Proposal by DoD to radically change military retirement

[packrat44]

A sweeping new plan to overhaul the Pentagon’s retirement system would give some benefits to all troops and phase out the 20-year cliff vesting system that has defined military careers for generations, the Military Times newspapers reported.
The plan calls for a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension, according to a new proposal from an influential Pentagon advisory board.

I do not know how to attach a link to the Military Times. Proposal is radical to anyone now serving in the military and have yet to complete 20+ years of service.

 

[steelyman]

I am not, nor have I ever been, in the military, but this sure sounds like a horrible idea to me.

 

[MasterBlaster]

Is this an actual proposal or just someone talking ?

if the latter then I would pay no attention.

 

[bbbamI]

Here's the link....

DoD panel calls for radical retirement overhaul - Military News | News From Afghanistan, Iraq And Around The World - Military Times

(btw...I know nothing about the Military Times)

 

[martyb]

I wonder how or if it would affect an already-retired reservist (like me) who has earned my retirement, but not yet old enough to begin receiving payment for it? Of course, the answer is...nobody knows. I still have 6 1/2 yrs to wait (age 60). There's no telling how things will look that far down the road.

 

[MasterBlaster]

I don't think you can compare military retirements to corporate retirements to suggest that pensions in the military are too good.

Note that this is only a proposal. Nothing has been decided. Nothing has been determined.

I would hope that some of the cooler heads in the military will know that they will just have to cut expenses elsewhere.

 

[Purron]

Nords??

 

[Texas Proud]

I wonder how or if it would affect an already-retired reservist (like me) who has earned my retirement, but not yet old enough to begin receiving payment for it? Of course, the answer is...nobody knows. I still have 6 1/2 yrs to wait (age 60). There's no telling how things will look that far down the road.

More than likely not....

I bet that the gvmt exempted themselves from the law, but there is a law that states you can not change a pension plan and give less than what has already been earned... IOW, past obligations are still obligations after any change...


Now, with people alread in the military they can do a 'cash balance' calculation and say 'this is your starting amount'.... but if the person retired and would have gotten more under the old system he still would get that higher amount....

 

[donheff]

The proposal is from the Defense Business Board, established by Rumsfeld to advise DoD on how to be more private sectory. Does anyone know if this is a credible outfit? The proposals sound like they would benefit folks who leave after 5, 10, 15 years. The major question I would expect from the Hill would be how best to deal with lifers.

 

[Gumby]

Is not the joy of serving your country enough? Now you want some kind of pension too? What is this world coming to?

 

[samclem]

The major question I would expect from the Hill would be how best to deal with lifers.

Or, how to staff the considerable number of nasty nobody-wants-to-do-this jobs that need to get done. Today, everyone understands those jobs are out there and you can expect to get one or two in a twenty year period--it's part of the deal. But if Joe, with 15 years in uniform, can get out when offered that year-long remote tour to Korea (or that 4th combat tour to Iraq) and still get 75% of the retirement package, the assignment folks are going to have to come up with a new bag of tricks.

 

[DoraM]

I do not think we should cut any benefits to current military retirees, but I do think we could require some payment from other countries who have benefitted from our military guys and gals.

But I think in the end we are all going to have to cut back and pay a little or this debt issue is not going to go away.

 

[MasterBlaster]

I do not think we should cut any benefits to current military retirees, but I do think we could require some payment from other countries who have benefitted from our military guys and gals.

- Good luck collecting on that one. Funny how the rest of the world views things just a little different than that.

 

[DoraM]

- Good luck collecting on that one. Funny how the rest of the world views things just a little different than that.

Of course they do. Nobody wants to pay for anything, they just want the benefits. (In this case a world that has not had a widespread war in over 50 years).

 

[Brat]

Here is what happened on the civilian side: new hires were put in the new retirement program, existing employees were given the option of keeping the existing or switching to the new one with credit for accrued benefits.

 

[arebelspy]

Nords??

My reaction exactly. Especially after just reading his guest post about Military Retirement over at Early Retirement Extreme today.

 

[Nords]

Nords??

My reaction exactly. Especially after just reading his guest post about Military Retirement over at Early Retirement Extreme today.

Thanks. Jacob mentioned he gets that question on ERE from the eager teens looking to [-]Accelerate Their Lives[/-] Be A Global Force For Good.

Not that I'm trying to get a hint across to my daughter or anything. But I'll encore that link on my blog again on Monday.

