
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 10USC1175]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                           PART II--PERSONNEL
 
                         CHAPTER 59--SEPARATION
 
Sec. 1175. Voluntary separation incentive

    (a)(1) Consistent with this section and the availability of 
appropriations for this purpose, the Secretary of Defense and the 
Secretary of Transportation may provide a financial incentive to members 
of the armed forces described in subsection (b) for voluntary 
appointment, enlistment, or transfer to a reserve component, requested 
and approved under subsection (c).
    (2)(A) Except as provided in subparagraph (B), a financial incentive 
provided a member under this section shall be paid for the period equal 
to twice the number of years of service of the member, computed as 
provided in subsection (e)(5).
    (B) If, before the expiration of the period otherwise applicable 
under subparagraph (A) to a member receiving a financial incentive under 
this section, the member is separated from a reserve component or is 
transferred to the Retired Reserve, the period for payment of a 
financial incentive to the member under this section shall terminate on 
the date of the separation or transfer unless--
        (i) the separation or transfer is required by reason of the age 
    or number of years of service of the member;
        (ii) the separation or transfer is required by reason of the 
    failure of selection for promotion or the medical disqualification 
    of the member, except in a case in which the Secretary of Defense or 
    the Secretary of Transportation determines that the basis for the 
    separation or transfer is a result of a deliberate action taken by 
    the member with the intent to avoid retention in the Ready Reserve 
    or Standby Reserve; or
        (iii) in the case of a separation, the member is separated from 
    the reserve component for appointment or enlistment in or transfer 
    to another reserve component of an armed force for service in the 
    Ready Reserve or Standby Reserve of that armed force.

    (b) The Secretary of Defense and the Secretary of Transportation may 
provide the incentive to a member of the armed forces if the member--
        (1) has served on active duty or full-time National Guard duty 
    or any combination of active duty and full-time National Guard duty 
    for more than 6 but less than 20 years;
        (2) has served at least 5 years of continuous active duty or 
    full-time National Guard duty or any combination of active duty and 
    full-time National Guard duty immediately preceding the date of 
    separation;
        (3) meets such other requirements as the Secretary may prescribe 
    from time to time, which may include requirements relating to--
            (A) years of service;
            (B) skill or rating;
            (C) grade or rank; and
            (D) remaining period of obligated service.

    (c) A member of the armed forces offered a voluntary separation 
incentive under this section shall be offered the opportunity to request 
separation under a program established pursuant to section 1174a of this 
title. If the Secretary concerned approves a request for separation 
under either such section, the member shall be separated under the 
authority of the section selected by such member.
    (d)(1) A member of the armed forces described in subsection (b) may 
request voluntary appointment, enlistment, or transfer to a reserve 
component accompanied by this incentive, provided the member has 
completed 6 years of active service.
    (2) The Secretary, in his discretion, may approve or disapprove a 
request according to the needs of the armed forces.
    (3) After December 31, 2001, the Secretary may not approve a 
request.
    (e)(1) The annual payment of the incentive shall equal 2.5 percent 
of the monthly basic pay the member receives on the date appointed, 
enlisted, or transferred to the reserve component, multiplied by twelve 
and multiplied again by the member's years of service.
    (2) A member entitled to voluntary separation incentive payments who 
is also entitled to basic pay for active or reserve service, or 
compensation for inactive duty training, may elect to have a reduction 
in the voluntary separation incentive payable for the same period in an 
amount not to exceed the amount of the basic pay or compensation 
received for that period.
    (3)(A) A member who has received the voluntary separation incentive 
and who qualifies for retired or retainer pay under this title shall 
have deducted from each payment of such retired or retainer pay so much 
of such pay as is based on the service for which he received the 
voluntary separation incentive until the total amount deducted equals 
the total amount of voluntary separation incentive received. If the 
member elected to have a reduction in voluntary separation incentive for 
any period pursuant to paragraph (2), the deduction required under the 
preceding sentence shall be reduced accordingly.
    (B) If a member is receiving simultaneous voluntary separation 
incentive payments and retired or retainer pay, the member may elect to 
terminate the receipt of voluntary separation incentive payments. Any 
such election is permanent and irrevocable. The rate of monthly 
recoupment from retired or retainer pay of voluntary separation 
incentive payments received after such an election shall be reduced by a 
percentage that is equal to a fraction with a denominator equal to the 
number of months that the voluntary separation incentive payments were 
scheduled to be paid and a numerator equal to the number of months that 
would not be paid as a result of the member's decision to terminate the 
voluntary separation incentive.
    (4) A member who is receiving voluntary separation incentive 
payments shall not be deprived of this incentive by reason of 
entitlement to disability compensation under the laws administered by 
the Department of Veterans Affairs, but there shall be deducted from 
voluntary separation incentive payments an amount equal to the amount of 
any such disability compensation concurrently received. Notwithstanding 
the preceding sentence, no deduction may be made from voluntary 
separation incentive payments for any disability compensation received 
because of an earlier period of active duty if the voluntary separation 
incentive is received because of discharge or release from a later 
period of active duty.
    (5) The years of service of a member for purposes of this section 
shall be computed in accordance with section 1405 of this title.
    (f) The member's right to incentive payments shall not be 
transferable, except that the member may designate beneficiaries to 
receive the payments in the event of the member's death.
    (g) Subject to subsection (h), payments under this provision shall 
be paid from appropriations available to the Department of Defense and 
the Department of Transportation for the Coast Guard.
    (h)(1) There is established on the books of the Treasury a fund to 
be known as the ``Voluntary Separation Incentive Fund'' (hereinafter in 
this subsection referred to as the ``Fund''). The Fund shall be 
administered by the Secretary of the Treasury. The Fund shall be used 
for the accumulation of funds in order to finance on an actuarially 
sound basis the liabilities of the Department of Defense under this 
section.
    (2) There shall be deposited in the Fund the following, which shall 
constitute the assets of the Fund:
        (A) Amounts paid into the Fund under paragraphs (5), (6), and 
    (7).
        (B) Any amount appropriated to the Fund.
        (C) Any return on investment of the assets of the Fund.

