Every few years, the military takes a deep look at the pay, benefits, and other forms of compensation given to military members and their families. On January 29, 2015, the Military Compensation and Retirement Modernization Commission released their recommendations for changing military pay and compensation. The report was two years in the making, is approximately 300 pages long, and is filled with reports, studies, and recommendations from a nine member panel.
There were 15 recommendations made, along with background information on the recommendations, why they make the recommendations, and the impact these recommendations will have on servicemembers and their families.
Big Proposals: Change Military Retirement Benefits, Dismantle TRICARE and replace it with a commercial health care program, only allow Tuition Assistance Benefits for Professional Development Courses, and more.
What you need to know about this report: First of all, this report is not a change in the law, or even a proposal for a new law. This is simply a proposal made to our Congressional leaders. It is up to our lawmakers to decide if, and when, they will propose any of the changes as new laws. As with all proposals for changes to military and retiree benefits, we can expect there to be some time before anything happens (if it does), and in some cases, there may be backlash from some of the military lobbying groups. That said, most of these proposals seem to be fairly even-handed and well-balanced.
Will your benefits be grandfathered in? When it comes to retirement pay, your benefits should be grandfathered in, so they likely wouldn’t change. Congress tried to change retirement benefits last year, but there was a huge backlash. The change never happened. Other benefits, such as health care, base-level benefits, and other benefits may be subject to change.
About the MCRMC Proposed Changes
As mentioned, there are 15 proposed changes to military and retiree benefits. They were broken down into three categories in the report:
- Pay & Retirement Recommendations
- Health Benefits Recommendations
- Quality of Life Recommendations
We will walk you through these recommendations and provide a little commentary on them. Keep in mind, these haven’t even been proposed as law at this time. So there is no impending action on these items at the time of publication.
Download the 2015 MCRMC Report
You can download the report here, or you can view the full report below. A summary of the major points is below the viewer.
Pay and Retirement Recommendations
What follows are the recommendations from the committee (in bold and italics, with page reference). The text below the recommendations is a deeper explanation, or some of my thoughts on the recommendations.
- Recommendation 1: Help more Service members save for retirement earlier in their careers, leverage the retention power of traditional Uniformed Services retirement, and give the Services greater flexibility to retain quality people in demanding career fields by implementing a modernized retirement system. 19
- Recommendation 2: Provide more options for Service members to protect their pay for their survivors by offering new Survivor Benefit Plan coverage without Dependency and Indemnity Compensation offset. Page – 42
- Recommendation 3: Promote Service members’ financial literacy by implementing a more robust financial and health benefit training program. Page – 46
- Recommendation 4: Increase efficiency within the Reserve Component by consolidating 30 Reserve Component duty statuses into 6 broader statuses. Page 52
Recommendation 1 – Pay and Retirement Recommendations: There were no recommendations made for changing base pay. So for now, we can accept the base pay system as the status quo. However, there may be some other benefits changes, which we will address later.
Big changes coming for retirement pay? Recommendation 1 is perhaps the biggest game-changer listed. Unfortunately, you don’t get much of an idea what a “modernized retirement system” is unless you dive into the report. Several years ago, the Defense Business Board released a plan for a modernized retirement plan, which is similar to the plan proposed by the MCRMC.
The MCRMC plan calls for changing the 20-year fully-vested pension to a hybrid retirement system that uses the Thrift Savings Plan, a Career Continuation Bonus, and a pension. Retirees under the new plan would also have a choice on how they receive their retirement pay.
- TSP Contributions: Under the plan, military members would be automatically enrolled in the Thrift Savings Plan (they can opt-out, but would have to do so annually). They would begin receiving matching contributions from the military starting at year 2, and would receive matching contributions up to 5% of their pay.
- Continuation Pay Bonus: Members would receive a bonus for reenlisting (or re-upping) at their 12 year mark. This would be equal to 2.5x their monthly pay.
- Reduced Pension: The pension would be reduced to 2% per year of service, instead of the 2.5% per year of service under the current High-3 retirement system. The difference is a 40% pension at 20 years as opposed to a 50% pension.
- A choice in how and when retirement pay is taken: Retiring troops would be able to choose one of three retirement payment plans: they can take the immediate monthly annuity, similar to the current plan; they could take a lump sum payment with a smaller monthly annuity, or they could take a larger lump sum with no immediate annuity. Those who take the lump sum payment would be eligible to receive the full annuity they would have had once they become eligible for Social Security Benefits.
Pros & cons to retirement proposal: There are a lot of pros and cons to this hybrid plan. The big benefit is that over 8 in 10 military members leave the service with no military retirement benefits (only what they have saved through their own TSP account). The proposed plan would give the military the funding to contribute to TSP accounts for all military members over 2 years in service, and give members something to take with them when they leave the service (TSP accounts can be transferred when you leave the military).
