Congress is considering changing, for the first time in decades, the way service members get retirement pay.
Military retirement now carries an all-or-nothing pension plan that requires a minimum of 20 years of service. The new plan would cut those pensions to 40 percent of pay from 50 percent, and create a matched 401(k)-style plan open to all service members.
The new retirement rules would affect all troops enlisting after the new plan is put in place in October 2017, Military Times reported. Troops already in the ranks could opt into the new plan or stick with the current “cliff vesting” system, it said.
The current system has to change in light of budget cuts being made after 14 years of war, says Col. Bryan Hilferty of Sumter, who retired last August from U.S. Army Central, formerly Third Army.
“We have to modernize and economize the system,” said Hilferty, U.S. Army Central’s former director of communications. “This is one hack at it.”
Part of the goal of the proposal is to help attract and retain young cyberwarriors who might want to hone their high-tech skills in the military but do not plan to stay for 20 years.
The plan is still at the subcommittee level in both the U.S. House and Senate. With the end of major ground wars in Iraq and Afghanistan, the U.S. military drastically is cutting personnel and budgets. That likely will have profound effects on the Midlands’ and state’s military installations.
For instance, the number of new soldiers trained at Fort Jackson, the nation’s largest Army basic training installation, would drop to about 17,000 a year from 45,000, if worst-case-scenario staffing cuts contemplated by the Army are enacted, according to the post commander. Another 27,000 soldiers a year receive advanced training at the fort, such as the drill sergeant school and the chaplain’s school, also would be heavily affected.
But no one knows for sure, and that uncertainty could continue for a year, until Congress decides whether to let $1.2 trillion in budget cuts kick in – half to the military, half to domestic spending, called the sequester.
Overhauling the retirement and compensation systems is one cog in that budget wheel.
Scaling back retirement benefits
The 401(k)-style savings plan was recommended by the Military Compensation and Retirement Modernization Commission. It recently was embraced by the House Armed Services Committee, and a version is being considered by the Senate Armed Service Committee.
Senate committee chairman Sen. John McCain, R-Ariz., said some version of the plan likely will be included in a draft of the annual defense authorization bill later this spring. It is already in the House bill.
The compensation commission was asked two years ago to examine the military’s long-term pay and benefits needs. Its recommendations included government contributions to an investment account matching up to 5 percent of troops’ base pay.
Troops who serve at least 12 years would see some bonuses and preserve some of the current 20-year retirement benefit, though all retirement payments would be scaled back by up to 20 percent.
Some veterans organizations worry the changes will hurt retention of talented soldiers, sailors, airmen and Marines.
“The new proposal doesn’t have enough in it to retain the very best officer for 20 years,” retired Army Col. Mike Barron, spokesman for the Military Officers Association of America, told The State newspaper.
Barron added young service members often don’t have the financial savvy to handle their own 401(k) plan. And having to contribute to it would force lower-paid troops to choose between retirement and bills.
The officers organization and some other veterans groups favor a “blended” plan that would create the 401(k) system but retain the full pension plan, he said.
But Hilferty said that proposal doesn’t help the bottom line; it exacerbates budget problems.
“I don’t see how it’s viable,” said Hilferty, once chief spokesman for U.S. Army Central, which plans and conducts military ground operations in the Middle East and Southwest Asia and is headquartered at Shaw Air Force Base in Sumter.
Soldier advocacy organizations such as the Military Officers Association that want a second layer of retirement plans “just want more, more, more” and do not recognize that active-duty soldiers face losing their jobs. “That is not selfless service,” he said. “It’s not patriotic.”
Other organizations, such as the Veterans of Foreign Wars, said during the House committee hearings that the new plan would help the 83 percent of veterans who did not reach 20 years of service.
According to the Military Times, a spokesman called the present pension system “rigged” against vets who may have served four or five deployments in Iraq and Afghanistan but didn’t reach 20 years of service.
Hilferty agreed, adding shifting away from a pension system would lead to a more balanced service.
The present plan “incentivizes things you don’t want to happen,” he said. “You don’t want everyone to stay in for 20 years. We need more privates than master sergeants. You need more lieutenants than generals.”
U.S. Sen. Lindsey Graham, R-S.C., who chairs the Senate Armed Services Committee’s personnel panel, told Military Times his panel’s details on similar retirement changes have not yet been finalized. But Graham said he supports “the general idea of a blended plan in the future.”
However, the new military authorization budget still has to pass the full House and Senate and be signed into the law by the president. If veterans organizations defending the full pension system push back hard enough, Hilferty said, that could be difficult.
“Who can say ‘no’ to veterans in Congress?” he said.
Reach Wilkinson at (803) 771-8495.
New retirement plan
A new military retirement plan is being considered by Congress that would add to the present pension system. It would:
▪ Cut pensions to 40 percent from 50 percent
▪ Establish a 401(k)-style plan for all service members
▪ Match up to 5 percent of pay
▪ Allow soldiers with 12 years’ service to draw from the plan