I was wondering why is it that if one elects to receive a lump-sum payment of there SRB that 15% is slashed off the top. That coupled with 25% going to taxes comes out to 40% of one's SRB gone. The 25% tax I get but can't figure out how the 85% of the total SRB was computated. Any ideas?

maybe it is being penalized..kinda like when you take out a Roth IRA early or something. Who knows.

Maybe Topeka puts the bonus money into some type of interest bearing account and that 15% is the amount of interest that it would earn. So for example, when I re-enlisted and got my $60K, the CG really only had to give me $51K and the other $9K came from earned interest.

Or....

They figure that all of these youngsters are part of the "I want it NOW" generation and are going to be stupid enough to take 85% rather than get the full bonus over several years. And the CG is more than willing to pay them less money than promised in their contract for signing on the dotted line. Kinda reminds me of REDUX... "You know, we promised you 50% at 20 yrs, but we'll give you 40% if you're willing to take this $15K now."

The real answer is much simpler.

Bonuses are given to encourage retention. Studies have shown that a lump sum bonus at a discounted rate can achieve similar retention rates for a lower overall cost. Not only does the bonus cost less but also there are significant reductions in management overhead costs.

SRB bonuses are not entitlements they are force shaping tools. If the retention objectives can be met with a lower overall cost, we can reallocate the savings into other initiatives such as critical skills training bonuses etc.

The bonus pot is a fixed amount. When the pie is sliced up, we need to make sure that (first and foremost) Coast Guard workforce objectives are met. If a need develops in one area, funds must be pulled from another to cover the cost.

It can all be summed up in one expression: Bang for the buck.

Be Safe.

By the way, once you really understand tax laws, you will know that you are not taxed at 25%, the IRS requires the CG to WITHHOLD that much until you file your tax returns, then you get a good chunk of that 25% back.

As a MCPO, married with no kids and no property, I get to go the easy way and file a 1040EZ. Wife also works. We are in no way close to the poverty line for sure. People who file a 1040EZ pay the HIGHEST % of their income in taxes as they get to use nothing but standard deductions. That said, at the end of things, my tax rate for last year was 11.1% of my income! Pretty damn minimal rate there!