weekly electronic newsletter, and is published every Thursday when Congress is in session.     ★★★ House and Senate negotiators have worked out their differences on the defense policy bill clearing the way for passage.The National Defense Authorization Act (NDAA) for fiscal 2016 authorizes $515 billion in spending for defense and an additional $89.2 billion for Overseas Contingency Operations (OCO) for a total of $604.2 billion.  As part of the OCO account, the proposal funds $38.3 billion in Operation and Maintenance activities in support of base budget requirements.In addition to a 1.3 percent pay raise for military personnel, the legislation also fundamentally changes the traditional 20-year military retirement system by allowing individuals who serve for a period of less than 20 years to participate in a 401(k)-type retirement plan.The plan:·       Reduces the traditional post-20 year payout by about 20 percent but offers a "continuation pay" bonus for service members who stay in beyond 12 years.·       Provides an automatic federal payout to troops' investment accounts totaling 1 percent of their base pay and matching federal contributions of up to 5 percent of troops' contributions.·       Ends federal contributions at the 26-year mark.·       Creates new financial literacy training to help troops make responsible investment decisions·       Allows servicemembers to cash out their entire retirement benefit at 20 years, but at a fraction of its total value. ·       Delays implementation of the plan until 2018.The new retirement system would be mandatory for all new troops who enlist after Jan. 1, 2018, but gives those currently serving and having less than twelve years of service, the option of remaining grandfathered into the old system or choosing the new option.Another hot button issue among conferees was a proposed reduction in Basic Allowance for Housing (BAH).  They ultimately agreed to cover 95 percent of estimated housing expenses, which is a 1 percent annual reduction per year for four years.  They also agreed on a one-year increase in pharmacy fees.  The Administration had requested a series of increases over 10 years. With regards to another round of Base Realignment and Closure (BRAC), the policy bill directs DoD to conduct a new capacity study that reflects the current threat profile and makes conservative assumptions about future end strength.  Conferees are concerned that once an asset is lost through the BRAC process, it can never be regained, or is prohibitively expensive to replace.  The active Army would drop by 15,000 soldiers in FY 2016, down to 475,000, under the bill.  That is the level requested by the White House and Army leaders last fall.  Additionally, the Army National Guard would drop by 8,200 soldiers, to 342,000, while the Army Reserve would drop by 4,000 soldiers, to 198,000.  The Guard and Reserve personnel levels are also exactly what the Army requested.A top priority of both House and Senate Armed Services Committee leaders is DoD acquisition reform.  To that end, lawmakers agreed to remove authority for acquiring new weapon systems from DoD leaders and push it down to the military services thereby giving the Army, Navy and Air Force the power to make key decisions about acquisition. What’s next?  The full House could vote on the measure this week with Senate action next week.  However, with a promised presidential veto threat looming, the path to a final bill is still uncertain.  The president has threatened to veto the legislation over the GOP’s use of the OCO account to get around mandatory spending caps.