spending on military and federal civilian retirement by $70 billion over 10 years by making them look more like private civilian systems, through such means as: • deferring any retired pay COLAs until age 62, with a one-time catch- up adjustment at age 62 to reestab- lish what retired pay would have been with interim COLAs; • shifting to a high-five-year average salary base to compute retired pay for newly retiring federal civilians (versus the current high-three-year average); and • increasing federal employee con- tributions sufficiently to cover half the cost of the benefit. The commission cochairs’ plan
released in November 2010 endorsed all of those initiatives and more. Another panel, cochaired by
former CBO Director Alice Rivlin and former Senate Budget Commit- tee Chair Pete Domenici (R-N.M.), proposed shifting the military to a
401(k)-style system under which members would be vested at 10 years of service, and eligibility for retired pay would be delayed until age 57. The Rivlin-Domenici plan envi- sioned applying the new system to all currently serving personnel with less than 15 years of service. MOAA has a fundamental prob- lem with making military retirement “look more like civilian systems.” The military system is unique precisely be- cause it is intended to offset decades of extraordinary demands and sacri- fices that aren’t required of civilians. Congress enacted military retire-
ment reform once before in 1986 that reduced benefits and cut COLAs for entrants after that date — and then had to repeal those cuts when they caused significant retention prob- lems by the late 1990s. Now, having seen the most arduous military service conditions in genera- tions, government officials are propos- ing even more severe cuts than those
that previously were proven to under- mine military readiness. Imagine a 10-year servicemember facing a fourth combat deployment being offered a choice between: • leaving service for a civilian career and receiving a pro-rata military re- tirement at age 60 or • being required to continue serving under these conditions until age 57 to draw retired pay. MOAA believes strongly that, if this
system were in effect today, the effect on retention would be devastating.
COLAs The fiscal commission proposed ad- justing the CPI methodology to the so-called chained CPI calculation as a means of holding down COLA growth for Social Security, military and federal civilian retired pay, and all other federal annuities over time. The Rivlin-Domenici panel also
recommended adopting the chained CPI for all federal annuities.
COLA Power
Defense actuaries project inflation will average 3 percent a year over the long term. At that COLA rate, a 20- year retired servicemember’s pay would double by age 65 and triple by age 80. Roughly half of all lifetime retired pay for a typical 20-year retiree will come from COLAs.
$240,000 $200,000 $160,000 $120,000 $80,000 $40,000
• Initial retired pay • Added value of 3% annual COLA
42
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54 84 MILITARY OFFICER MARCH 2011
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