Panel Recommends Overhauling Military Retirement

Whether it’s cuts to equipment, training, or bases, military downsizing is always difficult — especially when it results in fewer funds for lawmakers to deliver back to their local districts. But there is no part of the defense budget that is more difficult to trim than the military’s pay and benefits system.

That’s because in every congressional district there are troops, veterans, and their families. And after more than a decade of war, and with troops still deployed in combat zones, no one wants to appear to be taking benefits away from men and women in uniform.

But over the past few years, as external pressures on the Pentagon’s budget have grown, defense officials have practically begged Congress to provide some relief. They say pay and benefits are eating up the budget from the inside out.

Personnel costs, like just about everything else in the Pentagon’s budget, are getting more expensive every year. According to the Center for Strategic and Budgetary Assessments, “Over the past decade, the cost per person in the active duty force increased by 46 percent, excluding war funding and adjusting for inflation.”

Pay increases contribute to this, but the real driver is health care costs, the same problem that vexes the larger federal budget. More military retirees are using TRICARE, the Defense Department’s health care program, but there’s has been little change to premiums since 1994.

But so far, Congress will not touch any of these problems, rejecting the advice of the Joint Chiefs and the past few defense secretaries. The topic is so poisonous on Capitol Hill that some call military retirement pay, health care, and benefits the true third rail of politics — not Social Security.

Any attempts, even if passed into law, eventually come undone under the pressure of veterans groups. In December 2013, Congress agreed to cut the annual retirement cost of living adjustment for working-age retirees (under age 62) by 1 full percentage point in the budget deal crafted by Rep. Paul Ryan and Sen. Patty Murray. By February, succumbing to outside pressure, the House and Senate reversed itself and reinstated the 1-point increase.

Unable to do the job by itself, Congress created an independent commission in the 2013 defense authorization bill to review the current system and recommend ways to make it fiscally viable. Of the nine members, President Barack Obama selected only one, with the other eight divided evenly between House and Senate Democratic and Republican leaders.

The commission included a retired Army four-star general, and a retired Navy admiral. Six of the seven others also have served in the military.

After studying the problem for more than a year and a half, and gathering input from over 150,000 troops and veterans, the commission finally released its report Thursday.

The recommendations would save the Pentagon more than $12 billion annually, but also extend benefits to more troops. For example, retirement pay would drop from 50 percent of troops’ salaries at 20 years to about 40 percent. That would allow the military to extend benefits to service members who don’t serve the full 20 years. And, under the proposed system, far more enlisted troops would receive retirement benefits than do now.

The commission’s overhaul of the military health system includes the elimination of TRICARE coverage, which now extends to active-duty soldiers, their families, and retirees. Under the new system, active-duty troops and mobilized reserve component members would still receive their health coverage from the military. But their immediate families, as well as retirees under 65 and their families, would receive health care through commercial insurers.

An allowance would be given to active-duty families to cover the cost of their insurance premiums, but retirees who don’t qualify for Medicare would pay for theirs out of pocket, but at a lower cost than civilian plans.

The new system does put the onus on active-duty members and retirees to take a more active role in their benefits programs, particularly by investing in privately handled retirement plans. It also would allow troops and retirees to choose commercial health care plans.

Powerful veterans groups were bracing themselves for the commission’s findings. The Military Officers Association of America issued a wary statement, saying it all sounds OK, but “the devil’s in the details.”

The Senate Armed Services Committee plans to discuss the proposals next week. Meanwhile, Defense Secretary Chuck Hagel said none of the proposals are part of the Pentagon’s 2015 budget that will be unveiled Monday. Instead, the commission’s recommendations will inform discussions the Pentagon has with Capitol Hill over the coming year, Hagel said.

None of the proposals can be implemented by the Pentagon without congressional approval.

“Congress has struggled to address military pay and benefits for years, and I am hopeful that, after careful review, the commission’s recommendations will present Congress with an opportunity to finally begin to address this issue,” said Rep. Adam Smith, the top-ranking Democrat on the House Armed Services Committee.

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