Pentagon backs military retirement overhaul
WASHINGTON — The Defense Department on Wednesday said it has decided to back a historic overhaul of the military’s 20-year retirement system, increasing the chances of an approval by Congress this year.
The proposed changes would vastly increase the number of servicemembers with access to retirement benefits by blending the current cliff pension with a 401(k)-style system for all new recruits beginning in 2018.
The idea was floated in January by a special commission created by Congress to curb ballooning personnel costs and has since drawn widespread support in the House and Senate as a way to modernize an outdated benefits system. Both chambers have added the overhaul into their annual defense authorization bills.
“We believe the proposal will help give the department the flexibility it needs to manage our force into the future while helping ensure that 85 percent of servicemembers will start long-term retirement savings,” Pentagon spokesman Col. Steve Warren said.
After 2018, all new recruits will automatically have 3 percent of their pay diverted to a Thrift Savings Plan account, and the department will match with an amount equal to 1 percent of their pay. Troops can only reduce their contributions or opt out after competing financial literacy training at their first permanent duty station, according to a summary provided by the Pentagon.
The current 20-year pension will remain for new recruits but be reduced to 80 percent of its current value.
All servicemembers serving before 2018 can opt in or keep their current 20-year pension plan, which only pays out after two decades of service — long after most choose to leave.
The changes would save about $8.1 billion over a decade, Warren said.
The department’s final determination on the overhaul was sent to Congress on Wednesday, and Pentagon officials were planning Hill briefings Thursday.
Lawmakers are working to pass a final defense authorization act in the coming months.