[Computation of Retired Pay]

B-206107: Feb 1, 1983

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In response to a request from an Air Force Accounting and Finance officer, GAO considered questions concerning the proper method of computing retired pay using the newly authorized retired pay base, with particular reference to the proper retired pay entitlement of an Air Force service member. The new system differs from the old in that the retired pay is based on the average of pay received on active duty over a period of months rather than on a single specific rate of base pay determined by the grade the member held at retirement. To compute a service member's retired pay base, GAO stated that: (1) erroneous payments of basic pay should not be included; (2) since an average of basic pay received on active duty over a period of months determines the basic rate, reductions in the basic pay received because of forfeitures and demotions must be included; (3) a period of unauthorized absence should not be included unless such a period may also be included in the member's years of service; (4) cost-of-living adjustments, which are based on the periodic adjustments in Civil Service annuities, and partial cost-of-living adjustments should be applied to military retired pay as long as it is reasonable to do so; and (5) provisions under the law allow the use of basic pay rates in effect on the day before the effective date of the rates of basic pay on which the service member's retired pay would otherwise be based. In applying these principles to the case in question, GAO stated that the member's initial retired pay base should be calculated by totaling the basic pay he received while on active duty, including a reflection of a change in his pay rate due to a demotion. This total should be divided by the number of months on active duty and further, his 50-percent disability rating should be applied to the retired pay base to determine his initial retired pay. However, it appeared that it would be advantageous to use the 1979 pay rates rather than the 1980 pay rates. Finally, all applicable cost-of-living increases should be computed. With these guidelines, GAO returned the voucher for payment, if otherwise correct.