Fact vs. Fiction on Military Personnel Costs (Part 4). Here’s the fourth of five excerpts from a coming Military Officer magazine article examining Pentagon claims that your pay and benefits will break the bank. This week’s segment addresses military retirement.
Congress’ Last Pre-Election Gasp. Here’s a summary of recent Capitol Hill actions (or inactions) of interest as legislators wrap up the last legislative week before the election.
MOAA Meets with House Leaders. House Minority Leader Nancy Pelosi (D-CA) and senior House Democrats invited MOAA and other leaders for a discussion on legislative needs.
What Do You Know? How much do you know about military retirement? Take our short quiz below!
Fact vs. Fiction on Military Personnel Costs (Part 4)
This is the fourth of five installments previewing a November Military Officer magazine article in which MOAA’s Government Relations staff examines Defense leaders’ assertions that your pay and benefits will break the Pentagon bank. This week we take a look at military retirement.
“Military Retirement is Unfair and Unaffordable”
Whenever military budgets get tight, budgeteers, analysts, and chartered task forces also propose military retirement cutbacks. Past defense leaders resisted such efforts as detrimental to retention and readiness. In contrast, former Secretary of Defense Robert Gates and current Secretary Leon Panetta have voiced support for significant retirement changes.
“Unfair” – Gates criticized the 20-year retirement system as “unfair” to those who leave service short before that point, noting vesting options provided civilian workers. He directed the Defense Business Board (DBB) to identify alternative options.
In his final appearance before the Senate, Gates endorsed an early vesting program, noting, "70-80% of the force does not stay until retirement, but leaves with nothing.”
But there’s no support for spending more money on military retirement in budget-cutting times.
So all vesting options proposed so far – including those of the DBB and the DoD-sponsored 11th Quadrennial Review of Military Compensation (QRMC) – would fund that new, expensive benefit by imposing dramatic benefit cuts for the 17 percent who complete decades in uniform.
Both plans would convert the current program to a civilianized 401(k)-style system that would vest after 3 to 10 years of service. The QRMC would delay retired pay eligibility until age 57-60, whereas the DBB plan would eliminate traditional retired pay. One DBB option would grandfather retired pay creditable from existing service, but convert currently serving members to the new system for any subsequent service.
MOAA believes it’s a perverse concept of “fairness” that would impose major benefit cuts on those who serve and sacrifice longest to fund new benefits for early leavers.
The main purpose of the military retirement system is to attract top-quality people to serve multiple decades despite the unlimited personal and family sacrifices that may be demanded of them over that time.
There are good reasons only 17% are willing to endure those arduous demands and sacrifices for 20-plus years. The vast majority of Americans are unwilling to accept those conditions for even one tour of duty.
The DBB and QRMC proposals ignore the hard lessons of past experience with retirement cuts.
Budget pressures prompted Congress in 1986 to pass changes reducing 20-year retired pay value 25 percent for post-1986 entrants.
Then-Defense Secretary Caspar Weinberger adamantly opposed the so-called “REDUX” change, warning Congress it would inevitably undermine retention and readiness. That prediction proved true a decade later, and Congress repealed REDUX in 1999.
Stunningly, the cuts proposed by both the DBB and QRMC are vastly more severe than the retention-killing REDUX cuts.
MOAA asserts the powerful pull of the 20-year retirement system is the main reason retention hasn't imploded over the last 10 years of unprecedented wartime strains on troops and families.
If one tried to build a plan to slash career retention, it’s hard to conceive a better way than the DBB or QRMC proposal.
A 10-year soldier facing a fourth or fifth combat deployment would have a choice between (a) taking the vested military retirement and leaving to pursue a civilian career or (b) having to serve decades longer (with who knows how many more deployments) before being eligible for military retired pay at age 57-60. It’s not difficult to predict the retention outcome of such a scenario.
Advocates for these initiatives sugar-coat them by saying they wouldn't affect anyone now serving, but would only apply to new entrants. But that was true of the REDUX system, and we know how that turned out.
Grandfathering the current force only lets retirement-cutting leaders evade responsibility for their ill-advised actions – by deferring the inevitable retention disaster for a decade and dumping it on their successors.
“Unaffordable” – Military retirement critics have claimed for decades that this unique plan is unaffordable and unsustainable.
Almost 35 years ago, the 1978 report of the President’s Commission on Military Compensation included this extract from the minority report of Commissioner Lt Gen Benjamin O. Davis (USAF-Ret):
“Unfortunately, the Commission has embraced the myth that retirement costs will soon rise so high – from $10 billion this year to $30 billion in the year 2000 – as to become an unacceptable and unfair burden on the American taxpayer.
“Such assertions fail to point out that by using the same assumptions, today’s average family income of $10,000 will be $36,000 in the year 2000. The average cost of a home will be $171,000; a compact automobile will cost $17,000; and the overall U.S. budget will have increased from $500 billion to some amount in the trillions.”
Such numbers seem quaint in retrospect, but they make two telling points.
First, long-term projections that appear dire today often prove far less so as years pass.
Second, after budget-driven retirement cuts actually were imposed in 1986, Congress deemed restoring the current system as more affordable than continued retention and readiness shortfalls.
Amazingly, DBB leaders acknowledged they didn’t consider potential retention impacts of their plan.
During 2012 testimony before Congress, Defense witnesses acknowledged the DBB proposal would hurt retention -- and went a step further.
