Scrambled Nest Eggs

As Washington confronts a frightening federal deficit mess, military retirement plans are back on the front burner.

As 2011 began, two separate blue-ribbon panels made wide-ranging recommendations to address the national debt crisis - $14 trillion and climbing at that point - and each raised anew the specter of military-retirement reform.

Both debt panels suggest replacing the current "all-or-nothing" 20-year retirement system with one perceived to be more equitable, flexible and, most importantly, cost-efficient.

The final report of the bipartisan National Commission on Fiscal Responsibility and Reform, released in December, characterized both military and federal-
civilian retirement plans as "out of line" with pensions in the private sector.

The report urged Congress to create a federal workforce-entitlement task force to recommend ways to make federal retirement and health benefits alike more consistent with those generally available in the private sector, with a goal of saving $70 billion over the next decade.

An example of structural changes sought by the commission, co-chaired by former Republican Sen. Alan Simpson and Erskine Bowles, chief of staff to President Bill Clinton, would be to defer any cost-of-living adjustment on federal annuities until age 62, when a one-time catch-up raise, to match inflation, would be permitted.

The commission said that this and other cost-saving measures for federal entitlements should get fast-tracked through Congress.

The Debt Reduction Task Force, led by former Republican Sen. Pete Domenici and Alice Rivlin, the first director of the Congressional Budget Office, wields a sharper knife over military retirement. It urges adoption of the four-part "flexible" retirement package, proposed in 2008 by the 10th Quadrennial Review of Military Compensation (QRMC), and wants it applied to any active-duty member today with less than 16 years of service.

That plan's annuity would be set using the same formula as the current system: 2.5 percent of average basic pay over the member's three highest-earning years, multiplied by years served. But retired pay couldn't begin until age 57 for those who served at least 20 years, or until age 60 for those who served 10 to 19 years.

A second feature would be a government-funded thrift savings plan that members would be vested in after only 10 years of military service. The government would make all contributions, starting in the second year of service. At first, they would equal 2 percent of basic pay, but would gradually rise to 5 percent. Withdrawals could be made at age 60 or older.

The final two features would be separation pay, and special "gate pays" to entice members through specific year-of-service milestones. The timing, size and availability of these would be left to each service branch.

The Domenici-Rivlin report says this plan should replace the current system of immediate annuities after 20 years for any member who, at the time of the plan's enactment, would have served fewer than 16 years.

Stuart H. Rakoff, a manpower-policy consultant and former Defense Department executive who worked on personnel issues for the task force, said he would personally prefer to grandfather a large portion of the current force, protecting them from any involuntary change in retirement. But he endorsed the changes as more efficient and fairer than the current plan.

He cited three major flaws with the 20-year, cliff-vesting retirement plan used by the military since the end of World War II. One is that "only 15 percent of folks who enter ... serve long enough to get any retirement benefit at all." Thus, the plan builds no wealth for 85 percent of today's volunteers.

Point two is its cost. "When the system was conceived, nobody had the vaguest notion we would pay people to be on active duty for 20 years, and then pay them to be retired for 40 years (on average)," he said. "When the Germans first thought of a military-retirement system 150 years ago, the average officer retired at age 62 and died at 65."

That system made fiscal sense. "When people retire at 38 and live to be 90," however, "it's not such a good bargain for the taxpayer anymore."

Finally, the 20-year retirement plan "has really negative effects on force-shaping," Rakoff said. "For the most part, pilots never see a cockpit after 10 to 12 years of service. It has to do with the nature of assignments. So what happens to (them) after they finished their flying days? They get desk jobs for eight to 10 years because the service won't send them home without a retirement benefit. And so we draw people out to 20 years, to that cliff-vesting point, when really, in many cases, we don't have useful work for them."

The QRMC retirement plan, by contrast, has many more tools to smooth out the force profile and still keep the right number of personnel with the right skills to meet any service need, Rakoff said. Cash is always the most efficient incentive to influence behavior, yet more than half of total military compensation today is deferred.

Steve Strobridge, director of government relations for the Military Officers Association of America and co-chair of The Military Coalition, a consortium of 32 military associations and veterans organizations, testified before the Simpson-Bowles commission last June and warned against changing military retirement to become more like civilian 401(k) plans.

Strobridge said he was stunned to see the Domenici-Rivlin plan propose that its cost-cutting ideas be applied to such a large portion of the current force - those with fewer than 16 years of service. "I cannot express too strongly how egregious a breach of faith that would be," he said. "To have supposedly responsible people who have held senior government positions feel no more sense of obligation than that to people who have borne the country on their backs through this last decade of war is just unfathomable."

Strobridge reminded the commissioners last summer that Congress enacted a cheaper retirement plan, called REDUX, for new entrants after October 1986. Fourteen years later, the reduced career "pull" of that plan began to harm retention and, at the urging of the Joint Chiefs, Congress restored the old retirement plan and added $30,000 for any member who wanted to stay under REDUX.

Initiatives to reduce military-retirement costs by making the service plan more like civilian-retirement packages, Strobridge said, overlook the fact that the military's annuity plan "is an essential offset to the unique and arduous service conditions inherent in a multidecade service career."

Private-sector employees don't face combat, hazardous duty in foreign lands, extended force separations from family, or frequent relocations that impact the ability of spouses to build their own careers, he explained.

"One cannot expect to civilianize the career benefits for military service when military
service conditions simply cannot be civilianized," Strobridge said.

Without the drawing power of the 20-year retirement system, the service branches could not have retained the quality force that it has "over the past decade of constant combat deployments," he added.

President Obama and congressional leaders, spurred on by Tea Party members elected in November on promises of cutting federal spending, have promised to consider the debt panels' recommendations and take serious steps this year to begin to address the swelling national debt.

