Cost doesn’t factor heavily in military compensation panel recommendations

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wfedstaff | April 18, 2015 12:55 am

The Military Compensation and Retirement Modernization Commission came away from its herculean task of revamping the Defense Department’s benefits with a mixed bag of recommendations.

Some of the 15 suggestions the experts revealed Thursday were obvious changes that have been needed for decades. Other recommendations are going to cause heartburn among military service members, retirees and their families, and on Capitol Hill.

Alphonso Maldon, the chairman of the commission, said all nine members were in unanimous agreement with the recommendations, and they believe all of them are not only needed, but achievable.

“We’ve said many times before that this is not a cost cutting drill, that our efforts were not to go out and cut costs,” he said. “Rather what we’ve done is we’ve focused on reforms that could modify the structure of the compensation programs in a way that would bring about effectiveness and efficiency to those programs and provide us with an opportunity to protect the benefits, or maintain those benefits or improve those benefits for the service members.”

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The process to get to these final 15 recommendations was long and exhaustive. The commission, which Congress created and the White House and the Defense Department helped construct the overall structure, got feedback from more than 150,000 active and retired service members, traveled to 55 military installations and met with every major military and veteran organization.

The commission focused on trying to answer three specific questions:

  • How best can DoD ensure it delivers its intended benefits to service members, their families and retirees?
  • How best to make sure DoD is delivering the benefits in an effective manner?
  • What is the clear path to modernize these services?

Over the last 18 months, Congress has punted on addressing this issue of restructuring military compensation and benefits. Time and again, lawmakers have preached patience for the commission to do its job.

DoD, on the other hand, submitted proposals in the fiscal 2015 budget request to reduce the military pay raise and the housing allowance, but didn’t address compensation and retirement benefits.

Through their research, the commission came away with some changes that their time has come.

One of those is ending the DoD program that gives assistance in the way of food stamps to service members. The commission said instead the service members, families or retirees who need help should sign up for the Agriculture Department’s Supplemental Nutrition Assistance Program (SNAP) to receive help.

Bob Daigle, the executive director of the commission, said only 285 service members were using the DoD food stamp program in 2013, and they could easily move to the USDA SNAP program and get more benefits.

FEHBP isn’t under consideration

Daigle said another obvious one is streamlining the commissaries and exchanges.

“Right now commissary patrons get groceries at cost plus a 5 percent surcharge. The recommendation is to maintain that, but to gather some efficiencies in the back office functions by combining the commissaries and exchanges into one organization with a single manager,” he said.

Another idea that should be an easy sell is letting the Montgomery GI Bill sunset. Daigle said the Post-9/11 GI Bill is more generous and the Montgomery GI Bill is more than 40-years old.

Then, there are several changes that will upset or at least make people uneasy.

The big one is the recommendation to change how members of the National Guard and reserves, families of service members and non-Medicare eligible retirees get insurance.

Daigle said the goal would be to give these groups more options in the health care market, and eliminate a hole in the coverage when members of the guard or reserve are called up to active duty.

“TRICARE for life, on the other end of the spectrum remains unchanged. Medicare eligible retirees would continue to have access to TRICARE for life. In the intervening period, for the family members, the guard and reserves and non-Medicare eligible retirees, they would have access to a menu of private sector insurance plans,” he said. “For active duty family members, there would be a new basic allowance for health care that’s created that compensates the family members for the costs of the private sector insurance. That includes the both the premiums for the private sector insurance and expected out of pocket costs.”

This change would not impact active duty service members. They still would use TRICARE.

Daigle said the families, guard and reserves and non-Medicare eligible retirees would not be put on the Federal Employee Health Benefit Program (FEHBP). DoD would have to create an entirely new insurance market, and this new insurance plan would have to accept under their coverage areas military treatment facilities.

The second hot button issue is around guaranteed retirement payments.

Three-step retirement

The commission would reduce the percentage of pay the 20-year veteran would receive to 40 percent of his annual pay for life from 50 percent. But the commission would substitute the lost money by doing three things.

First, after 12 years, the service member would get a cash payment or a retention bonus.

Second, the service member from the day they sign up would be enrolled in the Thrift Savings Plan (TSP) where 3 percent of their pay would be invested.

Third the government also would invest in the TSP on behalf of the service member.

Daigle offered an example of an E7 who retired after 20 years in the military. That E7’s defined benefit lifetime annuity would drop from $201,000 to $161,000.

But with the TSP investment, the retention bonus and the government’s contribution to the TSP, that same E7 would end up with $248,000, Daigle said.

“You are spreading the retirement benefit to a larger portion of the force,” he said. “Right now, somewhere between 17 percent and 19 percent actually reach 20 years of service and benefits from the current retirement plan. Under the proposed retirement plan, 75 percent of the force would get retirement assets.”

In all these 15 recommendations, the commission said, would save the government about $12.5 billion.

The commission’s chairman Maldon said the commission believes these recommendations would meet their goals of modernizing the retirement and benefits systems.

“It’s my hope that all of these will end up in legislation and be adopted,” Maldon said. “We have no clue what Congress will do. Our work is really, for the most part, is done. We’ve done the recommendations and Congress will work their will and will do what they believe is the right thing to do.”

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Alphonso Maldon, Military Compensation and Retirement Modernization Commission

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