The Air Force Times is reporting today on a sweeping proposal by the Defense Business Board—“the wellspring for many cost-saving initiatives adopted by the Defense Department in recent years”—that would drastically overhaul the military retirement system and could affect today’s troops.
The new plan “would give some benefits to all troops and phase out the 20-year cliff vesting system that has defined military careers for generations.” It calls for “a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension.”
All troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years. Those contributions might amount to about 16.5 percent of a member’s annual pay and would be deposited into a mandatory version of the Thrift Savings Plan, the military’s existing 401(k)-style account that now does not include government matching contributions.
The plan would also adjust those contributions “to give more money to troops who deploy frequently, accept hardship assignments or serve in high-demand jobs. It would also give the services a new lever to incentivize some troops to leave or stay on active duty longer.”
The new retirement plan would “mark the biggest change in military retirement in more than 60 years and require approval from Congress” according to The Times, but would have no effect on current retirees or disabled veterans.
However,
Unlike other proposals to overhaul military retirement that would grandfather current troops, the board suggests that DoD could make an “immediate” transition to the new system, which would affect current troops quite differently depending on their years of service.
Finally,
The far-reaching proposal comes at a time of immense pressure on the military to cut spending and help reduce the national debt. President Obama has talked about cutting $400 billion over the next 12 years, while some proposals gaining support on Capitol Hill would call for cutting more than $800 billion over the same period.
For more specific details on the proposal, please click here.
The author is a retired U.S. Air Force officer and a writer.