DoD proposes changes to Military TSP

**James48843** · 08-05-2008, 07:01 PM

IN case you gusy haven't heard, there was a commission to study pay, retirement, benefits, insurances, etc. that published a new set of recommendations for the military.

Some of the things they are recommending (It's just recommendations at this time, not formal proposed changes yet) include major changes to the military retirement system (someone with 20 years service would only get 5% retirement pay, scaling up to age 57), and a TSP contribution to service members of 2,3,4,and then 5% of their pay- not matching funds, but a straight out contribution.

Overall there were a wide variety of things being proposed. Some of them will take legislative changes, others just DoD decision to proceed.

Here is the message I got on it, and also a link to the complete report.

If you are new to the military, you might want to look it over, and see what they are thinking about at high levels about policy in the future:

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Second Volume of Tenth Quadrennial Review of Military Compensation Released

The Department of Defense released today the second volume of the report of the Tenth Quadrennial Review of Military Compensation (QRMC), which assesses the effectiveness of military pay and benefits in recruiting and retaining a high-quality force.

Every four years, DoD commissions a complete review of compensation principles and concepts for members of the armed forces. The 10th QRMC began in 2006.

DoD will study the recommendations for potential implementation and send selected proposals to Congress as proposed legislation.

The second part of the QRMC reviewed non-cash and deferred compensation, focusing on the following four topics: retirement, Tricare, recruiting and retention incentives for health care professionals, and quality of life. Significant recommendations for each area follow.

Retirement. The commission recommended the department conduct a multi-year test of a new retirement system, to increase the services' force management flexibility. This new retirement system would provide automatic contributions to service members' TSP accounts, vesting, payments for reaching service milestones and separation pay. The commission maintains the new retirement system will provide greater equity, flexibility and efficiency, and may result in larger individual monetary outcomes.

Tricare. To ensure retiree fees for Tricare are fair to all retiree populations, the commission recommended under-65 retirees using Prime pay 40 percent of the Medicare Part B premium, and under-65 retirees selecting Standard/Extra pay 15 percent of the Part B premium. Family premiums would be set at twice the individual premium regardless of family size. Premium increases would be phased in over a four-year period. Over the years, the share under-65 retirees paid of their health care costs has declined, while over-65 retirees are paying a significantly higher portion of their health care costs. The commission's recommendations will return a sense of parity between the two retiree populations, while ensuring the health system remains economically viable.

Medical Personnel. The commission examined options to increase the recruiting and retention of medical, dental and nurse corps personnel. The commission's recommendations included increasing benefits for the Health Professions Scholarship, improving active duty nurse recruiting by expanding the market and adding educational opportunities, recruiting non-citizens with U.S. health degrees and leveraging inter-service transfer bonuses.

Quality of Life. The commission provided several recommendations to improve the efficiency and effectiveness of quality of life programs, including the adoption of health care and dependent care flexible spending accounts, creation of education vouchers, formation of military charter schools and changes to the child care system. The committee further suggested the department change the way it develops the overseas cost of living allowance rate, to be consistent with the methodology used in the continental United States.

This is the second volume of the study, covering non-cash and deferred compensation. The first volume was released in March, and focused on the following cash compensation areas: pay comparability, special and incentive pays, pay for performance and housing. Full recommendations, in greater detail, can be viewed on the Web at http://www.defenselink.mil/news/QRMCreport.pdf .

**JTH** · 08-05-2008, 07:21 PM

I've come across some hints of them changing our retirement system in the future. All I can say is who the hell would want to be in the miltary for 20 years and get 5%?

Answer: Nobody I know. Sure we all love to serve our country and all that Red White and Blue stuff, but everything has it's breaking point.

**James48843** · 08-06-2008, 02:05 AM

The recommendations are:
=================================

The key elements of the QRMC retirement plan are as follows:

■■ A defined benefit plan providing retirement pay equal to 2.5 percent of
high-3 annual basic pay multiplied by the number of years of service. The
benefit would be payable at age 57 for those with 20 years of service and
at 60 for those with fewer than 20 years. The plan would vest at 10 years.
Members who opt to receive the defined benefit immediately upon retirement would receive a reduced benefit.

■■ A defined contribution plan under which DOD would annually contribute
up to 5 percent of basic pay (the precise contribution would vary based
on years of service). The plan would vest at 10 years of service and begin
paying benefits at age 60.

■■ Gate pays payable at specified year-of-service milestones.

■■ Separation pay provided to members when they leave the military.

===========================

So, basically, if you retire at 20 years, and immediately start collecting a retirement pension, it's reduced 5% for each year under age 57 that you are. Someone who joins at age 19, and retires at age 39, would then have to accept a reduced annuity (age 39 is 18 years under age 57, so 18 X 5%= 90% REDUCED ANNUITY), plus they would get a lump sum payment to get out, plus would have 5 percent of pay each year put into TSP. And a defined benefit supplement that doesn't kick in until age 60...?

