From the Army Times:
A sweeping new plan to overhaul the Pentagon’s retirement system would give some benefits to all troops and phase out the 20-year cliff vesting system that has defined military careers for generations.
In a massive change that could affect today’s troops, the plan calls for a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension, according to a new proposal from an influential Pentagon advisory board.
All troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years.
What most fascinates me is the continued use of the word “fairness.” It’s not fair that people who separate from the military after only a few years leave without any retirement benefits. Yes, it is. And has been. Soldiers know up front that the only way to receive retirement benefits is to serve 20 years. How is that not fair?
“The current system is unfair, unaffordable and inflexible,” said Richard Spencer, a former finance executive and Marine Corps pilot who led the board’s eight-month retirement study.
This alternative plan would “enhance the ability of the service member to build a meaningful retirement asset [with] complete flexibility for their lifestyle or desires,” Spencer said.
There’s that word again. One of the President’s favorites.
And what of the Soldiers, Sailors and Marines currently in the service? Let me redefine the use of unfair: rather than grandfather those currently in service, the plan calls for immediate adoption of the new program, which would require Congressional approval. How would this effect military members? Let me count the ways:
• Recruits. The newest troops out of boot camp after the proposed change would have no direct incentive to stay for 20 years and would not get a fixed-benefit pension. Instead, they would receive annual contributions to a Thrift Savings Plan account and could leave service with that money at any time — although under current rules, they can’t withdraw the money until age 59½ without paying a penalty, except in certain specified circumstances.
• Five years of service. Troops would immediately begin accruing new benefits in a TSP account. If they remained in service until the “old vesting date” — the 20-year mark — they also would get one-fourth of the “old plan benefit,” or about 12 percent of their pay at retirement, as an annuity. If they separated, for example, after 10 years, they would walk away with no fixed-pension benefit but would have a TSP account with five years of contributions.
• 10 years of service. Troops would immediately begin accruing new benefits in a TSP account. If they remained in service for 10 more years, they would receive half of the “old plan benefit,” about 25 percent of their pay at retirement, as an annuity. If they separated after 15 years, they would walk away with no fixed-pension benefit but would have a TSP account with five years of contributions.
• 15 years of service. Troops would immediately begin accruing new benefits in a TSP account. If they remained in service for five more years, they would receive three-fourths of the “old plan benefit,” about 37.5 percent of their pay at retirement, as an annuity.
• 20 years and beyond. Troops who stayed in past 20 years would continue to receive annual TSP contributions.
For professional soldiers like my husband, this is a big slap. I reminded pjHusband last night that we all had to make sacrifices at this point because they government can’t pay its contracts. Even those with the military. That said, if we take a big bite out of our retirement, I want to know where equal cuts are made. $254 billion on the backs of those in military service? Show me the big cuts in entitlement programs. Show me the money, eh? Surely not the Social Security recipients or folks within 5 years of receiving benefits. Why is it now that Social Security can’t be reformed–because people have paid into it? What about the folks who’ve given up years with their families at home in war zones, eh? Different sacrifice, I’m sure.
Related: The military can take significant cuts but entitlements can’t?