By Tom Philpott
Military careerists have been spun up this month, unnecessarily in our view, by sensational headlines and news bulletins about a plan to “slash” their retirement, citing a “Pentagon study.”
The study, described here in more muted tones in late July, was done by the Defe
nse Business Board, a group of independent business executives that advises the secretary of defense from time to time on ways to streamline department organizations and programs.
For example, five years ago it urged consolidation of the Army, Navy and Air Force medical commands into a single joint command. That hasn’t happened. In recent years the business board also has pressed for substantial Tricare fee increases. That hasn’t happened, either.
The retirement report, still a draft, proposes replacing the current 20-year defined retirement plan with a 401k-like pension that would grow though annual government contributions equal to as much as 16.5 percent of military basic pay. The idea is that more service members would leave after only a tour or two with portable retirement benefits, and yet the total cost to the government would fall sharply, along with lifetime benefits for careerists.
Despite overheated headlines, no Department of Defense leader, civilian or military, has embraced this alternative pension system. Before he left office in July, then Defense Secretary Robert Gates did call for retirement reform. But Gates said any changes are likely to “grandfather,” or protect, the current force. Adm. Mike Mullen, chairman of the Joint Chiefs, seconded that view last week, saying retirement changes have to be implemented with care and should not break faith with current members.
On Tuesday, the new defense chief, Leon Panetta, weighed in. To an audience at the National Defense University at Fort McNair in Washington, D.C., Panetta said retirement reform must be done “in a way that doesn’t break faith with our troops and with their families. If you’re going to do something like this, you’ve got to think very seriously about grandfathering, in order to protect the benefits that are there.”
So, while it took longer than it should have, defense leaders have quashed the notion of cutting retirement benefits for the only segment of America that has sacrificed dearly since the attacks of Sept. 11, fighting two wars and being buffeted by an ungodly pace of operations.
That’s not to say, however, that retirement dollars aren’t at risk. Congress could agree, for example, to dampen the formula for setting annual cost-of-living adjustments for all federal entitlement programs, as described here in an earlier column. Amid the current debt crisis, Congress also could make military retirement benefits less generous for future generations of service members without fear of “breaking faith” with the current force.
Finally, retirement dollars might be put at risk if any reform plan has features to entice members to switch voluntarily to a less valuable plan. The effectiveness of that tactic is seen in how the career status bonus or Redux bonus operates.
Every month hundreds of careerists in their 15th year of service are enticed to slash the value of their own retirement. They do so by accepting an immediate $30,000 bonus in return for making an irrevocable decision to move under the cheaper Redux plan.
How that choice downgrades the lifetime value of military retirement has been updated by the think tank CNA in its report, “Retirement Choice: 2011.” The self-inflicted drop in lifetime retirement pay, CNA estimates, is now as high as $375,000 for a 38-year-old E-7 who retires after 20 years, assuming the retiree lives until age 79.
To comment, e-mail milupdate@aol.com, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or visit: www.militaryupdate.com
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