IAVA | July 10, 2015
Read: Blended military retirement reform will financially empower troops
One month after the Sept. 11 attacks, I stepped into my local U.S. Army recruiting station and enlisted. I was a 19-year-old from suburban Chicago who wanted to serve his country, but I also wanted to learn as much as I could about military training and benefits. Before signing on the dotted line, I wanted answers to a few questions that I had written in a notepad I brought with me. The first thing on my mind was preparing for the physical challenges of boot camp; the last thing on my mind was retirement. I did, however, have a question written down relating to retirement. “How long does a soldier need to serve to earn a pension, staff sergeant?” I asked.
“Twenty years, kid,” he replied.
Retirement benefits have historically been utilized for the dual purpose of incentivizing longterm service commitments from troops and providing financial security in the next chapter of life, postmilitary service. While certain categories of service members may retire early for medical reasons, the vast majority of military retirement benefits have traditionally been awarded to those who serve for the long haul and give 20 years or more. These”military retirees” take off the uniform for the last time and earn a pension benefit in which they collect 50 percent of their last salary as stated by their leave and earnings statement.
In comparison to other national issues, the White House and Congress have historically approached military and veteran issues in a bipartisan manner. Despite this longstanding cooperation, Congress is now faced with the challenges of addressing the longterm fiscal sustainability of compensation benefits. The Military Compensation and Retirement Modernization Commission (MCRMC) was created by Congress to examine how to maintain quality benefit programs for service members while identifying opportunities to alleviate federal fiscal deficits. This bipartisan commission is comprised of many defense experts and former elected officials, many of whom gave their entire careers to the nation in uniform.
Created in 2013, the MCRMC was charged with studying the current structure of military benefits and recommending reform proposals aimed at modernizing how benefits are handled. The MCRMC has done its due diligence and has met with military and veteran advocacy organizations frequently over the last two years. The resulting report, and the 15 reform proposals the commission produced, have spurred passionate debate across Washington and the country on the topic of retirement benefits. The report covers many current benefit programs, and Iraq and Afghanistan Veterans of America (IAVA) and other veterans groups have spent months studying its content. This report has generated many ideas and most importantly, in our view, is creating the opportunity for service members to utilize “blended retirement plans.”Expected to become law in 2017, the new retirement reform states, in basic terms, that if you serve for 20 years or more, you will still collect a pension but with a slight reduction in the payout “vesting” amount to military retirees. A slight pension shift away from the 20 year retiree will be balanced to the benefit of the vast majority of service members who currently do not serve the full 20 years.
IAVA has been at the forefront of these discussions on retirement reform negotiations. Testifying in front of both the House and Senate Armed Services Committees, we urged careful consideration of the proposals while at the same time calling for blended retirement reform for many of our midcareer service members and protection of veteran education benefits.
IAVA is optimistic that Congress has adopted — and will likely keep in the final agreement — this blended retirement reform that, once implemented, will provide more security and diversified financial planning options for so many of our veterans that currently would not have those financial supports if they left the military midcareer. Currently, too many veterans leave the service with limited financial security and find themselves behind their civilian peers who were afforded 401Kstyle retirement plans, having begun their retirement planning much earlier.
All service members will now be eligible to receive government matching funds through portable Thrift Savings Plan (TSP) accounts. These reforms are set to kick in during the 2017 fiscal year, in which 83 percent more of the current force will become eligible for blended retirement benefits. Recent survey data of IAVA’s membership base informed us that 67 percent of those polled favored the 401kstyle retirement reform proposal.
Too often, our members have deployed for multiple tours overseas and for unforeseen reasons, but cannot continue on to the 20 year mark and are thus unable to receive retirement benefits. This change will empower many more veterans to plan earlier in their career for retirement while exerting more confidence in their ability to transfer into a second career in the event they decide to leave service before the 20 year mark.
Congress is now working out the differences between the House and Senate versions of the National Defense Authorization Act (NDAA) for 2016. IAVA urges the conference committee to keep the blended retirement reforms, along with the financial literacy trainings that are critical for service members, in the final version of the bill.
We certainly know that not every reform is perfect and have fought hard to make sure that our members’ concerns have been voiced to the MCRMC, Congress and the White House. Blended retirement reform will be a huge win for IAVA members and the veterans community at large. The MCRMC, Congress, the White House and the veterans community have worked hard to get retirement reform right and achieve a balance between sustaining key benefit programs
while stewarding taxpayer dollars. Although not every reform is what all stakeholders wanted, this package works and this is good news for the future of our military force.
This piece was originally published in The Hill.