Thursday, January 29, 2015

The "New" Retirement Scheme

The military's 20-year retirement plan, with benefits payable immediately after two decades of honorable service, may soon be a thing of the past.

A DoD panel which has been studying pay and compensation issues is expected to release its final report tomorrow.  One of its major recommendations is a shift away from the current system to a new program, similar to civilian 401k retirement plans. If approved by Congress (and the President) the revamped military retirement plan would provide employer contributions from the start of a service member's career.  There would be a variety of investment options; the troops could contribute as well and those leaving the military before the 20-year point could take their retirement savings with them.

But for career service members, there is a big catch under the new proposal.  Instead of collecting their first check upon retirement in their late 30s or early 40s, they would have to wait to age 60.  In other words, thanks for all those years of long duty days, deployments, and separation from family; we'll keep sending you account statements for another 20 years, until you finally become eligible to receive those retirement benefits.

Andrew Tilghman of Air Force Times has published a detailed summary of the plan, which has been under development for more than a year.  Officially, Pentagon officials have expressed concern that the military's "antiquated" retirement system is no longer competitive with the private sector, since most service members receive no benefits for their years of service.  At the other end of the spectrum, the few who stay in for 20 years--or longer--receive very generous benefits, and collect a retirement check decades after they retire from active duty.

But that flies in the face of simple logic: if the armed services' retirement program is so outdated, why have the services been able to meet their recruiting quotas for more than 40 years, under the all-volunteer system?  Every soldier, sailor, airman, Marine and coastie who've signed on since 1974 knew that retirement benefits were reserved for those who served for at least 20 years.  They also understood that those who left before that point would receive nothing, unless they were discharged for medical or service-related conditions.

Indeed, the 20-year retirement plan has actually been a tremendous tool retaining our best and brightest officers and NCOs.   As our colleague George Smiley noted four years ago, the promise of instant retirement kept many military members in uniform, with the knowledge host they could receive benefits at a relatively young age and embark on a second career.

As for those benefits, the typical military member doesn't retire as a General or Colonel with an annual check at or above the six- figure level.  In fact, the average armed forces retiree leaves the military as an E-6, with a monthly retirement check of less than $2,000, before deductions.  When you subtract taxes and allotments for such items as the Survivor Benefit Plan (which provides an annuity for the spouses of military retirees), the monthly pension of an Air Force Technical Sergeant; an Army or Marine Corps Staff Sergeant or Petty Officer First Class (Navy or Coast Guard) is about $1,600.  In most places, that lavish pension might pay your mortgage, and if you're lucky, the power bill.

Another factor worth considering:  military pensions aren't necessarily the budget buster that some describe.  Last year, DoD spent about $16 billion on pension benefits for military retirees, with additional expenditures for healthcare, commissary and BX privileges (which also benefit the active-duty population).  Incidentally, that total includes payments to current retirees and funds set aside for future pensions.

Thanks to pay increases over the past thirty years (and cost-of-living increases), the average military pension is larger than in the past.  But those costs should not overwhelm the system.  First, the ranks of military retirees will actually decline over the next 20 years, as pension-eligible service members service members from the World War II, Korea, and Vietnam eras reach the end of their lives.  Younger retirees will receive their benefits for many years to come, but in smaller numbers, thanks to the near-continuous down-sizing of our military over the past 40 years.

So why the fuss over military pensions?  Because those payments are part of her Pentagon's Bill for personnel costs which includes such big-ticket items as pay and bonuses for active-duty personnel and medical expenses for everyone with a military ID card.  Cutting benefits for those now in service not only impacts readiness, it is also a sure ticket to political oblivion.  Members of Congress are more willing to take a risk with retirees, since many states--and individual districts--have relatively few retired military members.

At this point, the odds of the new plan being approved are probably slim, at best.  But reform of the retirement system has been a persistent discussion topic during the Obama years, and the movement will certainly continue if Hillary Clinton becomes President.  But Republicans aren't necessarily opposed to the idea, either.  Former Defense Secretary Robert Gates, who served in three GOP administrations, complained often about rising personnel costs and helped initiate discussions about reforming retirement benefits.

In the end, it's a matter of dollars and sense.  As a spokesman for the Retired Officers Association observed, her Pentagon has run the numbers and figures it can save a lot of money by changing the retirement system.  There will be a tradeoff, in terms of retention and readiness, but current leadership is willing to take the risk.  Who needs career officers and NCOs when you lead from behind.


Whiskey said...

It is part of the Obama regime's general thrust to destroy the United States, and in this case the structure and morale of the US military.

Vigilis said...

Where did great leader get the notion of a superpower leading from the rear?

In his 1994 autobiography, “Long Walk to Freedom,” Mandela this:

"I always remember the regent’s axiom: a leader, he said, is like a shepherd. He stays behind the flock, letting the most nimble go out ahead, whereupon the others follow, not realizing that all along they are being directed from behind."

Apparently, leadership from behind is appropriate to the shepherding of unarmed, pasture-grazing non-combatants.

While Admiral Nimitz and Gen. George S. Patton famously thought otherwise, rear echelon types, particularly JAGS who never collected hazard pay, like to minimize such distinctions.

Ex-Sen. Jim Webb, on the other hand, is highly qualified and might even be happy to lecture such idiots on the difference.