Government Slashes Military Retirement
Military Officers Association of America
October 2, 2015
House and Senate conferees finally agreed to move forward with an annual defense bill, one with a lower than expected pay raise and significant changes to military pay and benefits.
Military Pay
The defense bill capped the active duty pay raise at 1.3 percent. This marks a third consecutive year of pay caps, and continues to undo a decade of work by Congress to eliminate a 13.5 percent wage gap between military and private sector pay.
Pay caps add up. An active duty O-3 with 10 years of service has now lost over $1,800 since pay caps started.
Military Retirement
The bill also includes major changes to military retirement. Beginning in 2018, the new system will cut military retirement by 20 percent, and decrease the disability retirement calculation in order to provide a five percent government match to federal Thrift Savings Plan (TSP) accounts held by military members.
The intent of the plan is to provide a portable retirement benefit to troops exiting service prior to serving a full career. However, servicemembers are already eligible to use TSP, albeit without a government contribution.
MOAA has supported government matching of personal Thrift Savings Plan accounts, but it should not come at the expense of cutting military retirement, or cutting the payments to medically retired service men and women.
The new retirement plan provides an automatic one percent government contribution to TSP accounts, with an additional match of up to four percent of a servicemember’s contribution. Earlier proposals stopped government contributions after 20 years of service. Lawmakers compromised and agreed to extend government matching up to 26 years of service.
MOAA will continue to advocate for government matching for a full career.
The new plan also allows for a lump sum distribution of a portion of retired pay.
Current servicemembers and retirees will be grandfathered into the current retirement system. Servicemembers with less than 12 years of service will have the option to opt-in to the new program.
Slashing military retirement by 20 percent and providing a ‘401k-style’ benefit will erode career retention and provide a greater incentive for members to leave service early. Because the policy funds the new vesting provisions by imposing major cutbacks in benefits for those staying for a career, MOAA has great concerns about the impact on long-term readiness and retention.
Congress also repealed the final section of a complicated COLA-reducing law for future military retirees. Future retirees were originally subject to a one-percentage point reduction in annual retirement COLA until age 62. At age 62, military retired pay would be recalculated and receive full COLA increases.
MOAA was instrumental in repealing the COLA change, with members sending 300,000 messages to Capitol Hill in just a few months.
TRICARE
MOAA is grateful Congress rejected proposals to means-test annual TRICARE fees and implement new enrollment fees for TRICARE For Life beneficiaries, at least for now.
Congress also rejected proposals to consolidate TRICARE Prime and Standard. Under those proposals, beneficiaries would have been subject to the enrollment fees of TRICARE Standard without the guaranteed access of TRICARE Prime. In essence, beneficiaries would be paying more for less.
Although lawmakers rejected major changes to TRICARE this year, they made no bones about the fact that now that they’ve overhauled military retirement, their next focus will be on health care. In report language, lawmakers warned, “… that comprehensive reform of the military health care system is essential” and “all elements of the current system must be re-evaluated, and that increases to fees and copays will be a necessary part of such a comprehensive reform effort.”
Prescription Copays
One of the most contentious issues in the defense bill was the future of prescription copays. The administration’s original budget called for 10 years of TRICARE pharmacy increases.
Senate lawmakers agreed, and proposed increases of 25 to 125 percent.
Proposals to increase prescription copays fail to take into account that TRICARE beneficiaries now pay 145 percent more since 2011, and that pharmacy copays are already indexed to annual COLAs.
Fortunately, House conferees prevailed over the Senate, but had to concede to a one-year increase in prescription drug prices.
Survivor Benefits
The defense bill also included language to correct an inequity for military survivors. The bill authorizes Survivor Benefit Plan coverage for a spouse in the event a former spouse predeceases the servicemember.
Commissaries
Original budget proposals called for both a consolidation of the commissary and exchange systems and a dramatic cut in commissary funding.
Those plans were thwarted thanks largely to the work of Sens. Barbara Mikulski (D-Md.) and James Inhofe (R-Okla.). They delayed any privatization efforts until further cost saving studies on the proposal are conducted. Sen. Mikulski also led the effort to restore over $300 million in commissary funding.
The commissary budget only decreased slightly because of Mikulski’s efforts. Patrons would have seen a reduction in the number of days open and operating hours.