Yeh, I could see a lot of people jumping at an opportunity like that.

You notice in the report, who has that brilliant idea, right? To reduce active duty retirement for a 39 year old by 90% per year, and give them instead a one-time lump sum payout, and a TSP value equal to a single year of work?

I quote from page 5 of the report:

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**Silverbird** · 08-06-2008, 09:11 PM

Ok, what kind of behavior does this encourage?

If you don't stay for 10 years, you don't vest
So if you want to stay for less than 10 years, leave as soon as possible

If you are going to stay for some time, stay for 10 so at least you can vest, then go to another job if you want. Leave your money in the benefit plan until age 57 or 60, then collect it. Either that, or roll it into your friendly neighborhood IRA

Or am I reading it wrong?

**James48843** · 08-07-2008, 03:22 AM

Originally Posted by Silverbird

Ok, what kind of behavior does this encourage?

If you don't stay for 10 years, you don't vest
So if you want to stay for less than 10 years, leave as soon as possible

If you are going to stay for some time, stay for 10 so at least you can vest, then go to another job if you want. Leave your money in the benefit plan until age 57 or 60, then collect it. Either that, or roll it into your friendly neighborhood IRA

Or am I reading it wrong?

So you stay in for ten. And it vests. Ok, what do you do now? You get out of the military at 10.

And you have to wait thirty more years to ever see a dime of it- or 29 more years, anyway.

And, in the meantime, you starve, because you just spent ten years of your life when you could have been getting a college education, and earning bigger bucks as a civilian. Let us hope you got some college while on active duty, so at least some of that time can count towards a degree.

And so the number of people seeing it as a career goes down. You are ten years behind your peers in earning power. You get a tiny lump sum to carry you over for a few months while you try and find a civilian job in a tough market. Good luck.

And now Uncle Sam has to train someone else to do the job that you just did before you left at 10 years. And it may take that person three or four years to become proficient at it. And our NCO Corps suffers greatly because of it. And with a suffering NCO Corps, the entire service suffers.

Not very promising in my mind if you also have the goal of some stability of your forces in mind.

**JTH** · 08-07-2008, 03:34 AM

Originally Posted by James48843

So you stay in for ten. And it vests. Ok, what do you do now? You get out of the military at 10.

And you have to wait thirty more years to ever see a dime of it- or 29 more years, anyway.

And, in the meantime, you starve, because you just spent ten years of your life when you could have been getting a college education, and earning bigger bucks as a civilian. Let us hope you got some college while on active duty, so at least some of that time can count towards a degree.

And so the number of people seeing it as a career goes down. You are ten years behind your peers in earning power. You get a tiny lump sum to carry you over for a few months while you try and find a civilian job in a tough market. Good luck.

And now Uncle Sam has to train someone else to do the job that you just did before you left at 10 years. And it may take that person three or four years to become proficient at it. And our NCO Corps suffers greatly because of it. And with a suffering NCO Corps, the entire service suffers.

Not very promising in my mind if you also have the goal of some stability of your forces in mind.

James, you've summed it up in an articulate way I simple am too emotional to express.

You can't put a price on the toll a military life takes on you. I've seen far too many divorce's, affairs, missed births, strained separations from family near and far, and the true toll the face of war takes on a person including death.

And these are the things that have happened to people around me, I count myself as one of the fortunate ones...

**James48843** · 08-07-2008, 03:52 AM

Yes, the system we have today isn't perfect. But it seems to this former soldier that the new proposal has MUCH that could harm- as well as the things that could help.

Gate pay- that's an interesting concept. It's pretty much just a rehash of reenlistment bonuses with a different name. Vesting after ten years? Not a bad idea. But if you then make them wait until age 57 before they can collect any of it. it may be too distant in the future for someone to seriously consider.

20 and retire at half -pay? Maybe there is benefit in giving a little more for 21, for 22, 23, etc. As I recall, the pay scales cap at 18 years service for E-6, and 0-4. So there really is no incentive to stick around. Unless, of course, you won't be getting any retirement pay for another 17 years, except if it's reduced by 5% a year for each year below age 57....

I can tell you I remember a long time ago, before there was such a push for up and out, that I knew some really proficient E6's, who were good at their job, and just wouldn't be a good E7. They knew it, and they were happy, and productive, and good soldiers, right where they were. They could be very valuable as an E6 right where they were at for another ten years in the technical field they were in, in charge of a small number of others, but still dabbling in the technical side of things. At E7, they would be removed from the technical side, and have to worry soley on training and leading a much larger group, something they were not really enthused about.

When "up or out" pushed them out at 20 years, the military lost some fine people.

And now, if this goes through, they will be pushed out on the street without access to a pension/income/retirement, unless it's a greatly reduced retirement. And our forces will not be as well prepared.

There is a place for those who climb the ladder well, and those who do just fine where they are at. I'm afraid this kind of a proposal will not be good for what we truely owe those who put in the life.

Oh well- its time for a younger generation to go fight that battle.