Congress | Senate OKs partial concurrent receipt plan, but no SBP.

House, Senate Pass Budget Resolution

Efforts to include Survivor Benefit Plan (SBP) upgrade authority in the House and Senate FY 2004 Budget Resolution (H. Con. Res. 95) came up short in March when both chambers passed their respective versions of the resolution without any mention of an SBP fix.

On the other hand, Sen. Harry Reid (D-Nev.) did manage to include a provision in the Senate resolution that would phase out the disability offset to military retired pay for retirees (including Guard and Reserve retirees) with at least 20 creditable years of service and a Department of Veterans Affairs (VA) disability rating of 60 percent or higher.

Another Senate-passed provision would substantially increase Imminent Danger Pay and Family Separation Allowance payments to qualifying deployed servicemembers.

SBP outlook. While disappointing, the lack of any SBP authority in either chamber's budget resolution doesn't mean the issue is dead. It just means we'll have to shift our focus to a more difficult road - including a fix in the FY 2004 Defense Authorization Act.

That way is more difficult because the Armed Services committees responsible for crafting the authorization act have extremely limited authority to increase so-called "mandatory spending" programs like retired pay and survivor benefits on their own. Unless the budget resolution grants them authority to increase SBP annuities, any such action in the Defense Authorization Bill is subject to a parliamentary point of order. Our challenge will be to generate enough pressure on the issue that legislators - and congressional leadership - will be willing to waive the normal rules.

It will be tough but not unprecedented. That's how TRICARE For Life was enacted several years ago.

Concurrent receipt outlook. The provision included in the Senate version of the resolution is virtually identical to the one the House passed last year. It would phase out the disability offset for qualifying retirees over five years.

We certainly believe that's an appropriate next step. But we should recognize that this, too, will face an uphill battle. First, there's no similar provision in the House resolution, so House leaders would have to agree to keep it in the final resolution. They had that option last year and ended up backing down in the face of a presidential veto threat. In the end, they agreed to a less-expensive "special compensation" for a narrow group of retirees with certain combat- or operations-related disabilities. The Department of Defense is still working to implement that program, which is due to take effect June 1 (see separate article at right).

Given the major showdown over this issue last year, congressional leaders likely will be reluctant to refight that battle until they at least know who's covered and who's not under the new special-compensation program.

House-proposed budget cuts. The resolution first approved by the House Budget Committee envisioned dramatic spending cuts in almost all federal departments (only Defense and Homeland Security would have been exempt). The VA was slated for cuts in excess of $15 billion over 10 years, which would have required significant reductions in capacity to handle disability claims, health care, and other veterans' benefits. The committee also recommended 10-year funding cuts of almost $40 billion in federal employees' health care and retirement accounts, as well as more than $260 billion in Medicare and Medicaid.

In the end, House leaders agreed to forego most of those cuts to win enough votes to pass the resolution. In essence, they agreed not to impose the VA cuts but to accept the Senate's proposed increase for VA programs. Similarly, they agreed not to require cuts in federal civilian health and retirement programs and put back more than $200 billion into Medicare/Medicaid.

Retired Pay | MOAA tangles with the GAO over offset rationale.

Senate Listens on Concurrent Receipt

The Senate Armed Services Personnel Subcommittee held a special hearing on concurrent receipt March 27, with testimony from Sen. Harry Reid (D-Nev.) and witnesses from the Department of Defense (DoD), the Department of Veterans Affairs (VA), various government research agencies, and several military and veterans' organizations.

Reid presented the case to a sympathetic subcommittee. Then Chairman Sen. Saxby Chambliss (R-Ga.) and Ranking Member Sen. Ben Nelson (D-Neb.) grilled DoD and VA witnesses about progress in implementing the special compensation for certain combat-disabled retirees approved in the FY 2003 Defense Authorization Act. The administration witnesses said the new program should be up and running by June 1, and they hope to have application forms and procedures ready in May. They expect to make the first payments as early as July, and approved applicants will receive retroactive payments to June 1. When asked if the lack of concurrent receipt is a deterrent to retention, the DoD witness indicated that wounded members usually want to stay and don't worry about retired pay.

A General Accounting Office (GAO) representative discussed a new report highlighting potential concerns about enacting concurrent receipt, citing civilian precedents for compensation offsets, concerns about impact on VA caseloads, and the GAO's belief that the VA disability rating system needs updating.

