Naval Special Warfare Enlisted and Chief Warrant Officer Critical Skills Retention Bonus

1. Naval Special Warfare Enlisted and Chief Warrant OfficerCritical Skills Retention Bonus “A dip in retention at the mature end of the SOF lifecycle means unrecoverable experience and lost skills” ADM E. Olson

2. NSW CSRB 2011 BLUF: In order to shape the Naval Special Warfare force, an adjustment to the Critical Skills Retention Bonus was needed. Because the SO and SB communities require different force shaping requirements, the business rules of the new NSW CSRB will specifically target each rate to best meet the needs of the NSW Community. • Currently at maximum SEAL production, we require retention of every experienced operator to ensure health of the community and meet EPA • Retention of these limited supply/high demand assets is a priority. High rates of deployment over an extended period of time, significant force structure changes, competing demands, and growth in requirements are paramount considerations in retention of these high investment/high return capabilities. • Complex global and domestic environments, increasing demand for SOF, and diminished defense resources will continue to challenge NSW’s ability to meet the Nation’s security requirements. • Existing shortfalls in YG 14-19 require 90% retention of those year groups.

3. CSRB BACKGROUND In December 2004, the Navy instituted the SOCOM Enlisted and Chief Warrant Officer Critical Skills Retention Bonus (CSRB) program. This initiative specifically targets warrant officers and enlisted between 19 and 25 years of service (YOS) and is intended to sustain the health of the NSW community. • GOAL: Retain senior operators to provide leadership and expertise both in garrison and on the battlefield • FY10: 109 Eligible and 73 Takers • AVG take per person: $115,823.00 • Historical take rate: 73%

4. SO Retirement E7-E9percent of population that retires at a given year of service (YOS) Pre CSRB Post CSRB • Average retirement age of SOs has shifted 3 years to the right • NSW retention has INCREASED from 42% to 77% in the 20-25 YOS window • Total number of Operators with more than 20 years of experience has INCREASED by 130% Year of Service Year of Service

5. Retirement Eligible NSW Operators The CSRB has had a DIRECT POSITIVE IMPACT on retaining our retirement eligible SEAL and SWCC operators

6. SEAL LOS PROFILE Directed FY13+ growth at apprentice level must be offset by strong retention Existing CSRB has helped to fill the 20-25 YOS requirement Shortfalls in YOS 14-19 require 90% retention Need to increase SO incentive to stay past 25 YOS to meet demand for experience

7. Why Change the Current CSRB ? The CSRB offered in 2005 does not fully support the needs of the NSW Operator or the needs of the NSW community. Restructuring the Senior Enlisted and CWO NSW CSRB was enabled by a change in US law, allowing CSRB to be paid past 25 years of active service. • The average take per operator for the previous CSRB was $116k. By law, the maximum CSRB opportunity is $200k. Maximum bonus opportunity was not realized. • Navy policy was shifting away from granting NSW E7s HYT prior to their 19 year mark. Without a HYT waiver, E7s would only be eligible for a $75k bonus under the previous CSRB. They would never have the opportunity to get additional bonus even if they made E8 in their 19th year. Now all E7s can get up to $100k bonus and they will have the opportunity to get $60k more when they make E8. • SOCOM Assignment Incentive Pay, $750 a month for SEALs over 25 YOS was not being used as AIP was designed. DOD policy dictates that AIP be used to incentivize specific assignments by UIC vice NEC. The use of AIP across the entire SEAL community was being increasingly scrutinized. Additionally, the AIP moneys were paid monthly. The new NSW CSRB is paid as a lump sum bonus, which is potentially tax free. This means that an E9 SEAL has the potential to be awarded up to $78k up front at the beginning of his 25th YOS. That is well over the combined $45k AIP opportunity ($750 a month for 5 years).

