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Big Suggested Benefit Changes: What They Mean

It was the day all of us benefits nerds were waiting for -- Jan. 29 the Military Compensation and Retirement Modernization Commission (MCRMC) released its report and recommendations to Congress on changes to military benefits. Lawmakers ordered that this panel get together and study how to change military benefits to save the government some money while best serving military families. Two years of town hall meetings, studies, soliciting opinions and attending events (like the Military.com Spouse Summit) and, at long last, the recommendations have been released.

They suggest some big changes. But what do they actually mean to YOU?

What does the MCRMC report to Congress on military benefits changes mean to you?

First, what they don't mean.

 

The MCRMC report is just that -- a report. It's not law. It's recommendations. This does not mean there will be major changes to military pay, benefits and retirement any time soon or maybe even ever. For this stuff to happen lawmakers have to agree that they are a good idea and vote them into law. Then the president has to sign the bill. Have you seen how long it takes for Congress to get its act together? Seriously.

Now, what they do mean.

 

If lawmakers are actually for real about taking what this panel said seriously, they mean big changes could come eventually and some of our benefits may look nothing like the way they do now. It may mean bigger out of pocket costs and less income for future retirees.

But it could also mean some things get easier. Here are the details on the items that impact spouses and family members.

Do nothing to base pay.

 

No changes recommended at all. Well, that was easy.

Dismantle Tricare as you know it.

 

We all know that the current Tricare system can be frustrating, hard to use, include extraordinarily long wait times to see a doctor when your ear infection child needs help today, and not always the best quality of care. If you're a parent of a special needs kid this may be even more true.

But we all love that it's, well, mostly free. And we love that we have it to start with. There are worse things than hard to use healthcare ... like no healthcare or really expensive healthcare. That's why the MCRMC proposal includes what definitely felt like 1,000 pages on Tricare (but was really "only" 41).

Under the MCRMC proposal we would have to pick a new plan from a list of choices kind of like those using Obamacare do now. The MCRMC's proposal would take apart Tricare with its complicated plans (Standard? Prime? Reserve select? Retiree?) and dump all non-active duty users into what is basically a big, commercial healthcare market place where we could choose our own plan. Plans could include things we dont currently have -- like help buying glasses and contacts, for example. And they would still let us use the military treatment facilities (MTFs) if we wanted to.

To pay for this the military would pay our enrollment fees for us. So, the portion of health insurance considered a "premium" would be sent automatically to whatever provider we choose.

The military would give us money in our paychecks for co-pays. The report uses the example of $920 per-person  every year (up to age 26). So you would receive an extra $920 in your paycheck every year for you and each of your children. When you have co-pays, you have money to cover it (in theory ... unless you spend it on a TV or something. I can see a lot of potential problems with this idea).

Military treatment facilities would no longer be free. Instead they would be considered "in-network" for whatever healthcare plan you pick. You'd have to drop a co-pay to use them, although it's not clear if the co-pay would be the same as it would be to see an in-network civilian provider.

Dental and pharmacy coverage would remain the same. Everything you know and love (or don't love) about the current dental plan and the way you currently buy medication wouldn't be touched.

If you're wondering how this idea would specifically impact the plan you are currently on (I'm talking to you, reserve folks and retirees), I highly suggest you go to page 112 here and read about it. 

Make special needs health care better and easier.

 

Right now special needs health care is provided under a complicated system known as ECHO. It covers very specific things at a value up to $36,000 a year.

The MCRMC recommends expanding the number of things it covers, but not the total dollar amount. That means more people would find the system useful, and more people would end up using it. It would give better respite care and cover adult diapers, for example. It would be designed to mirror what most state Medicaid programs already cover.

Change retirement.

 

Ok, now it really starts to get complicated.

First thing to know, none of the recommended changes would impact current retirees or currently serving troops. If current service members wanted to move to the new system, they could. But you don't have to.

Biggest deal: this could actually result in you getting more out of military retirement than you did before.

So what is the new system, exactly?

I won't pretend to have a fantastic grasp on this topic. That's why I have Kate over at Paycheck Chronicles, your Military.com source for all things pay and money.

So go over there and read her (in English) rundown on the MCRMC's retirement proposal.

Combine the Commissary with the Exchange system.

 

Right now the Defense Commissary Agency (DeCA) runs 240ish commissaries worldwide. They, by law, sell groceries at cost plus a 5 percent surcharge that pays for construction and building and technology maintenance. They are given $1.3 billion in tax payer money to operate and pay for their employees, shipping and other operations. The Defense Department has talked for several years now about basically unfunding the system and forcing them to sell goods at a profit to pay for their operations.

Then you have a trio of private companies that run the exchange system across the services. They, by law, sell pretty much whatever they want at a profit with no surcharge or sales tax. That means you can get a pretty sweet deal on a new computer (because you aren't paying the local sales tax) but you probably don't want to buy groceries there. Their profits are given to the Morale, Welfare and Recreation (MWR) systems to fund things like the on-base gyms. They get a small amount of tax payer money, most of which pays for shipping stuff overseas or to rural stateside stores (like 29 Palms, California or Minot, North Dakota).

The Defense Department has talked for several years now about basically unfunding the commissary system and forcing them to sell goods at a profit to pay for their operations. It would probably also force some stores to close and layoff a lot of employees.

But the MCRMCs don't want to close the commissary. They suggested combining the two systems under one "umbrella."

As far as I can tell right now, this isn't a bad idea. Commissaries would still exist mostly as we know them, but they could be even more awesome because they could start carrying other non-grocery items. Like alcohol (can I get an "amen?"). And bibs for your kid. (Not considered "grocery" so currently not carried). Grocery items, MCRMC says, would still be sold at cost plus that surcharge. Everything else could be sold at a mark-up for profit.

