Are military pensions too 'generous'?
Friday, August 19, 2011
WASHINGTON (AP) — It sounds like a pretty good deal: Retire at age 38 after 20 years of work and get a monthly pension of half your salary for the rest of your life. All you have to do is join the military.
As the nation tightens its budget belt, the century-old military retirement system has come under attack as unaffordable, unfair to some who serve and overly generous compared with civilian benefits.
That very notion, laid out in a Pentagon-ordered study, sent a wave of fear and anger through the ranks of current and retired military members when it was reported in the news media this month.
If pensions are to be cut, Congress should go first, one person said on the Internet.
"Obviously, we're concerned about it," said retired Gen. Gordon Sullivan, an Army chief of staff in the 1990s who heads the nonprofit educational group Association of the United States Army.
The Defense Department put out a statement this week stressing that it was only a proposal and no changes will be made anytime soon.
"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," Eileen Lainez, a Pentagon spokeswoman, said. "And no changes will be made without careful consideration for both the current force and the future force."
The upset was sparked by a nonbinding recommendation from the Defense Business Board, the Pentagon's private sector advisory panel. A July 21 draft report that could be finalized this month recommended pensions be scrapped and replaced with a 401(k)-type defined contribution plan.
The board members are from big businesses — experts, the Pentagon says, in executive management, corporate governance, audit and finance, human resources, economics, technology and health care.
Their report was strictly about dollars and cents, part of a review of Pentagon spending started under Defense Secretary Leon Panetta's predecessor, Robert Gates.
It didn't mention intangibles: Would such a change make military jobs less desirable? Is it possible to compare military and civilian employment? How much does a grateful nation feel it owes to the less than 1 percent of the population that volunteers to fight America's wars?
The report noted that military retirees start collecting pensions immediately upon leaving the service, rather than at age 65. That's a benefit without peer in the private sector, although there's a parallel in government. Some city police departments start retirement payments immediately, for instance.
The report also said:
—Members of the military who retire before 20 years get nothing. Those who work 20 years get pensions worth 50 percent of their pay. That amount ramps up to 87.5 percent for 35 years of service.
—That means 83 percent of service members don't get a pension, even after serving for 10 or 15 years, while 17 percent do get one.
—Though the job's risks are cited as a reason for keeping the 20-year system, most troops who see combat don't stay that long.
—Low-cost health care premiums for retirees on top of pensions make total retirement benefits "significantly more generous than civilian programs" and more expensive.
—The program's costs are "rising at an alarming rate" and "future liability will grow from $1.3 trillion to $2.7 trillion" by 2034.
The report recommended a new mandatory savings system for all personnel but with the government making contributions comparable to the highest level of civilian plans. There'd be an option for individuals to contribute too; payments wouldn't start until age 60 to 65. Pentagon contributions would be larger for those who had family separations and other unusual duty and double for years spent in a combat zone. The report said there would be no impact on existing retirees or fully disabled vets.
The current system hasn't been changed materially in more than 100 years. It was designed when people didn't live as long, second careers were rare and military pay was not competitive with civilian pay, the report said. It said skills used by soldiers, sailors, airmen and Marines are now transferable to the civilian world and that many people find second careers after retiring in their 40s.
That means they collect the pension as well as income from second careers.
Sullivan dismissed the idea that the average military retiree becomes enriched by the system, saying few go to work for big defense contractors or find other high-paying jobs. More commonly, a retiree might get about $1,400 monthly in pension pay and a second career that earns $50,000 or $60,000 annually, he said.
But holding change at bay may not be possible. Officials have said that finding savings in personnel costs like health care and pensions is a possibility. Everything is on the table as the department looks for some $350 billion in savings called for in recent legislation to decrease the national debt.
"It's the kind of thing you have to consider," Panetta said this week, adding any change must be done in a way that doesn't break faith with the men and women in uniform.
Such benefits were once sacrosanct — part of the bargain the nation makes with those who put their lives on the line to protect it. Many opposed to any change cite the profound sacrifices troops and their families have made over the past decade, with repeated tours of duty, a crisis of ballooning military suicides and hundreds of thousands of cases of mental health problems, just to mention a few effects of war.
"If we want an all-volunteer force, the bottom line is that we're going to have to take care of these people who were willing to do what the bulk of people weren't willing to do," Sullivan said. "Going to war is dangerous — you can get killed doing it. And the question is, Are the American people willing to recognize the sacrifices of these young people?"
Money for troops has flown freely from Congress with the tacit support of taxpayers over the decade, when pay was raised, as the report notes, to "higher than that of average civilians with the same education."
There was no public pushback against special recruiting bonuses, the GI Bill for college tuition and expenses for health care and other needs of troops and their families.
The question now is whether the depth of support widely expressed for the troops will be tested by the different times. U.S. financial woes are at center stage as the wars in Iraq and Afghanistan wind down. Pensions are becoming a thing of the past; more risky market-whipped 401(k) programs are the civilian norm.
Will taxpayers want to continue for troops the special and costly programs that they themselves are losing?
Says Sullivan: "Maybe. Maybe not."