Aviation Continuation Pay (ACP - The Bonus)

[Dupe]

"Those receiving this e-mail are either potentially eligible to enter into an ARP Agreement or may know of aviators who could be eligible but haven't entered into an Agreement as of this date."

Really? Sounds like a cry for help, I've got 4 years left on my ADSC so obviously they're hoping I spread the word. To anyone who is eligible for ARP but hasn't entered an agreement, I have one word for you: run.

I'm not eligible, but different year groups in the same career are. I found it insulting.

[Flare]

Wait....so everyone is getting this e-mail?

I thought it was just me as I'm an eligible who hasn't taken the bait with 3 weeks to go.

[tac airlifter]

If one returns the signed agreement while one is deployed to a combat zone, would that person receive the lump sum tax-free? Based on the wording, there is some debate in our office.

Edited September 10, 2014 by tac airlifter

[addict]

No. "The Combat Zone Tax Exclusion (CZTE) is unlimited for enlisted members and warrant officers and is limited to the maximum enlisted pay amount, plus the amount of Hostile Fire Pay / Imminent Danger Pay payable to the officer for the qualifying month, for officers."

[tunes]

"Those receiving this e-mail are either potentially eligible to enter into an ARP Agreement or may know of aviators who could be eligible but haven't entered into an Agreement as of this date."

Really? Sounds like a cry for help, I've got 4 years left on my ADSC so obviously they're hoping I spread the word. To anyone who is eligible for ARP but hasn't entered an agreement, I have one word for you: run.

I VSP'd and separate in 3 weeks and I got the email

[NotADude]

Anyone know if if is possible to exceed the current $17,500 limit for 2014 for TSP contributions? I don't really understand how someone qualifies for the Annual Addition Limit of $52,000 for Traditional TSP contributions.

Cheers,

Beerman

Beerman,

I actually called the 800 TSP number and talked to a person (!), because I had the same question. Generally the $52K limit is for employer matching (thanks AF!), but for military, it is the total you can contribute from normal and tax-free income. So if you've deployed this year, subtract whatever you contributed while deployed from $17.5K, and that'll give you the amount you can still contribute this year. If you're like me and never log onto the TSP website, turns out your LES has the pertinent deets.

The kicker, however, is if you want to up your contribution you're stuck at 92% of base pay and 100% of incentive pay as the max monthly contribution. Turns out there's no way to write a check to TSP, you can only contribute via allotment. :/

Hope this helps you or other guys/gals out there!

(I recommend deployers up their contributions while deployed since you could theoretically double your annual contribution if you're gone for 6 months)

Posted from the NEW Baseops.net App!

[Jughead]

So if you've deployed this year, subtract whatever you contributed while deployed from $17.5K, and that'll give you the amount you can still contribute this year.

NO!

Subtract tax-exempt contributions (NOT necessarily the same as total deployed contributions for officers due to CZTE limits mentioned above) from $52K. You can make elective deferral contributions up to that amount, not to exceed $17.5K. In the case of an officer affected by the CZTE limit, the portion of contributions made from non-exempt income is an ordinary elective deferral and is part of that "not to exceed" amount.

Edited September 11, 2014 by Jughead

[Jughead]

(I recommend deployers up their contributions while deployed since you could theoretically double your annual contribution if you're gone for 6 months)

It depends.

Me, I'm a fan of getting every penny I can into tax-advantaged retirement accounts, and I did exactly that every single month I deployed from the day they opened up the TSP to the uniformed services--personally, I agree with you.

However, everybody's situation is different. It's important to realize that tax-exempt contributions don't get you any additional current-year tax advantage (it's already tax-exempt), so there may be other investing or savings or even spending strategies that make more sense. It boils down to whether you believe the tax-deferred growth of putting it in the TSP will yield the best long-term results (as I do, and evidently you, too), or if you believe you're better off putting it to work elsewhere. The lack of a (further) current-year reduction in taxable income makes it far less of an imperative.

You need to get paid and be deployed in the same calendar tax year month to get CTZE benefits.

It will also depend on how long you are deployed in that year. The max enlisted pay amount in 2014 is [...], which is the limit to an officer's tax exemption for that month.

