Reform of military retiree benefits is a hard battle for federal government

December 16, 2013

Not all military retirees fought in combat, but as a group they certainly know how to attack any legislative plan that cuts into their pensions.

So don’t count on the $6.2 billion in savings over the next 10 years promised in the original budget agreement reached by Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.). It calls for reducing annual cost-of-living adjustments (COLAs) in retiree pay by 1 percent, but only for those who retire after 20 years of active service, are not disabled and generally are still in their 40s.

The COLA reduction lasts until they hit 62, at which time they go back to full cost-of-living increases.

In justifying the change, Ryan’s House Budget Committee called military retirement “an exceptionally generous benefit, often providing 40 years of pension payment in return for 20 years of service.”

Retirement costs, like other defense spending, have been moving sharply upward.

Over the 10 years that ended Sept. 30, 2011, payments to military retirees from the military retirement fund rose by
49 percent, according to the House committee fact sheet. It also noted that in fiscal 2012 there were 2.3 million military retirees and survivor-benefit recipients receiving $52 billion. In 10 years, that will grow by 16 percent, to $59 billion. By 2034, its outlays could hit $108 billion, and the unfunded liability — the amount needed in the future to pay all those qualified — would be $2.7 trillion, according to the Defense Business Board.

Like other Pentagon personnel costs, retirement costs need reform to halt unfettered growth.

But even before Thursday’s House vote on the measure, the retiree lobbyist groups had successfully eliminated the idea of a gradual implementation of the COLA reduction — which was to begin next year. Instead, the plan will not start before December 2015, giving plenty of time for retirees to get it killed altogether.

The Military Officers Association of America and other groups are not waiting. As of Friday, MOAA said it had generated more than 92,000 messages to Capitol Hill. The Senate is prepared to take up the measure this week.

The Veterans of Foreign Wars on Friday called on its “nearly 2 million VFW and Auxiliary members and veterans advocates everywhere to voice their opposition to the COLA proposal by connecting with their senators,” according to a VFW news release.

“Although Iraq is over and the war in Afghanistan is winding down, we can’t allow Congress to dismantle the programs they created over the past 12 years,” said VFW National Commander William A. Thien.

Other than increasing benefits over the years, the military retirement program has been unchanged since World War II.

Unlike most civilian retirement programs, for which benefits start at age 65, military retirees receive retirement payments — half their average base salary from their three highest-paid years — right after they leave service.

But only 17 percent of those who join up serve 20 years or longer and qualify for retirement pay. For the 83 percent who don’t serve as long — including most Army, Navy, Marines and Air Force enlisted personnel who served in combat — there is no retirement benefit. The Defense Department doesn’t break down the number of retirees who served in combat.

On the other hand, a vast majority, about 76 percent, of those who join in their 20s do their 20 years and retire, according to a 2011 Defense Business Board study. Most get other jobs.

During the next 22 years, their annual retirement pay nearly doubles before they hit their mid-60s, thanks to COLA increases. At that point they also receive Social Security benefits, to which they have contributed.

An Army sergeant first class who retired at 40 after 20 years received an average yearly retirement payment of $23,000 in the first year. With a 3 percent COLA over the next 22 years, that payment would have grown to $44,000 by the time he or she had reached age 62, according to an analysis done for the MOAA.

To rally opposition to the measure, the MOAA is telling its members that same sergeant could see an average loss of more than $3,700 a year from the Murray-Ryan plan, or about $83,000 by the time he or she hits 62.

There is no mention of cutbacks that most federal civilian workers have faced recently, including a three-year pay freeze, unpaid furlough days, a 16-day government shutdown and, in the Murray-Ryan plan, an additional increase for new hires in their pension contributions.

The Obama administration, which has had almost no luck in getting Congress to reduce the growth of defense health-care costs, has turned the problem of corralling pensions and other personnel expenditures over to a Military Compensation and Retirement Modernization Commission, which is to issue a report by May 1.

In a Nov. 1 letter to the commission, then-Deputy Defense Secretary Ashton B. Carter made reference to other personnel pay and benefit reductions, but he ducked retirement.

“Although we have not made any specific retirement proposals, we would be glad to discuss our thoughts on the military retirement system informally with the Commission,” Carter wrote.

If the Murray-Ryan COLA reduction makes it through the Senate, and a handful of key Republicans have announced their opposition, it still faces hurdles. Sen. Carl M. Levin (D-Mich.), chairman of the Senate Armed Services Committee, said Friday his panel would review the proposal before its December 2015 effective date.

The Defense Department could take the lead in showing the country that entitlements can be reduced, but I fear chances of the plan’s survival on the congressional battlefield are slim.

For previous columns, go to washingtonpost.com/fedpage.

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