The commission tasked with finding ways to overhaul expensive military pay and compensation recommended allowing service members to enroll in a thrift savings plan but would cut retirement benefits for long-time personnel.
The Military Compensation and Retirement Modernization Commission estimated that its recommendations could generate $12 billion in savings.
The most anticipated idea, that the panel approve service members gaining more control over their retirement, was the commission’s first of 15 recommendations.
Members could contribute a percentage of their pay to the plan, which is like a 401(k), with an automatic 1 percent match by the Department of Defense.
Also recommended was automatically enrolling new service members into the plan with a starting contribution level of 3 percent, and allow service members to raise or lower their contributions at anytime. The Pentagon would begin matching contributions up to a maximum of 5 percent of basic pay after two years of service.
The increased retirement investment flexibility would come at the cost of reduced retirement payments to members who reach their full 20 years of service. Currently service members who reach a full 20 years of service become eligible to receive 50 percent of their base pay for the rest of their lives. The commission recommended that retirement payment be cut to 40 percent of their base pay.
The recommendation “spreads the retirement benefit to a larger percentage of the force,” said Robert Daigle, executive director of the commission. Under the proposal, “75 percent of the force would get retirement benefits.”
The commissioners said that the cost savings would come from matching for retirement up front and over the course of a member’s military career rather than having to maintain funds to meet unfunded liabilities of future retiree payouts.
A key to the new retirement plan would be that military members who are set up with automatic 3 percent contributions from their salary, even if they elect to reduce their contributions to zero, would be automatically re-enrolled every year at the 3 percent level. The commission is counting on members not going through the steps to unenroll each year, leading to more participants.
The commission also recommended that the government’s military health care plan, TRICARE, be reformed to move families into private-sector insurance plans.
Health care for active duty member, guard and reserve forces would remain the same, the commission said, but family members and some retirees would be moved to and compensated for private-sector insurance.
Members eligible for Medicare and TRICARE for Life would remain on that program, Daigle said.
But the commission said moving military families into the federal healthcare marketplace was “not practical” given military members specific health care needs. Instead, the commission said moving families off of TRICARE would require a “whole new plan” for health care.
“These are the recommendations we think are absolutely critical,” said commissioner chairman Alphonso Maldon, who served as an assistant secretary of defense from 1999 to 2001.
The commission was asked to reduce the inequity between service members who serve 20 years and are then eligible for full retirement benefits, and those members who leave the service prior to that and lose all of those accrued benefits.
The recommendations will need to be debated and approved by Congress.
This article was originally published at 1:35 p.m. and has been updated.
