MOAA Legislative Update: Panel Recommends Controversial Retirement Overhaul

February 1, 2008

CRSC Expansion Rules Place Claims "On Hold."

With this week's signing of the FY2008 National Defense Authorization Act, the Combat-Related Special Compensation (CRSC) program has been expanded to include those medically retired under Chapter 61 of Title 10 with less than 20 years of service, effective January 1, 2008.

Other than expanding the current guidance to disability retirees with less than 20 years of service, Army officials stated that CRSC eligibility remains the same during a teleconference this week.

Army CRSC officials, as well as Air Force and Navy CRSC personnel, reiterated that the Services will accept new applications; however, the applications will be place temporarily "on hold" pending receipt of DoD guidance. DoD officials are currently updating the CRSC guidance and are hopeful to have the guidance out by the end of February.

We expect the CRSC application, DD form 2860, will need to be updated. Therefore, in the interim, Service officials ask that Chapter 61 retirees with less than 20 years of service annotate "Chapter 61" in Sec II 8a or b.

MOAA On Stimulants

MOAA weighed in with the Senate Finance Committee this week, endorsing the Committee's economic stimulus package, in large part because it would cover up to 250,000 disabled veterans, retirees and survivors potentially excluded from the House-approved bill.

The Senate plan would provide $500 for a single person and $1,000 for a married couple, plus $300 for each child under age 17. It would apply to anyone with an adjusted gross (taxable) income of less than $150,000 per year ($300,000 per married couple).

The House plan would provide $600 for a single person and $1,200 per couple, plus the same provision for children, but includes significantly tighter income requirements. It would provide the full amounts only to people with adjusted gross incomes up to $75,000 per individual and $150,000 per couple. Those with incomes above that amount would have their rebate reduced by 5% of taxable income above the threshold. Singles with incomes above $87,000 and couples above $174,000 would receive no rebate, absent any qualifying children.

Several members have forwarded us reports that the House plan wouldn't cover non-working retirees. That's not entirely true. It would cover people with taxable income, to include taxable retired pay and Social Security. But it would exclude anyone with no taxable income, such as a disabled veteran or survivor who received only Social Security and VA disability compensation or VA Dependency and Indemnity Compensation.

That's a primary reason why MOAA endorsed the Senate plan, which would include such people in the eligible population.

Some have also expressed concern that congressional debates could delay delivery of the rebates. That's not really a worry at this point, since the IRS can't begin to process rebates until mid-May - after it processes the 2007 tax returns. And it takes 60 days to reprogram IRS computers. That means Congress has until mid-March to finish the stimulus package.

According to Senate Finance Committee sources, the Senate is expected to vote on the Committee plan next week. At this point, it's uncertain whether it can win enough votes to pass. If not, the Senate may just adopt the House plan, or perhaps try a more modest amendment to the House proposal to protect disabled vets and others with non-taxable income.

Guard and Reserve Commission Report

After two years' study, public hearings, scores of interviews, the Commission on the National Guard and Reserves has released its final report to Congress. The eleven commissioners and chairman were appointed in a bi-partisan process specified by Congress. The final report includes six major conclusions and 95 recommendations that address roles/missions, training, equipment, compensation/benefits, funding and sustainability.

The recommendations match many of MOAA's recommendations to the Commission, including:

• Increasing resources to secure enough manpower, equipment and training to sustain "operational reserve" missions
• Reducing the number of duty statuses from the current 29 to 2 -- on active duty or off active duty (inactive duty)
• Streamlining pay systems to allow smooth transition on and off active duty (MOAA believes this can be done without compromising the current compensation value of the traditional "2 for 1" base pay mechanism for reserve drill duty)
• Improving family health coverage continuity by allowing a choice to have the government subsidize continuation of a private employer's family coverage during activation
• Enhancing reserve retirement and GI Bill benefits

Commission Chairman Maj Gen Arnold Punaro, USMCR (Ret), told reporters, "There is an appalling gap in readiness for homeland defense." He said 88% of National Guard units were "not ready" primarily because they have not been adequately trained for homeland defense missions and lack the equipment and other resources to carry them out. Punaro chastised both the Department of Defense and the Department of Homeland Security for touting the "operational reserve" but taking inadequate steps to allow them to meet the demands placed on them.

