The yearly value of a 20-year military retirement would be cut for the current force steadily until age 62 under a COLA cap provision in the "bipartisan" budget deal struck by Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.), the House and Senate budget committee chairmen.
The cumulative effect would be to cut the lifetime value of military retirement by roughly $83,000 for a typical enlisted member who retires at age 40 after 20 years' service. The typical officer retiring at age 42 after 20 would lose about $124,000.
That's according to retired Air Force Col. Michael F. Hayden, director of government relations for Military Officers Association of America. Hayden also serves are co-chair of The Military Coalition, an umbrella group of more than 30 military and veteran associations, rushing to try to kill the deal.
Targeted in the Ryan-Murray deal is full inflation protection for "working age" military retirees, those younger than 62. Retirees 62 and older would continue to get annual cost-of-living adjustments (COLAs) that match inflation as measured by the government's Consumer Price Index.
Retirees younger than 62, and future retirees including currently serving members, would see yearly COLAs in retirement cut by one-percentage point below inflation until age 62. At that point they would receive a one-time catch up in their annuity to restore lost purchasing power going forward into old age.
The Ryan-Murray deal, said Hayden, reneges on assurances by Congress in setting up the Military Compensation and Retirement Modernization Commission last year, as well as promises from President Obama and his defense secretaries, that any substantive changes to retirement would be "grandfathered," impacting only future generations of members. Current retirees or serving members were to be protected.
The budget deal, said Hayden, "basically shoots the grandfather."
"I have to think anyone who signed on to this doesn't understand the full effect it will have on purchasing power of promised retired pay," Hayden said. The message being sent to the current force and younger retirees is, he said, "they just changed the rules on the benefit you signed up for."
To do so without the armed services committee holding a single hearing, and without any analysis conducted on the impact on force readiness, said Hayden, is "absolutely insane."
"You have a group of lawmakers not affiliated with the military that completely backdoor these changes," Hayden said.
Murray serves on the Senate appropriations subcommittee on defense and the veterans affairs committee, which she chaired for a few years until becoming budget committee chairman last year.
Hayden said The Military Coalition was rushing to try to stop the budget deal from becoming law. He wasn't optimistic.
"They basically are putting a lump of coal in the stocking and running out for the holidays," Hayden said.
Hayden said this would have "a significant impact on members and their families looking to make the military a career." The long-term financial impact is enough to change minds "on whether to stay in the military."
Congress and the White House seemed unaware of the hornet nest they had kicked inside the military community.
At a press conference late Tuesday, Ryan and Murray congratulated themselves on reaching a deal that takes a first step toward reducing the deficit through bipartisan compromise, eases across-the-board sequestration cuts to federal programs, including defense, and protects their "core beliefs."
For him, Ryan said, those are no tax increases and replacing arbitrary cuts of sequestration with "smart, targeted reforms."
"We eliminate waste. We stop sending checks to criminals. We cut corporate welfare. We reform some mandatory programs and we start to make real reforms in these autopilot programs that are the drivers of our debt in the first place," Ryan said. One "autopilot" program, in his view, appears to be full COLAs for working-age military retirees.
"For younger military retirees, we trim their cost-of-living adjustment just a bit," explains a fact sheet released by Ryan's committee. "It's a modest reform for working-age military retirees."
The first capped COLAs would take effect in January 2016.
President Obama called the deal "balanced" and "a good first step" to replace sequestration which has "harmed students, seniors and middle-class families and served as a mindless drag on our economy over the last year."
The deal, the president continued in a written statement, includes "targeted fee increases and spending cuts designed in a way that doesn't hurt our economy or break the ironclad promises we've made to our seniors."
Murray said the deal would cut $6 billion from military retirement over 10 years, and another $6 billion from federal civilian retirement by forcing new hires with fewer than five years' federal service to contribute an additional 1.3 percent of salary toward their pensions.
"We think it's only fair that hard-working taxpayers who paid for the benefits that our federal employees receive are treated fairly as well," said Ryan. "We also believe it's important that military families as well as non-military families are treated equally and fair."
The Federal Employees Retirement System (FERS), which took effect in 1987, only provides full inflation protection in years when the CPI increase is two percent or less. If inflation is between two to three percent, COLA is set at two percent. If the CPI is more than three percent, COLAs for FERS are set one percent below the CPI.
Advocates for military retirees argue that FERS wasn't imposed on career employees. They could stay under a system still paying full COLAs.
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