FIFY. For taxable wages on the W-2, it's all income in the current year (as you said); for CZTE treatment, it's the month (within that year) in which you get paid that matters. A CZTE month can be generated by as little as one day, so length of deployment is irrelevant.

Due to the limit on an officer's CZTE, very little (possibly zero) of a lump-sum bonus payment would be exempted.

ETA:

Turns out there's no way to write a check to TSP, you can only contribute via allotment.

Generally true (IRS rules, not USAF).

One exception that I've ops checked twice: if you deploy late enough in the month that that month's contribution doesn't get made properly (due to CZTE status not being applied in time), you can "write a check" to pay in the missing contribution. In IRS-speak, that option is allowed when a contribution is not made via the normal payroll deduction due to employer error, which is how the delay in getting CZTE started is treated for this purpose.

Edited September 11, 2014 by Jughead

[Jughead]

I disagree slightly. Yes, CZTE benefits are enabled by the qualifying month, but the original question was about trying to get the 50% up front bonus payment "tax free" and whether or not that would apply to when the contract was signed or when you received the money. First, its when you get paid the money. Second, you don't pay your taxes based upon month to month, you pay them in a calendar year. So in that case, length of deployment IS important as well as calendar year of the deployment.

But the tax-exempt entitlement IS applied month-to-month. Pick the month that the bonus payment is made. If that month is a CZTE month, then the officer's total (of ordinarily taxable) military income is exempt up to the monthly limit; the rest is taxable. In the case of the major in your example, about $600 bucks (i.e., the difference between the limit & his non-bonus income) of the bonus lump sum would be exempt*, and the balance is taxable--doesn't matter if the month was CZTE for 5 minutes in the airspace or the middle of a continuous 12-month deployment. Your taxable income will include all income from any CZTE month(s) in excess of the officer limit for each month; the taxable income from each month is totaled and reported on your W-2. The bonus (nor any other income) is not "averaged" or otherwise spread across the whole year for determining taxable status wrt CZTE.

Length of deployment, in terms of how many months are CZTE, certainly DOES matter from the point of view of reducing overall taxable income (each month adds to the total exempted), but the lump-sum payment, by definition, happens in a single month.

*You're obviously correct about how total taxable income works on an annual basis. Strictly speaking, "an additional ~$600 of tax exemption would be realized" is a more accurate way of phrasing this; but the question was about "exempting the bonus," so I figured that'd be the clearest way of addressing it....

[Jughead]

Hence the reason the $52,000 Traditional TSP limit increase would be helpful in a bonus year, but I don't see how that is possible currently. It looks like AD uniformed servicemembers are limited to $17,500 combined Roth and Traditional TSP.

Not at all true. That's not how it works. I exceeded the elective deferral limit every single year in which I had any CZTE entitlement since inception; one year, I managed to make the limit. Bonus had nothing to do with it.

You cannot "choose" to make an elective deferral ("normal") contribution with tax-exempt money; any such income will go in as tax-exempt and is NOT part of the $17.5K limit. If you contribute more than the difference ($34.5K, i.e., $52K - $17.5K), then your ability to make elective deferral contributions will be reduced, dollar-for-dollar, by the same amount--a VERY bad thing, since you'll have a higher current-year taxable income for the exact same amount put in the TSP. This only matters if you're able to contribute enough to approach these amounts.

Another, possibly easier(?) way to look at it: the $52K limit is an overall limit--the most that can be put in from any source. The $17.5K limit is a subset of that $52K. Any money put toward the $17.5K limit--i.e., elective deferral/"normal" contributions--counts as part of the $52K. Any contributions from any other source (CZTE-generated tax-exempt, in the case of military) does NOT count toward the $17.5K, but could effectively limit or eliminate the elective deferrals if the total will exceed $52K.

