June 5, 2015
momentum to overhaul the military retirement system gains speed on
Capitol Hill, a new report by the Congressional Budget Office (CBO)
provided predictions on if currently serving troops would convert to the
House and Senate lawmakers are proposing overhauls
to military retirement by combining the existing defined benefit with a
portable retirement device. In exchange for cutting military retirement
by 20 percent, lawmakers would provide government-matched contributions
to 401(k) accounts.
The House proposal provides a government
match up to 5 percent and continues the match throughout an entire
career. The Senate proposal provides only a 4 percent match (after two
years of service) and stops government contributions at 20 years of
Neither proposal requires currently serving troops to
participate in the plan. Troops would have the option to opt in to the
program. Once adopted, new servicemembers would be automatically
enrolled in the new system.
Proponents of the plans say both
proposals offer a better deal for the 83 percent of troops who do not
serve until eligible for a military retirement, and currently receive no
retirement benefits from the government.
For a much smaller
portion of the force - the mid-grade officers and non-commissioned
officers planning to serve a full career - the benefits of a blended
system are more complex.
Members with more than 12 years of
service would have little or no incentive to switch to the new plan. CBO
estimates that none of those members would make the switch.
report estimates that about 50 percent of servicemembers with 12 years
of service or less during the opt-in period would make the switch to the
Both proposals offer continuation pay at the 12-year
point in a career. However, what the report fails to mention is that
servicemembers are unable to invest their continuation pay back into
their TSP accounts.
"Troops at this stage in their careers face a
very tough decision," said MOAA's Deputy Director of Government
Relations, Col. Mike Barron, USA (Ret.). "They won't be able to make up
the difference in lost TSP contributions by twenty years of service."
recent virtual town hall
, Air Force Chief of Staff Gen. Mark Welsh told concerned airmen, "Those
of you who aren't sure, stick with the old plan. You know what you
The CBO report also estimated that the number of
servicemembers that will opt-in to the new plan would increase for those
with fewer years of service, so that 100 percent of servicemembers with
only one or two years of service would choose to switch.
there are significant differences between the House and Senate
proposals, the CBO report did not find any statistical differences in
opt-in rates of servicemembers.
DoD is expected to provide its take on the military retirement reform proposals over the next month.
Before Congress rushes to overhaul the retirement system, MOAA believes these proposals require further study.