Despite being considered a third rail by many members of Congress, the Pentagon is rolling out proposals to overhaul its military retirement system — including offering cash earlier but lowering the lifetime value for many service members, according to a 44-page document obtained by Military Times.
Some key takeaways from the report:
- The report lays out two concepts for potential reforms, but they would both mean a lower lifetime monetary value for many future service members, compared with the current system.
- Under one proposal, active and reserve members would get “partial benefits” once they retire from the military until they reach their early 60s. Pentagon officials have repeatedly pointed out that many military retirees go on to have second careers before leaving the workforce.
- Under the second proposal, active forces would get full benefits after they retire from the military — but the monetary value would be smaller than what service members get today. And reserve members would have benefits kick in at age 60.
- Both proposals require service members to serve 20 years before they are fully vested in the retirement plans.
- In both concepts outlined, the Pentagon would contribute a certain percentage of annual base pay after two years of service to a 401(k)-like plan. Service members would become vested if they continue serving after six years.
- Both proposals would offer a bonus around the 12-year mark to try to boost retention in mid-career service members. Defense Department officials and members of Congress worry that changing the current military system will hurt the military’s chances of keeping top talent.
- The proposals grandfather in current military members and retirees.
The report stresses that the proposals are only meant to be food for thought for a commission looking at compensation and retirement changes. Rear Adm. John Kirby, the Pentagon press secretary, said the commission asked for the Defense Department to provide options, and the Pentagon doesn’t side with one over the other.
The Military Compensation and Retirement Modernization Commission’s report isn’t expected until February 2015, and top Pentagon officials including acting Deputy Defense Secretary Christine Fox have pledged to hold off on formally recommending any changes until after the commission’s work is complete.
The report is a complex balancing act of trying to reform a system without affecting the military’s ability to retain top talent and recognizing, as Defense officials have said, that something has got to give.
But personnel costs have long been considered sacred ground for Congress, and lawmakers are quickly overturning most of a $6 billion cut to working-age military retiree pensions included in December’s budget agreement. The Pentagon is already facing an uphill battle on a handful of changes it is hoping to make as part of its fiscal 2015 budget request.