I usually have a half-dozen posts in draft for this blog, and I schedule them about a week in advance. (No, seriously, this time I really mean it!) When Monday morning rolls around, the hopper’s filled through at least Thursday. But today we’re going to interrupt the schedule with breaking news.
An “alert reader” just brought this to my attention: the preliminary slides used by the Defense Business Board to brief DoD (and Congress) on their latest radical overhaul of the military retirement system. (The final version of the brief is expected to be available this month.) In case DBB’s server is unavailable, I’ve archived another copy (DBB_Military_Retirement_August2011_Presentation) and embedded the presentation below this paragraph. I’ve noticed more than a few typos in the brief, so I think it was prepared in haste to get the board through a deadline. It’s possible that some of these ideas are already being revised or reconsidered.
Modernizing the Military Retirement System
View more presentations from Brian Lucke
Let’s be blunt: DBB’s mission is to be the sacrificial messenger. It’s their job to propose the ideas that no one else could career bring up. They float the trial balloons that are relentlessly machine-gunned by national veteran’s organizations. DBB gets to not only throw the hand grenades, but they’re expected to leap on them– to protect the rest of DoD and Congress from the inevitable public backlash.
After a few years of such outlandish public behavior, all three groups can work together in private to draft compromise proposals that seem positively mild and conservative by comparison. At some point the veteran’s organizations will join in, if for no other reason to attempt to exert some sort of guidance over the discussion before it accidentally gets accepted as gospel.
This is roughly the process that brought us the REDUX retirement system and the latest Tricare premium hikes. But maybe this time it’s different.
I’m going to let you digest the slides on your own, and hopefully you’ll share your comments here or on a discussion board like Early-Retirement.org. I’ll distill the commentary into a future post.
Here’s some data points to get us started:
Page 5: “Military retirement funds are not able to be invested in higher yielding equities and bonds.” If they were invested in other assets, how far would the higher returns go to resolve the perceived shortfall? We don’t have to privatize the funds, but I’ve heard that Treasury yields have recently shot up.
Page 6: “DoD pays retirees 40 years of retirement benefits for 20 years of service.” My calculations show that DoD expects to pay pensions until we’re at least 77 years old. How’s that compare to the life expectancy of the military retiree/veteran demographic? To be excruciatingly and actuarially thorough this study should include wounded veterans, servicemembers who are medically retired shortly before they die (usually of severe wounds), and servicemembers killed before reaching retirement eligibility.
Page 7: “It will be very difficult to release personnel with 15 or more years of service, yet these age groups are a likely target for downsizing.” Uhm, guys, did you note my three TERA applications from 1996-97? How’d that program work out for DoD? Could we see a study of the costs & savings?
Page 7: “The current system does not compensate for those in high-risk situations or extenuating circumstances (e.g., combat duty)…” I’m not sure a higher retirement benefit would motivate me to volunteer for an extra combat tour, and I’d sure hate to serve combat duty alongside someone who’s motivated by that. Is this really a retirement problem, or is it adequately compensated by combat pay?
Page 8: “There is no difference in retirement benefits between those who have served in high risk and low risk positions.” What risk category would this plan have assigned to those on shore duty in the Pentagon on 11 September 2001? Is it “low risk” only if nothing bad happens?
My spouse, who was excluded by Congress from combat zones for the first 10 years of her career, has a few pithy personal opinions on this “low risk” issue. Her retirement benefits were also reduced quite a bit by being shut out from her community’s male promotion opportunities. Let’s just say that her highly public visibility in uniform made her much more of a target than my years of “run silent, run deep” submarine sea duty. Yet who got all the sea pay & sub pay? How does the DBB plan offer equal opportunity to women who are still banned from certain military specialties? In an apparently related coincidence, my spouse was also one of the 7% who transitioned to the Reserves between their 15th and 20th years of service (page 11).
Page 13: “Establish a mandatory TSP program for all military service personnel.” I think mandatory TSP enrollment should be enacted tomorrow. Why wait?
I’ll be fair. For those of us already in the service (or who’ve left it), on page 14 the DBB brief says:
- “No impact on existing retired population”,
- “Fully disabled veterans not affected by new plan”, and on page 22,
- “For those with less than 20 years– proportional benefit under “old plan” if they stay for 20+ years”.
In other words, if you’re under 10 years of service then you presumably don’t care about retirement benefits (page 7) and if you’re over 10 years then you’ll preserve a healthy proportion of the existing system.
Let’s read your comments!
DoD panel proposes new retirement system
Will Congress change military retirement?
Will Congress change military pay?
“Present value” estimate of a military pension
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