Military digest: Board says military retirement overly generous

By Tom Philpott

Gen. Martin Dempsey, Army chief of staff, seemed to splash figurative cold water on ideas surfacing at the Pentagon and elsewhere to cut future retirement obligations and other personnel costs, deeply and soon.

Testifying at his confirmation hearing before the Senate Armed Services Committee to become the next chairman of the Joint Chiefs, Dempsey acknowledged that personnel costs are becoming untenable, particularly as the debt crisis drives down spending. In the Army, he said, manpower costs already consume 42 percent of his budget. It will rise to 47 or 48 percent in just five years if no changes are made, he predicted.

“That is not sustainable,” said Dempsey. “So the question comes back: What should we do about it and how can we do so in a way that maintains the trust we’ve established with our force over time.”

Nominated to succeed Adm. Mike Mullen as senior ranking member of the armed forces and the president’s principal military adviser, Dempsey said military cuts must be balanced across accounts — for personnel, equipment and modernization, operations, maintenance and training.

“That includes pay, compensation, retirement and health care because it’s important that we place everything on the table, assess the impact, and then request the time to do it in a deliberate fashion so that we maintain balance at whatever level we end up in,” he said.

On July 21, just days before Dempsey’s hearing, the Defense Business Board, a group of businessmen who advise the secretary of defense on fiscal matters, unveiled recommendations for “Modernizing Military Retirement.”

A seven-member task force of the board concluded, as have numerous past studies, that military retirement is overly generous to those who qualify, yet fails to provide any benefits to anyone who leaves short of 20 years.

In proposing a more complex but less costly alternative, built on service contributions into a tax-deferred Thrift Savings Plan, the task force blasted the current retirement system. It was designed when active duty pay was low, retirees had shorter life spans and “second careers were rare” because “military skills did not transferred easily to the private sector.”

And, the military’s “contribution” for retirement is “10 times greater than in the private sector. Average private sector pension contributions range from 4 to 12 percent per year (while the) military retirement benefit equates to 75 percent of annual pay per year for those who retire.”

And, “Immediate payout after 20 years has no comparison in the private sector.”

Only two of seven executives on the task force ever served in the military. Both left before 20 years and without any retirement benefit.

Their report will be delivered to the new defense secretary, former CIA director Leon Panetta. He vowed to be a “tireless advocate for troops and families.” But Panetta, who also once led the Office of Management and Budget, cautioned on taking office that “tough budget choices” lie ahead.