Originally Posted by
propfails2FX
Interesting.........
7. Reform Military Retirement. The US military sustains one of the last defined-benefit retirement plans in the United States. Most private businesses have switched to defined-contribution plans and federal civilian government employees were largely transitioned to a defined-contribution plan in 1983. In fact, the military retirement system was reformed at about the same time, but that reform was reversed in the late 1990s. With the budget contracting, the military retirement system must be reformed. The current system provides retirement benefits to only 17 percent of military personnel, mainly those who serve the minimum required 20 years, with limited to no benefits to most leaving prior to 20 years, and thus constitutes an inflexible personnel management tool. Reform also would achieve significant savings. Even if all current service members were “grandfathered” into the old system, BloombergGov estimates that implementing a variation of the Defense Business Board’s proposed defined-contribution plan would save $700 million in its first year and close to $2 billion in fiscal year 2015, with savings growing to $7 billion a year by the end of a decade.
More thread drift...A couple years ago another group proposed a bunch of recommendations, one of which was to make receipt of Active duty retirements more along the lines of Reserve retirements - paid when the service member reaches age 60. Additionally, servicemen's retirement would be more like a 401K or the thrift savings plan (TSP); matching by the employer and once vested (5 years of service or so) would be portable when the serviceman left military service. That study proposed a phase in of the new system so someone with 15 years of Active service that stayed until 20 years would get the 2.5%/year for the first 15 years (37.5%) upon retiring and then get the last 5 years in their 401K like retirement plan that they would ideally take with them to their new employer. The new recruit would be 100% under the new plan. The person with more than 20 years would be 100% under the old plan. I believe the "savings" referenced in this Stimson document come from the savings associated with delaying payment to service members associated with this kind of proposal. As the Active Duty force size is trending smaller, and during times of sequestration, the bean counters are best positioned to get away with implementing something like this. No way, in my opinion, it would have worked during the last 12 years.