Wednesday, March 4, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Officials to lure force to ‘reform’ retirement

By
From page B10 | May 18, 2014 |

Current military members and retirees are to be “grandfathered” from any retirement changes that the Military Compensation and Retirement Modernization Commission recommends to Congress next February.

Current force members shouldn’t let that dampen their interest in the work of the commission or its final recommendations, because any retirement reforms proposed almost certainly will include an “opt-in” feature.

Many currently serving members will get the chance to choose to switch to a more modern, less generous retirement plan. Who would do that?

If past behavior is a reliable guide, thousands will.

Economists use the term “personal discount rates.” More simply, its how the promise of cash-in-hand affects you versus larger future rewards.

It’s pretty clear, though, that current members, if they choose, will be able to stay under the “High-3” retirement with its immediate annuities after 20 years of service set to equal 50 percent of average basic pay for their highest three earning years. Why?

The Joint Chiefs of Staff are insisting on it. President Barack Obama’s administration has made retroactive retirement protection part of its guidance to the commission. The likelihood Congress will buck those promises is slim given the lashes Rep. Paul Ryan, R-Wisconsin, and Sen. Patty Murray, D-Washington, House and Senate budget committee chairmen, felt when their budget deal last December included a cap on military retiree cost-of-living adjustments.

Before the ink dried on that deal, Congress voted to replace the COLA cap with alternative budget savings it still might regret: lengthening the impact of sequestration on future defense budgets by another year.

So to borrow a phrase from recent popular culture: If you like your current plan, you can keep it. But you’ll have something new to consider.

Department of Defense pay experts gave the commission two concepts for reforming retirement. They also advised that a lot more money would be saved for taxpayers if, in adopting either of these ideas, the commission also endorses an “opt in” feature for those in service.

“Steady state” savings from any one of the new retirement concepts if adopted only for new entrants would range from $1.7 billion to $3.9 billion annually, officials told the commission.

“However, if currently serving members were permitted to participate . . . which DOD believes should be an option, savings to the department and the treasury would emerge more quickly,” officials said.

The greater the number of members “who opt-in, the faster the full savings of the change would be realized.”

Current military retirement is a “defined benefit” that pays an immediate annuity after 20 or more years. The value of the annuity climbs by 2.5 percent of basic pay for each year served. However, only 15 percent of all members who serve stay long enough to quality.

Both of the new concepts shown to the commission are a “hybrid” plan, combining a reduced defined benefit with two new tools.

One is a “defined contribution” feature, the government making regular payments on a member’s behalf into a Thrift Savings Plan, similar to a 401(k) account. The contributions would be invested and made portable for members to take with them even if they leave before 20 years. They would be fully vested in these accounts after six years’ service.

A third element of the hybrid concept is supplemental pay to give the services greater flexibility to shape force structure and to retain select skills or pay grades. These pays could ease transition to civilian life for careerists no longer needed, or be made “continuation pays” to entice members to served years longer until the defined retirement benefit is within reach.

Being able to pocket benefits sooner can be a powerful inducement to forfeit more valuable benefits. As Defense officials advised the commission: “Because service members on average value deferred benefits less than the actual cost to the government to provide these benefits, it is possible to generate savings and sustain retention by altering the mix of current and deferred benefits.”

Defense officials have seen this work with the $30,000 Career Status Bonus offered for the past decade to careerists in their 15th year. In return for that extra cash, to pay off credit cards or buy a new car or put a down payment on a home, careerists are still opting back into “Redux” with its reduced annuities and smaller cost-of-living adjustments to retired pay.

Congress conceived the CSB for one purpose, to dampen the cost of repealing that cheaper retirement plan, which Congress had imposed on any member entering service after July 31, 1986. When the Joint Chiefs complained about the impact on career retention from a cheaper retirement offering, Congress repealed Redux. But it also created the $30,000 bonus to entice at least some careerists to opt back in.

Though CSB has been frozen at $30,000 for more than a decade, steadily losing purchasing power, it continues to induce about

3 percent of officers and

15 percent of enlisted into a cheaper retirement. Wartime tax breaks on deployment increased its attractiveness.

As of 2012, more than 34,800 enlisted and 925 officers had retired under Redux rather than under the “High-3” plan. Because of that choice, the Defense Department, in setting aside funds to pay future retirement benefits, needs to contribute about $600 million less annually.

Defense officials and outside analysts who shaped the new retirement concepts would bristle at any comparison of their complex plans to the maligned CSB. Their hybrids, they say, address the unfairness of allowing most members to separate with no benefits toward retirement. The hybrids also give force managers greater flexibility to shape a cost-effective force.

