April 24, 2015
House Armed Services Personnel Subcommittee (HASC-P) embraced
controversial changes to military retirement in its version of the FY
2016 defense bill along with several other recommendations of the
Military Compensation and Retirement Modernization Commission (MCRMC).
retirement overhaul combines the existing defined benefit,
cliff-vesting retirement plan, with a transportable defined contribution
plan. Servicemembers will contribute to a portable Thrift Savings Plan
(TSP) account, with a government-matching and government-contribution
To pay for the increased costs of a transportable career
device for more troops, the proposal slashes the existing military
retirement annuity by 20 percent. Although MOAA supports providing a
transportable career device for those serving less than 20 years of
service, it should not come at the expense of those who stay.
bill seeks to overhaul the military retirement system by October 2017.
Current servicemembers will have the option to opt-in to the new system.
Existing retirees will not be affected.
Of the MCRMC’s 15 proposed recommendations, the subcommittee addressed 11 of them, including:
- Modernizing the current military retirement system by blending the existing defined benefit with a defined contribution plan.
- Requiring the Secretary of Defense and the Secretary of Veterans Affairs to establish a joint uniform formulary.
the current number of Reserve Component status category authorities
under which Reserve Component members may be called to duty from 30 to 6
starting in October 2017.
What was not included in the
subcommittee mark were several other sweeping recommendations made by
the MCRMC, including phasing-out the TRICARE health system in favor of
subsidized commercial insurance plans, an additional expensive option
for survivors benefits, and the merging of commissary and exchange
After speaking at MOAA’s Council Presidents’ dinner,
HASC Chairman Rep. Mac Thornberry (R-Texas) said, “People are our most
important thing. We want to get it right.”
HASC-P Chair Rep. Joe
Heck (R-Nev.) echoed Thornberry’s thoughts. “We couldn’t do [TRICARE]
justice with only a three-month review.”
The Dangers of Retirement Reform
contribution plans are unpredictable and contingent on variables like
fund choice, rates of return, member contributions, inflation,
cost-of-living increases, and other economic factors. The success of the
commission’s proposal is completely dependent on the financial literacy
of the force.
Unfortunately, the MCRMC found that only 12
percent of servicemembers surveyed said that they received financial
information from their command or installation.
embrace of the new retirement proposal came as a surprise to observers.
The administration has yet to release its perspective on the MCRMC
report, but is expected to respond by the end of April.
MOAA and 21 other associations expressed caution and concern about
retirement changes since the MCRMC’s report release in January. This
kind of major reform requires further study and analysis because of the
potential impact a blended system could have on the retention of the
mid-grade officer and NCO corps.
“There is some silver lining to
this news. The HASC-P rejected the MCRMC’s recommendation to stop
contributions after 20 years of service. Even so, we are very concerned
that this proposal will not retain the skilled, mid-grade NCOs and
officers our country needs in the long-run,” said MOAA Director of
Government Relations Col. Mike Hayden, USAF (Ret).
Services Committee Chairman John McCain (R-Ariz.) looks poised to accept
the House’s version of retirement reform. “We've been working closely"
with the House, McCain said. "We're basing our plan on the
recommendations of the commission and we feel comfortable with that."
is just the beginning of the FY 2016 defense bill legislative process.
MOAA will continue to work with Congress as the process moves to the