Uniformed Services Retirement Cost Reduction Act of 1986

Uniformed Services Retirement Cost Reduction Act of 1986 - Amends provisions of Federal law relating to retirement for non-regular service computation of retired pay, recomputation of retired pay or retainer pay to reflect later active duty tax treatment of disability retired pay, and computing years of service and the retired pay base. Adds provisions relating to the retired pay multiplier to reflect the adoption of a new method of computing non-disability retired pay for members of the armed forces who first become members of a uniformed service on or after the date of the enactment of this Act.

Requires the Secretary of Defense, effective on December 1 of each year, to increase, in order to reflect changes in the consumer price index for that year, the retired pay of members who were: (1) members before the date of enactment of this Act; and (2) retired for disability. Increases, taking into account consumer price index changes, the retired pay of those members entering the uniformed services on or after the date of enactment of this Act by a specified formula. Provides for the recomputation of retired pay to reflect consumer price index changes for members who: (1) have completed 40 years of service; and (2) first become members on or after the date of enactment of this Act.

Provides a new formula for: (1) computing the retired pay of members of the Army who first become members of a uniformed service on or after the date of enactment of this Act; and (2) recomputation of Army enlisted members or warrant officers upon advancement on the retired list to a higher grade.

Requires the use of the percentage factor (multiplier) prescribed in this Act for the computation or recomputation of retired or retainer pay of members of the: (1) Navy and Marine Corps, and such members who are advanced on the retired list, who first become members of a uniformed service on or after the date of enactment of this Act; and (2) Air Force, and such members and warrant officers, who are advanced on the retirement list, who first become members of a uniformed service on or after the date of enactment of this Act.

Amends provisions of Federal law relating to the retirement of captains, to computation of retired pay, and to limitations in retirement and retired pay to reflect the adoption of the new method of computing non-disability retired pay for members of the Coast Guard who first become members of a uniformed service on or after the date of enactment of this Act. Provides for the use of the percentage factor (multiplier) prescribed in this Act for computing the non-disability retired pay of such members.

Amends provisions of the Coast and Geodetic Survey Commissioned Officers' Act of 1948 relating to the computation of retired pay of commissioned officers of the National Oceanic and Atmospheric Administration to reflect the new method of computing non-disability retired pay for commissioned officers of the National Oceanic and Atmospheric Administration, and to reflect the new method of computing non-disability retired pay for commissioned officers of the National Oceanic and Atmospheric Administration who first become members of a uniformed service on or after the date of enactment of this Act. Provides for the use of the percentage factor (multiplier) prescribed in this Act for computing the non-disability retired pay of such officers.

Amends provisions of the Public Health Service Act relating to the separation and retirement of officers upon failure of selection for promotion and to the retirement of commissioned officers to reflect the adoption of the new method of computing non-disability retired pay for commissioned officers of the Public Health Service who first become members of a uniformed service on or after the date of enactment of this Act. Provides for the use of the percentage factor (multiplier) prescribed in this Act for computing the non-disability retired pay of such officers.

Amends a provision of Federal law relating to age and service requirements for retired pay for non-regular service to provide that a person who first became a member of a uniformed service on or after the date of enactment of this Act is entitled to retired pay for non-regular service only if he is a member of a reserve component at the time he otherwise becomes entitled to such retired pay.

Uses the unreduced retired pay in effect before the enactment of this Act as the basis for determining any Survivor Benefit Plan annuity to be paid to the beneficiary of a person who first becomes a member after the enactment of this Act.

Repeals the limitation on amounts available for obligation for basic pay and payments into the Department of Defense Military Retirement Fund, as contained in the Department of Defense Authorization Act, 1986.