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Assessment

The following information is part of a presentation by the Defense Business Board about Modernizing the Military Retirement System dated July 21, 2011.  You can find the first slide in the presentation here.

 

The Retirement Plan is Unfair

  • The military retirement system lacks fairness in several dimensions.
    • Personnel serving 5, 10, even 15 years receive no retirement pay. Those serving 20+ years are endowed with a lifetime benefit.
    • The risky nature of military service is an important justification for the 20-year plan. However, most of the troops engaged in combat serve far less than the required 20 years.(Only 12%-13% of enlisted troops earn retirement pay).
  • Retirement is a cost element attributable to each Service member, yet only 17% receive this benefit.
  • There is no difference in retirement benefits between those who have served in high risk and low risk positions.

The Retirement Plan is Unaffordable

  • The costs of military retirement will seriously undermine future military warfighting capabilities
  • For each dollar of current pay, the retirement plan accrues 33 cents, for a total of $24B** in FY11
  • Costs are rising at an alarming rate; future liability will grow from $1.3T (of which $385B is funded) to $2.7T by FY34.
  • Increases in inflation and life expectancy will further increase military retirement benefit costs
    • +1% inflation increase = $3.0B military retirement benefit service cost increase
    • +1 year of life expectancy = $300M military retirement benefit service cost increase

The Retirement Plan is Inflexible

  • The current system cliff vests at 20 years of active service
  • Personnel with fewer years of service earn no retirement
  • Only 7% of personnel leave between the 15thand 20thyear of service, compared to 76% of those serving 20 to 25 years
  • Years served is the only factor in the retirement benefit calculation, regardless of whether the Service member’s career risk profile is in an administrative role or a high risk combat role
  • Modifying the retirement system would create an effective force shaping tool

 

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