Military Update: House panel votes 55-8 for 'blended' military retirement plan

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Military Update: House panel votes 55-8 for 'blended' military retirement plan

by: Tom Philpott | .
Military Update | .
published: May 01, 2015

Despite vigorous opposition from a few colleagues who are military retirees, the House Armed Services Committee voted overwhelming on Wednesday to give future generations of service members something different from the all-or-nothing 20-year retirement system the military has relied on for seven decades.

The 55-8 vote was so lopsided that the last member to cast got a laugh by asking if his yea or nay would be decisive.  In the next moment Rep. Jeff Miller (R-Fla.), finding himself on the wrong side of a bipartisan trouncing, drew guffaws by asking that his vote be changed so he joined in rejecting another delay to reforms.

In approving its fiscal 2016 defense authorization bill (HR 1735), the committee endorsed almost every feature of the retirement recommendation shaped over the past two years by the Military Compensation and Retirement Reform Commission.  If the full House next month, and later the Senate, accepts the same plan, it would take effect for all new entrants on or after Oct. 1, 2017.

Current military members, whether active or reserve, could stay under their current High-3 plan or opt in to the new “blended” retirement package.  One ingredient is a 20 percent cut to the old annuity formula of 2.5 percent of basic pay for each year served out to 20 or more.  The new 2 percent per year formula would provide 40 percent rather than 50 percent of basic pay on completing 20 years.

But the new plan is called “blended” because it combines that annuity with a 401(k)-like Thrift Savings Plan (TSP) under which the government would match member contributions up to five percent of basic pay.  TSP growth would be helped too by an automatic 1 percent added government contribution yearly, and accounts would be fully vested to roll into civilian employer plans after only two years.

The third key feature is a continuation payment at the 12 years’ service mark.  At a minimum this would equal two-and-half months of basic pay for active duty careerists, or a half month of active duty basic pay for reserve component participants, assuming they agree to serve four more years, out to 16.

The commission says both active and reserve component personnel who participate in the blended new plan from its start, contributing at least three percent of basic pay with four percent government match, and investing appropriately in TSP funds that have average returns since 2001 of 7.3 percent, will see lifetime retirement benefits that exceed those of current military retirement.

The House committee accepts this. However it modified the commission plan in two ways: one by allowing government matching of TSP contributions beyond 20 years’ service; two by rejecting a commission recommendation to allow members under the blended plan to opt for a cash payment instead of military annuities out to age 67, when inflation-protected annuities would begin alongside social security.

Whether the full committee would vote for these changes seemed uncertain for a time late Wednesday when Rep. Chris Gibson (R-N.Y.), a decorated retired colonel with a 29 years total service, including four combat tours in Iraq, offered an amendment to strike retirement reform from the bill.

“We need to do more education on this,” Gibson told colleagues.  “We are talking about the complete overhaul of the military retirement system.”

Some features “our troops and families are going to really like.  But [other] aspects…are not fully understood, and I do expect they’ll oppose them,” Gibson said.  The 20-percent cut in annuities, for example, might be offset by TSP growth, he conceded.  But because military folks “are not tracking this major change,” he urged another year’s delay so he and other lawmakers could get more feedback.

Members of Congress needed time to conduct “listening sessions” with military folks in their districts.  He also warned how the Redux military retirement plan was enacted for new entrants effective in 1986 but had to be repealed by 1999 when career retention rates began a steep slide.

Heck countered that commissioners themselves had “spent two years in listening sessions, multiple town halls all across the country, thousands of hours and multiple surveys before they came to this recommendation.”

Also continuation pay and the matching of TSP beyond 20 years of service, Heck said, should alleviate worries that this is a repeat of Redux.  And setting a start date of October 2017 gives Congress and the Pentagon time to seek changes.

Meanwhile the plan is strongly supported by younger troops who otherwise won’t get any retirement benefits under the current plan because 70 percent leave within six years of entering service.

“This isn’t change for change sake,” agreed Rep. Susan Davis (D-Calif.).  “This is something that can make a difference for [military] men and women.”

Those who seeking more delays and fresh feedback from the current force, Thornberry suggested, need to bone up on the issue’s history.

“It’s important…to remember this proposal did not just spring out of this commission…There has been concern for sometime that a system where you don’t get a dime of retirement unless you stay in the military for 20 years is [not] going to enable us to attract and keep the kind of top quality people we need,” said the committee chairman. “Eighty-three percent of the people who serve in the military leave without a dime of retirement.”

“Yeah we can study and do all sort of things indefinitely, as has happened before,” Thornberry said.  The better path however, he said, is to build on what the commission recommended, improve it and then continue to listen to service chiefs, military members and associations on how well it’s working.

Given human nature, military members “are not going to focus in on the best choices for them until it’s real.  That’s why we need to make it real,” Thornberry said, but allow for a year to educate members on the choices ahead.

“It makes no sense whatever to delay this further.  In effect you’re just going to kill it,” Thornberry said, adding, “This is absolutely the time we have to do it.  As we work to improve acquisition, work to improve overhead, we must also act to improve our personnel system to attract and keep people.”

The committee’s ranking Democrat, Rep. Adam Smith (Wash.), said Gibson “could not be more wrong” in claiming retirement changes needs more study.

“We have been talking and studying and discussing and theorizing about the retirement system in the military since I’ve been in Congress,” said the nine-term congressman.  “So the idea that…we need more time boggles my mind.”

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