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It’s time for Washington to act on military pay, benefits reform

It’s time for Washington to act on military pay, benefits reform
© Greg Nash

The headline states the case with stark clarity: “The 20-Year Military Retirement System Needs Reform.” The report, prepared by a government watchdog agency, argues that the existing military retirement system does a poor job of attracting and retaining the best quality personnel, and should be reformed to better reflect the force’s contemporary realities.

Here’s the kicker: The report was issued in 1978 by the General Accounting Office (GAO, known today as the Government Accountability Office). Nearly four decades later, the problems outlined then have grown more acute and the need for reform more pressing.

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Which is why the recent final report of the Military Compensation and Retirement Modernization Commission (MCRMC) is so important. This comprehensive 300-page document lays out a roadmap to responsibly reforming compensation, retirement and healthcare benefits for military personnel — and Congress should act on the recommendations.

It’s difficult to overstate how unsustainable the current system has become. A recent study by the nonpartisan Center for a New American Security shows how military compensation has risen steadily for the last quarter-century, while the number of personnel has fallen. According to the Center, the Department of Defense now spends almost three times as much on compensation per service member as it did at the end of the Cold War — with compensation, retirement and healthcare costs now the largest portion of our defense budget.

The enormous costs of retirement and health benefits are placing urgent budgetary pressure on the military. With each passing budget cycle, America’s armed forces look less like a lean-and-mean combat force and more like a health and retirement benefits organization that also fights wars. DOD benefits and bureaucracy have grown, while modernization and force structure have suffered. 

The existing system is also highly inequitable, with military retirement benefits only available to those who serve 20 years. Those who serve a shorter term — even with multiple combat tours — receive nothing. Today, 83 percent of service personnel depart the military with no form of severance pay. The top-heavy system is out of touch with the current realities of our all-volunteer force, as the DOD competes with much more flexible retirement plans available in the private sector.

Meanwhile, despite an ever-expanding federal budget, military funding is unlikely to stabilize in the foreseeable future, thanks to mandatory cuts under the ill-advised sequester. America’s growing national debt further increases budgetary pressures. These dynamics, along with an increasingly dangerous world, mean that each defense dollar must be spent wisely and strategically.

In contrast to the defense sequester and Ryan-Murray budget of 2014, the MCRMC made a concerted effort not to slash personnel spending, but instead to approach reform in a way that makes the system work better for everyone. How? By grandfathering current beneficiaries and retirees, while empowering future military personnel and their families with more and better options, particularly in the areas of retirement and health benefits.

Among the best reforms is the establishment of a 401(k)-style savings plan, with matching federal contributions, that provides troops who leave before 20 years with portable and flexible retirement savings. At the same time, the MCRMC recommends preserving a 20-year defined benefit plan, but with the option to defer the annuity until retirement age (65+) and instead take a lump-sum payment upon military retirement that is equivalent to several years’ base salary. Military retirees could use this lump sum to build a home, start a business, transition to new career or invest for the future.

Either way, both the 20-year retiree and the eight-year staff sergeant are taken care of — and both are afforded options for the next chapter of their lives.

Similarly, military health benefits would be bolstered by a plan that offers greater choice and flexibility by allowing military retirees, active-duty personnel and their families to choose among commercially available insurance policies that are specially tailored for military families.

These reforms will streamline the pay and benefits system while protecting the quality of life of currently serving personnel and military retirees. They also ensure, as any reforms must, that the all-volunteer force can recruit and retain the very best, while maintaining a high level of morale and readiness.

The MCRMC report has its critics, many of whom have an incentive to protect the existing system. But the goal cannot be to protect the status quo; the goal should be to ensure the system is tailored for today’s all-volunteer force, improves overall readiness and allows the DOD to focus more resources on war-fighting capabilities.

But what about the explosion of nondefense mandatory spending programs? Or generous, and unsustainable, civilian federal retirement pensions? I certainly concur that these must be addressed immediately, and preferably first. But the existence of other federal government spending excesses does not mean defense reform should not be pursued. Aggressive spending reforms must be pursued across the board, but the military, as always, should lead the way — for its own good.

If the United States hopes to maintain the most powerful military in the world, and recruit and retain America’s best, the status quo is unsustainable and irresponsible. The thoughtful reform proposals presented by the MCRMC are a big step in the right direction.

Hegseth is CEO of Concerned Veterans for America. A U.S Army infantry veteran, he served tours in Afghanistan, Iraq and Guantánamo Bay.