The Military Guide


Six Wins On 2015 Military Benefits


[Nords note:  If you’re reading this sentence then I’m still in Spain visiting my daughter for another month or so.  I’ve loaded up the blog’s schedule with posts through the end of the month but I’ll be slower than usual on the comments and social media.  In the meantime, don’t worry about the Military Compensation and Retirement Modernization Commission’s recommendations.  If you’re in uniform now, then you’ll be grandfathered into the current pay & retirement system.  (You may also have an option of using one of the new plans.)  Ignore the political theater.  Let the military analysts and CFPs chew on the numbers for another month or two, and then the Congressional debate will really begin.]

There’s plenty of bad news and unhappiness about the drawdown. For the first time since the pay gap was declared “closed” in 2008, Congress has only raised military pay by 1%. Their 2015 defense spending authorization falls behind their own goal of raising pay at the same rate as the Employer Cost Index. Not only is pay losing to inflation, but housing allowance rates have been reset to cover only 99% of expenses instead of 100%. There are constant threats of more cuts to other benefits, and the specter of sequestration looms unpleasantly on the horizon.

I could go on for another 2000 words about the latest threats to military pay and benefits. However dozens of other military and personal-finance bloggers are already doing that, and I’m not going to subject you to the 82nd post on the subject.

Image of handing over pay at a fenced window |
Could’ve been a lot worse.

Instead let’s stand back from the crowd and reflect on a few small wins that popped up among the losses. After reading the rest of this post, you can make your own drawdown retention decision.


This post is based on secondary sources reporting through press releases and other military media. I haven’t personally plowed through the thousands of pages of the 2015 National Defense Authorization Act or the continuing resolution, and I’m still seeking confirmation of a few rumors that emerged before the bills were signed. I’ll update this post as I verify the details.

“COLA minus 1%”

First, it appears that Congress has delayed the retiree pension cut “COLA minus 1%” for future military servicemembers. This 2013 proposal was repealed last year for current retirees and those already in uniform, but everyone who joined the military in 2014 (and then earned a pension) would have had their pension’s annual COLAs reduced by one percentage point each year through age 62. Now the start of that program has been delayed until January 2016, and its future depends upon recommendations from the Military Compensation and Retirement Modernization Commission.

Speaking of the MCRMC, a number of DoD proposals were tabled by Congress until the MCRMC reports out. It’s the most comprehensive military compensation study since WWII, and it includes significant town-hall testimony from rank-and-file servicemembers and families. It’s so big that the White House has told DoD to cancel their 2016 Quadrennial Review of Military Compensation. I hope the Commission listened to the feedback, and I hope the report (as controversial as it may be) will start a healthy discussion on military retention. Although I’m skeptical that all of the Commission’s recommendations will become law (remember REDUX?), it’s an important step in thoroughly analyzing the military pension system. DoD needs to avoid a repeat of 2013’s last-minute Congressional compromise of piecemeal pension reform. The Commission was originally tasked to report out by 1 May 2014, but it was accelerated extended to 1 February 2015 for additional input and study*.  I would not be alarmed at its recommendations until they’re actually drafted into bills and the Congressional negotiations begin.  With a new Congress and a new SECDEF, it should be an interesting conversation. A fresh start can only be good news.

(*Thanks to alert reader and MCRMC expert Jeremy for the correction!)

VA funding

Back to another pleasant surprise from Congress: the Veterans Administration’s programs and benefits for veterans will now be funded at least a year in advance. This includes veteran’s pensions (from the VA, not from DoD), the GI bill, and survivor’s payments. This lesson was learned from the government shutdown of 2013 when veteran’s benefits (and payments) were at risk of being suspended. It also encourages the VA to conduct more long-range planning without having to keep a wary eye on whether the benefits funding will actually come through. I think that Congress is realizing that we have exactly the type of VA that we were willing to pay for, and they’re trying to improve that system.

Reserve and National Guard early retirement

Next, the Reserve and National Guard forces finally caught a break on the 2008 NDAA legislation authorizing earlier retirements for deployments. For every 90 days that they deploy to combat zones or for certain national emergencies, they receive their pension 90 days earlier. However the 90-day deployment periods had to occur within the same fiscal year. This meant that periods which crossed a fiscal year before 90 days didn’t count for an earlier pension. Understandably, it became unpopular to cut a set of Reserve/Guard deployment orders starting after 2 July.

That’s now been clarified by the 2015 NDAA. The law now allows the 90-day period to cross a fiscal year, and this applies to deployments which started after 30 September 2014. This is not expected to be extended retroactively to 28 January 2008 (the date of the 2008 NDAA), and it might never be retroactive to 11 September 2001.


