MILITARY UPDATE: Second plan to cut benefits surfaces
Military members and retirees have more financial darts to dodge after a second bipartisan task force on reducing the nation’s debt unveiled a different set of cost-cutting recommendations last week.
The Debt Reduction Task Force, co-chaired by former Republican Sen. Pete Domenici and economist Alice Rivlin, takes sharper aim at the military community including active duty forces at war in Afghanistan.
In the unlikely event Congress approves the Domenici-Rivlin plan for cutting military retirement, members who haven’t served more than 15 years would find themselves under a cheaper, “more flexible” and complex plan.
Proponents argue that many more members under the proposed plan would qualify for some retirement, at age 60, if they serve 10 years or more. But completion of a traditional 20-year career no longer would qualify for an immediate annuity on leaving service. Retired pay would begin at age 57.
Debt Panel II, as it might be called, began its work in January at the Bipartisan Policy Center, a Washington D.C. think tank founded by four former Senate majority leaders.
Like last week’s report from the National Commission on Fiscal Responsibility and Reform, co-chaired by Alan Simpson and Erskine Bowles, this report warns of an approaching debt tsunami that could destroy American prosperity if government spending isn’t slashed and taxes raised.
Among scores of initiatives are recommendations to raise social security payroll taxes, cap medical malpractice awards, freeze defense spending for five years and reduce active force strength by 275,000.
Both this and last week’s report recommend adoption of a modified Consumer Price Index to dampen annual cost-of-living adjustments (COLAs) for federal entitlements including military and federal civilian retired pay, social security, veterans’ compensation and survivor benefits.
Both reports also call for cutting military retirement and having TRICARE beneficiaries pay more out of pocket for coverage. But the Domenici-Rivlin panel would wield a shaper knife on both major benefits.
On retirement, Debt Panel II embraces reforms proposed by the 10th Quadrennial Review of Military Compensation in 2008. The idea is to allow more members to earn some retirement — making the plan more “fair” and, for force managers, more flexible — while slashing overall program costs.
Two of four features, a defined annuity and a government-funded Thrift Savings Plan (TSP) with vesting after 10 years, would apply to all who get pushed under the new plan.
The services would control the plan’s other two features: “gate pays” to help draw members to time-in-service milestones, and separation pay.
Critics argue the plan is too complex and would leave members confused as to the real value of their retirement. The quadrennial review proposed that the plan be tested on a few thousand volunteers. That wasn’t done.
Recommendations targeting TRICARE also are pulled off the shelf — they were part of President George W. Bush’s final defense budget request, provisions that Congress simply had ignored.
Domenici and Rivlin note again that TRICARE fees haven’t been raised since they were set in 1995 and, at the time, covered 27 percent of program costs. Now the frozen fees cover only 11 percent. And Medicare-eligible retirees, the report says, “currently do not share in their TRICARE costs.”
So Debt Panel II says TRICARE fees for working-age retirees should be raised high enough to again cover 27 percent of costs, among other changes.
Domenici quoted Adm. Mike Mullen, Joint Chiefs chairman, as calling rising U.S. debt “the most serious threat to America’s national security.”
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