MOAA Director of Government Relations Col. Steve Strobridge, usaf-Ret., testifying for The Military Coalition, highlighted the inequity of omitting combat-disabled Guard and Reserve retirees from eligibility for the new special compensation. He also gave several examples to illustrate the unfairness of the current penalty for thousands of others whose disabilities were caused by military duties that didn't happen to involve combat.

Strobridge also rebutted comments from earlier witnesses, asserting the following:

• Claims that concurrent receipt isn't a retention issue are misleading, because military members are only told what retired pay they will receive if they serve 20 years or more. They're not told their retired pay can be taken away if they become disabled.
• Comparing the military disability offset with civilian offsets based on Social Security and other programs with welfare components is spurious. Retired pay and VA disability compensation are earned by service and sacrifice.
• Military service to the United States is fundamentally different from civilian employment; the government has a higher obligation to military members than most private employers show their workers.
• VA workload issues have no bearing on the propriety of enacting concurrent receipt; clerical workload is not more important than doing the right thing by disabled retirees.
• VA reforms have been discussed for decades; the VA has implemented many and is working on more (as attested to by the VA witness); bureaucrats' never-ending debates over possible changes are no excuse to keep penalizing disabled retirees.

Legislation | War generates spate of proposals.

Legislators Seek to Support Troops

Senators and representatives sensitive to the sacrifices of regular, Guard, and Reserve servicemembers and families affected by the war in Iraq have proposed several initiatives to address their problems. Here is a list of selected bills of interest to MOAA members:

H.R. 879 (Rep. Dave Camp, R-Mich.) would open Montgomery gi Bill eligibility to active duty members who entered service between 1977 and 1985 and declined to participate in the Veterans Educational Assistance Program (the considerably less-advantageous program available at that time).

H.R. 1466 (Rep. Michael Capuano, D-Mass.) would allow Guard and Reserve servicemembers a tax credit for health care premiums paid while mobilized.

H.J. Res. 4 (Rep. Randy Cunningham, R-Calif.) would amend the Constitution to allow Congress to pass legislation prohibiting physical desecration of the U.S. flag.

S. 447 (Sen. Mary Landrieu, D-La.) would require institutions of higher learning to refund premiums and authorize a leave of absence, with no loss of academic standing, for Guard and Reserve students recalled to active duty in support of contingency operations. Similar legislation (H.R. 1412, Rep. John Kline, R-Minn.) passed the House April 1.

H.R. 1111 (Rep. Cass Ballenger R-N.C.) would limit the duration of division of retired pay for former spouses whose marrriage did not overlap with at least 20 years of military service. It also would base former spouse retired pay awards on the member's grade and years of service at the time of divorce.

S. 585 (Sen. Bill Nelson, D-Fla.) would end reduction of Survivor Benefit Plan (SBP) annuities by the amount of Dependency and Indemnity Compensation received by survivors of members who died of a service-connected cause.

S. 647 (Sen. Edward Kennedy, D-Mass.) would authorize the services to pay premiums for existing civilian health coverage for Guard and Reserve members activated for more than 30 days in support of contingency operations.

S. 704 (Sen. Susan Collins, R-Maine) would increase the death gratuity for servicemembers killed while on active duty to $12,000 (currently $6,000), retroactive to Sept. 11, 2001. (Note: S. 704 was passed by the Senate April 1 and awaits House action.)

S. 712 (Sen. John McCain, R-Ariz.) would provide an SBP annuity to survivors of reservists who die from a service-connected cause while on inactive duty for training. (Note: S. 712 was passed by the Senate April 1 and awaits House action.)

S. 718 (McCain) would authorize up to $40 in free telephone calls a month for members deployed overseas in direct support of military operations in Afghanistan or Iraq.

S. 721 (Sen. George Allen, R-Va.) would eliminate taxability of military pay for all members serving in a combat zone (not all pay is currently exempt for some officers) and would expand the exclusion to include income for the period of transit to the combat zone.

S. 715 (Sen. Lindsey Graham, R-S.C.) would extend full commissary privileges to drilling Guard and Reserve members and "gray area" retirees (now limited to 24 visits per year).

Military Pay/Benefits | Report fails to address retirement program.

