Military Benefits

New compensation proposals face skepticism in Congress

An independent commission's proposal for overhauling military retirement and health care benefits faced scrutiny and initial skepticism on Capitol Hill Wednesday as lawmakers got underway with committee-level review of the suggested changes.

The Military Compensation and Retirement Modernization Commission's January report calls for shrinking the size of traditional military retirement pay by about 20 percent and also offering a new defined-contribution benefit for troops who separate before 20 years of service.

In separate hearings before the personnel panels of the House and Senate Armed Services committees, lawmakers grilled commissioners on the details and assumptions underlying the proposals.

Some questions focused on the commission's claim that their proposal can make everyone happy by simultaneously improving retirement benefits for career service members and for troops who leave long before 20 years — while also saving the government money.

The billions in savings "is not coming out of the air ... it's coming from somewhere," said Sen. Angus King, a D-Maine.

"With regard to retirement, it's more efficient," responded Michael Higgins, a member of the commission. "We are moving dollars from future benefits to current dollars. Those dollars are far more effective in producing retention than dollars that are paid later in a deferred plan."

Some lawmakers questioned the piece of the new retirement system that would offer troops a lump-sum "continuation pay" at 12 years of service. The commission's data claiming that career troops would accrue more total benefits under the proposed system assumes that individual troops invest that money into their personnel retirement account and not touch it until age 59 and a half.

Rep. Susan Davis, D-Calif., doubted that all troops will make that decision.

"What if that assumption doesn't bear out?" she said. "Is the whole program impacted if they don't do that? Does it rest on that assumption?"

Commissioners assured her that is not the case. According to their analysis, the proposed retirement system offers more total benefits than the existing benefits package even if troops chose to pocket their continuation pay, Higgins said.

"Let's say for argument's sake there is no investment of continuation pay," Higgins said. "We still believe that our benefits — again widely variable based on assumptions — we still believe that our program will produce better [lifetime] assets or certainly as good as they have today."

The views of lawmakers on the personnel panels are a critical hurdle for the commission's proposal because any effort to pass a law must be approved by the committees.

The details of the commission's proposal include cropping the "multiplier" that the Defense Department uses to calculate traditional retirement pensions from 2.5 to 2.0, effectively reducing the initial value of retirement checks by 20 percent.

The new plan also would have the Defense Department contribute up to 6 percent of basic pay into individual troops' retirement savings accounts.

A 1 percent contribution is automatic, and DoD would further match service members' own contributions up to 5 percent. That benefit would go to all troops who serve more than two years regardless of whether they chose to separate before 20 years.

Some lawmakers zeroed in on the commission's recommendation that the Pentagon eliminate most of Tricare's health services and move millions of military dependents and retirees into private-sector health care policies similar to those offered to federal civilians.

Rep. Joe Heck, R-Nev., chairman of the personnel panel of the House Armed Services committee, who is also a trained physician, raised concerns about the commission's claim that Tricare is reimbursing doctors at rates lower than government-run Medicare and fair-market value.

"As a health-care provider for over 30 years, I question that assumption," Heck said.

That prompted a forceful response several commissioners, including former House member Steve Buyer and retired Adm. Edmund Giambastiani.

Buyer called Tricare "a broken system," while Giambastiani said Tricare is "in a death spiral."

Buyer pointed to studies conducted by the commission that show doctors in specific cities are far less likely to join the Tricare network and provide treatment to the military community.

Buyer pointed to the example of Fayetteville, N.C., home to the Army's Fort Bragg, and more specifically the field of obstetrician gynecologists. While some private-sector plans listed 114 doctors in their network, Tricare offered only 34, he said.

Sen. Kirsten Gillibrand, One influential senator asked pointed questions about the piece of the proposal that would offer retirees leaving after more than 20 years of service the option of forgoing traditional monthly pension checks and instead receive a lump-sum payment for the total value of their working-age retirement benefit.

"How do you recommend that DoD calculate that sum?" asked Sen. Kirsten Gillibrand, D-N.Y., the top Democrat on the personnel panel of the Senate Armed Services Committee.

Higgins gave a short response, saying the commission recommends that DoD develop an "actuarial type of assessment and consider the interests of people and what would draw them to this benefit."

Financial experts say the value of that lump sum could vary by hundreds of thousands of dollars, depending on the details of the calculations.

Some lawmakers said the real issue is whether Congress can summon the political will to vote for a change that may be unpopular among a relatively small group of people but good for the country at large.

"I think we've got to man up to what we've got to do" said Rep. Jackie Speier, D-Calif. "We just now have to inject a little bit of guts into all of us to do the right thing.

Rep. Timothy Walz, D-Minn., disagreed, saying political concerns have an appropriate place in this debate and there is nothing wrong with lawmakers taking into account the perceptions and concerns from the military community.

"If we ever divorce legislation and thoughtfulness from the politics and the will of those who serve, we make a great mistake," Walz said.

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