The Military Compensation and Retirement Modernization Commission released its recommendations Thursday after more than a year of work, surveying well over a million people in the military community about hundreds of pay and benefits issues–and the final list of recommendations, if fully implemented, would eventually save the government more than $12 billion a year.
The initial savings would be much more modest, according to data from the commission: a baseline-level cost estimate shows the federal government spending $961 million in the first year, saving only $160 million in the second year, and jumping up to saving $3.85 billion in the third year. The federal government would save $5 billion a year by 2029, $6 billion a year by 2033, $10 billion a year by 2046 and $12 billion a year by 2051. The commission provided a baseline cost estimate, as well as high-cost/low-savings and a low-cost/high-savings alternatives.
The bulk of the savings would impact the Defense Department budget, with the Pentagon saving $4.8 billion in the first year and leveling out at more than $8 billion a year in savings in the baseline estimate. In a defense budget of more than half a trillion dollars, the savings are relatively small–but they would alleviate some of the pressure of sequestration, which lawmakers have not allowed to hurt pay and benefits accounts and therefore the cuts have disproportionately fallen on research and development and acquisition accounts.
The commission made 15 recommendations meant to modernize and improve the value of the compensation package offered to service members–with the idea being to strengthen the all-volunteer force. Some ideas have a cost associated with them, such as adding financial literacy training and boosting health care readiness.
But retirement and health care reforms would generate significant savings. Under the plan published by the commission, TRICARE would go away for military families, guard and reserve members and non-Medicare-eligible retirees. The commissioners would “replace TRICARE as it is today with a menu of private sector insurance plans” and add a base allowance for health care to service members’ paychecks to cover the premiums and out-of-pocket costs for their families’ health insurance plans. Several commissioners, speaking to reporters on Thursday, said the move would improve the quality of care while saving money. Active duty troops would see no change in their health care.
On retirement, the commission recommended paying service members who retire after 20 years only 40 percent of their base salary each year for life, rather than the current 50 percent. Troops and DoD would also pay into a Thrift Savings Plan, resulting in the vast majority of service members seeing some kind of retirement pay when they leave the military instead of the about 17 percent who receive retirement pay now.
The retirement change would be grandfathered in instead of affecting those currently in the military, but all other recommendations, if adopted by Congress, would be implemented immediately.
“We have said many times before that this is not a cost-cutting drill, that our efforts were not to go out to cut,” commission chairman Alphonso Maldon said at the press event. Still, the savings would go a long way in increasing the fiscal viability of military compensation programs.
“It’s my hope all of them would end up in legislation, be adopted,” he said. “We don’t have a clue what Congress is going to do–our work is really for the most part done, we’ve done the recommendations and it’s entirely up to Congress. I’m sure they’ll work their will, and they’ll do what they think is the right thing to do.”
House Armed Services Committee ranking member Rep. Adam Smith (D-Wash.) released a statement after the report’s release, noting that while “the brave men and women of our armed forces have earned and deserve the top-notch compensation and retirement packages that they receive…the Department of Defense continues to function in a very difficult financial environment, partially due to growing personnel costs.
“Personnel cost have maintained approximately 25 percent of the total defense budget although the size of the force has been reduced by about half since 1990. That means the Department of Defense pays far more per service member today than it did 25 years ago,” he said. “The Congressional Budget Office estimates that the cost of healthcare will go from about $50 billion in fiscal year 2015 to $84 billion over the next 10 years and, over that same period of time, payments to retirees will increase from nearly $53 billion per year to $69 billion per year. Those are telling statistics that underscore DoD’s financial challenges. With that said, there are no easy solutions to this challenge. Congress has struggled to address military pay and benefits for years, and I am hopeful that, after careful review, the commission’s recommendations will present Congress with an opportunity to finally begin to address this issue.”
Defense Secretary Chuck Hagel released a statement saying that the recommendations would not be reflected in the fiscal year 2016 budget request he will release on Monday, but that the recommendations would be debated throughout the year.
“At the Pentagon, in Congress, and at bases around the world, these recommendations will be the subject of much discussion and debate. They should be. And as we decide how to move forward, we have to remember the two highest and most solemn obligations this country has to its military: to ensure our troops and their families are fairly and appropriately compensated and cared for during and after their time in uniform, and to provide our troops with the best training and equipment possible–so that whenever America calls on them, they are prepared to accomplish the mission and return home safely to their families.”