Once you retire, increases to your retired pay are tied to the annual cost-of-living adjustment (COLA).
Unless Congress says otherwise.
The fight over COLA is at the core of MOAA’s mission to protect your service-earned entitlements. Below, you’ll learn about the tactics on the Hill regarding this issue and MOAA’s efforts to date to preserve the value of your retirement benefit. In a follow-up article, I’ll offer an assessment of the anticipated challenges ahead, what those challenges could mean for your retirement, and MOAA’s plan for member engagement to welcome in the new Congress in January.
But first, a bit about how the math works for all who are serving now, regardless of the retirement plan.
[LATEST FIGURES: MOAA's COLA Watch]
Many servicemembers from all eight uniformed services, and their families, are somewhat familiar with their retirement plan, whether it be High-Three, REDUX, or the Blended Retirement System. And there remains barely a handful of servicemembers eligible for Final Pay retirement, which is only applicable to those who first entered service prior to Sept. 8, 1980. Read more about the retirement plans at this link.
For all retirees, regardless of retirement plan, the Military Pay Table* in place on the retirement effective date serves as the basis on which their retirement is calculated. Increases to the pay table itself, by law, are tied to the Employment Cost Index (ECI) from the Bureau of Labor Statistics. If you are eyeing retirement, you want to ensure those pay raises are taking effect; your retirement pay depends on them.
While the pay raises are codified in law, that same law allows for possible reductions down to zero depending on circumstances as determined by the president. Congress can also adjust the pay tables in either direction in their drafting of legislation for Authorizations or Appropriations. MOAA continues to engage Congress to ensure these pay raises survive such options; see our recent announcement on pay raises and the ECI here, and MOAA’s overview of pay and benefits news and advocacy issues here.
Challenging COLA: The 1980s
History is replete with attempts, some successful, to marginalize or even eliminate COLA for military retirees. Budget controls and other fiscal priorities are often the cause, and a lack of appreciation for a career of service catalyzes approval on the Hill and in the White House.
It’s all about money – and attempts to minimize mandatory spending to harvest those funds for other programs. Here is an overview of some of the past efforts:
1982: The Omnibus Reconciliation Act of 1982 delayed the effective date of COLA from the first of March, as was the law, to the first of April 1983, then May 1984, and then June of 1986.
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1983: In the omnibus act the very next year, Congress codified in law its intention to continue finding ways to reduce outlays to military retirees, stating that a “reduction of these unacceptably high deficits requires a comprehensive plan to slow the growth of Federal spending, including military and entitlement spending, and to increase revenues.”
1985: The Balanced Budget and Emergency Deficit Control Act of 1985, also referred to as the Gramm-Rudman-Hollings Act, failed to include military retired pay in the exemptions that included Social Security, Tier 1 Railroad Retirement, veterans compensation, and pensions. The bill halted automatic spending increases (save the exemptions), which included COLA increases for military retirees. The impacts were broad, resulting in mandatory cuts to programs and outlays to achieve established budget caps, and introducing a new use of an old word: sequestration.
(This act was the impetus to the formation of The Military Coalition in 1985. MOAA – then TROA, The Retired Officers Association – and the Non Commissioned Officers Association co-led a group of 15 associations who marched on Capitol Hill in protest over the exclusion of military retirees from the exemption list.)
1986: The president’s budget for FY 1987 proposed eliminating COLA in 1987 for military retirees. However, due to the engagement led by MOAA and The Military Coalition, Congress passed legislation counter to the administration’s wishes, restoring COLA through at least 1991 with a House vote of 305-70 and a 61-25 vote in the Senate.
Challenging COLA: 1991-2012
COLA was further continued after 1991, likely in part thanks to operation Desert Shield and Desert Storm, which increased overall support for the troops.
In the aftermath of Sept. 11, 2001, we experienced another surge of support from the general population and Congress. Military missions received broader media coverage than in previous conflicts, leading to a better understanding of sacrifice.
This brings us to a new era of concern, certain to be as detrimental as any of the previous assaults on COLA. We pick up the timeline to continue defining the battlefield, and to get the attention of all those currently serving in uniform and all working-age retirees under the age of 62.
2010: The president appointed the National Commission on Fiscal Responsibility and Reform, also known as the Simpson-Bowles Commission. Its job, per the executive order establishing the commission, was to identify “policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget. …”
One of its recommendations, which it said would save $17 billion through 2020, was to defer all COLA “for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect.”
You read that correctly – the recommendation was for no COLA until you reach 62, with a catch-up at that point but no effort to make up the lost income.
Fortunately, the final vote on the plan failed within the commission. A version of this plan with fewer tax increases, rolled into a bill, was defeated by the House 382-38.
Challenging COLA: COLA Minus 1 Percent
2013: The government shut down for 16 days in October, impacting 800,000 employees. To halt the shutdown, Congress passed an interim continuing resolution.
That December, still reeling from the shutdown and continued challenges in finding common ground, the Senate met to discuss the House-passed Continuing Appropriations Resolution, 2014, to avoid another government shutdown. Christmas was one week away.
That resolution, which passed the House 332-94 on Dec. 12, included language that would cut any COLA increase for military retirees under age 62 by one percent. Any increase of less than a percent would mean no raise for these retirees, though the law prohibited any negative adjustment.
Many in the Senate were opposed to the COLA reduction. With the provision’s effective date of Dec. 1, 2015, there was presumably enough time to submit legislation to overcome this injustice; however, there would need to be a pay-for to have a chance. Another pressing factor on the Senate’s calendar was the pending National Defense Authorization Act (NDAA), which had not yet passed.
Given these circumstances and absolutely zero tolerance for another government shutdown, the Senate approved the House version 64-36, and the president signed the resolution the day after Christmas. “COLA minus 1 percent” became law.
2014: In January, just over a month since the president signed the legislation, MOAA Board Chair Gen. John Tilelli Jr., USA (Ret), presented testimony to the Senate Armed Services Committee. With him were Gen. Gordon Sullivan, USA (Ret), from the Association of the U.S. Army (AUSA) and Master Sgt. Richard Delaney from The Retired Enlisted Association (TREA) – all members of The Military Coalition. Their testimonies regarding the impact of the COLA reductions were compelling and heartfelt. A MOAA-prepared chart showed the compounded cost to a retiring E-7, who would lose $83,000, or a retiring O-5, who would lose over $124,000 by age 62.
MOAA and the The Military Coalition continued to build on the momentum from this hearing. Visits to the Hill, phone calls, and letters all made a difference in the eventual solution to this atrocious attempt to reduce a retiree’s pay to fund other programs.
In February, a member of Congress stated his support for measures to repeal COLA minus 1 percent, citing MOAA's example of the $83,000 loss to a typical enlisted retiree after 20 years of service. The measure was attached to an energy bill already in motion, thus speeding the process with wide support up front. The House passed it 326-90, the Senate followed suit 95-3, and the president signed the law Feb. 15, averting a significant loss to those already retired and all those who first became members of the uniformed services prior to Jan. 1, 2014.
MOAA continues to watch the next moves on Capitol Hill and at DoD aimed toward reducing outlays for retired military pay.
This story is not over: With a mounting national deficit already past $3.3 trillion, and a national debt over $27 trillion, we can expect a reprise of budget cuts and extreme caps – sequestration will have a new life. Such changes to the economic landscape will put defense spending on its fiscal heels, fostering many ideas as to how to keep modernizing … and how to find the money to do it.
Stay tuned for MOAA’s assessment of these future challenges, and what we intend to do to ensure we capture what will be the impact to you and your family today and the foreseeable future.