posted on August 26, 2011 12:11
This time there is no MIGHT. If any of the changes to military retirement now being considered are enacted they WILL affect you! If you are already retired there are still issues for you here. If you are serving, whether Active or Reserve or if you are a Veteran you are squarely in the cross hairs of the Defense Business Board report on Modernizing the Military Retirement System. If you are reading this just because you are a Friend of the Navy you had better pay attention too because if DoD and Congress get this wrong (and we know they can) it will severely weaken our All Volunteer Force.
United States Secretary of Defense Donald Rumsfeld established the Defense Business Board in 2001 as a complement to broader efforts at transformation in the Department of Defense. The Board consists of approximately twenty private sector executives who have amassed a vast range of experiences in business management. The Board shall provide the Secretary of Defense, through the Deputy Secretary of Defense, independent advice and recommendations on effective strategies for the implementation of best business practices of interest to the Department of Defense. The ultimate objective of this advice is to enhance the efficiency and effectiveness of organizational support to the nation's warfighters. (source: Wikipedia)
The preliminary report issued by the DBB on 21 July 2011 is a power point series of slides (posted on our web site) so we are commenting here on bullet items. The full written report is due out later in the year. If one understands that the Board was created to bring best business practices into the Department of Defense then one understands that throughout the report on military retirement there are comparisons and contrasts with retirement plans for corporate America. They could hardly do otherwise and yet that is perhaps the greatest fault in the report. When they say “Military retirement exceeds levels in the private sector,” the implication is that this should be corrected. No where in the report is there a suggestion that there should be a premium paid for those in the profession of arms. No where do they suggest evaluating that premium. The DBB only compares military retirement with what they consider as private sector standards. There should be a premium for those who 1) volunteer to serve our country as a way of life. 2) Volunteer to be ordered into life threatening situations. Orders that may not be refused. If one makes a comparison with the defined benefit plans for police and fire department personnel one will find benefit plans very similar to our military plan.
Having taken issue with the primary fault, there are too many other points to be addressed to do it in one of these blogs. So we will make a few broad points here and then next month we will take up more specifics.
The primary danger here is that if Congress takes up military retirement reform in the midst of the debt crisis discussions, quick decisions could lead to unintended consequences doing irreparable harm out our All Volunteer Force.
Let’s begin with the reason for the study – “The Retirement Plan is Unaffordable” (DBB Report slide 9). That is the basic premise behind the three military retirement studies with which I am familiar – we can’t pay someone a retirement after only twenty years service and pay him /her that retirement for another forty years. People are living longer and something has to give. Without commenting on the validity of this position the fear is that if in the debt battles Congress hands the Defense Department a huge mark (DoD already has a 400 B mark from the President) DoD and that same Congress might see military retirement as a place to jump to for part of that mark. AUSN must and will work to see that such a rush to judgment won’t happen.
Every new retirement proposal includes, and Secretary Panetta himself last week stated that any change would have to grandfather in current serving personnel at some point. That could be everyone or everyone with 5, 10, or 15 years service – whatever is decided. The point is if a new system begins with vesting a potential retirement at 10 years while everyone with more than ten years is grandfathered the total cost of the retirement system increases for some time to come. It is not an immediate help to reducing expenditures. The changes being suggested would reduce retirement costs in the long run.
Here are some items in the report that we will address further next time:
- “The Retirement Plan is Unfair:” Those serving less than twenty years receive no retirement. There is no difference in retirement benefits between those serving in high and low risk positions.
- Military compensation is higher than that of average civilians with similar education levels.
- Retiree healthcare is significantly more generous than civilian programs
- 83% of military personnel receive no retirement benefits.
- The retirement system should be an effective force shaping tool.