October 17, 2008
| Final COLA Announced Most – but not all – military retirees will receive a 5.8% cost-of-living adjustment in their retired pay for 2009. What’s your number? |
| SBP/DIC Recoupment Victory A MOAA-generated law change has now gone into effect that requires the Defense Finance and Accounting Service to provide clear and more sensitive information and assistance to military widows whose Survivor Benefit Plan (SBP) annuities are reduced by VA survivor benefits. |
Budget Changes Coming for Defense MOAA’s Director of Government Relations is concerned that military families could be victims of a potential defense budget train wreck in the coming year.
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Final COLA Announced
It’s official. The 2009 cost-of-living adjustment (COLA) for military retired pay, SBP annuities, Social Security checks, and VA disability and survivor benefits will be 5.8%, effective December 1, 2008. It will first appear in the January checks.
Partial COLA for 2008 Retirees: Servicemembers who retired during calendar year 2008 will receive a somewhat smaller, partial COLA for this year only, because they already received a January military pay raise (which also raised their 2008 retired pay). If you retired in 2008, your COLA is calculated as follows:
- Members who entered service before Sept. 8, 1980, and who retired on or after Jan. 1, 2008, will receive a 5.0% COLA.
- Members who entered service on or after Sept. 8, 1980 (whose retired pay is calculated on their highest 36 months' basic pay rather than final basic pay), and retired between Jan. 1, 2008, and Sept. 30, 2008, will receive a partial COLA based on the calendar quarter in which they retired. Jan.-Mar. retirees will receive 5.0%; Apr.-Jun. retirees, 3.8%; and Jul.-Sept. retirees 1.2%. Those who retire after Oct. 1, 2008, will see no COLA this year.
- Members retired during 2008 will receive full-year COLAs in future years.
This is the third year in the last four that the retiree COLA has been higher than the pay raise for currently serving troops. The two are never the same because they are based on different things and have different purposes.
Military pay raises are based on private sector pay growth, as measured by the Bureau of Labor Statistics’ Employment Cost Index (ECI). Their intent is to ensure military pay is kept reasonably comparable to private sector pay, to allow the services to compete successfully for manpower over time.
Retired pay COLAs, on the other hand, are cost-of-living adjustments that track to inflation, as measured by the Consumer Price Index (CPI). Their purpose is to ensure that whatever purchasing power a member’s retired pay represented on the date he or she left service isn’t eroded by inflation over time.
Over time, the two tend to even out. During the 1970s, COLAs were higher in 5 years and pay raises won out for the other five. In the ‘80s, pay raises beat COLAs (6 – 4); in the ‘90s, it was 50-50 split (5 – 5). The first half of this decade, pay raises were higher, but with COLAs higher for three of the last 4 years, the pendulum seems to be swinging the other way again.
Go to MOAA’s COLA Watch page for more information.
SBP/DIC Recoupment Victory
At long last, DFAS has implemented a single, explanatory notice to military survivors whose SBP annuities are subject to deduction of VA Dependency and Indemnity Compensation (DIC).
DIC, a tax free allowance, is paid to the survivors of members who suffer a service connected death, but current law requires that SBP must be reduced by the amount of the DIC award. MOAA thinks that’s unfair and we’ve been striving to get it fixed. But in the meantime, widows are stuck with the deduction.
Too often, communication breakdowns between the VA and DFAS lead to horribly uncoordinated recoupment actions, subjecting some survivors to an alarming series of dunning notices – sometimes for five-figure amounts. Later, the survivors received a lump-sum refund of SBP premiums, all with little or no explanation about how the amounts were calculated or why the original recoupment couldn’t have been reduced by the subsequent refund.
For three years, MOAA sought to reform this broken process to make it clearer and fairer for the affected widows, and finally convinced Congress to change the law, as of this spring, to require DFAS to provide these survivors:
- A single notice of the net amount to be recouped or refunded
- A written explanation about why the action is taking place
- A detailed accounting of how the amounts were calculated
- The name and contact info for a real person at DFAS who can answer questions about their personal situations and calculations
It’s a relief to know that, hopefully, the horror stories of the past won’t be repeated.
But MOAA still can’t believe it took three years of pestering, and ultimately a law change, to force some basic human courtesy and sensitive treatment for survivors being subjected to large and unexpected financial recoupments on top of losing their military spouses to service-caused conditions.
Budget Changes Coming for Defense
With a new administration and a new Congress coming to Washington next year, there are a lot of powerful people planning for significant budget changes.
And nowhere in government are those planners more in conflict than on the defense budget — in the middle of a two-front war, no less.
Coming into its last three months, the Bush administration says it won’t submit a formal budget to Congress for FY 2010 but will leave that to the next president.
Instead, Pentagon planners are composing a defense spending “wish list” — unconstrained by the White House budget office — that would add almost $450 billion for the next five years to past defense budget projections.
Meanwhile, some influential leaders in Congress foresee a different scenario.
Early this month, the chair of the House Defense Appropriations Subcommittee told reporters that the defense budget will be squeezed by the fiscal bailout, domestic needs, and the presidential candidates’ proposed tax cuts. As a result, he said, planned increases in Army and Marine Corps force levels will be scaled back to pay for weapon needs.
The chair of the Senate Appropriations Committee also has talked about “slimming down” personnel and improving readiness through better equipment.
If and when we’re able to start drawing down troop levels in the combat zone — or if Congress thinks we’re going to be able to do that — we only have to look to the past to see the repeated propensity to declare a “peace dividend” and whack defense spending.
Unfortunately, the defense budget is caught in the middle of four harsh realities:
- Current wartime requirements don’t seem to be declining. Any troop drawdown that might be possible in Iraq likely is to be offset by the need for more in Afghanistan.
- Wartime growth in defense costs has depressed spending in other areas, and there are growing pressures to address those other needs, even as the financial crisis continues and concerns intensify about Medicare and Social Security solvency.
- The past six years have proven that today’s force is too small to meet wartime needs, and the extended war also has worn out equipment and weapons that must be replaced and modernized.
- We never know when the next major contingency will be thrust upon us, just as no one expected on Dec. 6, 1941, or Sept. 10, 2001, that the nation would be at war the next day.
- You don’t need to be a fortune teller to read the tea leaves indicating that executive and legislative branch leaders most likely will do what they have done in the past: follow the money.
And in the defense budget, the easy way to save money quickly is to cut personnel — which means putting off even further any real relief for the servicemembers and families who already have borne 100 percent of the nation’s wartime sacrifice.
If told in 2001 that active duty, Guard, and Reserve forces would face combat deployments pretty much every other year for the foreseeable future, every single thinking force planner would have predicted a retention meltdown before 2008.
The irony is that the continuing patriotism, resilience, and dedication of the military people who’ve carried the full burden of wartime sacrifice — far beyond any reasonable expectation — has had the perplexing effect of desensitizing their leaders to that sacrifice.
The thinking seems to be, “If they’ve borne up all this time, they’ll probably keep doing it.”
How else to explain those leaders’ knee-jerk inclination to scale back force increases that offer the only possibility of substantive relief for military families?
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