MOAA was surprised and disappointed that the Commission endorsed the proposals of last year's Defense Advisory Committee on Military Compensation that would make major changes in the active duty retirement system, including requiring members to serve until age 57 or older in order to draw retired pay immediately. A much more modest change enacted in 1986 had to be repealed in 1999 when the Joint Chiefs complained it was hurting career retention.

MOAA is concerned that such proposals don't adequately address long-term sustainment requirements for decades of arduous service in the all-volunteer force. The issue will be looked at in more detail by the ongoing 10th Quadrennial Review of Military Compensation. MOAA intends to ensure that any such proposals will get thorough scrutiny, and we'll be very surprised if Congress proves receptive to such a dramatic overhaul of this key compensation element.

Military Widows Argue Their Case

Three SBP annuitants are suing the federal government to restore their annuities and avoid the harsh offset by the VA's Dependency and Indemnity Compensation (DIC). They had their day in the US Court of Claims on January 30 (Sharp v. The United States).

A 2004 law (PL 108-183) restores DIC payments to veterans' surviving spouses who remarry after their 57th birthday. Before the law change, survivors lost DIC regardless of the age they remarried. The plaintiffs in the case contend that if a survivor is also drawing an SBP annuity, PL 108-183 should be interpreted as protecting those survivors from the reduction in SBP annuities by the amount they receive in DIC.

Defense Department lawyers countered that the widows are wrong. They say a 2004 DoD legal review of the law change in question determined that it didn't, in fact, repeal the SBP offset provision. So, DoD lawyers contend, the Defense Department has no choice and it must continue to deduct DIC payments from SBP annuities.

It's interesting to note that the DoD lawyer citing the legislative history of SBP stated that Congress has attempted to repeal the "onerous" DIC offset provision for years and has now established a Special Survivor Indemnity Allowance "to ameliorate" the offset (passed in the new FY2008 Defense Authorization Act). The judge in the case said he would take with widows' and Defense Department arguments under advisement and render a decision "in the near future."

MOAA hopes for a favorable settlement and commends these determined survivors for their tenacity in seeking equitable relief. We'll keep you posted on any further updates in the case.

TRICARE Conference Addresses Big Issues

The Military Health System (MHS) Conference in Washington DC addressed the full range of military health care programs, accomplishments, and needs. MOAA leaders participated in two particularly interesting panel discussions.

MOAA President VADM Norb Ryan, Jr., USN (Ret), was one of five distinguished panelists asked to address "the future of military health care." Ryan emphasized the need to make the budget fit requirements rather than vice-versa, expressing MOAA's support for a Defense Budget at least equal to 4% of GDP. He made the case that there's too much discussion about how much military health care costs the government, and not enough into the level of benefit that career military people earn through lengthy and arduous service.

"We need to put some principles in law such as those expressed in Sen. Frank Lautenberg's (D-NJ) Military Health Care Protection Act," (S. 604) Ryan asserted. "We need to specify in law that military retirement and health benefits are the primary offset to the adverse conditions of service; that those decades of sacrifice constitute a hefty, in-kind pre-payment of premiums; and that the percentage increase in military health fees in any given year shouldn't exceed the percentage increase in military compensation."

Ryan closed by saying that Congress and the American public understand and appreciate the sacrifices made by military people. He said it is up to leadership to ensure that the budget matches their needs.

CDR John Class, USN (Ret), MOAA Deputy Director of Government Relations, joined a group of industry experts in a panel discussion concerning needs for an electronic health record. Class emphasized three main issues. One focus of the system should be to improve the physician-patient encounter. The system should give physicians the information they need quickly and easily to facilitate diagnosis and treatment decisions. Another requirement is to improve information flow, not only between DoD and VA but also between military hospitals, network civilian providers, and non-network physicians. Finally, he emphasized that beneficiaries should have web-based access to their health information to check test results, access medical history information needed for insurance and long-term care applications, and provide immunization and other information for children's school and sports activities, etc. Patients shouldn't have to visit their medical facility to get this information.

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