8. NSW CSRB 2011 • Reenlistments + extensions will range from 2 to 7 years combined • Lump sum payment. Tax free if in an exclusion zone. • Early reenlistments are authorized. Must contract past current EAOS by >1 year • Three phases of bonus. Phases can be combined on a single contract • Phase I: SO & SB (E7/E8/E9/CWO) • E7 could commit from 19-23 yrs (5yrs) for $100K for PH I • E8/9 or CWO could commit from 19-25 yrs (7yrs) for $160K for PH I & II • Phase II: SO & SB (E8/E9/CWO) • E8 could commit for 24-25 yrs (2yrs) for $60K for PH II • E9 could commit from 24-29 yrs (6yrs) for $108K for PH II & III • Phase III: SO (E9/ SEAL CWO4/5) • SO E9 could commit from 26 yrs for $12K a year for up to $48k in PH III • CSRB is paid at a fixed amount per YOS regardless of contract length • PH 1 maximum is $100K / PH 1+2 maximum $160K • $200K CSRB max payout over career

9. Payout Reference Table Number of Years Contracted Years of Service at Signing * only E-8(select) and above are eligible for PHASE II †only E-9(select) and above are eligible for PHASE III

10. Example 1 SBC who wishes to reenlist for 3 years for $48k

11. Example 2 SBC on a 3 yr $45k contract promotes to SBCS and wants to maximize CSRB $45k Contract

12. Example 3 SOCS on an existing $150k contract and wants to maximize CSRB $150k Contract

13. Example 4 SOCS who wishes to reenlist for 7 years and maximize the CSRB

14. Example 3 SOCM on a $150 contract who wants to reenlist for maximum new CSRB $150k Contract

15. Member letter is automatically generated from the CSRB User Tool

16. NAVADMIN Release Date N130 – Pay and Compensation Office N1– Chief of Naval Personnel SECNAV– Secretary of the Navy (Manpower) OSD– Secretary of Defense (Manpower)

17. NSW CSRB RECAP • Eligibility: Members may apply at the beginning of their 18th YOS. • Phase ONE (19-23 YOS): SO or SB E7(select)-E9 or SEAL/SWCC CWO • Phase TWO (24-25 YOS): SO or SB E8(select)-E9 or SEAL/SWCC CWO • Phase THREE (26-29 YOS): SO E9 or SEAL CWO • All SWCC applicants must be Patrol Officer Qualified • CSRB Phase Caps: • Phase I, through the end of 23 YOS: $100,000 • Phase I & II, through the end of 25 YOS: $160,000 • Phase I, II, & III through the end of 29 YOS: $200,000 • Contract Lengths: • Reenlistments may be between 2 and 6 years in length. • Extensions may be between 1 and 23 months in length. • Combined RE and EXT can be added to support max CSRB 7 YR payouts. • Phase I contracts must extend through the end of a member’s 21st YOS • Phase III contracts must extend through the end of a member’s 26th YOS • New contracts must extend current EAOS by at least 1 year • HYT waiver grants do not authorize CSRB payment • Early reenlistments are authorized. RE on your ADSD anniversary day to maximize CSRB payout • CWOs may not receive both CSRB and an AB for the same time period.

18. QUESTIONS

19. Compound Interest • $60,000 invested for 5 years at 7% would be $84,153 • $100,000 invested for 5 years at 7% would be $140,255 • $160,000 invested for 5 years at 7% would be $314,744 • $100,000 invested for 10 years at 7% would be $196,715 • $160,000 invested for 10 years at 7% would be $314,744 • If a member had invested a $150,000 bonus 5 years ago in • A 5 yr CD @ 4.9% he would have $190,532 today • NASDAQ index fund he would have $184,701 today • Apple stock he would have $768,000 today • Gold he would have $413,513 today • Wal-Mart stock he would have $173.894 today • Ford stock he would have $62,500 today • If a 40 year old invests $100K for 20 years at 7% he would have $386K when he turns 60. If he purchases an annuity at that time with that money, he would receive $26K a year for the rest of his life. • If a 30 year old invests $100K for 30 years at 7% he would have $761K when he turns 60. If he purchases an annuity at that time with that money, he would receive $51K a year for the rest of his life.