Pay and Retirement Recommendations

Recommendation 1: Help more service members save for retirement earlier in their careers, leverage the retention power of traditional Uniformed Services retirement, and give the Services greater flexibility to retain quality people in demanding career fields by implementing a modernized retirement system

Careful thought was put into the current military retirement system decades ago when it was established by Congress. It has served the nation and the AVF very well through good times, but most importantly through the most challenging retention environments, including periods of high operational tempo and strong civilian economic opportunity.   

MOAA is wary of major changes to the retirement system because REDUX, the last major alteration to military retirement, was repealed years later due to its harmful effects to retention.  

Sustainment of the professional, experienced, mid-grade non-commissioned officer and officer corps is critical to the future viability and readiness of the AVF. The current retirement system has proven its worth since its inception.   

Although MOAA supports providing a transportable career device for those who leave the service prior to attaining 20 years of service, it should not come at the expense of those who serve for a full career and should not cause serious retention problems. MOAA has serious concerns that a blended retirement benefit will fail to provide the necessary draw to retain service members to 20 years of service.   

The combination of providing a transportable career device and reducing the value of the 20-year defined benefit by 20 percent provides a greater incentive to leave rather than stay. This is especially true in a high operational tempo environment and a robust private sector job market.  

Another shortfall of the new proposal is that it fails to continue to provide government matching to Thrift Savings Plan (TSP) accounts for members who serve beyond 20 years of service. This creates a major disincentive to serve beyond 20 years and greatly devalues their retirement value compared to the existing, cliff-vesting retirement benefit.   

One of the greatest attributes of the current retirement system is its predictability. The suggested 401K-like retirement benefit value is just the opposite – unpredictable – and is contingent on variables: fund choice, return rates, member contributions, inflation, cost-of-living increases, the economy, etc. This proposal signals a dramatic change in military culture by shifting a major element of retirement financial planning onto the service member, vice what is currently an employer (DoD) responsibility.   

Another concern of the MCRMC recommendation is regarding disability retirement. By reducing the retirement multiplier, disabled retirees receiving retirement pay and Department of Veterans Affairs (VA) disability compensation could receive less compensation under this proposal.   

The success of this recommendation is completely dependent on the accomplishment of major education in financial literacy of the force. By the commission’s admission, only 12 percent of service member respondents indicated they received financial information from their command or installation.   

We remain skeptical of the services’ ability to provide sound financial and health care counseling based on industry past practices and whether highly qualified, government-sponsored financial planners will be available at all locations to provide continued assistance to members, retirees, and their families.   

Finally, MOAA recognizes that many reservists may find the plan attractive since they consider reserve retirement as a supplement to civilian retirement plans and may be more comfortable with 401k and IRA financial instruments.  However, the continuation pay of only .5% at the 12th year of service (compared to 2.5% for active duty) may harm career retention.  Moreover, uncertainties over how when the Thrift Savings Plan would be matched in the reserve environment indicate that more study is needed on this aspect of the MCRMC proposal.  

MOAA Position – This recommendation requires further analysis and study, given the potential impact a blended retirement system could have on the retention of the mid-career NCOs and officer corps.  

Recommendation 2: Provide more options for service members to protect their pay for their survivors by offering new Survivor Benefit Plan (SBP) coverage without Dependency and Indemnity Compensation (DIC) offset   

A long-time goal of MOAA is to eliminate the SBP-DIC offset. We are encouraged that the commission highlights this unfairness; however, this proposal does nothing to eliminate the current offset inequity affecting approximately 60,000 survivors. Under a two-tier system, retirees will be paying for elimination of the SBP-DIC offset through higher premiums.  

The higher tier benefit would be most advantageous to survivors of retirees that are the most financially strapped – 100 percent total and permanently disabled retirees. MOAA believes we should not ask these disabled retirees to pay even higher premiums.  

Our analysis shows that while some service members support a two-tier system, an overwhelming majority would not be willing to pay higher premiums for the benefit. We believe that higher premiums would provide a disincentive for retirees to enroll in the program altogether.  

MOAA Position – MOAA does not support the recommendation.     

Recommendation 3: Promote service members’ financial literacy by implementing a more robust financial and health benefit training program  

The commission’s retirement recommendation success is predicated on the accomplishment (and success) of a major education campaign focused on the financial literacy of the force. As we mentioned in recommendation 1, we are skeptical of the services’ ability to provide sound financial and health care counseling based on industry past practices and whether highly qualified, government-sponsored financial planners will be available at all locations to provide continued assistance to service members and retirees and their families.  

Currently, some bases share Personal Financial Managers with other installations, limiting their availability. Therefore, any plan to grow a more robust financial and health benefit training program must include service members and family members, as well as retirees and their families.  

We also recommend that any plan to promote financial literacy should include education on accessing benefits at key touch points during the military life cycle, including separation.   

MOAA Position – MOAA supports the recommendation.     

Recommendation 4: Increase efficiency within the Reserve Component by consolidating 30 Reserve Component duty statuses into 6 broader statuses  

MOAA Position – MOAA supports the recommendation but believes the final number of statuses requires vetting with the reserve component to ensure service members are provided proper credit for their duty.