A financial services company says a rising number of U.S. service members would support overhauling the military pension system so long as they receive a lump-sum retirement check.
Almost half, or 46 percent, of career-oriented troops or their spouses who participated in a recent online survey agreed with Defense Department proposals that would shrink their monthly retirement checks but give them a lump-sum payment at retirement, according to First Command Financial Services Inc. That’s up from just 13 percent earlier this year, the firm said in a release.
Scott Spiker, chief executive officer of the Fort Worth, Texas-based company, said he’s still trying to figure out what led to the increased support.
“For now, the most important thing we can say about this change is that it reflects a relative openness of career service members to alternative retirement options,” he said in an e-mail. “It is a good indication of their desire to seek solutions for an uncertain financial future.”
Overall, respondents were divided over military pension reform, with an equal percentage opposed to the idea and 8 percent unsure, according to the release. The survey was conducted Oct. 18-31 by another company, Sentient Decision Science Inc., based in Portsmouth, New Hampshire, and includes responses from 200 active-duty personnel, including officers and senior noncommissioned officers, or their spouses.
Veterans groups such as Military Officers Association of America have long opposed changes to the current retirement system. MOAA argues it’s a vital component for maintaining a high-quality, all-volunteer force. Earlier this year, it lobbied against a cost-of-living adjustment to retirement pay at 1 percent less than the rate of inflation. In the end, the pension cuts were modified to exempt existing retirees and troops who entered service prior to Jan. 1.
“We don’t want to provide any kind of change to the retirement system that would incentivize people to leave and lose that critical mid-grade force,” Mike Barron, deputy director of government relations for the association, said in a telephone interview.
Lawmakers should wait to enact changes to the system until after they review and debate the recommendations of the Military Compensation and Retirement Modernization Commission, an independent panel that’s expected to release its findings in February, he said.
Under the Pentagon’s existing pension system, which has been in place for almost 70 years, active-duty troops can retire after 20 years of service and begin drawing checks equal to half their final basic pay. The defined-benefit plan has been criticized as expensive and unfair, as only about one in three officers and one in seven enlisted personnel serve long enough to receive it.
Rand Corp., the nonprofit research organization based in Santa Monica, California, in a study earlier this year called for a hybrid plan that would include both a defined benefit and a defined contribution, with retention incentives in mid-career and transition pay at separation.
The proposed changes could help the Pentagon better deal with automatic budget cuts known as sequestration by generating cost savings of as much as $4.4 billion a year, according to a release announcing the study.
“A hybrid system could provide both a predictable source of income for old age and a benefit that is available immediately upon separation from the military, which would ease the transition from military service to a second career,” it states.
A Military.com survey this year of more than 2,000 active-duty personnel showed widespread opposition to the Pentagon's recommendations to curb personnel costs – and they didn’t even include pension cuts. About nine in 10 active-duty respondents disagreed with plans to curb pay raises to 1 percent from 1.7 percent and housing allowances until recipients pay about 5 percent of the cost.
Similarly, a recent Military Times survey of about 2,300 active-duty troops found increasing dissatisfaction over their compensation package. In 2009, 87 percent of respondents rated their pay and allowances “good” or “excellent,” while this year, the figure was just 44 percent, the publication reported.
Spiker of First Command said his company doesn’t have a position on the Pentagon’s personnel proposals. Instead, it focuses on helping service members and their families better understand them and pursue long-term financial security, he said.
Even so, the firm’s research shows a high level of interest among troops or their families in getting smaller monthly checks of about a quarter of the average of their three highest years of compensation, in addition to a lump-sum “transition” payment of about three years of basic pay, according to the release. Similarly, many like the idea of getting compensation earlier in their careers, such as a Thrift Savings Plan account and retention incentive payment halfway through their careers, it states.
-- Brendan McGarry can be reached at Brendan.McGarry@military.com