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New military retirement system gets Pentagon OK

by Andrew Tilghman and specific legislative proposals, Junor said. Specifically, the bills pending before Congress would
Military Times staff writer The Pentagon agrees with Capitol Hill that a future provide a lump-sum cash payment at the 12th year of
service contingent upon service members agreeing to
After months of official silence, the Defense De- military retirement system should involve individual stay in uniform for an additional four years. Those bills
partment on Wednesday sent to Capitol Hill its formal investment accounts for all troops and provide govern- guarantee troops a cash payment of at least 2.5 times
recommendation for transforming military retirement ment contributions to those accounts as part of a Thrift their monthly basic pay, and the services could increase
benefits, a move that is likely to clear the way for major Savings Plan. Money put in a TSP is not available that for troops in high-demand career fields.
changes to become law. without tax penalties before age 59 and a half.
The Pentagon’s proposal, however, would eliminate
The Pentagon is officially backing a “blended” sys- In effect, the new retirement system would signifi- that guaranteed minimum payment for troops and seeks
tem that would shrink the size of the current pension cantly reduce monthly pension income for so-called more flexibility for the services to determine when and
by about 20 percent yet supplement that benefit by of- working-age retirees, but it would restore that money how much continuation pay to offer individual troops.
fering government contributions to individual retire- — and potentially more — after veterans reach age 60.
ment investment accounts. The Pentagon’s “continuation pay” proposal would
The Defense Department is also urging some mod- look similar to the current system of retention bonus-
The proposed system would provide for the first time est changes to Capitol Hill’s military retirement reform es. But the continuation pay would result in more and
a modest retirement benefit for the vast majority of ser- bills. That includes eliminating a feature backed by the
vice members who leave the military before reaching Senate that would give service members retiring af- See RETIREMENT page 9
20 years of service to qualify for the traditional pension. ter 20 years of service the option to forgo traditional
monthly pension checks and instead receive a lump-
The Defense Department’s recommendations are most- sum immediately upon leaving military service.
ly similar to the legislation that is gaining steam on Capitol
Hill and comes at a time when lawmakers are hammering That lump-sum option was criticized as being a bad
out the details of their annual defense policy bill. deal for troops and, in concept, resembling pay-day
lenders that charge exorbitant interest rates. The mili-
“We believe very strongly in this and I hope that this tary essentially agreed, noting in it’s memo to Congress
does become law,” Laura Junor, the principal deputy that such a lump-sum payment is a “smart financial de-
undersecretary of defense for personnel and readiness, cision in very limited circumstances” and “proposed
told Military Times in an interview Wednesday. computation methodologies … result in relatively small
lump sums, while forgone annuities are significant.”
The Pentagon on Wednesday sent top lawmakers
a six-page “white paper” outlining in detail the mili- The Pentagon’s new recommendation also includes
tary’s official position on the retirement reform efforts. a substantial adjustment to the lump-sum “continua-
Top defense officials will begin meeting with lawmak- tion pay” bonus that is part of the current proposals.
ers on Capitol Hill on Thursday to discuss the details

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