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Military Retirement Faces Overhaul

Some in the DoD are pushing to dump the current retirement system and replace it with a version of the “Thrift Savings Plan” similar to the one currently offered Federal Employees. This plan would allow DoD to save money by making contributions to a civilian style 401(k) retirement plan.

According to some reports, the DoD would also use the new retirement plan as leverage or incentive by offering increased contribution rates for those who opt for multiple deployments, hardship assignments, and high demand or unpopular military occupations. In addition, service branches could use it to entice servicemembers to retire early or stay in longer.

Unlike past changes to the military retirement plan, which shielded current servicemembers from the changes, the plan presented by the Defense Business Board would not grandfather current servicemembers. The plan would go into effect immediately and includes current and future servicemembers.

Under that plan, new recruits would start immediately earning TSP contributions, but, would have no incentive to stay in the military for 20 or more years since they would not get a fixed-benefit pension. Current servicemembers would begin receiving TSP contributions immediately and would earn a graduated percentage of their pay if they stay in the military for 20 years or more years. Their fixed pension rate would be based on their years of service when the new plan kicks in. For example a servicemember who has 15 years of service would get 37.5 percent of their base pay at 20 years in addition to the new TSP contributions.

Some see this as a way to make the system more flexible or fair to those who serve less than 20 years and a great way to reduce the overall cost of military retirement.

[BLOGGERS NOTE: A 2010 Defense Business Board slide show presentation states that “Paying the military and their families for 60 years to serve for only 20 years” is unsustainable. Many retirees may find the point of view that “only 20 years” of service shouldn’t earn benefits, troubling. The same slide presentation also refers to the military retirement system as a “sacred cow.” Seems to indicate the bias the board has toward military retirement.]

Whether you support the overhaul plan or not, you should contact your elected officials to let them know how you feel about this issue.

More details are avialable at the Military Times.

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