    (3) All voluntary separation incentive payments made by the 
Secretary of Defense after December 31, 1992, under this section shall 
be paid out of the Fund. To the extent provided in appropriation Acts, 
the assets of the Fund shall be available to the Secretary to pay 
voluntary separation incentives under this section.
    (4) The Department of Defense Retirement Board of Actuaries 
(hereinafter in this subsection referred to as the ``Board'') shall 
perform the same functions regarding the Fund, as provided in this 
subsection, as such Board performs regarding the Department of Defense 
Military Retirement Fund.
    (5) Not later than January 1, 1993, the Board shall determine the 
amount that is the present value, as of that date, of the future 
benefits payable under this section in the case of persons who are 
separated pursuant to this section before that date. The amount so 
determined is the original unfunded liability of the Fund. The Board 
shall determine an appropriate amortization period and schedule for 
liquidation of the original unfunded liability. The Secretary shall make 
deposits to the Fund in accordance with that amortization schedule.
    (6) For persons separated under this section on or after January 1, 
1993, the Secretary shall deposit in the Fund during the period 
beginning on that date and ending on September 30, 1999--
        (A) such sums as are necessary to pay the current liabilities 
    under this section during such period; and
        (B) the amount equal to the present value, as of September 30, 
    1999, of the future benefits payable under this section, as 
    determined by the Board.

    (7)(A) For each fiscal year after fiscal year 1999, the Board 
shall--
        (i) carry out an actuarial valuation of the Fund and determine 
    any unfunded liability of the Fund which deposits under paragraphs 
    (5) and (6) do not liquidate, taking into consideration any 
    cumulative actuarial gain or loss to the Fund;
        (ii) determine the period over which that unfunded liability 
    should be liquidated; and
        (iii) determine for the following fiscal year, the total amount, 
    and the monthly amount, of the Department of Defense contributions 
    that must be made to the Fund during that fiscal year in order to 
    fund the unfunded liabilities of the Fund over the applicable 
    amortization periods.

    (B) The Board shall carry out its responsibilities for each fiscal 
year in sufficient time for the amounts referred to in subparagraph 
(A)(iii) to be included in budget requests for that fiscal year.
    (C) The Secretary of Defense shall pay into the Fund at the end of 
each month as the Department of Defense contribution to the Fund the 
amount necessary to liquidate unfunded liabilities of the Fund in 
accordance with the amortization schedules determined by the Board.
    (8) Amounts paid into the Fund under this subsection shall be paid 
from funds available for the pay of members of the armed forces under 
the jurisdiction of the Secretary of each military department.
    (9) The investment provisions of section 1467 of this title shall 
apply to the Voluntary Separation Incentive Fund.
    (i) The Secretary of Defense and the Secretary of Transportation may 
issue such regulations as may be necessary to carry out this section.
    (j) A member of the armed forces who is provided a voluntary 
separation incentive under this section shall be eligible for the same 
benefits and services as are provided under chapter 58 of this title, 
sections 404 and 406 of title 37, and section 503(c) of the National 
Defense Authorization Act for Fiscal Year 1991 (104 Stat. 1558; 37 
U.S.C. 406 note) for members of the armed forces who are involuntarily 
separated within the meaning of section 1141 of this title.

