The military is continually looking at ways to stretch its budget, and one of the largest expenses is personnel – including pay, benefits, and the cost of supporting personnel through deployments, permanent changes of station, training, and facilities. Two of the major areas the military is looking to save money is by overhauling the military retirement system for active duty military, and by overhauling Guard and Reserves drill pay.
Military pay and benefits represent a huge portion of the defense budget each year. This figures to continue over the coming decades are the cost of paying for retirees continues to increase at a rapid rate. The major concerns center around the cost of retiree and dependent health care which continue to increase, along with the increases in retiree pensions through the Cost of Living Adjustments (COLA).
As we mentioned, the military is looking at changing the active duty retirement system, but they are also taking a strong look at changing the National Guard and Military Reserve pay and retirement system, starting with the possibility of slashing drill pay and retirement points across the board – but it’s not all doom and gloom. In fact, there could be some benefits to a reduction in how drill and retirement points are calculated.
Will the Military Overhaul Guard and Reserve Drill Pay?
Congress has commissioned a study, the 11th Quadrennial Review of Military Compensation (QRMC), to look at ways to reduce long term expenses, and one of the aspects they are studying is Reserve and National Guard pay and benefits. One of the recommendations is reducing the number of drill pay days and annual retirement points awarded to Guard/Reserve members, in exchange for starting retirement pay earlier than age 60, as current law dictates. From the report:
The QRMC recommended modernizing the reserve compensation system by transitioning the reserve components to a total force pay structure under which a member receives full pay and allowances for each day of duty regardless of the type or purpose of duty. Further, the QRMC recommended transitioning the reserve components to a retirement system that is more closely aligned with the active duty system with guard and reserve members receiving retired pay upon reaching their 30th anniversary of military service, having completed 20 qualifying years.
Let’s break this down: Basically, the QRMC wants to simplify how Guard and Reserve members are compensated, including how they earn drill pay and retirement points.
Current law compensates members of the Reserve Component (Guard and Reserve members) for 4 days salary and 4 Drill Points per drill weekend (2 working days). In addition, Reserve Component members can earn 14 points for the two weeks they serve per year, and 15 participation points per year. In most cases, Guard and Reserve members earn around 75 retirement points per good year of participation, not counting any additional active duty time they may incur.
The proposal would limit members of the Reserve Components to a total of 53 retirement points per year – one point for each weekend drill day, 14 points for the two weeks of summer training, and 15 annual participation points. Instead of paying members of the Reserve Component for 4 days of service per weekend drill, Guard and Reserve members would receive the same pay and benefits as active duty personnel, regardless of their status. This would simplify the pay system, but have the net effect of reducing the number of retirement points Guard and Reserve members could earn in any given year.
In exchange, the board proposes to allow retirees from the Reserve Component to begin receiving retirement pay 30 years from the date they began military service, or age 60, whichever comes first. In this example, and enlisted person who joined at age 18 out of high school could begin receiving retirement pay at age 48 (30 years after joining the service), provided they have completed their 20 years of service.
Thoughts on this Proposal
Members of the Guard and Reserve have a complicated pay system that rewards them more for drill weekends than working on active duty status. Additionally, members who are activated for less than 30 days earn less than their active duty counterparts, while members who are activated for 31 days or longer are compensated at the same rate as their active duty counterparts. There are several other factors affecting Guard and Reserve pay which can complicate matters (including the purpose of activation, duration of activation, etc.).
The purpose of this proposal is to simplify Reserve Component pay, eliminating much of the confusion, and putting Guard and Reserve members on equal footing with their active duty counterparts. In exchange for being awarded fewer retirement points per year, members of the Reserves and National Guard would be able to receive their retirement benefits much earlier than the current standards allow – 30 years from the date they entered military service, or age 60, whichever comes first.
Guard and Reserve members have long wanted retirement pay and benefits to start before age 60, though not at the expense of cutting drill pay and retirement points. But in the long run, this proposal is not a huge detriment to total compensation, depending on the situation of the service member. (see page 154 of the report for some examples).
Who will this affect? Keep in mind this is just a proposal, and not law. If enacted, there are two options – one which would grandfather all Guard and Reserve members into the old system, and an option that would grandfather those with 18 years of service or more, and move everyone else into the new system. Those who are grandfathered into the old system would continue earning their points and pay as they previously have.
My thoughts. I read through chapters 6-8 of the report (the sections which pertain to the Guard and Reserves), and overall, this appears to be a positive proposal for many Guard and Reserve members. Each situation will be unique, of course, and those who have been in the Guard or Reserves with a lot of service time may be better off under the old system. But others would do better under the proposed changes. Though members would end up earning fewer retirement points and lower pay while they are serving, many members serving in the Reserve Component would be able to retire much sooner than they otherwise would, giving them many additional years of retirement pay and benefits.
Though I didn’t specifically read this in the report, it appears as though the retirement that starts at 30 years after entering the service would be full retirement with the pension based on retirement points, grade, and time in service, and with health care. (someone please chime in with a comment if health care is not included until age 60). If the earlier retirement option includes health care starting at 30 years from entering the service, then this is a great deal for many prior service members and others who would be able to begin receiving TRICARE at a much earlier age. For many Guard and Reserve members, TRICARE is more valuable in the long run than the actual pension they receive, and starting this earlier would be a huge benefit.
The full report is 290 pages long, and can be found here (pdf).
What are your thoughts on these proposed changes?