The Pentagon wants to make even more changes to troops' retirement plan

The Pentagon is fending off criticism that another round of updates to the military's retirement system would benefit older career-minded personnel at the expense of younger troops who fulfill only a short-term obligation.

The proposed changes are outlined in the Defense Department’s 2017 budget request, revealed Feb. 9, which urges Congress to rework several pieces of the new retirement plan that was passed into law last year and is slated to take effect in January 2018.

“We absolutely do not agree that this is something that is trying to benefit the most senior people at the expense of junior people,” Defense Department Comptroller Mike McCord told Defense News, a Military Times partner, during an interview following the budget’s release.

“I think this has been misconstrued or mis-portrayed as something that is only going to benefit generals. This is for people, senior enlisted and senior officers, and we think these are changes we’ve proposed before that would help us manage the force better,” McCord said.
The Pentagon supports Congress's transition to a blended retirement system, which will shrink military pensions for future troops by 20 percent yet offer cash contributions to individual investment accounts for most troops, even those who separate long before serving a full 20-year career.

But now defense officials want Congress to make “modifications” meant to help the individual military services meet “retention needs,” budget documents show. Those proposed changes seek to:

Delay contributions for junior troops. The Pentagon wants to delay the start of government matching contributions to individual investment accounts until troops reach their fifth year of military service. Under the current law, matching contributions begin when troops reach their third year of service. Since about half of the enlisted force leaves the military before reaching five years, this change would significantly reduce the retirement benefit for the non-career force.

Expand contributions for senior troops. The Pentagon wants to extend government matching contributions for senior leaders by continuing matching payments until a service member’s retirement date. Current law suspends those contributions at 26 years of service. While only a small fraction of the force stays beyond 26 years, this change would have a big impact on those individuals. A 5 percent government match for someone at the O-6 pay grade — colonels in the Army, Air Force and Marine Corps, captains in the Navy — amounts to more than $500 monthly. For generals and admirals, it would be worth even more — and officials hope to boost the max contribution from 5 to 6 percent (see below).

Eliminate required bonus rates for mid-career troops. The Pentagon wants to remove the new retirement system’s mandatory minimum "continuation pay" for all troops reaching 12 years of service, and give the services flexibility to set continuation pay based on their individual needs. Current law ensures that all troops reaching 12 years of service receive continuation pay equal to 2.5 months basic pay. Removing the mandatory element of this benefit would make it similar to the existing system used for retention bonuses and would hit the less-competitive, easy-to-fill career fields hardest.

Boost the maximum matching contribution. The Pentagon wants to raise the current cap on government contributions to individual investment accounts to 6 percent of basic pay. Current law limits that to 5 percent. Theoretically this would impact most of the force equally. But in practice this revised benefit would flow to the troops and families who can most afford to maximize their own personal contributions and draw the bigger matching contribution.