Military Pay and Benefits in Limbo As Obama Weighs Veto

This story has been updated.

The pay and benefits of troops and their families next year remain in limbo as President Obama weighs a veto of the fiscal 2016 Defense authorization bill.

The massive Defense bill includes a 1.3 percent pay raise in 2016 for troops, an overhaul of the military’s retirement system, and money for basic housing allowances, among other provisions affecting service members’ finances. Obama has to decide whether to send the legislation back to Congress to fix “a number of provisions” he opposes, most significantly one that allows Defense to sidestep sequestration caps by increasing the “emergency” Overseas Contingency Operations fund.

The president has 10 days (excluding Sundays) to sign or reject a bill passed by Congress. The Senate passed the final version of the fiscal 2016 Defense authorization bill on Oct. 7 (the House passed it on Oct. 1), but Congress hasn't sent Obama the bill yet. Congress returns from recess next week, and is expected to send it to the president then, when the countdown clock will begin.

The president has threatened to veto the last six defense authorization bills, but ultimately he signed them into law.

A veto override in Congress is unlikely because the House doesn’t have the votes. While the Senate passed the legislation 70-27, Minority Leader Harry Reid, D-Nev., has said Democrats will sustain the veto if Obama nixes the bill.

Some of the most significant pay and benefits provisions in the bill affect the military’s retirement system, phasing in changes that would allow non-career military service members to boost their retirement nest eggs. The changes, based on recommendations from the Military Compensation and Retirement Modernization Commission, would automatically enroll new troops into the Thrift Savings Plan at 3 percent of their pay with a 1 percent government deposit. Also, the government can match up to 5 percent of any additional contributions service members make. 

In addition, service members who stay in the military for 20 years, and are thereby entitled to a retirement pension, would receive a less generous calculation for their annuity. To encourage members to stay in the military, they would receive “continuation pay” after 12 years of service.

The new blended retirement system would only affect new service members. Current service members are grandfathered into the current system, but could opt into the new one.

The fiscal 2016 Defense bill also:

• Continues providing two basic housing allowances to dual-military married couples and unmarried service members living together.
• Covers 95 percent of estimated housing expenses, reducing the monthly amount of the BAH through a phased decrease of 1 percent (which began in fiscal 2015) per year over four years.
• Requires “modest” increases to TRICARE pharmacy drug co-pays for many enrollees.
• Requires the Defense Department to reduce its workforce by 25 percent over the next five years. Savings already realized by the Pentagon’s self-initiated cuts implemented in recent years would count toward the final reduction goal, which must be met in fiscal 2020.
• Preserves cuts to per diems for service members and Defense civilian employees on long-term government travel.
• Maintains the current structure of the commissary system.

If Obama decides to veto the bill, service members will need to keep an eye on Dec. 11. That’s when the current continuing resolution funding the government expires. If Congress can’t agree on a long-term spending plan or another stop-gap funding measure by then, the government will shut down and troops’ paychecks (as well as the pay of federal civilian employees) will be delayed.

Rep. Mike Coffman, R-Colo., has introduced the Pay Our Military Act, which mandates that all active-duty, reservists, National Guard troops, as well as any civilians and contractors working in support of those forces, be paid on time regardless of the shutdown’s duration.