Pentagon Probes for Details on Proposed Military Retirement Overhaul


Last month, the Military Compensation and Retirement Modernization Commission released a long-awaited report containing a series of policy proposals designed to decrease the cost of military benefits, including retirement benefits.

One of the more controversial proposals: the phase-out of the military’s current defined-benefit plan in favor of a hybrid plan that features characteristics of a 401(k).

[Proposal details can be read here.]

Now, the Pentagon is digging deeper into the report, and officials are asking for access to the data that was used to form the proposals.

From the Military Times:

“[The commission] claims they’ve done all the analysis but we have not been able to see what’s inside that analysis, so I’m anxious to see it . … We are interested in looking at how the commission came to the conclusion that [its proposed retirement recommendations] would be a better option,” [Defense Department Chief of Naval Personnel Vice Adm. Bill] Moran said.

Military officials are receptive to the idea, Moran said, noting that the Defense Department last year offered its own proposal for military retirement reform that includes some similar features.

Still, Moran said he’d like more information about the commission’s claim that troops would prefer the proposed system and it would not affect retention.

“There are aspects we like and aspects we need more analysis on,” Moran said.

Top personnel officials have been working around the clock to analyze the controversial proposals.

Why is the Pentagon examining the proposals so closely?

The Pentagon’s official view of the report will hold sway on Capitol Hill when it comes time for lawmakers to vote on the proposals.


Photo by Brian Schlumbohm/Fort Wainwright PAO

Minnesota Legislation Would Exempt Military Pensions From Taxes


Minnesota is one of six states in the country that fully taxes military benefits.

But that could change soon, as two pieces of legislation in the state House seek to exempt some or all of military pensions from taxation.

The first, introduced by Rep. Bob Dettmer, would exempt from taxation the first $30,000 of military retirement benefits earned, regardless of the retiree’s rank.

Rep. Josh Heintzeman has introduced a similar bill. But Heintzeman’s version would exempt all military retirement income from taxation.

More from KARE 11:

Many military retirees end up in warmer states than Minnesota, both when it comes temperatures and tax climate.

But there are several bills in the hopper this year in the State Legislature designed to draw those retirees here, and hold onto the ones who already live in Minnesota.

“Most of them will be in the 40’s, so they’ll be starting a second career and that’s an economic boost for the state,” Rep. Bob Dettmer of Forest Lake told KARE

He said there are 370,000 military veterans living in Minnesota, and at least 18,000 of them were career military members who served long enough to earn a pension.

Rep. Dettmer would like to see at least part of those pensions exempt from state income taxes.


“If we really want to hire veterans we’ve got to get them to live here. We want to have them stay here, put their kids in school, buy homes, and be part of Minnesota. Many other states have already figured this out.”

Rep. Dettmer’s bill has drawn more support than Heintzeman’s, as some lawmakers are more comfortable with “capping” the tax exemption.


Photo by Brian Schlumbohm/Fort Wainwright PAO

Government Panel Likely to Call For Military Pension Changes

US Army

The Military Compensation and Retirement Modernization Commission has spent the last two years drawing up policy proposals to decrease the cost of military benefits, including retirement benefits.

The Commission will make the proposals to Congress on Thursday, but people familiar with the report have already been revealing its contents to the USA Today and the Military Times.

According to the sources, the report will propose big changes to the military’s retirement system – including the phase-out of the military’s current defined-benefit plan, in favor of a hybrid plan that features characteristics of a 401(k).

More details from USA Today:

The Military Compensation and Retirement Modernization Commission will propose detailed legislation to phase out the current 20-year cliff-vesting pension payable immediately upon leaving service, according to people who have been briefed on the report but requested anonymity before discussing its recommendations.

The plan calls for Congress to create a hybrid system that includes a smaller defined-benefit pension along with more cash-based benefits and lump-sum payments. A significant portion of troops’ retirement benefits would come in the form of government contributions to 401(k)-style investment accounts, those familiar with the report told Military Times.

Specifically, the proposal calls for automatically enrolling each service member in the federal government’s Thrift Savings Plan, or TSP, an investment account that accrues savings. Individual troops will be responsible for managing their accounts, and the money is typically not available for withdrawal without penalty until age 59.5.

But that same proposal would make it easier for troops to keep their retirement benefits after leaving the military. USA Today reports:

By allowing many troops to keep their TSP government contributions after separation, the new proposal would give limited retirement benefits to the vast majority who leave the military before hitting the traditional retirement milestone of 20 years of service, most of them enlisted members who do four, six or eight years, then leave.

That’s a big potential change from a system that now offers retirement benefits to about only 17% of the force — many of them officers — who serve 20 years.

The retirement changes would only apply to new troops – not anyone currently enlisted or retired.

All of these proposals would still need to get through Congress to become law. Military compensation is a controversial area for cuts, so it’s unclear if the political will exists to move forward with the retirement system changes.


Photo by Brian Schlumbohm/Fort Wainwright PAO