As for this proposal... I feel another blog post coming on. Anything with the words "Congress" and "retirement" in the title is practically guaranteed to triple the hits. Thanks to you guys, this month has been a record 4000+ hits (so far) and today was a new high-- 459 hits so far, 45% over the previous high.

Anyhow IMO this headline is the military equivalent of financial porn.

Imagine if Kiplinger's or SmartMoney or TMF came out with a civilian headline:
"OMG Congress to radically change 401(k) retirement laws!!!"

Everyone would drive website traffic up by 10x, buy all the magazines off the newstand, and give it top rotation on CNBC. Then the talking heads would start dragging senators & representatives onto the set to talk about how they're going to preserve our American standards.

But upon further reading you'd learn that what really happened was a press release on the steps of the Capitol by an Ameriprise lobbyist that a think tank proposed lowering 401(k) matches, letting fund companies charge higher fees, and raising the minimum age for distributions. You'd know immediately that nobody would be persuaded to vote for such a thing.

Same thing here, only in these military publications it's intended to [-]piss off[/-] motivate servicemembers, families, and veterans to write their elected representatives. Just look at the comments on the articles:
http://militaryadvantage.military.com/2011/07/military-retirement-faces-overhaul-plans/

[BLOGGERS NOTE: A 2010 Defense Business Board slide show presentation states that “Paying the military and their families for 60 years to serve for only 20 years” is unsustainable. Many retirees may find the point of view that “only 20 years” of service shouldn’t earn benefits, troubling. The same slide presentation also refers to the military retirement system as a “sacred cow.” Seems to indicate the bias the board has toward military retirement.]

DoD panel calls for radical retirement overhaul - Air Force News | News from Afghanistan & Iraq - Air Force Times (as Bbbami posted)

No more 20-year rule? DOD panel calls for radical retirement overhaul - News - Stripes

DoD needs to cut a few hundred million from the budget, and they'd rather not cut fuel or ammunition. There's talk about scrapping (let alone postponing) the USS KENNEDY (CVN79), and I don't think its keel has even been laid yet. Aircraft programs are being cut way back, Army weapons systems development is grinding to a halt, and once again the Marine Corps is getting eyed by the other services like a sheep that stumbled into a wolf's banquet. Don't even get me started on submarine construction or force levels.

The way this budget-cutting is done is to have "independent authorities", preferably filled with blue-ribbon panels and experienced defense consultants, turn their staffs loose on various proposals. Some of them are "skunk works" from previous administrations, others are pet projects of the service heads (like the CNO's "DEEP BLUE" staff), and others are legit think tanks like RAND. They float the trial balloons, DoD passes them over to Congress, Congress shoots them down, or the President vetoes them. The cycle starts anew.

It's taken 15 years to raise Tricare premiums. The reality is that the think tanks, lobbyists, and DoD failed to make the case for raising Tricare premiums. It was actually done by the veteran's organizations in exchange for controlling the rate at which future increases could happen.

I've heard rumors of senior Army officers discouraging the troops from signing up for the TSP. The fear is that the TSP will eventually morph into a military version of the federal civil service's TSP, with contribution matches and everything else, so that Congress can do away with the traditional military retirement system. That rumor's been around for over nine years. Yet the military is just getting around to a Roth TSP next year, and matches are a distant [-]hallucination[/-] vision.

It took decades to pass the REDUX retirement system in 1986. It did not affect anyone in the service-- only new recruits. Only 13 years later retention had plunged so low (perhaps aided by the Internet gold rush) that the JCS actually stood up in front of Congress, put away their backstabbers, and sang in four-part harmony to restore the previous retirement system. Congress compromised with a combination of High Three (which is working) and the REDUX Career Status Bonus (which is being allowed to die through inflation erosion).

The last major change to the retirement system actually allowed senior enlisted and senior officers (E-9s, flag officers) to collect pension multiples up to 40 years instead of 30. Pensions at those stratospheric ranks used to top out at 75% of base pay and can now go to 100%. But at that level of leadership, it was never about the money.

The military's coming budget cuts and the personnel drawdown will be bad enough. However the retirement system will not change anytime soon, and when it does change (in years? decades?) it'll start with matching TSP contributions. I think it'll be decades before it ever messes with the 20-year system, and people will vote with their feet.

 

[rescueme]

Is not the joy of serving your country enough? Now you want some kind of pension too? What is this world coming to?

