White House Cool to Retirement Reform

The White House said it needs more time to study proposals to overhaul military retired pay.

On April 30, the administration unveiled its positions on the Military Compensation and Retirement Modernization Commission (MCRMC) report. The administration was originally scheduled to provide its analysis on April 1, but because of the complexity of the sweeping recommendations, requested an extension for additional study.

The administration came out in support of 10 of the recommendations proposed by the MCRMC. The proposals endorsed were largely non-controversial, including calls for improved collaboration between DoD and the VA, enhancing financial education for servicemembers, providing additional Space-Available travel, and reporting on military children.

Although the White House expressed that the retirement proposal has merit, it signaled that the Pentagon needs more time to look at the commission’s recommendation. Several media reports indicate the White House will give Congress a complete evaluation of the retirement proposal by the end of July.

Under the MCRMC proposal, troops will receive matching government contributions to 401k accounts. The intent is to provide troops who serve less than 20 years a transportable retirement benefit.

However, the proposal does reduce the overall pension. In order to provide transportable retirement benefits to more troops, the proposal reduces military retired pay by 20 percent.

Current retirees will not be affected by the changes.

MOAA believes that the combination of a reduced pension and a transportable 401k could provide a greater incentive to leave the military prior to 20 years of service.

Congress Acts in Haste

Surprisingly, the House Armed Services Committee did not wait to hear the administration’s position before moving forward with changes to military retirement.

Like the MCRMC proposal, the HASC bill moves servicemembers into TSP accounts and reduces military retired pay by 20 percent. However, matching government contributions to TSP accounts continue for troops that serve more than 20 years.

“If the MCRMC proposal was so well thought out, why did lawmakers change it?” said MOAA’s Director of Government Relations, Col. Mike Hayden, USAF (Ret). “If House members agree that stopping contributions at 20 years of service is problematic, what other problems will surface? This is a big change we’re talking about here. The last thing we should do is fast-track this.”

MOAA thinks that proposed changes of this magnitude require further analysis.