(Added Pub. L. 102-190, div. A, title VI, Sec. 662(a)(1), Dec. 5, 1991, 
105 Stat. 1396; amended Pub. L. 102-484, div. A, title X, Sec. 1052(16), 
div. D, title XLIV, Secs. 4405(b), 4406(a), (b), 4422(b), Oct. 23, 1992, 
106 Stat. 2499, 2706, 2707, 2719; Pub. L. 103-160, div. A, title V, 
Secs. 502, 561(h), Nov. 30, 1993, 107 Stat. 1644, 1668; Pub. L. 103-337, 
div. A, title V, Sec. 542(c), Oct. 5, 1994, 108 Stat. 2769; Pub. L. 105-
261, div. A, title V, Secs. 561(b), 563(a), (b), Oct. 17, 1998, 112 
Stat. 2025, 2028; Pub. L. 106-398, Sec. 1 [[div. A], title V, 
Secs. 571(b), 572(a)], Oct. 30, 2000, 114 Stat. 1654, 1654A-134, 1654A-
135.)


                               Amendments

    2000--Subsec. (d)(3). Pub. L. 106-398, Sec. 1 [[div. A], title V, 
Sec. 571(b)], substituted ``December 31, 2001'' for ``September 30, 
2001''.
    Subsec. (e)(3). Pub. L. 106-398, Sec. 1 [[div. A], title V, 
Sec. 572(a)], designated existing provisions as subpar. (A) and added 
subpar. (B).
    1998--Subsec. (a). Pub. L. 105-261, Sec. 563(a), designated existing 
provisions as par. (1), struck out ``, for the period of time the member 
serves in a reserve component'' after ``under subsection (c)'', and 
added par. (2).
    Subsec. (d)(3). Pub. L. 105-261, Sec. 561(b), substituted 
``September 30, 2001'' for ``September 30, 1999''.
    Subsec. (e)(1). Pub. L. 105-261, Sec. 563(b), struck out at end 
``The annual payment will be made for a period equal to the number of 
years that is equal to twice the number of years of service of the 
member.''
    1994--Subsecs. (a), (b). Pub. L. 103-337, Sec. 542(c)(1), inserted 
``and the Secretary of Transportation'' after ``Secretary of Defense''.
    Subsec. (c). Pub. L. 103-337, Sec. 542(c)(2), struck out ``of the 
military department'' after ``Secretary''.
    Subsec. (g). Pub. L. 103-337, Sec. 542(c)(3), inserted ``and the 
Department of Transportation for the Coast Guard'' before period at end.
    Subsec. (h)(3). Pub. L. 103-337, Sec. 542(c)(4), inserted ``by the 
Secretary of Defense'' after ``incentive payments made'' and ``to the 
Secretary'' after ``shall be available''.
    Subsec. (i). Pub. L. 103-337, Sec. 542(c)(5), inserted ``and the 
Secretary of Transportation'' after ``Secretary of Defense''.
    1993--Subsec. (d)(1). Pub. L. 103-160, Sec. 502, struck out ``before 
December 5, 1991'' after ``active service''.
    Subsecs. (d)(3), (h)(6). Pub. L. 103-160, Sec. 561(h)(1), 
substituted ``September 30, 1999'' for ``September 30, 1995'' wherever 
appearing.
    Subsec. (h)(7)(A). Pub. L. 103-160, Sec. 561(h)(2), substituted 
``fiscal year 1999'' for ``fiscal year 1996''.
    1992--Subsec. (a). Pub. L. 102-484, Sec. 1052(16)(A), substituted 
``reserve component'' for ``Reserve component'' after ``transfer to a''.
    Subsec. (b)(1), (2). Pub. L. 102-484, Sec. 4422(b)(1), (2), inserted 
``or full-time National Guard duty or any combination of active duty and 
full-time National Guard duty'' after ``active duty''.
    Subsec. (b)(3), (4). Pub. L. 102-484, Sec. 4424(b)(3), redesignated 
par. (4) as (3) and struck out former par. (3) which read as follows: 
``if a Reserve, is on the active duty list; and''.
    Subsec. (d)(1). Pub. L. 102-484, Sec. 1052(16)(B), substituted 
``before December 5, 1991'' for ``prior to the time this provision is 
enacted''.
    Subsec. (e)(2). Pub. L. 102-484, Sec. 4406(a)(1), substituted ``may 
elect to have a reduction in the voluntary separation incentive payable 
for the same period in an amount not to exceed the amount of the basic 
pay or compensation received for that period.'' for ``shall forfeit an 
amount of voluntary separation incentive payable for the same period 
that is equal to the total amount of basic pay, or compensation, 
received.''
    Subsec. (e)(3). Pub. L. 102-484, Sec. 4406(a)(2), inserted at end 
``If the member elected to have a reduction in voluntary separation 
incentive for any period pursuant to paragraph (2), the deduction 
required under the preceding sentence shall be reduced accordingly.''
    Subsec. (e)(6). Pub. L. 102-484, Sec. 4406(b), struck out par. (6) 
which read as follows: ``Years of service that form the basis of the 
payment under paragraph (5) may not be counted in computing eligibility 
for, or the amount of, annuities under title 5 or any other law 
providing annuities to Federal civilian employees.''
    Subsec. (j). Pub. L. 102-484, Sec. 4405(b), added subsec. (j).