As a jacket I purchased in Nam said "When I die I'm going to heaven - I've already spent my time in hell".

Heck, who needs a pension in "eternity" ...

 

[Bimmerbill]

I didn't think the military pension amounts were too damaging to the national budget. I thought the military health care that went along with the pensions is what is costing big bucks.

The only gripe I've heard about the military pensions is you get absolutely nothing (no vesting at all) before 20 years. So if you get to 15 ot 16 and get hurt or forced out, you get nothing.

I guess the same could be said for a lot of other pension/retirement plans, but most of those I've seen you get partly vested at least.

I am also a gray area retiree and won't start to collect my pension until 2026.

 

[Texas Proud]

I didn't think the military pension amounts were too damaging to the national budget. I thought the military health care that went along with the pensions is what is costing big bucks.

The only gripe I've heard about the military pensions is you get absolutely nothing (no vesting at all) before 20 years. So if you get to 15 ot 16 and get hurt or forced out, you get nothing.

I guess the same could be said for a lot of other pension/retirement plans, but most of those I've seen you get partly vested at least.

I am also a gray area retiree and won't start to collect my pension until 2026.

It used to be that way with companies a LONG time ago... the rules have changed to where you have to be vested in 5 years or if you choose a step basis you can go out to 7 years (IIRC)...

The companies kind of brought it on themselves.. my dad worked for a mega back in the 60s and they had a 10 year cliff vesting... and the manager who he reported to would lay off everybody just before they got to that 10 years... except that they made an error on my dad's file and they laid him off after that time... he took them to court since it was their mistake and won... he started to get something like $30 a month even though he was in his 50s... when he died my mom got survivor benefits and has received a check every since... with increases and such I think the check is not closer to $100 or so... the total time they have been sending checks is now approaching 45 years....

 

[HawkeyeNFO]

IF TSP ever becomes DoD's retirement program, expect a mass exodus of personnel after serving 4-8 years. After that point, experience and/or a clearance generally results in multiple job offers from all kinds of different employers. The military will have a very tough time retaining personnel at the E-6 level and above among enlisted, and the best and brightest O-3's and field grade officers will get out in search of better opportunities, unless the pay is increased significantly. In other words, such a plan will backfire, costing the taxpayers even more money.
$.02

 

[BLS53]

Without the traditional 20 year retirement, you will be left with careerist that love the military. And there has always been many more careerist that love the 20 year retirement,and tolerate the military, rather than love it. How those numbers would pan out in today's environment is anybody's guess.

I always considered the benefit of serving 5 or 10 years, was entitlement to the G.I. Bill and Veteran's benefits. Want a pension? Continue your service in the Guard or Reserves. Which brings up the question, who would serve in the Guard and Reserve if they already have a pension from serving on active duty for 5+ years?

 

[Ed_The_Gypsy]

The policy of having continuous war should reduce the number of military retirees by attrition and non-reenlistment.

Have you read 1984 recently?

 

[samclem]

And there has always been many more careerist that love the 20 year retirement,and tolerate the military, rather than love it.

I disagree with you on this. The folks I observed probably wouldn't have said they "love the military," but most would cite the challenge and rewards of the work they did, the feeling that it was important, and getting to work beside great folks on a tight team as reasons they stayed in uniform. Yes, there were frustrating/cr*ppy days and even entire assignments, and the "carrot" for 20 years kept a lot of folks in the traces through those rough times, but I wouldn't say more folks were there for the retirement than for the job, mission, and people.

Which brings up the question, who would serve in the Guard and Reserve if they already have a pension from serving on active duty for 5+ years?

That military pension for 5 years of service will be fairly miniscule. So, I'd bet lots of folks would still be motivated to go Guard and Reserve even if they had a small AD pension.

 

[JDARNELL]

The folks I observed probably wouldn't have said they "love the military," but most would cite the challenge and rewards of the work they did, the feeling that it was important, and getting to work beside great folks on a tight team as reasons they stayed in uniform.

I would agree with this also. It was first the sense of doing something important, challenging, and fun. Then it turned to working with great people. Fast forward a few years and now as a Sqdrn DO or Commander you had to deal with all the "duds" and even some of your peers which in these cases I pretty much cleaned their clock. Near the end it was no fun but by that time we all were eyeing just getting to 20. I made it to 21. The assignment teams knew this also. I think most of us got the "do I have a deal for you" offer.

I don't know many that ever said I am here for the retirement and did well.

JDARNELL