American service members are confronting a potential haircut. Under a proposal the Pentagon outlined last week, new members of the armed forces would see their guaranteed retirement benefits cut by one-fifth if Congress approves the plan.

But if future veterans are being asked to make do with less, one key constituency stands to capture more: Wall Street.

Under the details of the Pentagon plan, the federal government would divert 3 percent of service members’ pay into a 401(k)-style plan that would be managed largely by BlackRock, a financial firm whose executives helped bankroll President Barack Obama’s election campaigns.

The change could wind up transferring as much as $50 billion from military paychecks to BlackRock, generating tens of millions of dollars in fees for the Wall Street giant. BlackRock employees have donated over $90,000 to Obama’s campaigns directly, and nearly $75,000 to the Democratic National Committee during the course of Obama’s two presidential campaigns, according to data compiled by the Center for Responsive Politics. BlackRock Chairman and CEO Larry Fink was also a prominent supporter of Obama’s election campaigns, and the company in 2013 named Hillary Clinton's former State Department chief of staff to its board of directors.

Under the proposed change, current veterans and service members would have the option to retain their existing benefit scheme and could opt in to the new 401(k)-style plan on a voluntary basis. The change would affect all people who join the military going forward. The Obama administration’s deficit-reduction commission has argued that the cuts are necessary cost-saving measures. The Pentagon has embraced the change as a means of gaining flexibility needed to field necessary levels of troops.

“The department considered all elements of current and potential retirement plans and built a blended system that -- in the military judgment of the Department of Defense -- best enables us to maintain the readiness of the all-volunteer force,” said Pentagon spokesman Army Col. Steve Warren in a press release about the proposal. Warren asserted said the shift will save the Pentagon some $8.1 billion over the next decade, Reuters reported.

But advocates who track federal spending say future veterans are essentially being asked to swallow cuts to their retirement checks so the Pentagon can maintain spending on costly and dubious pet projects.

“If Congress is looking to save money, we can think of a far bigger fish for them to fry in the Pentagon budget -- namely overpriced and unproven weapons systems,” said Joe Newman, a spokesman for the Project on Government Oversight, a watchdog group. In comparison to the $8.1 billion in projected savings on retirement benefits, Newman cited the Pentagon’s F-35 jet program, which is not cleared for use in combat and which is estimated to cost $1.4 trillion.

An independent audit of the Pentagon has never been completed, despite a long-standing federal law requiring such an exercise. A 2013 report from Reuters found that the Pentagon has a “chronic failure to keep track of its money -- how much it has, how much it pays out and how much is wasted or stolen.”

The proposed changes at issue would bring modern day 401(k)-style retirement investing to one of the last major preserves for old-fashioned pensions in which retirees are guaranteed pre-set amounts of income.

Under the current program, the military invests retirement money exclusively in U.S. Treasury bills, while guaranteeing set levels of benefits for retired veterans. The new initiative would reduce guaranteed benefits while shifting 3 percent of service members’ pay into the federal Thrift Savings Plan (TSP), with the government financing an additional 1 percent in contributions.

The TSP is a 401(k)-style retirement plan that invests money with private financial firms and does not guarantee a set amount of retirement income. The TSP currently invests more than 55 percent of its assets with BlackRock, according to the system’s financial statements.

While the TSP does allow participants to forgo investing in actively managed funds by enrolling in a lower-risk U.S. Treasury bill option, the system encourages enrollees to “diversify” across asset classes. Over the next 25 years, the Obama plan would, if enacted, shift roughly $91 billion in service members’ compensation into the TSP. Assuming military participants invest in the same way as other TSP participants, that shift could end up funneling up to $50 billion to BlackRock in that time period.

Though the TSP discloses its overall fees, program officials declined to disclose how much it specifically pays to BlackRock, asserting that such information is proprietary. BlackRock did not respond to International Business Times’ questions.

Under the military’s existing pension plan, service members currently pay no annual fees to Wall Street money managers. If the Obama administration’s changes are approved, new service members in the TSP will pay investment management fees -- either to the TSP or to BlackRock, depending on which investment fund they choose.

The proposed changes to the military’s retirement system came from the president’s National Commission on Fiscal Responsibility and Reform, headed by former Sen. Alan Simpson and private equity executive Erskine Bowles. That commission was most famous for pushing cuts to Social Security benefits, but also included proposals to slash military retirement benefits.

“Military and civilian pensions are ... out of line with pension benefits available to the average worker in the private sector,” the commission’s 2010 report argued.

One of the leading proponents of the Simpson-Bowles proposals was Pete Peterson, President Richard Nixon’s former secretary of commerce and co-founder of the Blackstone Group. BlackRock was seeded by the Blackstone Group, and BlackRock’s original name was Blackstone Financial Management. In addition, BlackRock CEO Larry Fink is on the steering committee of a group founded by Simpson and Bowles to champion their commission’s recommendations.