Financial Management and Entitlements
What to know
Know the core pay and entitlements: basic pay, basic allowance for housing, basic allowance for subsistence, special and incentive pays, and the tax treatment of each. Understand permanent change of station entitlements, temporary duty per diem, and the leave and earnings statement. Know the Thrift Savings Plan and the Blended Retirement System, including matching contributions and the continuation pay concept. Candidates should understand the difference between allowances (generally non-taxable) and pay (taxable), and the role of finance offices in resolving pay errors.
Traps
Frequent traps involve tax treatment-assuming allowances are taxable or that all pay is tax-free in a combat zone. Another is confusing BAH with BAS or misstating when PCS entitlements apply. Watch for items that treat the TSP as mandatory or that misstate the matching formula.
Worked example
A member stationed overseas receives BAH and BAS; these allowances are generally not taxed, while basic pay is. If a question asks which portion is taxable, the answer is basic pay, not the allowances.
Rule of thumb
Pay is taxable; allowances generally are not.