Feds Consider Changing Military Retirement System from Pensions to 401ks with Normal Retirement Age and Trimming the Military's $50 Billion-a-year Health Care System

New legislation aims to cut federal pensions for all new employees hired after 2012, citing a need to bring benefits in line with those in the private sector. Sen. Richard Burr, R-N.C., on Thursday introduced a bill (S. 644) that would eliminate the pension portion of the Federal Employees Retirement System for all new government hires beginning in 2013. The legislation would not affect Thrift Savings Plan benefits and agency-matching contributions. Nor would it affect FERS pensions for current federal employees and retirees. It would, however, apply to members of Congress. [Senator Proposes Cuts to Federal Annuity Benefits, Government Executive, March 18, 2011]

In addition, an influential panel of military advisors called the Defense Business Board laid out their plan in a 24-page presentation, “Modernizing the Military Retirement System,” which would eliminate the familiar system under which anyone who serves 20 years in the U.S. military is eligible for retirement at half their salary. Instead, they’d get a 401k-style plan with government contributions and have to wait until the normal retirement age. [See following article.]

Military Eying Radical Change to Retirement Pay

August 15, 2011

Colonel6's Blog – The military retirement system has long been considered untouchable – along with Social Security and Medicare. But in these days of soaring deficits, it seems everything is a potential target for budget cutters.

A Pentagon-sponsored study says military pensions are no longer untouchable – they’re unaffordable.

CBS News investigative correspondent Sharyl Attkisson reports high-level, closely-held meetings are taking place at the Pentagon regarding a radical proposal to overhaul retirement for the nation’s 1.4 million service members – a bedrock guarantee of military service.

The proposal comes from an influential panel of military advisors called the Defense Business Board. Their plan, laid out in a 24-page presentation “Modernizing the Military Retirement System,” would eliminate the familiar system under which anyone who serves 20 years is eligible for retirement at half their salary. Instead, they’d get a 401k-style plan with government contributions.

They’d have to wait until normal retirement age. It would save $250 billion dollars over 20 years.

Douglas Holtz-Eakin, former director of the Congressional Budget Office says it’s very important that the military attack its retirement issues.

“We’re talking about an underfunding that starts to look like hundreds of billions of dollars in the next 20 years. And if you want to maintain the core mission which is to defend the nation and have the strategic capabilities we need, we can’t have all their money tied up in retirement programs.”

Advocates say the new system would not only save money — but would also be fairer. It would give benefits to those who serve less than 20 years. Right now, they walk away with nothing. And it would give more money to those in combat or high risk situations.

The proposal leaves a lot of blanks to be filled in, including whether to exempt current service members so their plans won’t change.

CBS News spoke to some active duty troops who agreed costs must be cut – but worry the number of experienced soldiers will dwindle with no incentive to stay enlisted for 20 years.

The proposal is in early stages and would require Congressional approval. But it’s clear that military retirement is no longer untouchable. A Pentagon spokesman said the military retirement system “is a fair subject of review” but no changes will be made “without careful consideration.”

Gates Goes after Military Health Care

January 7, 2011

Associated Press - Defense Secretary Robert Gates is betting that the nation's frustration with a ballooning deficit will allow him to trim the military's $50 billion-a-year health care system.

Gates' proposal, announced this week, would raise fees only on military retirees under the age of 65, who presumably have access to health care in their civilian jobs and haven't seen a rate increase in more than 15 years.

But Gates has tried and failed to push similar proposals through Congress before. And his push this year is particularly fraught with political risk. President Barack Obama is defending his own health care plan from threats of repeal in the House, while Republicans are looking for ways to discredit the administration's commitment to the troops ahead of the 2012 elections.