AN ANALYSIS OF THE EFFECT OF THE CONTINUATION PAY BONUS ON ACTIVE DUTY MARINE PERSONNEL

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Authors
Martin, Cullen M.
Subjects
blended retirement system
military retirement
behavioral economics
continuation pay
retention bonus
Advisors
Bacolod, Marigee
Ahn, Sae Young
Date of Issue
2024-03
Date
Publisher
Monterey, CA; Naval Postgraduate School
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Abstract
As part of its efforts to modernize the military retirement system in 2018, the Department of Defense introduced the Blended Retirement System. One critical component of this new retirement system is the continuation pay (CP) bonus. The CP bonus is a retention incentive and force shaping tool offered to Marines at 12 years of service. Taking the CP bonus obligates a four year pay back. In this thesis, I explore the impact of the Marine Corps’ bonus multiplier change from 2.5x to 5.0x beginning in 2023. Using data from the Total Data Force Warehouse from 2018 to 2023, I find a 5.9 percentage point increase in the likelihood of eligible Marines taking the CP bonus when the multiplier was changed from 2.5x to 5.0x. Employing linear probability models, I also find that Marines who are female, enlisted, married, and a minority are more likely to take up the CP bonus. Furthermore, I find that above average performers are more likely to take the CP bonus and demonstrate greater sensitivity to the change in multiplier rate. Lastly, I calculate the true cost of the multiplier rate change at $20,819 per year for enlisted Marines and $72,430 for officers.
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Thesis
Description
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https://hdl.handle.net/10945/72736
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Department
Department of Defense Management (DDM)
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Distribution Statement A. Approved for public release: Distribution is unlimited.
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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