AUSA will examine compensation, retirement report

Sunday, March 01, 2015

The highly-anticipated report from the Military Compensation and Retirement Modernization Commission was released on Jan. 29.

The commission’s recommendations would fundamentally change military benefits, including the current retirement and health care delivery systems.

Here are some of the key areas the commission studied and their recommendations:

Retirement – The commissioners recommend the creation of a blended system that would automatically enroll each service member in the federal government's Thrift Savings Plan, or TSP, 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.

Government contributions 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 service members had completed several years of service and would allow many troops to keep their TSP government contributions after separation.

The 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.

Current service members and retirees would be grandfathered in the current retirement system, but would be allowed to switch to the new plan if they wanted.

In addition to the 401(k)-style benefits for troops serving fewer than 20 years, the commission recommends a more modest defined-benefit pension than the current retirement system offers.

The pension would not begin paying out immediately after individuals leave service; instead, payments would begin at a more traditional retirement age, such as 60 or older.

Health Care – The commission recommends that active duty military families, survivors and retirees be moved into commercial insurance plans similar to what’s offered to federal employees.

A Basic Allowance for Health Care to offset the premiums and co-pays of the commercial plans would be created for active duty family members.

Additionally, a program would be established that would assist active component families that have expensive/chronic health problems. For non-Medicare retirees, cost shares would go up 1 percent each year for 15 years to 20 percent.

The report also calls for a new health care allowance for troops that would be designed to cover some expenses, such as doctor-visit co-pays and eyeglasses.

Members of the reserve component (RC) could purchase a plan at varying cost shares. The current RC cost share is 28 percent.

The commission recommends lowering it to 25 percent in order to incentivize the RC to maintain medical ‘deployability.’

Medicare-eligible retirees would remain in the TRICARE-For-Life program.

The plan calls for the creation of a new four-star medical command to oversee the defense health care system instead of the current system in which individual service to operate its own health care command.

Morale, welfare and recreation – The report recommends keeping current commissary benefits intact, to include continuing to sell products at cost plus a 5 percent surcharge.

Also included in the report is a recommendation to consolidate the commissary and exchange systems. Initially, the services would maintain individual Exchange names, but would combine into a single entity over time.

The commission recommends building more child development centers on military bases, subject to the base commanders' discretion. The also recommend the hiring of more child care staff who would be exempt from hiring freezes and furloughs.

Education – The commission concluded that the Post 9/11 Montgomery GI Bill and the Reserve Educational Program are redundant and recommend that the Montgomery GI Bill and Reserve Educational Program be phased out.

They also recommend that transferability requirements be allowed at 10 years of service with a 2-year additional commitment.

What’s next? A lot of chatter! The chairman of the House Armed Services Subcommittee on Military Personnel, Rep. Joe Heck, R-Nev., was asked which possible proposals would engender the most opposition on Capitol Hill. Heck’s response: "All of them."

That should give you an idea how controversial and difficult it will be to enact some of these proposals. No changes to the military retirement system can be made without Congress’ approval.

AUSA will thoroughly scrutinize the commission’s recommendations and the Pentagon’s response.

We will also closely monitor the House and Senate hearings and keep you informed.