GAO Testifies on Reserve Issues

On March 19, Derek Stewart, a senior General Accounting Office (GAO) official, testified before the House Total Force Subcommittee on possible pay and benefits improvements Congress should consider for members of the National Guard and Reserve components.

Stewart said the GAO was concentrating on three areas that most concern reservists based partly on an unpublished Department of Defense survey of Guard and Reserve service- and family members conducted before Sept. 11: income loss following activation, family support programs, and health care coverage.

The survey indicates about 41 percent of activated Guard and Reserve members earn active duty pay that's lower than their civilian pay and benefits. Losses vary depending on military and civilian specialties. For example, physicians in private practice reported an average loss of $25,600 from their civilian to military pay. Half of those reporting income loss said it was a big problem.

Stewart said it would be important to watch retention rates in high-demand military skills like civil affairs, military police, and intelligence. The GAO is examining whether targeted special pays would help alleviate the income gap problem. Stewart dismissed revisiting the failed "mobilization insurance" program because the earlier program didn't have broad enough participation and attracted only those most likely to be activated.

Guard and Reserve members report having problems with their spouses and children following activation. Half of those surveyed believe DoD family support services are not available to them.

Continuity of health care coverage is the third area the GAO is studying. According to the GAO, 50 percent of those surveyed said they had civilian coverage, and 90 percent of those elected to keep it for their families when activated. Last week we reported that DoD now has authorized automatic family coverage under TRICARE Standard if a Guard or Reserve servicemember is called up for at least 30 days. But GAO indicated reservists who took TRICARE for their families in the past have reported problems with the program.

The GAO's testimony provided helpful insight, as far as it went. But we're disappointed that it failed to address the need to revisit the reserve retirement system. Chairman John McHugh (R-N.Y.) observed that reliance on the reserve component increased 13-fold in the post Gulf War period - even before Sept. 11.

MOAA believes it's time to update the Reserve Component compensation and benefits package to better reflect the enormously increased operational responsibilities borne by citizen-soldiers.

Health Care | Plan would provide equity with civilian employees.

Legislators Push Pretax Premiums

Reps. Tom Davis (R-Va.), Jo Ann Davis (R-Va.) and Sen. John Warner (R-Va.) have reintroduced legislation (H.R. 1231 and S. 623) that would amend the Internal Revenue Code of 1986 to allow active duty and retired military members and federal civilian retirees to pay health insurance premiums on a pretax basis. Depending on state income tax laws, this initiative could have the effect of reducing the cost of such premiums by 35 percent or more.

Similar legislation already was enacted in 2000 to let currently employed federal civilian employees pay premiums for their Federal Employees Health Benefits Program (FEHBP) coverage with pretax dollars.

Under the provisions of these bills:

• TRICARE Prime enrollment fees paid by retired military beneficiaries and FEHBP premiums paid by federal civilian or military retirees would be treated in the same manner as the cafeteria plan option already available to many private sector employees. This means premiums would be deducted by the government from the person's gross retired pay and such enrollment fees and premiums would not be reported as taxable income.
• TRICARE Standard supplemental premiums paid by active and retired servicemembers would be treated somewhat differently, because these are not government policies. In these cases, members would be allowed to deduct such premiums on their federal income tax forms. The deduction would be allowable whether or not taxpayers itemize deductions.

MOAA strongly supports H.R. 1231 and S. 623. Our hope is that the precedent set in 2000 for currently serving federal civilian employees will pave the way for similar pretax treatment of health insurance premiums for all military and federal personnel. Active and retired servicemembers and retired federal employees deserve the same health insurance premium conversion option already available to current civil service and many private-sector employees.

Congress | TMC representatives make case for program upgrades.

MOAA, Coalition Testify Before Senate

On March 11, MOAA Deputy Director for Government Relations Sue Schwartz, dba, rn, and four other association witnesses presented The Military Coalition's (tmc's) 2003 legislative priorities to the Senate Armed Services Subcommittee on Personnel. Here are some selected highlights from the tmc testimony:

Military pay raise: Support the proposed 4.1 percent average pay raise for 2004 for all uniformed services, including the U.S. Public Health Service and National Oceanic and Atmospheric Administration Commissioned Corps. Accelerate housing allowance upgrades if possible.

End strength: The services have too few troops for assigned missions and need end-strength increases to ease overstressed members and families.

