An overhaul that could save the government more than $12 billion a year.
By Roxana Tiron, Bloomberg |
Updated on January 29, 2015
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(Bloomberg) — Future U.S. military families and retirees should be given a choice of health-insurance plans and help paying the premiums, according to an independent commission that looked at ways to update benefits and slow the growth of personnel costs.
The Military Compensation and Retirement Modernization Commission also suggested adding 401(k)-style retirement accounts to the mix of military benefits.
Those and other recommendations could save the government more than $12 billion a year, according to the commission’s report.
Convincing Congress to make any of the proposed changes would would be a hard sell. Lawmakers say that there’s reluctance on Capitol Hill to doing anything that might be seen as diminishing military pay or benefits, even though those costs are eating into a constrained Pentagon budget.
“It’s not a very good appetite for anything unless we can prove to people that it is absolutely necessary to make some reforms,” Senate Armed Services Committee Chairman John McCain of Arizona told reporters.
“By and large, military retirees are very satisfied with what they are paying for their health-care and the retirement that they receive. And they don’t want to see change,” Representative Adam Smith of Washington, the top Democrat on the House Armed Services Committee, said in an interview.
Personnel spending accounted for about 28 percent of the Defense Department’s base budget in fiscal 2014, according to the Congressional Budget Office. The independent commission was formed to look at options to update benefits and make personnel costs more sustainable so that more money could be available for weapons, deployments and other costs.
The commission proposed that any changes to the compensation structure be made for future service members so that those now serving would keep their current benefits.
Among its recommendations:
– Move retirees, National Guard, Reserve members and military family members off the military health plan known as Tricare and give them a choice of commercial health-insurance plans. Continue to provide free health care at military facilities for active duty service members.
– Give those on private insurance a government allowance for paying health-care premiums or co-pays.
– Eliminate duplicative education programs and allow service members who serve 10 years and commit to another two years to transfer the GI Bill schooling benefits to their dependents.
– While continuing to provide a defined pension benefit for military personnel, also allow them to enroll in a 401(k)- type savings plan that would include some matching contributions from the government. The federal government has a program called the Thrift Savings Plan. Under the proposal, current military members would be grandfathered into the present system and wouldn’t see changes to their defined pension benefit.
The commission’s report said that recommendation is intended to blend “the recruiting benefits of a modern 401(k) plan with the retention benefits of the current retirement annuity, lump sum career continuation pay and retention bonuses paid at important career milestones.”
Smith said the 401(k) proposal might be attractive to those interested in remaining in uniform for less than the 20 years it takes to qualify for the defined pension benefit.
“We don’t have a clue what Congress is going to do,” one of the commission members, Alphonso Maldon Jr. said at a press conference.
Hearings on the recommendations will be led in the Senate by Lindsey Graham of South Carolina, chairman of the Armed Services Personnel Subcommittee.
Graham said his starting position is “to have affordable and generous benefits.”
Rhode Island Senator Jack Reed, the top Democrat on the full Armed Services Committee said, “We have an obligation to look carefully, constructively not just ignore it or dismiss it and we will do that.”
Proof of how hard it is for Congress to agree to any changes in military benefits came in December when congressional negotiations over the annual defense policy bill stalled over a proposal to increase out-of-pocket costs for pharmacy co-pays under the Tricare military health system.
The compromise was a one-year $3 increase rather than a series of higher co-pays over multiple years.
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