Wednesday, October 26, 2011

Cutting the Deficit: A Civilian Retirement System for the Military?

The House Armed Services Committee’s Subcommittee on Military Personnel held a hearing Tuesday afternoon before a number of representatives of The Military Coalition (TMC), including the Reserve Officers Association (ROA), on Military Retirement Reform.  Since the Defense Business Board (DBB) released recommendations for a military retirement overhaul this past July, this issue has prompted anxiety among servicing members, many of whom are represented by the organizations within TMC.   Under the proposed plan suggested by the DBB, the Department of Defense (DoD) would do away with the current military retirement system. The Board suggested for military retirement compensation would be altered from a “defined benefit” to a “defined contribution” as private sector plans have done using a 401(k) style plan, allowing members of the armed forces to be vested between three to five years. Under this system, service members would begin collecting retirement from age 57—60. This would eliminate the military career of twenty years minimum required for a retiree to immediately begin collecting retirement.[1]  

Although only four individuals were asked to sit on the panel as witnessed, the groups represented included the DoD, and the thirty-four organizations that comprise the TMC, including Reserve Officers Association and the Reserve Enlisted Association. Subcommittee Chairman Joe Wilson noted the absence of one significant group involved in the retirement reform conversation: The Defense Business Board (DBB), who declined the subcommittee’s invitation to testify at the hearing. The Principal Deputy Under Secretary of Defense for Personnel and Readiness, Jo Ann Rooney, and the Deputy Assistant Secretary of Defense for Military Personnel Policy, Virginia. S. Penrod, represented the DoD. Both Rooney and Penrod maintained a boilerplate assurance that the DoD is currently reviewing the military retirement system, but have neither completed this review nor endorsed the recommendations of the DBB. It should be noted, however, that Defense Secretary Leon Panetta testified at a House hearing on military budget issues on October 12. In that hearing, Panetta stated that there are no immediate plans to change the military’s retirement system, but any future changes will not affect those currently serving.

Representatives from TMC, Colonel Steve Strobridge and John Davis, however, reiterated the sentiments included in ROA’s testimony submitted to the hearing. They stated that Congress and the DoD should recognize the distinct differences between a military career and a civilian career, including the retirement systems of each.[2]
No permanent change to the military retirement system was recommended at the hearing. The absence of DBB limited the conversation regarding their suggested changes, and the representatives from DoD maintained that no changes could be discussed until the Department completed its review of the military pay and compensation package. 

Nevertheless, ROA and TMC brought to the forefront the real implications of changes to the military retirement system. As the serving armed forces represent less than 1 percent of the Unites States population with the retirees representing just another 6/10s of a percent, the ROA and TMC underlined the sacrifices and stress faced by this group of men and women are unique compared to the remaining 98.5 percent of American citizens. It is important that the DoD considers the effects any changes have on the morale, structure, and readiness, including the recruitment and retention, of our armed forces. Those who have sacrificed should not have to sacrifice again in their retirement compensation. 

Since following this issue since 2003, ROA is willing to work with the committee to find better ways to effectively reduce costs to not only maintain an adequate national security, but sustain the benefits of those who have served to attain it.   

[1] An article about this can be found in the upcoming November issue of The Officer on page 15.
[2] TMC’s testimony provides a history of the military retirement issue, as well as the difference options under consideration.


Eric Rogers said...

Is there any discussion about adopting a system similar to civil service? i.e. 1% per year defined benefit along with a matching TSP and vestment at 5 years, with payouts at 60-62 years. There would be advantages to the 83% of veterans who do not complete 20 years of service and walk away (or are forced out) with no pension.

Another thought is to better bridge our retirement and HR system with federal civilians. So as the military shapes the force, those booted out at least have some form of retirement and can transition into the federal workforce more easily.

Leonard Sobieski said...

I appreciate that less than 2% of the US is in this category and that military sacrifices deserve a certain level of return; however, the bottom line is that the majority of the DoD budget can not be personnel costs without hurting national security. You can't maintain an organization that spends that much on people. So, if we agree that the current system is unsustainable, how can we continue to articulate that the current system must be maintained? We need parity in the retirement system, active duty retirement benefits need to mirror the reserve retirement deferment, institute the recommended 401K model, or something but we can't just keep the status quo!

Ralph Mitchell said...

It is EXCELLENT that they want military retirement to resemble what civilians get. I would recommend that they start with looking at the compensation and the retirement programs that law enforcement agencies such as State Troopers and large municipalities give police officers. Take a closer look and you will see that not only are the paychecks bigger, collecting Disability payments have fewer hurdles and full retirement can come as young as age 50. Our troops deserve equal parity and full retirement at age 50 would be a Godsend to Guard & Reserve troops who are still the ONLY government employees forced to wait until age 60 before ever getting one penny of the money that they have earned.

jason haris said...

I loved reading this piece! Well written! :)

rescue my pension