No Military Retirement Changes Anytime Soon

Washington — Pentagon planners may be closer than ever to radically overhauling the military retirement system, threatening an end to the longstanding practice of guaranteed lifetime payouts for retirees with 20 years of service.

Last month, officials from the Defense Business Board outlined their plan for changing the way military retirees are paid, abandoning the 20-year service target in favor of a 401(k) style plan.

That board is expected to issue final recommendations later this month, just a few weeks before a congressional panel begins its own three-month push to find billions in spending cuts (and possibly new taxes) to balance the federal budget. Budget analysts say that puts everything under scrutiny, including military retirement benefits.

Going back 40 years, this is something that has always been talked about,” said Todd Harrison, a fellow for defense studies at the Center for Strategic and Budgetary Assessments. “But it’s getting more serious attention now than it has in the past.

“In the current environment, when you’re looking at major changes to entitlement spending like Social Security and Medicare, that makes it easier to talk about changing military retirement.”

On Tuesday, Defense Secretary Leon Panetta said that no changes in military retirement have been finalized, but he reiterated that they are under consideration. That includes breaking away from the 20-year plan, and possibly reducing the generous payout that future retirees will be eligible for.

The current military retirement systems act essentially the same as a corporate pension plan. Anyone who serves at least 20 years is eligible to receive payouts equal to at least half of their military pay (and up to 75 percent of it, if they serve longer) starting the day they retire.

Those payouts continue for the rest of the veteran’s life. Those who serve fewer than 20 years receive nothing.

The Defense Business Board’s proposals would act more like a corporate investment program or 401(k) plan, offering partial benefits payouts to individuals who serve at least 10 years. Money would be invested in the military’s Thrift Savings Plans, allowing them to accumulate interest.

Board planners argue that such a move would more equitably distribute the department’s retirement funds. Currently, 83 percent of all military personnel receive no retirement payouts from the department.

But it could reduce the payouts for troops who serve more than 20 years, since they’ll be tied to a fixed sum of money, instead of the endless annual payouts.

An Armed Forces Press Ser­vice report cites assur­ances made to ser­vice­mem­bers at Kan­da­har Air­field, Afghanistan in late July by Navy Adm. Mike Mullen and state­ments by Defense Sec­re­tary Leon E. Panetta in early August.

Adm. Mul­lens told troops that there is “no imme­di­ate plan to affect retire­ment” and any changes to mil­i­tary retire­ment should be stud­ied care­fully and should be “grand­fa­thered” so the mil­i­tary doesn’t break faith with those in the ser­vice.

In a pos­si­ble attempt to calm the reac­tion, Sec­re­tary Panetta said that the pro­pos­als to change mil­i­tary retire­ment are only being used to “inform the deci­sions and strate­gies.”

Pen­ta­gon spokes­woman, Eileen Lainez, said, offi­cials are review­ing the board’s rec­om­men­da­tions. “Any rec­om­men­da­tion to change the mil­i­tary retire­ment sys­tem must be approached with thought­ful analy­sis, to include con­sid­er­a­tions of impacts to recruit­ing and reten­tion,” Lainez said. “While the mil­i­tary retire­ment sys­tem, as with all other com­pen­sa­tion, is a fair sub­ject of review for effec­tive­ness and effi­ciency, no changes to the cur­rent retire­ment sys­tem have been approved, and no changes will be made with­out care­ful con­sid­er­a­tion for both the cur­rent force and the future force.