02 December 2008

Retirement System Reforms


There is a request to congress to take away military retirement payments at 20 years of service.

I have written about this (from the Report of the Tenth Quadrennial Review of Military Compensation dated July 2008) in my thesis: the concept is to bring equality to the Reserve/National Guard and the active Army and also to allow those with 10 years of service to eventually receive part of their retirement pension. In my opinion, it is a method to keep officers in past 20 years of service because the incentive to take the retirement paycheck after just 20 years is gone. Almost no one will get a retirement paycheck until you reach 60 years of age! There is no “grandfather” clause in this request by the SECDEF to Congress.

The full memo is 41 pages long, but here is the part I am talking about.

Retirement System Reforms — recommendation 28:

Congress should set the age for receipt of a military retirement annuity at 62 for service members who serve for at least 10 years, 60 for members who serve for at least 20 years, and 57 for members who serve for at least 30 years. Those who wish to receive their annuity at an earlier age should be eligible to do so, but the annuity should be reduced 5 percent for each year the recipient is under the statutory minimum retirement age (consistent with the Federal Employees Retirement System).

For reserve component members, retired pay would continue to be calculated on the number of creditable retirement years, based on earning at least 50 retirement points per creditable year.

a. Congress should expand current statutory authority to permit all service members to receive up to 5 percent of annual basic pay in matching government contributions to the Thrift Savings Plan; the government’s contribution would vest at 10 years of service, and the Thrift Savings Plan benefit would be portable and thus capable of being rolled over into a civilian 401(k) account.

b. Congress should pass laws providing that the military retirement system allow some portion of its benefits to be vested at 10 years of service.

c. As part of the reformed retirement system, retention would be encouraged by making service members eligible to receive “gate pay” at pivotal years of service. Such pay would come in the form of a bonus equal to a percentage of annual basic pay at the end of the year of service, at the discretion of the services.

d. As part of the reformed retirement system, service members who are vested would receive separation pay based on the number of years served and their pay grade when they complete their service.

This recommendation to Congress on the change to the military retirement system is a bit under the radar now, but could bring down morale and recruitment for big Army if it passes Congress. This is a decision by Congress, not SECDEF.... BUT, the office of the SECDEF did not note "The Department does not support...” as it did in some other sections. By recommending nothing, I think the SECDEF circuitously supports the request, or at least does not fully disagree (political jargon).

It is a bit in-line with my thesis (shortage of field grade officers) but only makes the situation worse: I think this would only encourage more offices to get out sooner; there would be little incentive for the officer with 10 years of service to stay in until 20. In my opinion, this is the military shooting itself in both feet. Whatever happened to the second half of the "Mission First, People Always" slogan?

I doubt Congress would approve this system as is... but if they did, I could see most officers getting out with 10-14 years in. This would make a bad situation critical and bring down our volunteer military within a year. It may not happen, but what if...

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