Current servicemembers and retirees would be grandfathered into their current retirement plans under the proposal. However, current servicemembers would be able to move to the new plan if they chose to do so. The proposal was more detailed than I can cover in this section, so I encourage you to read the full proposal for more information. I did not see any mention changes to the Guard or Reserves retirement plans, but it’s possible I might have missed it.
Recommendation 2 – Survivor Benefit Plan: This is going to be a very case-specific situation, and is more detailed than I can go into in this article. But basically, the recommendation gives retirees the option of keeping their current survivor benefit program plan, or paying more into the SBP plan to avoid the Dependency and Indemnity Compensation offset. You would need to see if this applies to you, then run the numbers to see if it is a good deal or not.
Recommendation 3 – Financial and Health Literacy: I love this idea – financial literacy is not taught well in the US in most school systems. And many military members struggle with their finances. The same goes for more in-depth health training. I support this idea 100%.
Recommendation 4 – Consolidate Reserve Component Duty Statuses: I was shocked when I learned there were 30 duty statuses for members of the Reserve Component. Seriously? Streamlining this from 30 to 6 seems like a great idea (at least on the surface). I’m sure there will be growing pains, but the long-term benefits should be found through fewer pay and benefits problems, reduced paperwork, etc.
Health Benefits Recommendations
Health care is a hot topic both in and out of the military. And the changes proposed by the Military Compensation and Retirement Modernization Commission are big—affecting active duty, family members, Guard & Reserve, and Retirees. Here are the recommendations, with my thoughts below:
- Recommendation 5: Ensure Service members receive the best possible combat casualty care by creating a joint readiness command, new standards for essential medical capabilities, and innovative tools to attract readiness-related medical cases to military hospitals. Page – 57
- Recommendation 6: Increase access, choice, and value of health care for active-duty family members, Reserve Component members, and retirees by allowing beneficiaries to choose from a selection of commercial insurance plans offered through a Department of Defense health benefit program. Page 79
- Recommendation 7: Improve support for Service members’ dependents with special needs by aligning services offered under the Extended Care Health Option to those of state Medicaid waiver programs. Page 120
- Recommendation 8: Improve collaboration between the Departments of Defense and Veterans Affairs by enforcing coordination on electronic medical records, a uniform formulary for transitioning Service members, common services, and reimbursements. Page 127
Recommendation 5 – Medical Readiness: Recommendations to improve health and combat-casualty care. Topics include, training, facilities improvement, joint medical operations, and more. There is an emphasis on joint training and standardized procedures, as well as maintaining proficiency in treating battlefield injuries. Overall, these appear to be positive recommendations, but they lead to the next recommendation, which is a big one.
Recommendation 6 – Dismantle TRICARE as we Know it: Told you it was big. The report basically states TRICARE has become inefficient, it’s too expensive, and the quality has deteriorated. The Panel recommends giving military members and dependents access to commercial insurance health insurance programs. The proposal would keep TRICARE in place for active duty servicemembers, but give access to commercial health insurance plans to family members, members of the Guard / Reserves, and retirees (except TRICARE for Life recipients, who would remain on TFL).
The new proposed health care plan would be similar to the health care plans in place for federal employees and would be managed by the Office of Personnel Management rather than the Department of Defense. Military members would receive a Basic Allowance for Health Care (BAHC), to pay for the new health insurance options. The goal would be to cover all medical expenses, and BAHC rates would be based on locality and the cost of the available options. The process would be interesting, as the proposal calls to pay a portion of the BAHC to the insurance provider, and the rest to the family member to cover copays and out of pocket expenses.
Recommendation 7 – Improve Special Needs Care: This would provide additional medical coverage to servicemembers with family members who have special needs.
Recommendation 8 – Improve Collaboration between DoD and VA: The DoD and the VA don’t coordinate very well right now, so any mandates to do so seem like they would be in the best interest of servicemembers. Standardizing the flow of information, using a standard formulary, and improving coordination should reduce expenses, errors, and frustration.
Quality of Life Recommendations
Almost half of the recommendations are for quality of life. Some of these could be game changers for many military members, retirees, and their families. Let’s jump in.
