In last week’s blog on the President’s “Blue Ribbon” debt panel’s plans to cut the deficit, the suggestion of overhauling the current military retirement system seemed to go quietly unnoticed. This week a second panel has announced their plans to gut the military retirement system.
To be clear, the panel’s suggestion is not to tweak the program, their plan is to replace it with a new program that would allow members to retire after 10 years, but not start drawing pay until they reach 60 years old.
The debt panel’s suggestion is short and to the point, it simply reads: “Reform military retirement system to vest after 10 years (not 20); defer collection until age 60.”
However, before the ink dried on the “Blue Ribbon” report, a second debt panel’s report, dubbed the Debt Reduction Task Force, set its cost-cutting sights on the military community. The bipartisan Task Force, co-chaired by former Republican Sen. Pete Domenici and economist Alice Rivlin, offered a detailed plan for overhauling military retirement and TRICARE.
The Task Force proposal would tie military retirement to the government-funded Thrift Savings Plan (TSP) with vesting after 10 years. The Task Force’s plan would start paying retirees at age 60 for those who serve 10 to 19 years and at 57 for those who serve 20 or more.
In addition, the plan would base the retired pay formula on an average of the highest five-years of a members pay – not the highest three-year (High -36)average.
Read Tom Philpott’s article, New Panel Targets Retirement and TRICARE, for further description of the Task Force’s proposals.
The idea of cutting the cost of military retirement is not new. In fact, over the last 30 years the DoD and Congress have introduced two major changes aimed at trimming the cost.
Change one – Until 1980 military retirement pay was computed based the retirees last month’s pay. Servicemembers who joined after 1980 fall under a program known as the High-36 program, which uses an average of the retirees highest 36 months of pay to determine their baseline for retirement pay.
Change two – In 2000 the DoD began offering a Career Status Bonus/REDUX retirement plan. This plan offers members a taxable $30,000 cash bonus on their 15th anniversary if they agree to serve at least five more years and accept a reduced monthly retirement check.
In 2001 active duty servicemembers were given the opportunity to start contributing into the same Thrift Savings Plan as other federal employees. The Uniformed Service TSP is similar to a 401K without the matching funds offered to federal employees. The TSP is tauted as a way to help servicemembers set aside money for retirement. However, many saw this as yet another signal that the government was looking to phase out the current military retirement plan, especially when the Army began piloting a “matching contribution” for new Recruits a few years ago.
Some fear DoD is looking for a way to replace the 20 year retirement system – the debt panels’ suggestions finally give them that opportunity.
The full “Blue Ribbon” debt panel proposal can be read at: www.fiscalcommission.gov. There is also a link on the site for submitting feedback and ideas.
The Debt Reduction Task Force report can be read at the Bipartisanpolicy.org website.