But like the CSB, their plans also save a lot of money by moving retirement cash forward where many members will decide it has greater value than in the long run.

Send comments to Military Update, P.O. Box 231111, Centreville, VA, 20120, email [email protected] or tweet @Military_Update.

LEAVE A COMMENT

Discussion | 1 comment

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Rich GiddensMay 18, 2014 - 12:36 pm

    80% of prospective enlisted recruits are now being denied first time entry in the US Armed Forces because they are not able to meet the mental, physical or moral requirements. A lot of kids are physically weak and just eat junk food while playing video games. Many can't lift a 100 pound weight above their heads or run a mile in a half in 13 minutes. If you're not a high school or college graduate, recruiters are not interested in you---and that includes the Army and Marines. The military can be choosy now because they are downsizing. There seems to be a misconception amongst many kids that anybody including the handicapped can enlist. Miscreant getting out of jail and local gangbanger types think they will be accepted as Navy SEALS. None of those people, or for that matter, most of the civilian population know nothing about the military.

    Reply | Report abusive comment
  • Recent Articles

  • Enter your email address to subscribe and receive notifications of new posts by email.

  • .

    Solano News

     
    County honors Meadows Trigueiro as Woman of the Year

    By Kevin W. Green | From Page: A1, 1 Comment | Gallery

    Police shut down Fairfield street after shooting

    By Glen Faison | From Page: A1, 10 Comments | Gallery

     
    Celebrity chef motivates Armijo students

    By Susan Winlow | From Page: A2 | Gallery

     
    State schedules work on Highway 12

    By Kevin W. Green | From Page: A4

     
    Bridge work to shut down Highway 12 east of Rio Vista

    By Kevin W. Green | From Page: A4

    Highway 12 Association to meet this month

    By Kevin W. Green | From Page: A4

     
    Caltrans reschedules work on J-Mack Ferry

    By Kevin W. Green | From Page: A4

     
     
     
    Robots, raucous businessmen set to arrive on big screen

    By Amy Maginnis-Honey | From Page: A7

     
     
    Teen hit by SUV remains in hospital

    By Glen Faison | From Page: A9

     
     
    Fairfield police log: Feb. 28, 2015

    By Susan Hiland | From Page: A12

    Suisun police log: March 2, 2015

    By Susan Hiland | From Page: A12

     
    Suisun City police log: March 1, 2015

    By Susan Hiland | From Page: A12

    Suisun City police log: Feb. 28, 2015

    By Susan Hiland | From Page: A12

     
    Fairfield police log: March 2, 2015

    By Susan Hiland | From Page: A12, 1 Comment

    Fairfield police log: March 1, 2015

    By Susan Hiland | From Page: A12

     
    Enrollment of non-residents to be capped at some UC campuses

    By The Associated Press | From Page: A13

    .

    US / World

    California survey finds Sierra snowpack far below normal

    By The Associated Press | From Page: A1

     
    Ex-CIA chief admits sharing military secrets with mistress

    By The Associated Press | From Page: A12, 1 Comment | Gallery

     
    Family of girl declared brain-dead sues Oakland hospital

    By The Associated Press | From Page: A13

    US marshals say man killed by Los Angeles police was wanted

    By The Associated Press | From Page: A13, 2 Comments | Gallery

     
    72 passengers reach settlements in Asiana crash

    By The Associated Press | From Page: A13

    Netanyahu warns US ‘bad deal’ would put Iran on nuclear path

    By The Associated Press | From Page: A13

     
    Mines, bombs slow Iraqi advance on Islamic State-held Tikrit

    By The Associated Press | From Page: A13

     
    India orders TV stations not to give rapist a platform

    By The Associated Press | From Page: A13

    Health officials perplexed by vaccination skeptics

    By The Associated Press | From Page: A13, 1 Comment

     
    Lawmakers taking another crack at expanding gun checks

    By The Associated Press | From Page: A13

     
    Agents target industry helping Chinese women have US babies

    By The Associated Press | From Page: A13 | Gallery

    .

    Opinion

     
    Editorial cartoon: March 3-4, 2015

    By Daily Republic Syndicated Content | From Page: A11

    Minority outreach that works

    By Jennifer Rubin | From Page: A11, 3 Comments

     
    Israelis worry about inequality, not Iran

    By Daniel Gordis | From Page: A11, 3 Comments

     
    .