Dr. Jo Ann Rooney, Principal Deputy Undersecretary of Defense for Personnel and Readiness, testified the current military retirement system is “neither unaffordable, nor spiraling out of control,” noting retirement costs as a percentage of pay have remained reasonably constant.
Check back next week for the final installment, and read part 1, part 2, and part 3 on MOAA’s website.
Congress’ Last Pre-Election Gasp
With the House planning to go into recess this weekend until after the elections, senators and representatives scrambled with varying degrees of success to get some final legislating done.
Keeping the Government Running: House and Senate leaders have agreed on a six-month continuing resolution (H.J. Res. 117) to keep the government funded until April 1, 2013. The House has passed it, and the Senate is expected to this weekend.
FY2013 Defense Authorization Bill: The House passed this key bill (including important caps on TRICARE pharmacy copay hikes) back in May, but the Senate won’t act on it until after the election. This week, Senate Armed Services Committee Chairman Carl Levin said the number of amendments will have to be limited, given the short time the Senate will have to pass it. That could be bad news for MOAA-supported amendments on concurrent receipt, SBP, and more.
Veterans Job Corps Bill: Chances for legislation to enhance veteran hiring (S. 3457) died in the Senate when partisan disagreements couldn’t be resolved. Sponsor Sen. Patty Murray, D-WA, included all of Sen. Richard Burr’s (R-NC) alternative proposals in the bill, but it fell two votes short of the required 60, on a party-line vote after only five Republicans joined all Democrats in supporting it.
Senate Veterans Affairs Committee: The Committee approved a number of bills of interest, including:
• S. 3340 (Murray, D-WA) would require the VA to reduce wait times for mental health care services; expand such care for families of deployed servicemembers; and expand outreach efforts to improve mental health care access. It also would put Clark Veterans Cemetery in the Philippines under the American Battle Monuments Commission.
• S. 2241 (Murray; Webb, D-VA; Merkley, D-OR; Lautenberg, D-NJ) would strengthen oversight of all colleges serving GI Bill students by expanding consumer protections for student veterans, banning deceptive advertising; and establishing counseling requirements. It also would extend Post-9/11 GI Bill eligibility to surviving spouses.
• S. 3322 (Brown, D-OH) / S. 2299 (Murray) would extend mortgage foreclosure protections to servicemembers in combat zones; surviving spouses of personnel who die on duty, and 100% disabled medical retirees. It also authorizes suits against banks, landlords and businesses that violate Servicemember Civil Relief Act protections.
• S. 2259 (Tester, D-MT) would authorize a COLA for VA disability and survivor annuitants at the same percentage as the retired pay COLA.
Stolen Valor Act: The House approved H.R. 1775 (Heck, R-NV), which would make it illegal to reap financial gain from false claims regarding the Medal of Honor and certain other military decorations.
Veteran Hiring Incentives: S. 3536 (Mikulski and Cardin, both D-MD) introduced a bill to extend tax incentives for employers to hire veterans to 2016. Current authorities expire in December.
MOAA Meets with House Leaders
MOAA Government Relations Director Colonel Steve Strobridge (USAF-Ret) was among military and veteran association leaders invited to Capitol Hill last week to discuss legislative priorities with House Minority Leader Nancy Pelosi (D-CA) and more than a dozen other senior House Democrats.
Pelosi highlighted ongoing challenges in resolving the sequestration issue that threatens an additional $1 trillion in across-the-board budget cuts over the next 10 years if Congress doesn’t approve alternative ways to cut the deficit by the end of the year.
She acknowledged that political considerations have forced deferral on this and a number of other key legislative efforts into the post-election, “lame duck” session of Congress, including the need to change the current law that’s scheduled to impose a 27% cut in Medicare and TRICARE payments to doctors in January.
The assembled association representatives detailed a variety of priorities remaining to be addressed, including various wounded warrior and veteran hiring initiatives, protecting VA funding, addressing the unfair deduction of VA survivor benefits from military SBP annuities, and more.
Strobridge highlighted that, while Congress has exempted VA health care from sequester-driven budget cuts, no such protection has been extended to military health care, at least for beneficiaries under 65 and care delivered through military facilities. He supported protection of VA care, but said if we’re going to protect health care for vets who served as little as one tour of duty in uniform, those who sacrifice for decades deserve no less.
He also praised House Republicans and Democrats alike for including caps on TRICARE pharmacy copay increases in the House-passed version of the FY2013 Defense Authorization Act. He urged House leaders to ensure those caps are retained in negotiations with the Senate during the lame duck session.
What Do You Know?
How much do you know about military retirement? Take our short quiz below!
1. For a military retiree with 20 years of service, what percentage of his or her total lifetime retired pay will come from annual cost-of-living adjustments (COLAs)?
A. 35 percent
B. 50 percent
C. 67 percent
Answer: B. COLAs account for 50 percent of lifetime retired pay based on a 42 year-old retiree receiving a 3% COLA annually (as the actuary assumes) and living until age 84.
2. What was the average age of military officers and the average age of enlisted members who retired in FY2011 (excluding reservists).
A. 43.7 and 39.6
B. 45.1 and 41.9
C. 46.7 and 41.2
Answer: C. The average age of a regular or disability officer retiree retiring in FY2011 was 46.7, and 41.2 for enlisted retirements. If you include newly retiring reservists, the average ages jump to 52.0 and 48.7.