House Panel Advances Military Retirement Reform Bill

A House panel on Thursday advanced a package that would overhaul retirement benefits for military personnel, expanding perks for those who do not spend a large portion of their careers in the armed forces.

The House Armed Services Military Personnel Subcommittee approved several proposals from a compensation reform commission in its markup of the fiscal 2016 National Defense Authorization Act, while ignoring several others. Included in the measure is a proposal to automatically enroll new troops in the federal employee Thrift Savings Plan with a matching contribution from the government. Military members currently can participate in the TSP, but are not enrolled automatically and do not receive a matching contribution.

The bill would assign service members a default contribution of 3 percent of their salaries into their retirement investment accounts. They would automatically receive a 1 percent contribution from the government, which -- similar to civilian federal employees -- could increase to as much as 5 percent if the military members also contributed 5 percent.

The Military Compensation and Retirement Modernization Commission made its recommendations in January after two years of studying how to make the armed services’ pay and benefits system more sustainable. Lawmakers and the review board have said a blended retirement system combining a defined benefit with greater participation in the TSP would ensure benefits for the 87 percent of troops who serve for fewer than 20 years. Under the pending legislation, 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.

The Federal Retirement Thrift Investment Board, which administers the TSP and has been pushing to boost military enrollment despite the lack of a government matching incentive, has said the measure would be a major coup for the troops.

“This is a biggie,” Kim Weaver, an FRTIB spokeswoman, told Government Executive when the commission unveiled its recommendations. “For uniformed service members, this would be a real game-changer, to get an employer match and automatic contributions.”

Auto-enrolling service members, which would start in October 2017 under the bill, would add roughly 250,000 new participants to the TSP each year. There are currently 4.7 million participants in the plan. 

Service members would be fully vested in their plans after two years of service. To encourage members to stay in the military, the measure includes a commission proposal to provide “continuation pay” after 12 years of service.

Lawmakers declined to tackle some of the other benefits changes the  commission suggested, such as increasing user fees in the TRICARE health care program and reducing commissary costs.

“We are not including any of those provisions in the subcommittee mark,” said Rep. Susan Davis, D-Calif., the panel’s ranking member, “but at some point I think it is important to think about those issues as well.” She added that while the subcommittee is not including any of the changes, it does not want to prevent them if they are “the right approach that we should be taking.”

Lawmakers have been loath to make any significant changes to military compensation after more than a decade of war, dogged by the fear of being viewed as breaking faith with troops.

The panel also did not include language to set the pay raise for the troops in 2016, which effectively allows President Obama to move forward with the 1.3 percent boost he called for in his budget.  By not suggesting an alternative, committee members are embracing an automatic cost-of-living adjustment of 2.4 percent, but tacitly allowing Obama to intervene. Service members have received a 1 percent raise in each of the last two years.

The Defense authorization bill would provide improved financial literacy programs for troops, as well as enhanced counseling for victims of sexual assault.