Pay modernization panel gets warm reception on Capitol Hill
WASHINGTON — A plan to cut defined pensions by 20 percent will not reduce long-term retention in the military, a panel appointed by Congress told lawmakers Tuesday.
Instead, spreading smaller retirement benefits over troops’ careers will result in the same number serving two decades or more, according to the Military Retirement and Compensation Modernization Commission.
The reduction in pensions is one aspect of a retirement and health care coverage overhaul recommended last week by the committee. The landmark study — the most comprehensive review of pay and benefits since an all-volunteer force was create in the 1970s — received initial praise on Capitol Hill during a hearing of the Senate Armed Services Committee.
“The system we have devised includes the incentives, the flexibility and the choice people want in [the] force, so we felt it is going to be a very powerful retention tool,” Commissioner Michael Higgins said.
The panel has proposed modernizing the aging retirement system by offering 80 percent of the current defined military pensions paid after 20 years. In return, every servicemember would be automatically enrolled in the Thrift Savings Plan and the military would match contributions, similar to 401(k) accounts.
Troops could keep whatever money has accumulated whenever they separate and collect it after they turn 59 years old.
The new system would “exactly model” the current structure of the military, Higgins said.
“It will include the tools that will draw people through the 20-year career much like the definite benefit does today,” he said. “We believe it will operate very effectively and the modeling we have does support that.”
Only about 17 percent of servicemembers now leave the military with any retirement benefits and the overhaul would increase that to 75 percent.
Sen. Claire McCaskill, D-Mo., said there has been a double standard, with federal civilians having access to 401(k) accounts with matched payments and service members who do not.
“You might just have gotten this right. This might be just what we need to do,” McCaskill said. “The fact that we would move to a match for the military makes a great deal of sense.”
The panel spent nearly two years looking at the 70-year-old retirement system and Tricare health insurance as the Pentagon warns that ballooning pay and benefits costs are threatening to overtake the defense budget. Its health insurance recommendations included abolishing Tricare and providing troops an allowance to buy a variety of policies from private insurers.
The reform recommendations could eventually save about $12 billion per year and create new benefits systems that are sustainable in the long run, the commission said.
Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, praised the panel for an “excellent comprehensive report” and said it would be used by lawmakers as a tool as they consider reform.
The Senate committee is planning a series of hearings on the panel recommendations helmed by Sen. Lindsey Graham, R-S.C., a significant move and a strong signal that the chamber could eventually take up legislation to change the retirement system.
Sen. Kelly Ayotte, R-N.H., said the panel’s “important work” gives the military a chance to lead the way in reforming expensive entitlement programs at a time when growing federal debt and spending are a looming problem.
“I think we are looking at our military stepping forward first in making many changes,” she said.