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Lawmakers Reach Deal to Cut DoD Workforce, Overhaul Military Retirement

Pentagon offices would have to shed staff by 25 percent over five years.

Headquarters, administrative and support offices across the Defense Department would have to reduce their workforces by 25 percent over the next five years under an agreement unveiled by congressional negotiators on Tuesday.

The 2016 defense authorization compromise bill would require $10 billion in cuts, half of which must occur by fiscal 2018. The one-quarter staff reduction was a compromise between the 20 percent cuts required by House-backed legislation and a 30 percent decrease approved by the Senate. Savings already realized by the Pentagon’s self-initiated cuts implemented in recent years would count toward the final reduction goal, which must be met in fiscal 2020.

The agreement, if approved by Congress and signed into law by President Obama -- who has threatened to veto a provision allowing Defense spending to sidestep sequestration caps by increasing the “emergency” Overseas Contingency Operations fund -- would surpass the 20 percent cuts the Pentagon has imposed on itself.

The bill also includes a 1.3 percent pay raise for members of the military, the same amount proposed by President Obama for civilian federal employees.

The measure would reform several benefits for military personnel, including modifying the basic allowance for housing, bumping up co-payments for prescription drugs under TRICARE and, most significantly, overhauling the retirement system.

Under the proposal, modeled after recommendations made by the Military Compensation and Retirement Modernization Commission earlier this year, new troops would automatically be enrolled in the Thrift Savings Plan and receive a matching contribution from the government. Service members who stay in the military for 20 years, and are thereby entitled to a retirement pension, would receive a less generous calculation for their annuity.

The bill attempts to move away from the 20-year, all-or-nothing pension system currently in place for military members. Only about 17 percent of troops serve for 20 years and become eligible for the benefit. To encourage members to stay in the military, they would receive “continuation pay” after 12 years of service.

The new blended retirement system would only affect new service members. Current service members are grandfathered into the current system, but could opt into the new one. The legislation also calls for a program to educate troops about the modified retirement system.

Kellie Lunney contributed to this report.

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