Joint Chiefs Back Retirement Reform, With Some Key Changes
The Joint Chiefs of Staff are asking Congress to slightly modify a military retirement reform plan to maintain the viability of the all-volunteer force, and they are also asking lawmakers to fully protect all currently serving and retired service members from losing any benefits.
They are asking for Congress to repeal a 2013 change in cost-of-living adjustments for military retirees that could result in a double whammy for new soldiers who could face not only a reduced retirement annuity, but also annual pay adjustments that don’t keep pace with the rising price of goods and services. The 2013 law set COLA at 1 percent less than Consumer Price Index for working-age retirees.
Additionally, the chiefs want to protect disability retired pay from reductions by keeping the existing multiplier instead of the reduced multiplier that would apply to regular retirement.
The chiefs also want wide flexibility to providing continuation pay to service members with between eight and 16 years of service, with no minimum and no maximum set in law, the ability to pay the amount in a lump sum or in installments, and the ability to adjust the continued service obligation as they see fit.
Their views are contained in a July 1 letter to the House and Senate armed services committees, sent as negotiations are underway to complete work on a compromise version of the 2016 defense policy bill before Congress takes its summer vacation.
The letter, signed by Chairman of the Joint Chiefs Army Gen. Martin E. Dempsey on behalf of the joint chiefs, endorses the concept of a blended retirement plan that includes defined retirement benefits, a pretax savings plan with government contributions, and continuation pay to keep mid-career soldiers from leaving the Army. This is the basic structure of retirement reform recommended by the Military Compensation and Retirement Modernization Commission in a report to Congress in January.
However, the chiefs don’t adopt every detail of the commission plan, suggesting slight differences in terms of the timing and amounts of benefits that they say will reduce the chances of harming retention of key personnel.
The Association of the U.S. Army has expressed some of those same concerns.
The chief’s preferred plan modifies the commission’s recommendations for expanding participation in the Thrift Savings Plan retirement savings program in a move Dempsey says would ensure 85 percent of soldiers who complete at least two years of service would depart with portable retirement savings.
There are four parts to the Thrift Savings Plan recommendation:
- Every new soldier would be enrolled, automatically, to contribute 3 percent of their basic pay into the savings planning starting on their first day of service. They could elect to contribute more, contribute less or contribute nothing.
- Starting with the first day of service, the government would contribute an amount equal to 1 percent of basic pay into a soldier’s savings account. This contribution would continue until the day of retirement or separation.
- Soldiers would be vested in the government contribution on the first day of their third year of service.
- Starting on the first day of the fifth year of service, the government would match a soldier’s contribution up to 5 percent of basic pay, on top of the 1 percent contribution that began on their first day of service.
The Association of the U.S. Army wants the 5 percent matching contribution to continue for a full career rather than end after 20 years of service. The 20-year cutoff was one of the recommendations of the Military Compensation and Retirement Modernization Commission.
Dempsey said soldiers who serve more than four years who make the maximum contributions could contribute the equivalent of 11 percent of their basic pay into the savings plan by maxing out their contribution and the government’s matching contributions.
The traditional defined retired pay would continue under the chiefs’ recommendation, but the multiplier on which pay is computed would be reduced to 2 percent of basic pay for each year of service, less than the current 2.5 percent per year. The 2 percent per year multiplier would apply for the full length of service, leaving open the possibility that someone with a long career could earn the same level of retired pay as they would under the current compensation system.