Guest Post by Shaun Rieley
In the military/veterans policy realm one of the biggest topics of the year has been comprehensive military compensation reform. In January, the Military Compensation and Retirement Modernization Commission (MCRMC) released its final report (http://mldc.whs.mil/public/docs/report/MCRMC-FinalReport-29JAN15-HI.pdf) detailing the findings of a two-year study that examined the question of what changes can and should be made to military compensation are retirement to ensure the ability to sustain an all-volunteer force while simultaneously ensuring a force strong enough to ensure that national security considerations are not compromised, and improving cost-effectiveness. It offered fifteen recommendations for improvement, ranging from changes to TRICARE (the military medical insurance system) to changes in commissaries and exchanges, to changes in the GI Bill.
Each year, Congress must pass a piece of legislation known as the National Defense Authorization Act (NDAA). Contrary to the understanding of some, this is not a bill that authorizes unconstitutional detention in the name of national defense (though it is true that the FY2012 version of the bill contained a controversial amendment which critics claimed would allow for indefinite detention of anyone – a claim which is partially true: http://www.snopes.com/politics/military/ndaa.asp), but instead is the bill authorizes the funds for the defense department each year. Along with the massive must-pass bill usually comes a large number of amendments relating to national defense, national security, and/or veterans issues.
This year, the bill is again being subjected to some debate, this time having to do with the MCRMC recommendations and how to best implement them. Currently, both chambers of Congress have passed a version of the NDAA, and both contain provisions that reflect the MCRMC recommendations. However, the two chambers have not yet agreed on which recommendations are to be implemented, how they are to be implemented, or how they are to be funded under the “pay-go” (pay-as-you-go) rules.
According to a recently released Heritage Foundation Issue Brief on the topic of Compensation Reform in the FY2016 NDAA (http://www.heritage.org/research/reports/2015/08/2016-national-defense-authorization-act-stuck-on-compensation-and-retirement-reform), the following specific compensation issues are being considered:
– Military Pay Raise: The House does not address the pay raise in their budget, effectively defaulting to the standard 2.3 percent. The Senate opted to match the President’s budget request, which only raised pay by 1.3 percent, saving $4.8 billion over five years.
– Basic Allowance for Housing (BAH): As part of their compensation package, service members receive an allowance for housing, which is pegged to the average cost of living in a given area. The President’s FY16 budget request would reduce the payment from 99% of the average cost of rent to 95% (last year’s NDAA reduced it from 100% to 99%). The House has not agreed to this reduction; the Senate bill includes it. This would save $3.8 billion over five years.
– BAH Reduction for Marries Couples and Housemates: Currently, service members who are married to each other can each receive a full BAH payment, as can non-married service members who share housing. The Senate bill removes one of the BAH payments for married service members, and reduces BAH for housemates. This would save $1.7 billion over five years.
– Commissaries: Another benefit that service members and retirees are offered is the use of subsidized commissaries that allow for reduced prices on goods and services. The President’s budget would reduce the subsidy – currently around $1.4 billion – by $322 million, saving $4.4 billion over five years. The House’s bill allocates funds to maintain current levels, while the Senate’s version, according to a Congressional Research Service fact sheet (http://www.fas.org/sgp/crs/natsec/R44019.pdf), “Authorizes some proposed efficiencies (Section 651); requires a plan for commissary privatization” and “authorizes no additional funds”.
– Retirement: The MCMRC report drilled down most heavily on future retirement plans. Currently, service members must serve a full twenty years in order to obtain a defined-benefit pension. Service members who serve less than twenty get nothing, unless they opted to participate in the Thrift Saving Plan (TSP), wherein non-matched funds are diverted to an investment account, pre-tax, from the service member’s paycheck. The MCMRC offered recommendations that would alter this somewhat, providing more flexibility for service members who leave service before completing twenty years, including adding a 401k-style match to the TSP. Specifically, the MCMRC recommendation allows for a 4 match beginning after two years of service, and ending at twenty years. The Senate version of the NDAA incorporates the recommendation. The House version of the NDAA, however, is more generous: it offers a 5% match, beginning after two years, but which continues through the entire duration of service.
– TRICARE: According to Military Times (http://www.militarytimes.com/story/military/capitol-hill/2015/07/31/ndaa-stalled-retirement-copays/30879343/), changes to TRICARE could prove to be the toughest area to find agreement between the two versions of the NDAA. The Senate version, following the President’s budget, proposes increases to TRICARE pharmacy copays. Last year, copays were increased by $3. The House version does not authorize these increases.
September promises to be a busy month on Capitol Hill. The NDAA is only one of the fights looming, both between the chambers, and between the parties. And, if that weren’t enough, President Obama is threatening to veto the NDAA over several provisions (http://www.federaltimes.com/story/government/management/agency/2015/05/13/ndaa-veto/27236907/), including the use of Overseas Contingency funds to bypass defense budget caps, and a prohibition on further Base Realignment and Closure (BRAC).
