ILW paper examines ‘Earned Deferred Compensation’

Monday, October 01, 2012

AUSA’s Institute of Land Warfare has recently released a new publication.

"Earned Deferred Compensation" (National Security Watch, August 2012) examines some of the proposed policies to overhaul deferred compensation for soldiers.

By exploring the numerous historical reasons for the existence of a unique military compensation system, the paper puts the suggested changes in perspective and considers whether the proposals would achieve their intended aims at an acceptable cost.

The arguments behind most proposals to revamp military pay, TRICARE fees or the military retirement system generally fall into three main categories.

They usually imply that policies must be modified to save taxpayer money because of the federal budget and national debt crises, stabilize Department of Defense (DoD) account growth or make the compensation system more fair to those who serve.

However, under close examination, these arguments do not hold up.

Regardless of whether one takes a short view or a long view of the federal budget situation, military compensation expenses are an insignificant fraction of government spending.

Even the most radical reform proposals would make only the most minor contributions to resolving the debt crisis or affecting the specific cuts required by the Budget Control Act of 2011.

No amount of TRICARE fee increases or "privatization" of the retired pay structure could ever take more than a symbolic bite out of even one year’s federal budget deficit, much less the entire national debt.

Nor would any combination of fee hikes or new soldier pay raise limits meaningfully stabilize DoD account growth.

Much of that account growth over the past decade can be explained by other factors such as increased active duty endstrength, the implementation of new accounting methods within DoD and congressional action to close the pay gap.

Proposals to begin holding soldier pay raises under the rate of inflation effectively penalize soldiers for continuing their service in the future and are not unlike the policies that created the intolerable pay gap in the first place – hardly a sustainable or stabilizing trend.

On the other hand, even the most exorbitant TRICARE fee hikes for retirees would not address the underlying causes of DoD’s increased health care costs and would only slightly delay, not stabilize, further cost growth.

Further, the real purpose of the military compensation system is to help guarantee military readiness. It is in the nation’s interest to pay a premium to ensure that the expertise and professionalism of the force endures.

The Army desperately needs to retain a compensation system capable of recruiting and retaining professional, expert soldiers who are the backbone of the force.

Paying soldiers the full value of their earned, deferred compensation is mandatory; that is fairness.

What is intolerable is that soldiers and families are being asked to go along with compensation reform ideas that cause them additional hardship even though most proposed measures are, at best, half-steps and temporary fixes to enduring challenges of national breadth.

The United States absolutely can afford to take care of the few who volunteer to accept deferred compensation tomorrow in return for service on battlefields around the world today.

This and other ILW publications are available online at http://www.ausa.org/ilw and can also be obtained by calling (800) 336-4570, Ext. 4630, or by e-mailing a request to [email protected].