07 March 2014

Breaking: DoD releases its own proposal for retirement and pension overhauls | RallyPoint.com

Image copyright Military Times

By Andrew Tilghman
Copyright Military Times

After years of silence on the intensely controversial issue of military retirement reform, the Pentagon on Thursday unveiled a detailed proposal for fundamental, far-reaching changes to the current pension system, Military Times has learned.

The changes would preserve the current system’s defining feature of a 20-year, “cliff-vesting,” fixed-income pension. But it would ultimately provide smaller monthly checks, according to documents obtained by Military Times.

To compensate for that, the new proposal would offer three new cash payments to be provided long before old age — a 401(k)-style defined contribution benefit awarded to all troops who serve at least six years; a cash retention bonus at around 12 years of service; and a potentially large lump-sum “transition pay” provided upon retirement to those who serve 20 years or more.

In the broad view, the new plan would lower the total economic value of the military retirement package. But maybe not by that much. Details vary, but several options show a roughly 10 percent reduction in cumulative lifetime payments.

Pairing that long-term reduction with the new cash payments is a strategic decision by Pentagon personnel experts, based on the notion that troops would prefer a plan that gives them more money up front to reduce the impact of smaller pension payments later in life.

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