    Living

    Today in History: March 4, 2015

    By The Associated Press | From Page: A2

     
    Community Calendar: March 4, 2015

    By Susan Hiland | From Page: A2

    Get ready to add white to the rainbow of produce you eat

    By The Associated Press | From Page: B5

     
    Mushrooms are nutrient-packed, with a deep, savory flavor

    By The Washington Post | From Page: B5

     
    Horoscopes: March 4, 2015

    By Holiday Mathis | From Page: B7

    My husband and I want different things in our retirement

    By Kathy Mitchell and Marcy Sugar | From Page: B7

     
    .

    Entertainment

    Fashion week moves Milan to Paris

    By The Associated Press | From Page: A7

     
    Apollo to celebrate Holiday birthday

    By The Associated Press | From Page: A7

    Oprah’s Chicago studios to close down

    By The Associated Press | From Page: A7

     
    TVGrid

    By Daily Republic Syndicated Content | From Page: A8

    .

    Sports

     
    Vanden girls roll, advance to SJS championship game

    By Marcus Lomtong | From Page: B1

     
    Bumgarner hit hard in spring debut, A’s beat Giants 9-4

    By The Associated Press | From Page: B1

    Trooper: Fingerprints show victim in Hernandez’s rented car

    By The Associated Press | From Page: B2

     
    Play ball! Quickly! Baseball tries to speed game this spring

    By The Associated Press | From Page: B2

    Australian rugby star Hayne signs 3-year deal with 49ers

    By The Associated Press | From Page: B2

     
    Maid: Hernandez messed with security camera after killing

    By The Associated Press | From Page: B2

    Pacquiao big hit so far in Vegas sports books vs Mayweather

    By The Associated Press | From Page: B2

     
    Kings bring back former player Divac in front-office role

    By The Associated Press | From Page: B2

    No ‘floating rubbish’ collection for Olympic sailing venue

    By The Associated Press | From Page: B2

     
    Cal senior Reshanda Gray named Pac-12 Player of the Year

    By The Associated Press | From Page: B2

    Rudy Gay, Kings hand Knicks worst loss of season, 124-86

    By The Associated Press | From Page: B2

     
    Cubs’ scramble on Wrigley Field hits bump when mayor balks

    By The Associated Press | From Page: B2

    Raiders officially release S Tyvon Branch

    By The Associated Press | From Page: B2

     
    .

    Business

    Oil glut could soon lead to plummeting prices

    By The Associated Press | From Page: A8, 2 Comments

     
    .

    Obituaries

    Jacqueline Mendes

    By Nancy Green | From Page: A4

     
    Robert C. Thierry

    By Nancy Green | From Page: A4

    Garland (Curly) Henry Tackett

    By Nancy Green | From Page: A4

     
    Otto Vasak

    By Nancy Green | From Page: A4

    John Henry Fechter, Jr.

    By Susan Hiland | From Page: A4

     
    .

    Comics

    Beetle Bailey

    By Daily Republic Syndicated Content | From Page: B6

     
    Rose is Rose

    By Daily Republic Syndicated Content | From Page: B6

    Dilbert

    By Daily Republic Syndicated Content | From Page: B6

     
    Get Fuzzy

    By Daily Republic Syndicated Content | From Page: B6

    B.C.

    By Daily Republic Syndicated Content | From Page: B6

     
    Peanuts

    By Daily Republic Syndicated Content | From Page: B6

    For Better or Worse

    By Daily Republic Syndicated Content | From Page: B6

     
    Sally Forth

    By Daily Republic Syndicated Content | From Page: B6

    Wizard of Id

    By Daily Republic Syndicated Content | From Page: B6

     
    Baby Blues

    By Daily Republic Syndicated Content | From Page: B6

    Baldo

    By Daily Republic Syndicated Content | From Page: B6

     
    Garfield

    By Daily Republic Syndicated Content | From Page: B6

    Frank and Ernest

    By Daily Republic Syndicated Content | From Page: B6

     
    Blondie

    By Daily Republic Syndicated Content | From Page: B6

    Pickles

    By Daily Republic Syndicated Content | From Page: B6

     
    Zits

    By Daily Republic Syndicated Content | From Page: B6

    Crossword

    By Daily Republic Syndicated Content | From Page: B7

     
    Bridge

    By Daily Republic Syndicated Content | From Page: B7

    Word Sleuth

    By Daily Republic Syndicated Content | From Page: B7

     
    Cryptoquote

    By Daily Republic Syndicated Content | From Page: B7

    Sudoku

    By Daily Republic Syndicated Content | From Page: B7