9.1 Individual Finances & Allowances

Fiscal Fitness

AFH 1 draws the analogy directly from AFI 1-1: "just like physical fitness is important for health, 'fiscal fitness' is equally important to overall well-being of USAF members." The two key aspects of individual financial responsibility are establishing a personal budget and effectively managing debt.

Three habits are named: review Leave and Earnings Statements regularly, file travel vouchers on a timely basis, and use the government travel charge card (GTCC) to pay for all costs related to official government travel. Official government travel is defined as travel under official orders while performing duties pertaining to official government assignments, such as TDY and PCS.

Governing references: the Joint Travel Regulation, DoD Financial Management Regulation 7000.14-R, Volume 7A, and AFMAN 65-116, Volume 1.

Basic Pay

Basic pay is the fundamental component of military pay and typically the largest component. Annual raises are set by Congress and the President in the National Defense Authorization Act, and by federal law the 1 January annual pay raise automatically matches private sector wage increases, as measured by the Employment Cost Index for the previous year. If national emergencies or serious economic conditions affect general welfare, the President may propose that Congress instill a lower annual pay raise.

Military pay date determines length of service for pay purposes. It should generally match the date the member entered RegAF status absent prior service, but is adjusted for credit if the individual previously served in certain governmental agencies. Negative pay date adjustments may result from absence without leave, desertion, and sickness or injury due to personal misconduct.

The Leave and Earnings Statement

The LES is the DFAS Form 702, a comprehensive statement of entitlements, deductions, allotments, leave information, tax withholdings, and Traditional and Roth Thrift Savings Plan information.

AFH 1 singles out PCS as the moment to apply increased attention to the LES, because entitlements such as BAH and COLA change when moving between duty locations — and PCSing usually occurs more frequently than a birth, marriage, or divorce.

Pay schedule. Members are paid monthly with the option to receive payments once or twice per month. A net pay advice arrives at mid-month (if receiving a payment) and the comprehensive LES at the end of the month via myPay, both created centrally by DFAS.

Cutoff dates fluctuate but generally occur around the 6th for the mid-month and the 20th for the end-of-month paydays.

Local, partial, and emergency partial payments. Local cash payments are normally only authorized for overseas areas where on-base military banking facilities are not readily available, with exceptions for classified or contingency operations. Commanders may authorize immediate cash payments up to the amount of accrued entitlement to date. Non-cash partial payments arrive by electronic funds transfer normally in two to three business days, are limited to accrued pay and allowances, and are recouped in full on the next available payday. A stateside member may receive an emergency partial payment if time sensitive and required within 24 hours due to unforeseen circumstances.

Allowances and Entitlements

The organizing principle: monetary allowances are provided when the government does not provide for that specific need. Those in government housing do not receive full housing allowances; those who are not receive allowances to help obtain commercial housing. Many allowances are not taxable — an embedded benefit of military pay.

Federal tax advantage: service members do not pay federal or state taxes on BAH or BAS, and also enjoy combat tax exclusion and fully deductible mortgage interest.

Special and incentive pays named by AFH 1: hazardous duty incentive pay, imminent danger pay, special duty assignment pay, enlisted flying duty incentive pay, and hardship duty pay-location, plus enlistment and retention bonuses.

Deductions

Involuntary

Involuntary deductions are payroll deductions of certain amounts of pay imposed by law.

• Withholding income tax — all pay is income for federal and state tax purposes, including basic pay, incentive pay, special pay, lump-sum payment of accrued leave, and separation pay. The LES shows "FICA TAXES," "FED TAXES," and "STATE TAXES"
• FICA — requires withholding of Social Security and Medicare taxes from basic pay, with matching agency taxes paid to the Social Security Administration
• Federal Income Tax Withholding (FITW) — funds national programs; a member may authorize an additional monthly amount
• State Income Tax Withholding (SITW) — based on the state where the member is a legal resident
• Armed Forces Retirement Home — monthly deductions from regular enlisted members' pay up to a maximum of $1, set by the Secretary of Defense after consulting the AFRH board

The $1 AFRH cap is a small number that shows up surprisingly often.

Voluntary

Discretionary allotments are controlled through myPay. Nondiscretionary allotments have limited uses: charitable contributions, loan repayments to the Air Force Aid Society, garnishment for commercial debts, and delinquent travel charge card debt. Members are not authorized to start allotments for purchase, lease, or rental of personal property. Allotments should be requested 30 days before the desired month.

Thrift Savings Plan. Established by the Federal Employees' Retirement Act of 1986, offering advantages similar to an IRA or 401(k). Traditional contributions come out before taxes; Roth contributions come out after income is taxed, so withdrawals are tax-free.

Members enrolled in the Blended Retirement System (enlisted on or after 1 January 2018) are automatically enrolled in TSP at 5 percent of monthly basic pay, beginning with the first pay period following the 60th day of service as calculated from the Pay Entry Base Date. AFH 1 records that as of January 2023 the maximum TSP contribution was $22,500 for deferred and Roth contributions, with up to $66,000 total combined — and members may not contribute more than 92 percent of basic pay so required Social Security and Medicare deductions can be made.

SGLI as a deduction. Maximum coverage is $500,000, and members are covered by law at the maximum rate unless they decline or reduce coverage in writing. Reductions must be in amounts divisible by $50,000. SGLI automatically insures an eligible member on RegAF status or training for an ordered period of more than 30 days. Each child is covered at $10,000 at no cost, and the member may not insure any child for less than $10,000. The military personnel section is the office of primary responsibility.

Financial Obligations and Debt

Members must pay financial obligations in a proper and timely manner, provide adequate support of a spouse, child, or relative for whom they receive support allowances, comply with court orders or written support agreements, and respond to applications for involuntary allotments within established suspense dates. The reference is DAFI 36-2906, Personal Financial Responsibility.

Handling complaints. Complaints are forwarded to the individual's immediate commander, and the complainant is notified of the referral. Commanders will attempt to respond within 15 days and must actively monitor complaints until resolved. If the complaint reflects adversely on the member, the action should be included in the unfavorable information file. If the member has separated or retired, the complainant is told the Air Force cannot assist — but AFH 1 notes that retired members' retirement pay can be garnished for child support or alimony obligations.

Government debt collection. A member who owes debts to the government does not have to consent to collection. Generally, for debts exceeding $100, the member must be notified of pending collection and given a chance to repay before withholding. Due process need not be completed first when the member's estimated date of separation is not sufficient to complete collection and the Air Force would be unlikely to collect, or when collection can be completed within two monthly pay periods.

Waiver and remission. A waiver may be granted for erroneous payments when there is no indication of fraud, misrepresentation, fault, or lack of good faith; DFAS rules on all waivers. Remission may be applied for by a RegAF member, a separated member, or their commander; financial hardship may be a factor, but the Air Force may not remit or cancel any debt due to non-collection of court-martial forfeiture.