[Chicken]

I emailed the dude working ARP packages, and he responded with this:

Unfortunately, you are not eligible because you do not meet the primary

criteria to enter into an agreement:

PSDM 14-59, Part III: Eligibility Criteria, Paragraph 1.a.ii., says Initial

Eligible CSOs whose ADSC for UFT expires in FY2014 or completes the

appropriate YAS will be able to request and execute an ARP Agreement in

FY2014. CSOs must have completed their 6-year UCSOT ADSC and/or 7 CSO YAS

in FY2014 (whichever is later).

You completed your UCSOT ADSC on 5 May 2008 and 7 CSO YAS on 24 Jul 2008,

both of which are outside the FY2014 requirement.

The PDSM actually says this though:

b. Early-Eligible: Pilots and CSOs whose ADSC for UFT expires in FY2015 or completes the appropriate YAS will be able to request and execute an ARP Agreement in FY2014

i. Pilot: 10-year UPT completion and 11 pilot YAS in FY2015 (whichever is later)

ii. CSO: 6-year UCSOT completion and 7 CSO YAS in FY2015 (whichever is later)

So I have completed my ADSC for UFT and have 12 YAS. Does this PDSM say I have to have exactly XX YAS or more than XX YAS??

Edited September 12, 2014 by Chicken

[TnkrToad]

Just wanted to note--last day for anyone looking to take the bonus this FY. I sure hope folks are huge procrastinators, since the numbers posted last night aren't promising:

- Fighter and RPA pilots (those the Air Force apparently wants most to retain) thus far have the lowest take rates of all communities, at 46.6% and 30.8%, respectively

- Mobility pilots (community with the largest number of eligibles) have the third-lowest take rate, at 51.4%

- The C2ISR/EW, Bomber and CSAR--which have traditionally had high take rates--are well behind where they were last year: they are 19.2%, 17.6% and 25.7% below last FY's final take rates, respectively

- One "bright spot" is that the Spec Ops community's 60.3% take rate is only 6.4% behind last year. Sure glad they're healthy manning-wise (as indicated by them only being offered the standard bonus option)

The overall take rate thus far is 52.6%--15.7% below last year's 68.3% final tally.

For the health of our service, I hope AFPC's inbox is getting flooded with signed ARP agreements as I write this. Given that the last time anyone even posted on this discussion was 19 days ago, I'm not terribly optimistic. The final ARP report will make for an interesting read.

[BFM this]

For the health of our service, I hope AFPC's inbox is getting flooded with signed ARP agreements as I write this.

So, for the sake of the service, you're hoping AFPC is right.

I'll take the counter position: the only way change is going to come about is if AFPC is glaringly wrong. Yeah, it will mean some short term pain, but our recent track record shows a gross lack of organizational agility.

Posted from the NEW Baseops.net App!

Edited September 30, 2014 by BFM this

[TnkrToad]

So, for the sake of the service, you're hoping AFPC is right.

I'll take the counter position: the only way change is going to come about is if AFPC is glaringly wrong. Yeah, it will mean some short term pain, but our recent track record shows a gross lack of organizational agility.

Posted from the NEW Baseops.net App!

Copy all--what you wrote has been the subtext of my recent posts. In my view, the ARP program is at best inherently self-contradictory . . . and to compound the problem is way too reactive. I want to be wrong in my criticism, because the consequences of failing to retain quality aviators will be terrible for the service and the nation as a whole. My general theme has been to point out obvious contradictions in the program, while hoping that folks like GC, rtgators, or someone else with insight will provide a rational basis for the program as currently constructed. Since no such rationality has been forthcoming, all I can then hope for is that senior leaders and/or their staffers who follow this discussion will realize how screwed up the program (and more broadly the Air Force) is and actively seek to change it. The first step in correcting a problem is recognizing that you have one. Maybe this year's ARP take rates will spur meaningful change.

[Herk Driver]

And what is your proposal to fix it?

Posted from the NEW Baseops.net App!

[Butters]

And what is your proposal to fix it?

Posted from the NEW Baseops.net App!

Bitch about it online.

[Herk Driver]

Solid work

Posted from the NEW Baseops.net App!

[TnkrToad]

And what is your proposal to fix it?

Posted from the NEW Baseops.net App!

