Don’t turn away from reforming military retirement benefits By Gen. James L. Jones (USMC, retired), Adm. Gregory Johnson (USNA, retired), Major Gen. Arnold Punaro (USMC, retired) and Gen. Charles Wald (USAF, retired)

DeM Banter:  If all of the sudden we are high-fiving ourselves for this great measure and budget cutting–isn’t it interesting that no one is talking about the 900lb gorilla in the room or the very large pink elephant in the corner?  None of these distinguished gentlemen are affected by the budget cuts and if we are hurting so bad…what about social security (we should be adjust the ages there as well….right?), what about welfare, what about a myriad of other programs that could by “adjusted?” If leadership is all about setting the example….where are the cuts to congress’ retirement benefits, their medical, or the Executive Branch, the Judicial Branch…and the staff there?  One thing that is noted below…it is an all volunteer force…what happens when no one volunteers?  We are kicking 25,000 people out of the USAF (that just one branch), training hours are cut…the airlines are hiring and the economy is every so slowly starting to churn (depending on how you count the numbers).  Do we still value military service? It is really starting to feel like we are living in some strange dream.  Apologies…too emotional?  Too much coffee…

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View Original / The Hill / 17 Jan 14

The U.S. military is at a crossroads. We can either properly train and equip our future warriors or maintain overly generous benefits for young military retirees who have many years in the workforce ahead. We cannot do both. How the nation chooses will, to a great degree, determine how secure Americans will be in decades to come.

The president’s signature on the Bipartisan Budget Act of 2013 (BBA) is barely dry, yet several members of Congress have already pledged to undo a provision that would modestly limit annual increases to pension payments for working-age (38 to 62) military retirees, while directing budgetary savings to preserve military readiness.

We are increasingly concerned that fast-growing personnel costs – including health and retirement benefits that begin at a very early age – will crowd out other defense priorities. As DOD spending on the all-in personnel costs of the volunteer force approaches 70 percent of the defense budget annually, with the prospect of additional unchecked acceleration in the years ahead, it is clear that we are heading for a readiness and procurement catastrophe if causal factors are not addressed. These factors are benefit entitlements, pensions, and military health care on the personnel side, and acquisition reform and overhead on the business side of the defense budget. Given this reality, we find the objections to the very modest proposals currently on the table, which represent a small start to the comprehensive reforms that are truly necessary, to be without merit. We urge the implementation of this beginning effort. If we fail here, the road ahead will be increasingly perilous to our national security.
Under the current military retirement system, members of our armed forces can receive pension payments and health care benefits after serving for at least 20 years, regardless of their age. In the case of a service member who retires at age 38, pension payments and health coverage could easily continue for more than 40 years, totaling over 60 years of pay and benefits for 20 years of service, a very unusual – and expensive – benefit. Currently, military retirees of all ages receive annual cost-of-living adjustments (COLAs), which increase these payments according to the consumer price index (CPI), a common measure of inflation. Beginning in 2016, the BBA provision will reduce this COLA by one percentage point (i.e., to CPI minus one percentage point), for working-age military retirees only. When those retirees reach age 62, their pension payments going forward will bump up as if the lower COLA had never applied, and from then on, they will receive a higher annual COLA based on the full CPI. This modest and reasonable reform would reduce lifetime retirement pay by about 6 percent—from $1.7 million to $1.6 million—for an Army sergeant first class retiring at age 38. Senator Patty Murray and Representative Paul Ryan have pledged to make a technical adjustment to exempt military retirees with disabilities from the change.

Entitlement spending within the military, in the form of retirement and health benefits, poses the same challenges as it does for the entire federal budget. Indeed, many state governments are encountering this same issue, and some have implemented COLA reductions for their retirees. Those states face the tradeoff of paying for critical services today, such as law enforcement, or meeting unaffordable pension promises to previous employees.

Likewise for defense, in an era of spending caps and limited resources, fast-growing benefits are crowding out military readiness today and investments in our future national security. For example, in Fiscal Year (FY) 2013, the federal government budgeted more for military retirement and health care benefits ($143 billion) than it did for military procurement ($110 billion). When total personnel costs are considered, the contrast is even starker. The total budget for pay and benefits for active and retired service members in FY 2013 ($264 billion) was greater than the budget for military operations and maintenance (excluding healthcare-related operations, which are more appropriately classified as a personnel cost).

Congress was wise to take the first step toward military retirement benefit reform in the BBA. Much larger reforms must come in the near future. We must rethink every aspect of military spending, including benefits. In doing so, policymakers should protect the Veterans Administration and other benefits for service members who were wounded or disabled in the course of their service. Very generous health care and pension benefits for able-bodied, working age (38-62) military retirees – benefits that have no parallel in either the private or public sectors – cannot remain the same without causing damage to our war-fighting ability in an era of constrained resources.

