Pay, Benefits Cuts Deferred

Wednesday, April 22, 2015

A House panel has rejected, at least temporarily, Pentagon proposals to limit military pay and housing allowances, cut government support for commissaries and increase out-of-pocket cost for health care. 

The action by the military personnel subcommittee of the House Armed Services Committee on the 2016 National Defense Authorization Bill follows advice offered by the Association of the U.S. Army to avoid cuts in personnel funds that could be seen as an erosion of benefits. 

However, the bill does include an overhaul of the military retirement system that concerns AUSA. The change, which would not take effect before Oct. 1, 2016, would reduce the value of retired pay for future service members but expand participation in the federal government’s Thrift Savings Plan so those leaving the military with fewer than 20 years of service would have some retirement savings. 

“We are pleased Congress has listened to our concerns about taking action perceived by soldiers and their families as cutting compensation. Now is not the time to do this,” said retired Army Lt. Gen. Guy Swan, AUSA’s vice president for education.  “We are worried about changing the current 20-year retirement system. This is not a change that should be rushed because of the potentially significant harm it could do in having an experienced career force in the future.”   

AUSA is worried that Congress may have only delayed but not rejected some of the changes, Swan said.

  • Pay raise—The bill does not include a Pentagon request to cap the 2016 military raise at 1.3 percent, an omission that indirectly allows a 2.3 percent increase in basic pay and drill pay effective Jan. 1, 2016, because that is an amount called for under a statutory pay formula in permanent law. However, not having a specific percentage raise in the bill leaves open the possibility that a presidential order could still cap the raise, which is what has happened for the last two years.
  • Commissaries—A Pentagon proposal to cut $300 million in taxpayer support for commissaries, a move that could have reduced the hours of operations, was rejected by the panel, but only so there is time to complete studies about consolidating military commissaries and exchanges.
  • Housing allowance—The panel did not approve a Pentagon plan that would increase out-of-pocket expenses for those living off-base by capping growth in housing allowances, saying the idea needs more study.
  • Tricare fees—Hikes in Tricare fees requested by the Pentagon that could have affected military families and retirees are not included, but health care reform remains on the minds of lawmakers. Fee changes are being delayed until a unified medical command is established and until there is a report on the possible realignment of military medical treatment areas. A pilot program for a preferred retail pharmacy network is authorized in the bill, an idea that might cut prescription drug costs without raising co-pays. The two-year test would begin on May 1, 2016, but implementation plans and zones would be determined by the Defense Department.
  • Retired pay—While everyone currently in the Army would be grandfathered under the current retirement plan, the bill authorizes establishment of a so-called “blended” retirement benefit that would include a combination of  reduced retired pay for those who serve 20 years or longer, an expanded pre-tax savings plan, and career continuation pay and retention bonuses at specific career points to give an incentive to keep serving. The plan would not take effect before Oct. 1, 2017, but lawmakers expect to see a full implementation plan by March 1, 2016.