duty anniversary. Complete the application and return it to PPC for processing. Reservists who happen to have 15 years active duty and are on an ADOS contract that will not let them complete at least 20 years active duty are not eligible for CSB/REDUX and if they receive an application by mistake should not submit it.

OSD CSB Information

Information on CSB can be found on the Office of the Secretary of Defense Military Compensation CSB/REDUX Costs and Benefits.

Last Modified 10/21/2014