The defense bill fell short on major MOAA-supported issues. The bill did not include provisions to:
- End the “widow’s tax” for military survivors
- Expand concurrent receipt for disabled retirees
- Establish that career reservists with no active duty service are deemed veterans of the armed forces
“We are disappointed in the final defense bill and its adverse effect on military families,” says MOAA President Vice Adm. Norbert R. Ryan Jr., USN (Ret). “We must reverse this trend of eroding pay and benefits because we’re sending the wrong signal to the troops at the wrong time.”
With the political horizon looking the way it is, MOAA’s membership will be even more important next year to protect hard-earned benefits in service to the nation.
Comments
The only unsustainable part of the "cliff vesting" retirement system was that the demographics changes from 1947 to today. Basically, people are living longer more productive lives, so the payout of retirement benefits (and therefore the cost) increased along with than curve.
In light of individuals living longer more productive lives, the real question concerning retirement should have been, "Does the 20/30 year up or out career make sense or do we need to adjust that to something else such as 25/35 years".
Instead, we have now instituted a "new and improved" system that doesn't save the taxpayer any money but merely transfers funds from future career service members to non-career service members. All this, while reducing the cost to exit for our critically required mid-term members.
Couldn't disagree with you more.
Army leadership allows massive waste, fraud and abuse. Billions of dollars. With a wave of hand, or even an off-hand remark, hundreds of millions of dollars are committed to new initiatives or programs. They linger on for years even when they produce little to nothing. Want to see palatial living? Go visit the home of someone even partially well connected to a DOD contract.
But the human cost is the easy 50 meter target. So our leaders sink their teeth into it. This satisfies the corporate masters behind the curtain, and they have the likes of AAEV3324 to apply their Austrian Economics 101 worldview upon the ripe juicy easy human target.
The guys claiming sleep apnea are the crooks, we are supposed to believe, and the fat cat contractors with their juicy rice bowls run rampant. No one is held accountable for the lack of oversight of misspending. As long as you don't get caught with your hand in the cookie jar, you are ok. Wasteful spending or inefficient governance of programs, that's ok. That's the price of freedom, baby.
Do you want to lower the human cost of the military? Do two things. Stop blindly recruiting a force so large that we end deploying 10 do-nothings for every 1 guy actually producing. It's not the fault of the do-nothings. They shouldn't suffer the cost. They were recruited and promoted and deployed. It's the leadership that can't come close to effectively managing this organization -- this is their fault. Once you put the uniform on the do-nothing, he's yours for life. Deal with it. Instead of treating him like chattel property, don't hire him in the first place.
2nd thing. Recruit better quality. Recruit tougher, more resilient, more virtuous people. Then you'd have fewer do-nothings. You'd be able to do more with less. And you'd have fewer costs on disability ratings and such.
The "these are volunteers" argument is bogus and immoral. But it plays right into the hands of the corporate elites behind the curtain, keep it up.
When you see an officer promoted way beyond his abilities, think a second time. Instead of fixating your anger at him, try coming to a deeper understanding of how a flawed system promoted him in the first place. That's where your anger should be focused.
"... we're sending the wrong message to the troops at the wrong time." When is the time right? When we, DoD, completely ruin the federal budget and widen the civ/mil divide as far as possible through our elitist attitude?
I know this will inevitably be the most unpopular comment as readers let their emotions get in the way and buy into MOAAs rhetoric, but the retirement system is unsustainable, especially when the abused disability payment system is taken into account. As an active duty officer who was just diagnosed with sleep apnea, I was appalled to listen to my peers congratulate me for earning an automatic 75% disability when I reach retirement. It's almost as disgusting as listening to retirees-turned-contractors around my building mentoring the active duty officers on how to prep their medical files in order to capitalize on and exploit the benefits system during ACAP.
We need to take as critical a look inward, before we look outward and start bashing congress for their budget decisions. The last 14 years have been tough on the force, but the last I checked we all volunteered to be here. Serving in a time of war is not an excuse to cry treason when congress has to make the hard choices, and make changes to programs that continue to be abused. Using stats like "an O-3 losing $1,800" over an unspecified amount of time is just another example of how lobbyists and interest groups continue to manipulate data unnecessarily, all while bashing responsible practices like building a 401k equivalent TSP that not only helps service members but teaches fiscal responsibility.
Let's start fighting the good fight, instead of every fight.