Jones served as Supreme Allied Commander Europe and National Security Advisor for President Obama. Johnson was Commander of U.S. Naval Forces, Europe. Punaro was the Staff Director of the Senate Armed Services Committee. Wald was Deputy Commander of U.S. European Command. All are affiliated with the Bipartisan Policy Center, a Washington think tank.

4 Replies to “Don’t turn away from reforming military retirement benefits By Gen. James L. Jones (USMC, retired), Adm. Gregory Johnson (USNA, retired), Major Gen. Arnold Punaro (USMC, retired) and Gen. Charles Wald (USAF, retired)”

  1. Hi Bill,

    The irony of this argument …. isn’t it interesting that the complaint is about personnel costs and yet, it takes people, in this case, young volunteers, to fight the wars the military gets involved in at the behest of the politicians in Congress and Executive Branch? I seem to recall that there is a “… provide for the common defense” clause in the preamble. Seems to me there is a bill to pay that is part of the “cost of doing business.” This is a second key promise broken — I am becoming very cynical due to continued breaches of trust.

    I am loathe to follow the argument that a 20 year career with benefits is “unusual”. The modern construct seems to be somewhere around a 5 year vesting in retirement plans in corporate america, whereas the military plan is to a) opt out early and take a one-for-one exchange on getting behind others in your cohort on building a retirement, or b) make a commitment and survive 20 years to become eligible for a retirement. For what it is worth, there exist other examples of short careers that earn retirements. Athletics is one notable example.

    OK I will stop my rant here for a moment. This really is a strategy question, and it appears that the strategy adopted is to change promises already made to people that cannot now change their past lives. This is done in order to balance someone else’s budget problem. The strategy ought instead deal with the cost issue going forward. I already heard that it is not a big cut….. Consider the size of the nest egg that has to exist to make up that lost earning potential and the diminishing time remaining to build that nest egg and the real impact of that cut becomes apparent.

    Regards,

    Ben

  2. Two things that drive me crazy about the the COLA reduction.
    #1. Labels. Congressman Ryan deemed these benefits “exceptionally generous” and the retired Joint Chiefs deemed them “overly generous.” I take great exception to these labels. These benefits were promised to keep soldiers/sailors/airmen in the service to their nation while it was actively at war. The same people impacted by the COLA reductions are the ones who have been serving on active duty while the nation has been continuously at war since DESERT STORM/ONW/OSW. On whose scale do these benefits qualify as “overly generous?” Certainly not when compared to Congressional benefits or the those received by the now retired JCS?
    #2. Breach of contract. Those impacted by the COLA reduction are powerless to make a decision about it. If you have a home loan, how would you feel if the bank suddenly decided your interest rate was “exceptionally generous” and added an extra 1% to your mortgage rate for the next 20 years? At least you MIGHT be able to refinance with another bank. But if you had worked very hard to preserve your credit score, relentlessly kept to your budget and saved money so that you qualified for one of those extremely low interest rates when nobody else could, you might not be able to get a loan rate at those low levels once more. So, if the banks wanted to clear their roles of all the super low-interest loans they offered in the darkest days of the housing slump, they could universally declare those mortgage rates “overly generous” and raise your mortgage rate by 1% or force you to refinance ot the much higher rates available now. How would this be any different than what Congress has done to its soldiers?

    – Todd

  3. Ben/Todd: Interesting… as I was just reading an article: Air Force Cheating Scandal: Time for a Bold Response: http://www.jqpublic-blog.com/?p=641&utm_content=buffer84d61&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
    Does anyone else see the interconnectivity of it all? Morale is plummeting at an accelerating rate…is it a loss of confidence in leadership? Is it broken promises? Is it a lack of strategy? Or perhaps all of the above?
    The article at the link above talks about morale….
    Morale. It’s a misunderstood idea. Some associate morale with attitude or general mood. Some think it’s about whether people are “happy.” These are perilous oversimplifications. Morale is about confidence, enthusiasm, and discipline. It is the mental and emotional capacity of a fighting force to engage in a fight. That’s an expansive concept. It includes not just things like job satisfaction and team cohesion, but fundamental things like quality of training, adherence to standards, and trust in teammates, leaders, and the validity of the mission itself.

    Commanders — good ones, anyway — understand morale as both nuanced and determinative. The things that comprise it must be held in balance. Neglecting or overweighting any aspect of it can disturb the balance. A giddy band of weed addicts who can’t run a checklist may seem happy, but they have low morale. By the same token, a group of people who seem gruff or even mildly distressed but are able to kill or wound with precision measured in inches are said to have high morale. In other words, at execution level, morale is nearly indistinguishable from readiness. Good commanders understand morale is the key to mission success, because in any warfighting endeavor, people determine victory or defeat. The bad news, manifest for some time now, is that the Air Force missile community has morale problem.

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