November 1, 2012
The government must reform military pay and benefits to help the Defense Department rein in spending, according to a new report from a left-leaning think tank.
The Center for American Progress praised Pentagon proposals to cut personnel costs, which include capping pay raises for service members beginning in fiscal 2015, raising TRICARE enrollment fees for military retirees to keep pace with increases in health care costs, creating a 401(k)-based retirement system to replace the current vesting system, and increasing the age at which service members can receive their pensions.
The report, which outlined recommendations for “thoughtful” spending cuts while maintaining a robust national defense, also recommended reducing the number of active-duty personnel stationed in Europe and Asia, something the Obama administration also has proposed.
Some personnel-related reforms CAP supports include:
There are three major components to military compensation: pay, health care and retirement benefits. In that sense, it’s similar to many pay and benefits packages elsewhere in government and in the private sector. But that’s where the similarities end. Take pay, for example. The military has more than 70 types of pay and allowances for service members. A typical active-duty service member receives basic pay, housing and food allowances, an annual pay increase, and some tax breaks. Service members also are eligible for combat pay or other kinds of incentive pay based on their specific jobs and any special skills, such as proficiency in a foreign language.
Health care and retirement benefits together cost the Pentagon less in actual dollars today than pay, but much more in political capital and good will among troops, retirees and their families. The House this spring shot down the administration’s recommendations to raise health care premiums for military retirees based on their retirement pay, in addition to other fee hikes.
The Pentagon now has a 20-year cliff-vesting retirement system, which some critics would like to replace with one providing some benefits to all service members regardless of their tenure. Personnel who serve less than 20 years -- about 83 percent -- do not receive a retirement benefit, which some believe is unfair given their multiple deployments during the wars in Iraq and Afghanistan. Those who do spend a career in the military can hit the 20-year mark relatively early, retire from service in their 40s or 50s, draw a pension and work elsewhere for a while. About 17 percent serve 20 years or more in the military.
“Military pay and health reform will allow the Pentagon to achieve substantial savings in the near term,” the report said. “Retirement reform, however, presents the greatest opportunity for savings.”
November 1, 2012