Not What We'd Call Pension Reform

The Commission on the National Guard and Reserves has been making headlines in recent days. First, the advisory panel claimed that the guard is "worse off today" than it was a year ago. That observation was made in a wide-ranging report which also stated that military forces are "poorly prepared" for the challenges of a WMD attack at home. Members of the commission urged both the Pentagon and the Department of Homeland Security to "put new emphasis" on the military response to domestic terrorist attacks.

But the commission’s recommendations weren’t confined to readiness issues. In one of their most controversial proposals, panel members urged a major overhaul of the military retirement system, requiring service members to give up part of their pension if they begin drawing it before age 60.

As the (Norfolk) Virginian-Pilot reports, the proposed revision would alter one of the military’s signature benefits for active duty members. Under current rules, soldiers, sailors, airmen and Marines who spend 20 years on active duty can draw full pensions upon their retirement, using that income to supplement salaries earned in a second career as a civilian.

The commission notes that the present system is weighted against guardsmen and reservists. Their retirement eligibility is calculated differently and they must wait until age 60 to begin receiving pension checks. According to the panel, three-fourths of those in the guard or reserve do not serve long enough to earn a pension; they proposed limited benefits for those who serve in the military for shorter periods:

Commission members urged that retirement benefits be provided to those who leave the military after as few as 10 years, active or reserve, and that the active force and reserve operate under the same set of rules for eligibility.

The proposal would allow those with 10 years of service to begin drawing pension checks at age 62; those with 20 years, at age 60; and those with 30 years, at age 57. Retirees could make earlier withdrawals but would pay a penalty for the privilege.

The panel also pushed for periodic bonuses to those who make a career of the military. Members tempted to retire after 10 years, for example, might be offered bonuses to induce them to remain in uniform for an additional period. The bonuses could be varied depending on the members’ job assignments, giving the military an additional tool to hold experienced troops with needed skills.

There’s no word on how much the revised pension plan might cost. Under the commission’s plan, personnel now in uniform would use the existing retirement system. Troops enlisting over the next five years could choose between the current plan and the new system, and the revised program would take effect after that.

Clearly, there are some good ideas in the Guard and Reserve commission plan. The current system is unfair to guardsmen and reservists, who sometimes wait 20 years for pension benefits paid to active duty personnel immediately upon retirement. Finding a way to end that imbalance should be a priority for the Pentagon and the next administration. The panel’s proposal to let reservists enroll in the federal employee health care plan is another idea worth pursuing.

But delaying pension payments to active duty retirees is a notion that’s misguided at best, catastrophic at worst. The promise of a retirement check after 20 years has long been an important recruiting and retention tool for the armed services. For many of us, the decision to re-enlist was based (in part) on the idea that we could earn a pension with two decades of service, receive that benefit upon leaving the service—and still embark on a second career.

Delaying pension payments to age 60 (or forcing retirees to pay a penalty for "early" benefits) would save Uncle Sam some serious money. And that’s the dirty little secret behind various "pension reform" efforts. Many of us who joined the military during the Reagan era-build-up have now reached the military retirement age. The Pentagon is looking at the prospect of paying us monthly for the next 30 or 40 years, along with retirees from the down-sized armed forces of the 1990s and beyond.

Delaying full retirement benefits until age 60 would give DoD some budgetary breathing room. In 2005, the Pentagon allocated 35% of its budget--$139 billion-- on pay and benefits for active duty personnel and retirees. That’s more than it spent on weapons development and procurement. Pushing back the date for collecting "full" retirement benefits would save the Pentagon billions.

While the pay and benefits portion of the budget actually declined during the 1990s, it has increased in recent years for a variety of reasons, ranging from increased retirements (by personnel who enlisted during the military expansion of the 1980s), to added costs for incentive pay and bonuses, paid to keep current personnel in uniform. Add in budgetary pressures outside DoD you can see why the government bean-counters and advocacy groups are so anxious to "reform" military pensions.

Still, it’s going to be an uphill battle to eliminate "immediate" pension payments for 20-year military retirees. Facing the demands of a military career (and the prospect of not receiving a full retirement check until age 60), more than a few career officers and NCOs would "vote with their feet," and leave the service, believing they could have a longer career—and better benefits—in the private sector. That will only compound the leadership and experience problems that currently affect our military.

There are a number of steps that can (and should) be taken to improve military pay and benefits. Delaying full pension payments to age 60 isn’t one of them.