Each year, Congress must pass a piece of legislation known as the National Defense Authorization Act (NDAA). Contrary to the understanding of some, this is not a bill that authorizes unconstitutional detention in the name of national defense (though it is true that the FY2012 version of the bill contained a controversial amendment which critics claimed would allow for indefinite detention of anyone – a claim which is partially true: http://www.snopes.com/politics/military/ndaa.asp), but instead is the bill authorizes the funds for the defense department each year. Along with the massive must-pass bill usually comes a large number of amendments relating to national defense, national security, and/or veterans issues.
This year, the bill is again being subjected to some debate, this time having to do with the MCRMC recommendations and how to best implement them. Currently, both chambers of Congress have passed a version of the NDAA, and both contain provisions that reflect the MCRMC recommendations. However, the two chambers have not yet agreed on which recommendations are to be implemented, how they are to be implemented, or how they are to be funded under the “pay-go” (pay-as-you-go) rules.
According to a recently released Heritage Foundation Issue Brief on the topic of Compensation Reform in the FY2016 NDAA (http://www.heritage.org/research/reports/2015/08/2016-national-defense-authorization-act-stuck-on-compensation-and-retirement-reform), the following specific compensation issues are being considered:
– Military Pay Raise: The House does not address the pay raise in their budget, effectively defaulting to the standard 2.3 percent. The Senate opted to match the President’s budget request, which only raised pay by 1.3 percent, saving $4.8 billion over five years.
– Basic Allowance for Housing (BAH): As part of their compensation package, service members receive an allowance for housing, which is pegged to the average cost of living in a given area. The President’s FY16 budget request would reduce the payment from 99% of the average cost of rent to 95% (last year’s NDAA reduced it from 100% to 99%). The House has not agreed to this reduction; the Senate bill includes it. This would save $3.8 billion over five years.
– BAH Reduction for Marries Couples and Housemates: Currently, service members who are married to each other can each receive a full BAH payment, as can non-married service members who share housing. The Senate bill removes one of the BAH payments for married service members, and reduces BAH for housemates. This would save $1.7 billion over five years.
– Commissaries: Another benefit that service members and retirees are offered is the use of subsidized commissaries that allow for reduced prices on goods and services. The President’s budget would reduce the subsidy – currently around $1.4 billion – by $322 million, saving $4.4 billion over five years. The House’s bill allocates funds to maintain current levels, while the Senate’s version, according to a Congressional Research Service fact sheet (http://www.fas.org/sgp/crs/natsec/R44019.pdf), “Authorizes some proposed efficiencies (Section 651); requires a plan for commissary privatization” and “authorizes no additional funds”.
– Retirement: The MCMRC report drilled down most heavily on future retirement plans. Currently, service members must serve a full twenty years in order to obtain a defined-benefit pension. Service members who serve less than twenty get nothing, unless they opted to participate in the Thrift Saving Plan (TSP), wherein non-matched funds are diverted to an investment account, pre-tax, from the service member’s paycheck. The MCMRC offered recommendations that would alter this somewhat, providing more flexibility for service members who leave service before completing twenty years, including adding a 401k-style match to the TSP. Specifically, the MCMRC recommendation allows for a 4 match beginning after two years of service, and ending at twenty years. The Senate version of the NDAA incorporates the recommendation. The House version of the NDAA, however, is more generous: it offers a 5% match, beginning after two years, but which continues through the entire duration of service.
– TRICARE: According to Military Times (http://www.militarytimes.com/story/military/capitol-hill/2015/07/31/ndaa-stalled-retirement-copays/30879343/), changes to TRICARE could prove to be the toughest area to find agreement between the two versions of the NDAA. The Senate version, following the President’s budget, proposes increases to TRICARE pharmacy copays. Last year, copays were increased by $3. The House version does not authorize these increases.
September promises to be a busy month on Capitol Hill. The NDAA is only one of the fights looming, both between the chambers, and between the parties. And, if that weren’t enough, President Obama is threatening to veto the NDAA over several provisions (http://www.federaltimes.com/story/government/management/agency/2015/05/13/ndaa-veto/27236907/), including the use of Overseas Contingency funds to bypass defense budget caps, and a prohibition on further Base Realignment and Closure (BRAC).
This was interesting. So this MCRMC with a long name sounding nice but really suggestions to cut costs, is a big reduction in benefits to the military?
Although that bit about phasing the military into a 401K type pension thing is a really good idea. That system works; leave it to the private market.
As for changes in commissary and housing allowance….all of those suggestions involve cutting the budget. Which is a fine thing but seems like the politicos, especially the libs, only cut budgets like this on the military.
Here’s the thing…..we no longer have a drafted military. Our military is all volunteer and thus we should be recruiting, paying and matching funds as if a company trying to get the best. Before, when were drafting our military, the argument was….well let’s give them real cheap food, some housing allowance. After all they didn’t plan on moving across country; the draft did that.
Even the concept of Veteran’s Affairs….I wonder why we are obligated to take care of a veteran forever and ever. Now don’t get mad at me, somebody’s got to think this stuff through. For a wound in combat, sure, of course, only the best. But don’t the VA take care, allegedly, for ALL health care issues of a veteran?
So if the guy was drafted….well yeah, let’s give him health care.
To summarize my rambling, it looks that board with all the initials is trying to phase our military in like a private business.
Cause we don’t force them to join anymore.