Good question. If you've read my previous posts, you might have already figured some of this out. Mostly I was posing particular questions in the belief that rtgators & General Chang (who at least claim to have insight into the bonus decision making process) would have some worthwhile insights and/or might indicate that Big Blue is enacting changes that might make a difference. In the absence of input from them, here goes:

- Offer the enhanced bonus options to all pilots, but at a minimum--to the 11M community. Rationale: 11Ms give you the most bang for your buck. If money is the primary driver then focusing monetary options on the largest community (which by the way is backfilling other communities' billets) would be a good first start

-- Even better would be to offer the same options as those offered to 11Fs to all communities. It really wouldn't have a major impact on raw numbers, however. A 10-15% increase in take rate among small communities that typically already have high take rates ain't gonna do much good, but it would ensure that everyone feels like they're part of the same team

- Barring the above, senior AF leaders might want to explain how/why it is that 11Ss & 11Hs (which last I checked were at least as overstretched, if not more so than the 11F community) weren't offered the same cool bonuses that the 11Fs were. In the information vacuum, the only rational conclusions are either that Big Blue cares nothing about getting the helo and AFSOF communities healthy . . . or alternatively (and more cynically) they're taking these communities for granted. "They'll stay in anyway, why throw more money at 'em?"

- Target promotion rates and/or school slots to enable proper balancing of career fields--at least through Maj, if not Lt Col--by airframe, if necessary

-- I couldn't help noting that there are 155 C-17 bubbas eligible for the bonus, but only 77 KC-135 pilot eligibles. This, despite the fact that the USAF has over 400 KC-135s, and a little over 200 C-17s. Granted the AD vs. ARC mix might be a little different, but how is it that a community with roughly half the airplanes has twice the number of eligibles (at least in this year group)? I will submit that gross mis-distribution (prob a better way to say that, but my thoughts fail me right now) such as this leads to really screwed-up lives for everyone involved. Undermanned communities get kicked in the teeth, yet don't get promoted/get good deals because they're too busy doing good to look good, while way overmanned communities likewise have trouble finding useful work

- For particular year groups/pilot communities that a clearly undermanned, do what you can to retain their talents

-- As an 11M from a mid-90s year group that is in the bottom of the pilot-production "bathtub"--we're undermanned overall, but even worse are grossly undermanned for 11Ms (there are almost twice as many 11Fs in my year group than 11Ms)--I can tell you that there will inevitably be slim pickin's when time comes to pick O-6 and above types. Limited choices generally do not lead to good leadership selections. If we in the heavy community end up with crappy leaders because AFPC/HAF A1/whomever enacted policies that effectively encouraged folks to get out, then the impacts will go well beyond just one or two year groups. See the JQP/toxic leader thread.

Would the above ideas solve all our problems? It's unlikely, but they might at least start to make a dent in what seems to be a quickly metastasizing problem, as airline demand is just starting to ramp up. Standing by for spears . . .

TT

edited for poor grammar/badly worded argument

Edited October 1, 2014 by TnkrToad

[Learjetter]

And what is your proposal to fix it?

1) End 10 yr UPT commitments (make 'em 5)

2) End the bonuses.

[ViperStud]

1) End 10 yr UPT commitments (make 'em 5)

2) End the bonuses.

The AF hates free agents too much. They can't plan at all with so many people holding their own cards. The current bonus does nothing to actually retain people, but it does create a nice pool of people who can't say no to orders. AFPC has not used that too much yet, but (and this is from the horse's mouth) if manning problems is some AFSCs get much worse they may have to.

I think their only fix is to UP the commitment. Make it 12-15 years and you are putting people in a tough spot to give up a pension before hitting 20. This is all ball wash though - let's see what the final numbers are.

[goingkinetic]

The solution is simple. Prioritize people who can 7 day opt over OG number 1's when it comes to the assignment process.

People are getting out because the rich are getting richer in the assignment process and signing a commitment for 9 years to suck up bad deals seems like a bad choice when there are are guard and airline options beginning to develop.

All of the guard bro's I've been talking to are saying there are good full-time ART opportunities as older guys filter back to the airlines. Without significant financial incentive, around 50k per year, I don't see many fence sitters willing to jump on AFPC's assignment that's the equivalent of the proverbial fat chick.