And the exchanges, with the exception of convenience stores ("shoppettes") would start carrying grocery items at cost (plus that 5 percent) instead of the higher prices they now charge.

I'm feeling like this a win, aren't you?

The commissary would still receive tax payer money to make selling goods "at cost" possible, although it isn't clear how much they would need. Combining would allow the income from the surcharge to be used to pay for some needs in the exchange system, and the income from the exchange system's mark-ups to pay for some things in the commissary system. They also recommend allowing that exchange income to fund some of the shipping costs currently paid for by tax payers.

The only recommendation in this list that may not be a win for everyone is the moving of the almost 13,000 commissary workers from the current "Government Services" (GS) pay system to status as "Non-appropriated funds" (NAF) employees. That means while they would probably be paid similar amounts, the money to pay them would come from a different pot (not tax payers) and may not be as stable. Also, the benefits associated with long term GS employment may be better. And there aren't a lot of details in the report on how this would work, either. Would current employees move to the NAF system? What about employees who are nearing GS retirement? Clearly, a lot of unanswered questions on this one.

Cut some of the money from a transferred GI Bill.

 

Right now your service member can transfer his (or her) GI Bill education benefits to you or your kids if he meets certain qualifications. It comes with the whole package -- including the BAH payout so you or your kids can cover housing.

The MCRMC wants to do away with the BAH component for transferred benefits. That means you can still transfer the GI bill to you from your service member, but you won't get that cash payout as a part of it. They are suggesting doing this starting in 2017 so that people currently using it while counting on that payout won't be impacted.

Amp up financial literacy.

 

The MCRMC report is packed with suggestions that involve giving service members more choices over their benefits and money. The problem with that? It's going to cause a lot of confusion. Right now we pretty much take what the DoD gives us and call it "good" (or, well, mostly good). We don't have choices and we don't have to worry about deciding, well, anything really.

But if we get more choices the MCRMC says we should get more know-how, too. They suggested a bunch of extra financial training. And they said the DoD should give service members online budget tracking systems while also making changes to the current Leave and Earnings (LES) statement to make it a little more user friendly (imagine that!)

Provide more daycare centers on base.

 

Anyone who has ever spent what feels like ages on the waiting list for on-base childcare is saying "YES" right now.

Currently on-base daycare centers (or "CDCs") are plagued by problems. Hiring freezes mean low staffing levels. Background check requirements and the way they are processed, in particular, result in problems getting potential staff in the door (or keeping out staff that shouldn't be there to start with). And then there is the simple fact that there are just not enough centers.

The MCRMC report recommends exempting CDCs from hiring freezes, updating employee requirements, changing the background check process and building more centers. They also want the DoD to get a solid handle on just how long these waiting lists are by tracking them across all the services. All good things!

Ditch the Family Subsistence Supplemental Allowance

 

You probably don't even know what this is. Why? Because only 285 people used it in fiscal 2013.

The Family Subsistence Supplemental Allowance (FSSA) is a DoD run program designed to keep military families off food stamps. It gives you more money in your paycheck if you qualify, and then keeps you from joining any local food stamp (known as "SNAP") program. I've written about it before here.

The MCRMC report says DoD should get rid of FSSA for stateside (keep it for OCONUS where SNAP isn'ts available) and just let the people who qualify use the food stamp program. So few people use FSSA because the barriers for entry are high (first of all you have to get finance to process it) and you might get more out of the SNAP program anyway.

One truly fascinating portion of this report shows that the perception about how many military families have to use food stamps may be inaccurate. I'll be reporting more on this later, but for now here's what they showed: if you are E1-E3 and receiving average BAH, you must have six members of your household (that's the military member plus five dependents -- in theory four children and a spouse) to qualify for food stamps. We'll explore this more later.

Expand Space-A travel.

 

This one is pretty simple. Right now you can travel Space-A without your service member if he is deployed for more than 120 days. The problem comes if you are the type of person (say, Special Forces) whose service member deploys all the time but often for less than 120 days. That's a bummer if you like Space-A.

The MCRMC report recommends dropping the minimum to 30 days.

See? Simple.

Track how our military brats are doing with their education.

 

We know keeping tabs on the education progress of military kids is hard because they move so much. Even the school liaisons and the programs the DoD has already set-up struggle to make sure everyone is getting where they need to be.

The MCRMC report suggests assigning an "identifier" to military kids so that officials can track their progress through existing systems. That way they would know how military kids are performing, overall, and be able to better meet their needs.

Change survivor benefits for retirees.

 

Right now the survivors of military retirees can receive a payout through the Survivor Benefit Plan (SBP) program -- like a life insurance policy for retirees. Great. You pay into it while your service member is alive and if he passes away before you, you get a monthly payout.

The problem comes if a second payout kicks-in through the Veterans Affairs administration (VA) because the retiree's death is ruled as "service related." Right now there is an "off-set" required. That means that for every dollar you get from the VA's "Dependency and Indemnity Compensation" (DIC) you get one dollar less in SBP. Rather than receive a plus-up because your spouse ultimately died from something caused by service, you receive only one.

Really, what's the point of the second benefit?

That's basically how the MCRMC panel felt, too. They recommended giving retirees a choice about whether or not they use an SBP that has that off-set. If they don't want the off-set they can pay more for the SBP and, in the end, get a higher payout for their surviving spouse. Or they can keep the current system and accept the penalty.

 

Whew, did you get this far? Yeah, me neither (just kidding). I included all but two of the report's recommendations above -- those deal specifically with making the VA and the DoD get along better and making transition to civilian life easier.

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