- Recommendation 9: Protect both access to and savings at Department of Defense commissaries and exchanges by consolidating these activities into a single defense resale organization. Page 141
- Recommendation 10: Improve access to child care on military installations by ensuring the Department of Defense has the information and budgeting tools to provide child care within 90 days of need. Page 152
- Recommendation 11: Safeguard education benefits for Service members by reducing redundancy and ensuring the fiscal sustainability of education programs Page 161
- Recommendation 12: Better prepare Service members for transition to civilian life by expanding education and granting states more flexibility to administer the Jobs for Veterans State Grants Program. Page 173
- Recommendation 13: Ensure Service members receive financial assistance to cover nutritional needs by providing them cost-effective supplemental benefits. Page 180
- Recommendation 14: Expand Space-Available travel to more dependents of Service members by allowing travel by dependents of Service members deployed for 30 days or more. Page 189
- Recommendation 15: Measure how the challenges of military life affect children’s school work by implementing a national military dependent student identifier. Page 192
Recommendation 9 – Combine the Commissary and Exchanges: This is another big recommendation. The Commissary currently sells items at cost, plus 5%. This makes food and other good very inexpensive compared to many civilian stores. The Exchanges are a for-profit organization, but they funnel much of the profits back to the bases for Moral, Welfare, and Recreation activities. This proposal would combine the two agencies to help achieve cost savings. There are pros and cons to this proposal. By law, Commissaries can only sell groceries. Under a combined umbrella, Commissaries could still sell groceries at cost-plus 5%, but they could also sell non-grocery items they could resell at a profit (for example, things like plates, silverware, baby items, alcohol, and more). There are a lot of unknown details in this proposal, but there has been a push for this over the last couple years. So we may see something happen here.
Recommendation 10 – Increase On-Base Child Care Options: Child care has been a big problem on many installations, primarily due to unavailability and long waiting lists. The DoD doesn’t have a good way of tracking the number of people on wait-lists, or the average time they are on the wait-list. Couple that with a hiring freeze on many installations, and many military families aren’t able to get access to on-base child care (which can often be substantially less expensive and more flexible than off-base options).
Recommendation 11 – Education Benefits: This proposal calls for consolidation of the available education plans, changing the Post-9/11 GI Bill Transfer Rules, limiting Tuition Assistance use to professional development courses only, and preventing veterans from receiving unemployment benefits while also receiving Post-9/11 GI Bill benefits (which is currently allowed).
- The proposal calls for the sunsetting of the Montgomery GI Bill and REAP programs, which have been superseded by the Post-9/11 GI Bill, which is a more valuable benefit, and doesn’t require members to pay into the program.
- The proposal also calls for changing the minimum service requirements for transferring the GI Bill to dependents from 6 years of service to 10 years of service, and no longer allowing dependents to receive BAH (after October 1, 2017, to allow for current dependents to finish their schooling based on their current budgets).
- The proposal calls for limiting Tuition Assistance benefits for professional development only, because servicemembers have access to the GI Bill for taking college classes. There are several more highlights, but these are the biggest in this section.
Recommendation 12 – Military Transition Programs: The military to civilian transition is difficult for many veterans (I know it was for me!). Anything that makes it easier for transitioning veterans is a win in my book!
Recommendation 13 – Food Stamps and Supplemental Nutrition Benefits: The Panel recommends getting rid of the Family Subsistence Supplemental Allowance (FSSA), for military members stationed stateside. FSSA is similar to food stamps (also known as Supplemental Nutrition Assistance Program (SNAP)). FSSA is only available to military members. Why ditch it? It was used by fewer than 300 people last year. The recommendation is to replace it with the SNAP for those based in the US, and replace it with something else for those stationed overseas. It is also easier for servicemembers to qualify for SNAP than FSSA, making FSSA a redundant program. Servicemembers would still be cared for, it would just come through a different program.
Recommendation 14 – Expand Space-A Travel: Right now, family members must travel Space-A with the servicemember unless the servicemember has been deployed 120 days or longer. This proposal would reduce the deployment time frame to 30 days, making it easier for family members to travel Space-A. Sounds good to me!
Recommendation 15 – Measure military children’s schooling: The concern is that being a military dependent makes school more difficult for students. This proposal would place an identifier on each student in DoD schools and track their progress through the system.
Overall Thoughts on the MCRMC Recommendations
All too frequently we hear proposals for changes to military pay and compensation and the knee jerk reaction is to throw our hands in the air and cry foul. But the Military Compensation and Retirement Modernization Commission took a very balanced view of many aspects of military life, including pay, benefits, retirement, health care, education, dependent issues such as day care and education, transition programs and more. Overall, the recommendations make sense.
Will all the recommendations be enacted? Almost certainly not. Congress rarely works that way. But we could certainly see some changes from this report. And some of them could be beneficial. And some might have a prolonged adjustment period. But at the end of the day, the Panel appears to have made recommendations with the best interests of servicemembers, their families, and the military in mind. It will be interesting to see what comes of these recommendations.