Report: Pay and benefits panel to recommend killing 20-year retirement

From a Stars and Stripes article, published: January 28, 2015.

Troops will see smaller pay raises and housing and health care benefits next year under a defense budget agreement unveiled Tuesday in Congress.

The Military Compensation and Retirement Modernization Commission will release its long-awaited report Thursday, which will propose fundamental changes to military benefits including ending the 20-year retirement, according to the Military Times, citing sources familiar with the report.

The plan calls for Congress to create a hybrid system of smaller defined-benefit pension along with more cash-based benefits and lump-sum payments. A significant portion of retirement benefits would come in the form of government contributions to 401(k)-style investment accounts, those familiar with the report told Military Times.

In addition to the 401(k) for troops serving less than 20 years, the commission will suggest promising a pension to troops who serve a long-term career, but one that would be more modest than what military retirees receive today, a defense official briefed on the plan told the Times.

And, unlike the current system, this pension would not start upon separation from service; instead, those payment checks would begin at a traditional retirement age, such as 60 or older, according to the official.

While retirement changes would affect only future service members, changed to health care could affect those serving now.

According to the Times, the commission will also propose:

• a change in health care benefits for current military families and retirees — Tricare customers could move into the health care coverage provided to federal employees;
• a new health care allowance for troops designed to cover some expenses, such as doctor-visit co-pays and eyeglasses.
• a new four-star medical command to oversee military health care, a significant break from the tradition of each service operating its own health care system.
• keeping current commissary benefits, to include continuing to sell products at cost plus 5 percent surcharge. A separate DOD budget proposal is expected to call for increasing prices to operating costs.
• consolidating the commissary and exchange systems. Initially, they would keep their separate branding — Navy Exchange, Defense Commissary Agency, etc. — but eventually would be combined.
• building more child development centers on military bases. The proposal also calls for automatically enrolling each service member in the Thrift Savings Plan, an investment account that accrues savings. Individual troops would be responsible for managing their accounts, and the money is typically not available for withdrawal without penalty until age 59.5.

The government contributions likely would be a percentage of basic pay and could vary depending on years of service and/or deployment status. Full ownership of the TSP account would come only after troops have completed several years of service.

By allowing many troops to keep their TSP government contributions after separation, the new proposal would give limited retirement benefits to the vast majority who leave the military before hitting the traditional retirement milestone of 20 years of service, most of them enlisted members who do four, six or eight years, then leave.

It would be a sea change from a system that now offers retirement benefits to about only 17 percent of the force — many of them officers — who serve 20 years.

Any change to military retirement would require Congress to pass changes in law. Many experts say Congress is unlikely to summon the political will to take action on the controversial issue of military compensation. Nevertheless, the report is likely to trigger a new battle in that arena. Also unknown is whether the commission’s proposals will get fast-tracked to an up-or-down vote, or move through Congress’ normal process.