Whether military retirement will be exempt from the wave of changes ahead, as some prominent politicians have asserted, remains to be seen.

As for The American Legion, it has opposed similar proposals before and will again, National Commander Jimmie Foster said.

"Every time Washington wakes up with a deficit hangover after decades of spending binges, those who study the serious problems of our national debt can't resist the easy but unfair route of trying to balance the budget on the backs of veterans," he said. "It is unfair, and if these ridiculous proposals are passed into law, it will hurt America's ability to defend itself from our enemies.

"I want these commissions to look a 22-year-old Marine in the eye and say that if you retire at age 40 - after 20 years of service and three, four or even more tours of being shot at in Afghanistan - you still have not done enough to receive your retirement. I want these commissions to tell the soldiers in Iraq that the benefits they are receiving are too much.

"America has a huge debt, all right. And it is owed to these men and women who protect our freedoms every day. It is a debt that must be repaid."

Tom Philpott writes the Veterans Update column for The American Legion Magazine.

 

 

Say What You Need To Say

May 2, 2011 - 4:04pm

I think we can all agree that the proposed debt reduction plan that is currently being debated in Washington is extremely unfair and borders on being criminal in it's attempt to strip away the contractual agreements that have already been forged between military personnel and the government upon enlistment.

Now what can we all do about it?

Contact your representatives! You can read up on the latest BS from the Debt Reduction Task Force at the Bipartisan Policy Center website - links are not allowed on this post so you'll have to Google: bipartisanpolicy debt military
Let them know that there are reasonable ways to cut spending in Washington, but taking away our hard earned retirement is not one of them.

mattcavtastic

April 19, 2011 - 11:35am

It never ceases to amaze me what our government is willing to do to save a buck. I am an Active Duty Army Sergeant First Class with 14 years of service, 5 combat deployments to both Afghanistan and Iraq, a husband and father of two boys. I'm currently back in Iraq on my fifth deployment and now having to worry about my retirement being fondled with. This coming just weeks after the governments threatened to not pay me during the government shutdown scare. Me and many others are career Soldiers with the expectations to receive a retirement pension if we chose to do 20 year or 30 years. That has been my expectation since I joined the Army and has been a major deciding factor every time re-enlistment comes up. There is absolutely no comparison between the civilian job market and our Service to our country, having to deal with struggles that the American public can't possibly imagine. On a second note I'm kind of curious how much money and resources are being sunk into this committee

Boomski2

April 3, 2011 - 7:25pm

DoD Manpower Policy consultant implies that professional servicepeople once promoted beyond there basic MOS/Branch "don't have useful work for them." What bull posterior ejection is that!! So after I was promoted above the flight line and was ordered to serve in the Pentagon on the CJCS "for the needs of the service," that was just a placeholder job to carryout the last 8 years of my retirement credible service!? I was ordered-- not my choice-- to the Pentagon and have my professional pilot skills and flight experience become noncompetitive effectively removing me from a good civilian aviation/pilot position post retirement! This is the appreciation we get from DoD politicians consulting with national leadership on our behalf. Honor and truth are dead in Beltway political culture.

Boomski2

April 3, 2011 - 7:03pm

DoD Manpower policy consultant says service men and women who serve, serve, for 20 or more years are "a good bargain." So that is what the DoD civilian leadership think we are--the poor saps who fell for the false promise of free medical for life and a cost of living protected retired pay. We served at substandard wages and in harms way. We suffered and our families suffered. What, military is overpaid?? I do remember the DFAS actualized compensation fliers sent at tax time every year outlining the unpaid compensation we were supposably to be getting that mitigate LES poor pay/conditions. But now, Beltway politicians say we were over paid, and you have to pay for your own disability and medical care. Now what pension? Two years of no COLA; federal taxes taken from RAS increase 61 percent last month; and talk of incrasing family TriCare annual premiums from $460 to as mouch as $2000! I beginning to kind of feel like the American Indians after they were promised the sky by USGov

john vanliew

April 3, 2011 - 11:17am

To compare a military career to ANY civilian job is ridiculous,it's a way of life no matter what branch you serve in.The cost is too high?What civilian job requires you to deploy to an area like a combat zone,continually separate from your family,risk your life 24/7 and all the hardships,physical demands that go with military service? Now they want to pull the rug out from people now serving, if they pass this retention will severely drop and it should.Congress should address it's compensation because they are far out of whack.With all the political correctness,gender friendly,social engineering forced on the military today I'm glad I'm retired.This is just another slap in the face of those serving.The current system retirement rates are low for 20/30 years of your life and what military life requires,especially the willingness to give your life.

Jo Alfaro Lt Col USAFr

March 30, 2011 - 5:23pm

Once again our political leaders are looking to fix a problem they created on the backs of the women and men who signed a check payable to the United States of America for an amount up to and including their lives. I would be interested to know if there were any recommendations on the golden parachute our Congress members created for themselves in retirement and health care. How about their retriement be on a scale based on number of years served and payable once they reach full retirement age? And, they use the same health care system they created for the American public. Think there is a chance of that happening in any deficit cutting measures?

the nosh

March 30, 2011 - 12:29pm

I am really tired of the prima donnas in Washington, spending our tax dollars on everything and anything they deem fit! THEY are out of control! Now they want to go after vet benefits??? They need to lower their wages and benefits and quit sending our dollars overseas to countries who accepts the money then spits on us as Washington turns the other cheek and just does it all over again and again!! Take care of our own!!!!

Washington is the monster that steppenwolf sang about!

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd> <p>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
By submitting this form, you accept the Mollom privacy policy.

Tell us what you think