                    Effective Date of 2000 Amendment

    Pub. L. 106-398, Sec. 1 [[div. A], title V, Sec. 572(b)], Oct. 30, 
2000, 114 Stat. 1654, 1654A-136, provided that: ``Subparagraph (B) of 
section 1175(e)(3) of title 10, United States Code, as added by 
subsection (a), shall apply with respect to decisions by members to 
terminate voluntary separation incentive payments under section 1175 of 
title 10, United States Code, to be effective after September 30, 
2000.''


                    Effective Date of 1998 Amendment

    Pub. L. 105-261, div. A, title V, Sec. 563(c), Oct. 17, 1998, 112 
Stat. 2028, provided that: ``The amendments made by this section 
[amending this section] apply with respect to any person provided a 
voluntary separation incentive under section 1175 of title 10, United 
States Code (whether before, on, or after the date of the enactment of 
this Act) [Oct. 17, 1998].''


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-337 applicable only to members of the Coast 
Guard who are separated after Sept. 30, 1994, see section 542(e) of Pub. 
L. 103-337, set out as a note under section 1141 of this title.


                    Effective Date of 1992 Amendment

    Amendment by section 4405(b) of Pub. L. 102-484 applicable as if 
included in this section as enacted Dec. 5, 1991, with any benefits or 
services payable by reason of applicability of that amendment during the 
period beginning Dec. 5, 1991, and ending Oct. 23, 1992, to be subject 
to availability of appropriations, see section 4405(c) of Pub. L. 102-
484, set out as a note under section 1174a of this title.
    Section 4406(c) of Pub. L. 102-484 provided that: ``The amendments 
to section 1175 of title 10, United States Code, made by subsections (a) 
and (b) shall apply as if included in section 1175 of title 10, United 
States Code, as enacted on December 5, 1991.''


     Payment of Incentives From Voluntary Separation Incentive Fund

    Pub. L. 104-208, div. A, title I, Sec. 101(b) [title VIII, 
Sec. 8044], Sept. 30, 1996, 110 Stat. 3009-71, 3009-98, provided that: 
``During the current fiscal year and hereafter, voluntary separation 
incentives payable under 10 U.S.C. 1175 may be paid in such amounts as 
are necessary from the assets of the Voluntary Separation Incentive Fund 
established by section 1175(h)(1).''
    Similar provisions were contained in the following prior 
appropriation acts:
    Pub. L. 104-61, title VIII, Sec. 8054, Dec. 1, 1995, 109 Stat. 662.
    Pub. L. 103-335, title VIII, Sec. 8062, Sept. 30, 1994, 108 Stat. 
2633.
    Pub. L. 103-139, title VIII, Sec. 8073, Nov. 11, 1993, 107 Stat. 
1457.
    Pub. L. 102-396, title IX, Sec. 9106, Oct. 6, 1992, 106 Stat. 1927.


            Separation Payments; Reductions and Prohibitions

    For provisions reducing, with certain exceptions, amounts received 
under this section by amounts received as bonus payments under chapter 5 
of title 37 in case of members who separate from active duty or full-
time National Guard duty in a military department and prohibiting such 
members from receiving Voluntary Separation Incentive program payments 
if rehired in DOD civilian position within 180 days of separation, see 
note set out under section 1174a of this title.


                   Tax Treatment of Incentive Payment

    Section 662(b) of Pub. L. 102-190 provided that: ``Notwithstanding 
the Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.] and any other 
provision of law, any voluntary separation incentive paid to a member of 
the Armed Forces under section 1175 of title 10, United States Code (as 
added by subsection (a)), shall be includable in gross income for 
federal tax purposes only for the taxable year in which such incentive 
is paid to the participant or beneficiary of the member.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1152, 1153, 1174a of this 
title; title 29 section 2918; title 38 section 3018B.