[Prozac]

How about 5 year commitments and make working conditions such that people actually want to stay in longer. No bonus needed. Problem solved.

[TnkrToad]

The solution is simple. Prioritize people who can 7 day opt over OG number 1's when it comes to the assignment process.

People are getting out because the rich are getting richer in the assignment process and signing a commitment for 9 years to suck up bad deals seems like a bad choice when there are are guard and airline options beginning to develop.

All of the guard bro's I've been talking to are saying there are good full-time ART opportunities as older guys filter back to the airlines. Without significant financial incentive, around 50k per year, I don't see many fence sitters willing to jump on AFPC's assignment that's the equivalent of the proverbial fat chick.

I think you're right on with the assignment process being a huge factor. Here’s an interesting thought experiment on the effectiveness of the pilot bonus:

- Assumption: The bonus is only effective to the extent that the take rate exceeds 35%

o 25% of a year group are bright and shiny, future O-6 types who will stay in anyway because as part of the ubermensch, they figure their futures are golden. No bonus required in order to retain

o 10% are slugs or gluttons for punishment—regardless, they don’t have a great future, but still have little incentive to get out. Again, no bonus required for retention

Looking at the fighter types, which (thus far) have a 47.3% take rate from 281 eligibles. By my logic:

- 70 (25%) are striver types who didn’t need the bonus to stay in

- 28 (10%) are slugs/gluttons who, again, didn’t need the bonus to stay in

- The striver types will be protected from the bad deals (they almost invariably are) and the slugs shouldn’t be sent to hard-to-fills. Logic: if that hard-to-fill deployment is important enough to take a fighter pilot out of his cockpit to fill, I’d hope it’s important enough to send someone that won’t screw it up

- That then means that Big Blue effectively just spent $28,025,000 (the total obligated for fighter pilot bonuses thus far) to convince the 35 notional fence-sitters (folks good enough to have options, but not bought into the leadership track) to stay in, and in doing so, accept that they’ll likely get screwed for the latter half of their respective careers

- Works out to over $800k apiece to allow Big Blue to fill those hard-to-fill billets

If my logic is correct, Big Blue didn’t get anything out of offering the bonus to the RPA pilots. Only 4/13 took (30.8%) took the bait:

- 2 or 3 of those are bright and shiny types

- 1 or 2 are slug/glutton/gonna stay in no matter what types

- Bad news is it was a waste of money—Big Blue got no more people to fill hard-to-fill billets than they would have without offering the bonus at all

- Good news is that they only spent $500k for RPA pilot bonuses this year—less than the cost to keep one fighter pilot fence-sitter!

Given how much we’ve paid to retain the fence-sitters, I sure hope the hard-to-fill billets are really worth filling. Seems to me that one huge retention (and cost-effectiveness) factor will be assessing how important many of the hard-to-fill billets really are.

[goingkinetic]

TnkrToad,

I don't think the bonus is ineffective per se; however, I do think it would be an effective tool if it were raised. Let's say my number is 50k a year, which doesn't seem unreasonable since the 25k per year has been around for 15 years, and inflation adjusted assuming 2% inflation it should be 34k.

It is still much cheaper to pay a fighter pilot 500k then try to replace him.

Assuming 1200-1500 Ftr Hours at Seperation x 10k per flight hour plus pilot training and the replacement costs are a significant cost driver. I'm not an actuary, but any bonus under 1-2 million to retain the majority of the folks would still likely be cost effective from an experience cost standpoint. Additionally, it takes 3-4 years to get an experienced fighter pilot which is one of the major issues the fighter porch is dealing with right now.

Quite frankly, AFPC's number crunchers are doing a piss poor job in my view. I'd love to see what an actuary at a major insurance company thinks the bonus should be.

Unfortunately, the air force is more concerned with creating GO's than retaining experienced line flyers. As a result the bonus becomes somewhat irrelevant as you alluded to with something like the top 20% and bottom 20% taking the bonus.

[Jughead]

AFPC's number crunchers are doing a piss poor job

In other news, rain is wet....