A July 2005 Government Accountability Office (GAO) study (“DoD Needs to Improve the Transparency and Reassess the Reasonableness, Appropriateness, Affordability, and Sustainability of Its Military Compensation System”) provided lots of “red flags” for MOAA and other military compensation advocates.

Last month, I took issue with the GAO’s one-sided accounting methodology that looked only at government costs without considering what constitutes real compensation value for servicemembers or the value of their service to the country (See TK). This month, let’s take a closer look at the GAO’s questioning of the utility of money spent on deferred benefits like military retirement.

GAO: More than half of military compensation costs are allocated to deferred benefits, which aren’t valued as much by the servicememberss, and therefore don’t have as much impact on recruiting and retention. This is less efficient that civilian systems, which are far less benefit-heavy.

MOAA: Historically, basic pay and allowances have been intended to sustain general pay comparability with the private-sector workforce, with special pays and allowances added as necessary to compete successfully for individual skills. But you can’t put a price tag on family separations, repeated forced relocations, hazardous duty, and the loss of many personal freedoms enjoyed by other Americans (such as being able to quit, refuse an order, get fat, or date whoever you want to without risking a felony conviction).

Instead, the military offsets the extraordinary demands and sacrifices of a service career through a unique package of institutional benefits — 20-year retirement, inflation-based cost-of-living adjustments, lifetime health care, etcetera. These benefits must be substantially better than the typical civilian package because the conditions of a military service career are far more arduous.

Although young servicemembers might not value retirement benefits, older ones certainly do. There’s a good reason why surveys consistently show that military retirement is the single greatest career retention incentive — and why the so-called REDUX retirement benefits cut (enacted in 1986 for subsequent service entrants, then repealed in 1999 after it caused retention problems) became a larger concern as the REDUX-covered cohorts advanced in seniority.

GAO: Fewer than one in five servicemembers completes 20 years of active duty to become eligible for retirement benefits, so the military retirement system is inequitable compared to civilian plans. Today’s younger servicemembers would prefer earlier vesting.

MOAA: Civilian-style vesting works with civilian-style working conditions. Younger servicemembers would prefer more cash compensation up front or earlier vesting because that would help keep their options open to leave service without completing a career. But the military service environment is completely different from civilian employment.

For one thing, the military depends on retention and promotion from within — it can’t hire fully qualify replacements for mid-level leaders who leave after eight, 10, or 12 years. Therefore, the military must have powerful incentives for continued service — despite adverse service conditions that most Americans wouldn’t put up with.

Just as fundamental are real-world cost considerations. There’s no getting around the fact that implementing vesting or a 401(k)-style matching plan would require a ton of money to pay those who choose to leave — and that doing so would reduce incentives to serve 20 years or more. With DoD already complaining about military retirement costs, does anyone really think it will toss billions (yes, billions) into military retirement out of a sense of fairness to voluntary separates?

When a budget analyst calls for equity, hold onto your wallet. Past experiences with military and civilian retirement “reform” show that any money spent on earlier vesting, 401(k) matching, or something similar almost certainly would be funded by curtailing retirement benefits for those who serve 20-year careers. In MOAA’s book, taking money from career military servicemembers to pay those who choose to leave this arduous service isn’t a viable formula for protecting retention, readiness, and long-term national defense capabilities.

The GAO report is clear in its assertion that deferred benefits like military retirement aren’t “efficient” — a term that puts MOAA on alert, because analysts who use it are almost always undervaluing military servicemembers’ career service and sacrifice. They’re following private-sector practices of treating people as human capital — commodities from whom the “efficient” objective is to extract the most service at the least expense.

But trying to apply that philosophy to the military compensation package is self-defeating in the long run. Military compensation programs must embody the reciprocal commitment between servicemembers and their government. Those from whom we demand the ultimate in loyalty, commitment, and sacrifice deserve reciprocal loyalty and financial commitment in return.

That includes ensuring they’re treated fairly later in life. We know the impact, for example, of failing to provide inflation protection for retired pay and survivor benefits — even though younger servicemembers might not appreciate the full value of that protection yet.

The government has a moral obligation not to take advantage of their misunderstanding or naiveté. Fortunately, Congress has understood that reciprocal obligation far better and has worked hard in recent years to do the right thing in spite of narrow-viewed resistance from the executive branch (under both Democrat and Republican leadership).

MOAA will continue to exercise the national conscience on this score.

Col. Steve Strobridge, USAF-Ret., director of MOAA government relations