A blue-ribbon panel on military compensation and retirement recommended overhauling the decades-old retirement system for troops and the existing health care program for military families.
The long-awaited proposals, unveiled on Thursday after a nearly two-year study, include offering troops 401(k)-like retirement plans before they reach 20 years of service and replacing the existing Tricare program with a choice of commercial health insurance options.
The recommendations, 15 in total and influenced by surveys of troops and retirees, are sure to set off a massive political fight on Capitol Hill and beyond over the future of military compensation. Panel members said the efforts, if adopted by Congress, will give service members, retirees and their families more choice while saving $12 billion a year in personnel costs by around 2040.
"We are unanimous in our belief that our recommendations strengthen the foundation of the all-volunteer force and ensure our national security, now and into the future," members said in a release.
Even so, they acknowledged that lawmakers may not embrace all, if any, of the ideas.
"We don't have a clue what Congress is going to do," Alphonso Maldon, the panel's chairman and a former assistant secretary of defense for force management and policy, said during a press conference in Arlington, Virginia, to discuss the findings. "It's my hope all of them will end up as legislation."
Future service members could still opt to receive a version of the existing retirement plan, known as a defined-benefit, after two decades of service. However, the retirement pay -- a staple for more than a half-century -- would be reduced. The formula would be equal to 2 percent, rather than 2.5 percent, of the average basic pay for each year served.
With slightly lower annuities for careerists, the Defense Department could for the first time offer a 401(k)-like defined-contribution plan to the vast majority of troops, more than eight in 10, who leave before the 20-year mark and don't receive any retirement pay.
To do so, the Pentagon would automatically enroll troops into a Thrift Savings Plan, similar to other federal agencies, and provide matching contributions of up to 5 percent. Troops would be vested after just two years and could roll over the savings to a private-sector plan when they leave the military. They could elect out of the benefit, but would have to do so annually, officials said.
After 12 years, service members would be eligible for a lump-sum "continuation" payment equal to 2.5 months of basic pay for active-duty members, provided they agree to stay in the military for another four years. The payment is designed as a force-shaping tool to encourage service members to stay in the military, officials said.
Retiring troops could elect to receive their retirement pay in one of three ways: the standard monthly annuity, a lump-sum payment with a smaller monthly annuity, or a large cash payout with no monthly annuity. When eligible for Social Security benefits, those who chose the latter two options would receive the same monthly annuity as their peers who picked the standard option.
An E-7 retiring from active duty would have almost $250,000 in retirement assets under the blended plan, including about $161,000 in the defined-benefit value, $39,000 in government contributions and $31,000 in personal contributions to the Thrift Savings Plan (along with investment returns), and $17,000 in continuation pay, according to a chart in the commission's report. That compares to just slightly more than $200,000 under the existing plan.
None of the proposals would affect the retirement pay of existing retirees or that slated for currently serving troops, though they would have the option to switch into the new retirement system.
The commission proposed doing away with the three Tricare plans for military families, reservists and working-age retirees, though none of its recommendations would affect Tricare for Life for elderly retirees.
The Tricare program has eroded in quality, become financially unsustainable and can't manage the rate at which beneficiaries use the service, according to the commission's report. "Since its creation, Tricare has deteriorated," it states. "The quality of Tricare benefits as experienced by service members and their families has decreased, and fiscal sustainability of the program has declined."
The new health care program, similar to the one for federal civilian employees, would allow recipients to choose from a list of commercial health care plans. It would be managed by the Office of Personnel Management rather than the Pentagon. Participating insurers would be required to include military treatment facilities as in their provider networks, with reduced co-pays and deductibles at military hospitals and clinics.
Even so, military families would have to pay co-pays at base facilities. As columnist Tom Philpott notes in a column on the panel's work, military families and working-age retirees "would have to pay five percent of health plan premiums," a share that would gradually increase to 20 percent of health care costs – until they're eligible for Medicare and Tricare for Life.
To cover the cost of most, if not all, out-of-pocket health care expenses, the panel would create a new Basic Allowance for Health Care, or BAHC. The benefit would be paid in part to the carrier and the family. It would be based on the costs of average medical, dental and vision plans available in a given location; and set at a level designed to cover health care costs or even afford a surplus, like with Basic Allowance for Housing (BAH). It could also be used to purchase health care through a spouse's employer.
In addition, the commission proposed expanding a current healthcare benefit for special needs family members known as ECHO to cover more services and mirror those covered by state Medicaid programs. Services would still be capped at $36,000 a year, but more types of care would be covered, the panel recommended.
The commission also recommended combining the exchange and commissary systems under one "umbrella." As it stands now, the exchange, which receives some tax payer funding, mostly spent on shipping goods to rural and overseas locations, is operated by a trio of private companies across the services.
The companies sell goods at a profit and turn it back to base Morale, Welfare and Recreation (MWR) services. The Defense Commissary Agency (DeCA) receives a large amount of tax payer funding, sells groceries at cost plus a 5 percent surcharge, and is limited by law in what it can carry.
Under the MCRMC proposal, both agencies would combine. The new agency would sell food and essential groceries items at cost and other items now carried by the exchanges at a profit. And while it would continue to receive some tax payer money to operate and would continue to give some profit to MWR, it would also be more self-sufficient than the current DeCA model.
Expanding childcare service to military families is also highlighted as a priority in the report. Right now, officials wrote, on base childcare is difficult to access, has long waiting lists, outdated employee requirements and not enough workers thanks to hiring freezes. The Pentagon, they said, has no way of tracking the demand for care across the services.
The commission recommends establishing a mandatory waitlist tracking system to evaluate how quickly care is provided. They also suggested no longer subjecting child care facilities to hiring freezes while also building more care centers to increase availability.
The commission also recommends canceling the department's Family Subsistence Supplemental Allowance (FSSA) for stateside military families. That benefit, meant to be a cash replacement for food stamps, known as SNAP, was used by under 300 service members in 2013.
But families can receive a large payout under the SNAP program, the commission said. Doing away with FSSA will cancel out what they see as a duplicative program, they said.
Other family related recommendations included expanding Space-A travel to be available to families of service members deployed more than 30 days instead of 120, and establishing a national military child student identifier to track the educational progress of those students.
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