SBP payments to special needs trusts

Fourth: the SBP scored another huge win, although it’s simply catching up to 20th-century estate planning. Survivor Benefits Plan payments can now be designated to a special needs trust as well as to a person. (Thanks to military spouse Jeremy Hilton for pointing out this problem and its solution.) For over 40 years, by law a retiree’s SBP payments had to be designated to a “natural person”, even if it was an adult disabled child of the retiree. However disabled adults are frequently supported by a patchy collection of state and Medicaid benefits, many of which are needs-based, and most of which are worth far more than the amount of a monthly SBP payment. (See page 3 of that PDF for a detailed example.) If SBP payments went to that beneficiary then their new higher income was usually above the threshold for their other benefits, and they’d actually end up losing money. They also risked losing their subsidized housing, their support system, and perhaps their only safety net.

Now, thanks to a legislative change which could be handled by most paralegals, retirees can direct their SBP payments into a special needs trust for their adult disabled beneficiary. The income goes to the trust, not the beneficiary, so it doesn’t count against other support. SBP beneficiaries remain eligible for their other benefits yet their trustee can make sure that other (unfunded) needs are still met. Nobody gets rich from this update, but many families will breathe easier.

I’m not sure how long it will take the Defense Finance and Accounting Service to implement this legislation, but here’s an unintended consequence: thousands of retirees with disabled children will want to enroll in or modify their SBP. Neither DoD nor DFAS have an accurate database of these veterans, so they’ll have to mount a huge publicity campaign. I think they’ll broadcast this change by declaring an open enrollment period for the SBP, where any military retiree can enroll or modify their benefits. This has only happened a handful of times in the history of the program, and the last time was 2005. I get a number of questions from readers about changing their SBP (which is usually not possible) so keep an eye on this blog and your other military websites.

Commissary funding

The fifth unexpected win (in a battle that never should have happened) was commissary funding. Depending on how the numbers were reported, DoD planned to cut Defense Commissary Agency funding by $100M-$200M dollars. This gave DeCA a choice of eliminating waste in their logistics chain, or cutting commissary hours and staff. The first goal would have eventually been carried out, but it would have meant months of pain before commissary hours and workforce returned to the status quo. Fortunately, during the Congressional negotiations over the appropriations bills, most of this funding was restored. DeCA still took a cut of $10M, and hopefully they’ll continue finding new ways to cut waste without making life harder for their customers. I’m still calling this a win.

I can predict the comments now: your commissary is a 20-year-old base building with horrible food, and you can do a lot better at Wal-Mart or Costco. However hundreds of thousands of military families appreciate the convenience of being able to shop on base (especially if they’re in base housing). Most commissaries also offer price matching, coupons, and parking-lot sales. It’s our benefit, and when you show that it’s important to us then it will get better. DoD alternatives would be a voucher system or a new food allowance, and I think we’d all lose a community resource.

No pay raises for admirals or generals

Finally, here’s an interesting article from journalist Tom Philpott about capping the pay and pensions of admirals and generals. The flag ranks did not get a 2015 pay raise like the rest of the military, and the pension system is being revised to prevent them from earning more in retirement than they earned on active duty. (A few of these retirees are earning nearly a quarter-million dollars of pension. Per year.) Considering the runaway compensation of many executive positions in corporate America, this can only be a win. (And yes, I do have several classmates who are four-star admirals.  I hope they’re reading this post too!)  I doubt that an admiral or general is in it for the money, but this change will help reinforce a long-term perspective.

Every year I hope to write a post describing how our entitlements and benefits have been preserved or even boosted, but this is a drawdown. Some of you readers joined me in the 1990s post-Cold-War “peace dividend” slashing of the armed forces by 25%. Perhaps you’ll agree that today’s drawdown is not only smaller by numbers and percentages, but also carried out (a little) better. However today we have more veterans than ever with long-term disabilities, injuries, and undiagnosed syndromes. Congress is reluctantly beginning (once again) to appreciate the true price of war. Both the Executive and Legislative branches of the federal government are learning (yet again) that just like doctors, police, and firefighters: you get the military that you’re willing to pay for.

It’s still all too easy for servicemembers (and their families) to become drawdown victims. (Ask any Army captain who was promoted from the enlisted ranks.) However you can avoid being victimized, and you can start right now: review your personal spending and push for your own financial independence. If you’re going through a drawdown with student loans, consumer debt, or an excessively materialistic lifestyle then you already have one foot in the ditch. Invest in yourself and your future: get all of the training you can, meet those promotion requirements, study for advancement, and do the best you can. If you don’t have a college degree or advanced certification (yet) then start taking classes and figure out what you want to do with your GI Bill. Families can invest in themselves too: track your spending and budget only for the expenses that really bring value to your lives. Get out of debt, try to maximize your Thrift Savings Plan and Roth IRA contributions, and then try to save even more in taxable accounts.

Once you have your feet on firm financial ground, then you can make the retention decision that’s best for you and your family– instead of one that’s driven by a paycheck.

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Related articles:
Will Congress Change Military Retirement?
From the archives: Congress Cuts Military Pensions
More Details On The Survivor Benefits Plan