Guard/Reserve issues: Reserve members and their employers also are overstressed from recurring and extended call-ups. We need to update force-mix planning as well as personnel, compensation, and retirement programs for the Guard and Reserve to ensure that these programs are consistent with the demands being placed on today's Total Force. A more seamless health care transition is particularly important for activated members and families - either authorize subsidized TRICARE coverage or authorize Department of Defense (DoD) to subsidize members' civilian coverage when activated.

Retired and survivor issues: Increase the Survivor Benefit Plan (SBP) age-62 annuity to restore the intended 40 percent federal subsidy and equalize the benefit with federal civilian SBP. Ensure against excessively narrow implementation of the new special compensation for disabled retirees with combat-related disabilities and continue progress toward enactment of full concurrent receipt; accelerate implementation of the 30-year paid-up SBP coverage. Eliminate the dollar-for-dollar offset of SBP annuities for any survivor annuity received from the Department of Veterans Affairs.

Health care issues: Schwartz told the subcommittee that Congress and DoD must help attract more doctors to participate in TRICARE by increasing payment rates and reducing administrative hassles for providers and beneficiaries. Particular attention is needed to improve TRICARE Standard, by providing more information to beneficiaries and helping them find participating providers. Schwartz said Congress should resist Pentagon efforts to reinvigorate requirements for nonavailability statements.

Health Care | Schwartz focuses on reserve, TRICARE improvements.

TMC Delivers Health Care Testimony

Two weeks after her Senate appearance, MOAA's Sue Schwartz, dba, rn, and The Military Coalition (tmc) Health Care Committee cochair Bob Washington, director of Legislative Affairs for the Fleet Reserve Association, presented tmc's goals at a health care hearing before the House Armed Services Total Force Subcommittee.

Schwartz first expressed gratitude for Congress's recent action to reverse proposed cuts to Medicare/TRICARE provider fees and urged continued support to fix Medicare's/TRICARE's flawed reimbursement schedule. "Our TRICARE beneficiaries deserve the best health care our nation has to offer, not the cheapest available," said Schwartz. Among other priorities, she and Washington urged the subcommittee to:

• require the Department of Defense (DoD) and its contractors to help TRICARE Standard patients find participating providers and to recruit more Standard providers. DoD devotes considerable attention to TRICARE Prime, while Standard beneficiaries' access problems remain unresolved.
• improve provider participation by raising fees and decreasing administrative hassles.
• resist the administration's efforts to reimpose requirements for nonavailability statements.
• allow Guard and Reserve members to buy into TRICARE under the same rules applicable to the TRICARE dental program, or have the government pay their private insurance premiums during periods of recall to active duty.
• ensure full funding of the Defense Health Program in light of increased requirements from the war on terrorism.

Schwartz's comments were well-received by the subcommittee members; we hope they'll work to improve health care for active duty servicemembers, retirees, reservists, and family members.

Taxes | Special-interest provisions dropped to ease passage.

House, Senate Pass Military Tax Bills

Along-sought bill to provide tax relief to military homeowners, survivors, and drilling reservists has passed both the House and Senate, but not without hitting a few obstacles along the way.

The Armed Forces Tax Fairness Act was close to enactment toward the end of the last congressional session, but the House and Senate could not agree on the details of compromise legislation before a deadline imposed by House leadership. Having come so close to success, most observers anticipated full support for the tax bill and quick enactment in the 108th Congress.

Unfortunately, the leadership of the House Ways and Means Committee took advantage of this support and added a wealth of special-interest provisions to the bill (H.R. 878), providing tax relief on everything from alternative diesel fuels to winnings earned by foreigners gambling at American horse tracks. A public outcry followed, and leaders were forced to pull the bill before it could be considered by the full House. The bill was reintroduced as H.R. 1307 and was passed quickly by both chambers.

Some differences remain. The House bill would exempt up to five years (10 years in the Senate version) spent away from home on military orders from counting against the requirement to have occupied the home for at least two of the five years before sale to qualify for a capital gains tax exemption. It also would allow a deduction of up to $1,500 (no ceiling in the Senate) a year in drill-related expenses for Guard and Reserve members, even if they don't itemize deductions. Both bills would exempt the full $6,000 death gratuity from taxation for survivors of members who die on active duty.

Now, once again, the House and Senate must resolve the differences between their respective versions of the bill. We hope Congress will quickly pass this long-overdue legislation.