Graham explains proposed retirement reforms

Sen. Lindsey Graham, R-South Carolina, new chairman of the Senate armed services’ subcommittee on military personnel, has signaled he will defend retirement reforms proposed for a new generation of service members by the Military Compensation and Retirement Modernization Commission.

Graham on Wednesday led Commission Chairman Alphonso Maldon Jr. carefully through the logic that fueled its retirement proposals, having him underscore that current retirees would be unaffected and those currently serving would be free to keep their current plan or choose the new one.

Graham then called a second panel of witnesses, representatives of military associations, to share their concerns. But as he closed the hearing, Graham addressed those worries, finding nothing significant to block a plan that would lower annuities for 20 or more years’ service in return for a Thrift Savings Plan with government matching of contributions plus early vesting.

The new plan also would use GI Bill transferability to entice members to serve to 10 years, and offer a continuation bonus at 12 years in return for four more years of service. At 16 years, the plan assumes most members will stay to earn an immediate annuity at 20, though the annuity would be set at 40 percent of basic pay, not 50 percent as under the current plan.

This combination of features, Graham said, would be more “fair” to the vast majority of members who now leave service short of 20 years with no employer-paid retirement benefits. It also would be fairer to the current force because they could stay under the existing plan or shift to the new one.

Robert L. Frank, chief executive officer of Air Force Sergeants Association, challenged the commission’s claim that 80 percent of service members, given such a choice, would pick the new plan.

“Now that everything is in context and we run our survey, I can tell you there’s a stark difference in what people currently serving in uniform today say about the choice,” Frank said.

He blasted how the new plan narrows retired pay for future careerists to provide “easier offramps” to non-careerists as if they leave now empty handed. Consider the valuable training, $80,000 in GI Bill benefits, robust veterans’ benefits and thrift savings without government matching, he said.

“To take away from those who have gone the long term — the ones we need to go long term — to give to those who are one-and-done, will have a significant effect on the all-volunteer force,” Frank predicted.

He suggested billions of dollars in savings might be the true catalyst.

Deirdre Parke Holleman, executive director of The Retired Enlisted Association, quoted an economist who said the commission used a “discount rate” far too high to calculate the perceived present value of future retirement money in comparing the proposed plan to the current system.

Also, it seems that if service members perceive the value of the new plan as far more favorable than it really is “then retention will not be harmed. That assumption may be correct but is it appropriate,” she asked.

Graham said he’s more concerned that with today’s plan thousands of Iraq and Afghanistan war veterans are leaving service or being forced to leave short of 20 years with no government-funded retirement package.

“Here’s my belief: That if you’re going to enlist in the military the day after we reform the system, you’re going to know on Day One the defined benefit plan (for serving 20 years) is 40 percent. If that’s not a good deal for you, don’t join. Go somewhere else,” Graham said.

“If you’re halfway decent managing your money, you’ll make up the 10 percent” using a TSP with government matching up to 5 percent of basic pay after two years in service and continuing until reaching 20 years.

But Richard A. Jones, legislative director of National Association for Uniformed Services, said the “pay for” to deliver those early benefits is a 20 percent cut in retirement annuities for those who reach 20 years. He asked why that’s necessary “to enhance the system for those who leave early.”

Graham rejected criticism the new plan would pay “for this on the backs” of careerists “because you can’t create a new benefit — helping the 12-year guy, the eight-year guy — without something giving…(T)his modernization effort of a blended plan will serve the country well.”

Earlier Wednesday commissioners defended their plans before the House military personnel subcommittee where more focus fell on its call to replace triple-option Tricare with a menu of commercial health insurance plans willing to include in their networks military providers and facilities.

Active duty families would get a health care allowance to cover most of these plans’ costs. Elderly retirees get to keep their Tricare for Life coverage, a prized insurance supplement to Medicare. Younger retirees, however, would have to pay five percent of their insurance premiums and their cost share would climb gradually, a point a year, to reach 20 percent.

Rep. Joe Heck, R-Nevada, an Army Reserve physician who chairs the subcommittee, challenged the commission’s claim that Tricare is failing because doctor fees are set at or below Medicare rates, making physicians reluctant to join networks and leading to long waits and limited care choices.

“Even private health insurers right now base all their reimbursements on Medicare rates,” Heck said. “So there’s really not a big difference between what you’re calling ‘fair market’ rate and what most private health insurers are providing as reimbursements to their networks.”

Commissioner Steve Buyer defended that charge, noting that relatively small numbers of specialists serve Tricare patients near, say Fort Bragg, North Carolina, compared to specialists who participate in Blue Cross and Blue Shield.

Buyer later advised lawmakers to rely on the deep knowledge gained by commissioners rather than bureaucracies “out there that I call the muck and…defended by gargoyles. And those gargoyles…have to respond to membership. They have a different constituency than what you have.”

Rep. Paul Cook, R-California, a retired Marine colonel, asked why the commission didn’t strive to simplify compensation.

“Twenty, 30 years ago I used to understand this,” Cook said. “Now I feel like I’m in the middle of a calculus problem.”

To comment, write Military Update, P.O. Box 231111, Centreville, VA, 20120, email milupdate@aol.com or via twitter at Tom Philpott @Military_Update.

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