U.S. lawmakers this week praised the work of a commission on military compensation and retirement reform.
The senators and congressmen stopped short of endorsing the panel's specific recommendations to offer troops 401(k)-like retirement plans and families a choice of commercial health insurance plans in lieu of Tricare, among other proposals designed to give military personnel more benefits options while saving the Pentagon an estimated $12 billion a year by around 2040.
Sen. John McCain R- Arizona and the chairman of the Senate Armed Services Committee, acknowledged during a hearing on Tuesday that existing benefits programs are aging and "may be unsuitable for modern day military members."
Rep. William "Mac" Thornberry, R- Texas who heads up the House's counterpart panelsaid Wednesday said, "I particularly appreciate the Commission's work to help us understand which of the various forms of compensation is most valuable to the men and women who serve – and to their families. Their proposals deserve a thorough examination."
Both lawmakers pledged to hold a series of hearings in coming months to debate the recommendations of the congressionally mandated Military Compensation and Retirement Modernization Commission, which last week released a report containing 15 proposals after a nearly two-year review. Panel members testified about the findings before both defense committees this week on Capitol Hill.
The long-awaited document calls for shrinking the defined-benefit retirement plan for troops who serve 20 years or more -- a staple for much of the past century -- from 50 percent of pay to 40 percent. With slightly lower annuities for careerists, the Pentagon could for the first time offer a 401(k)-like defined-contribution Thrift Savings Plan, with matching contributions to the more than eight in 10 troops who leave before the 20-year mark and don't receive any retirement compensation.
The document also recommended doing away with the three Tricare plans for military families, reservists and working-age retirees, though none of the recommendations would affect the Tricare for Life program for elderly retirees. The new health care system, similar to the one for federal civilian employees, would allow recipients to choose from a list of commercial health care plans.
Rep. Joe Heck, a Republican from Nevada and chairman of the House Armed Services Committee's Personnel Subcommittee, questioned how the commissioners sought to strike a balance between adopting meaningful reforms while "keeping the faith" of those who serve in uniform.
The recommendation to grandfather existing retirees in the current retirement system while giving them the option to move to the new plan "shows some thought," Heck said. "But when you get into the health care issue and moving currently serving dependents out of the current system, some may argue that that's breaking faith," he added. "It's not what they signed up for."
Commissioners said their proposals, which they unanimously support, will keep the faith with service members, their families and retirees, as well as enable the Defense Department to recruit and retain a future force with a benefits package that will be sustainable well into the future.
"I learned as a young junior officer and I've lived by it for four decades of service: If you take care of your people, they'll take care of you," Commissioner Edmund Giambastiani, a retired Navy admiral, said in response to the congressman. "Quality of service is how we as a commission looked at this."
Rep. Randy Forbes, R- Virginia and chairman of the committee's Seapower and Projection Subcommittee, asked commissioners for their response to a statement from the Fleet Reserve Association, an Alexandria, Virginia-based advocacy group for Navy, Marine Corps and Coast Guard personnel.
The group argued that giving portable retirement benefits to service members with as few as two years of service is "laying the groundwork for a catastrophic retention crisis," Forbes said.
Commissioner Michael Higgins pointed to the panel's analysis that showed 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. That compares to just slightly more than $200,000 under the existing plan.
"We would disagree with the premise of their comment because I think what they are suggesting is that people that stay for 20 years are going to pay for these new benefits that are not currently provided to service members in the Thrift Savings Plan," Higgins said. "We believe, and our analysis strongly supports that, these benefits for the 20-year retiree are going to be every bit as good as they are today or better, and that we're still going to deliver this interim benefit for those that don't choose to stay."
-- Brendan McGarry can be reached at email@example.com