JUNE 17, 2015, WASHINGTON – A Defense Department proposal submitted to Congress on June 10 would create what Pentagon officials called a “blended defined benefit and defined contribution” military retirement system.
Pentagon spokesman Army Col. Steve Warren told reporters that the proposal includes elements the department believes are necessary to promote retention, to maintain the all-volunteer force and to protect service members who retire due to disability.
“The department carefully reviewed proposals offered by the Military Compensation and Retirement Modernization Commission as well as Congress,” Warren said. “And in crafting its final recommendation, the department considered all elements of current and potential retirement plans and built a blended system that – in the military judgment of the Department of Defense – best enables us to maintain the readiness of the all-volunteer force.”
Officials believe the proposal will help to give the department the flexibility it needs to manage the force into the future, the colonel said, while helping to ensure that 85 percent of service members will start long-term retirement savings.
Proposal Highlights
Highlights of the proposal include:
* Creating a defined contribution element through the Thrift Savings Plan for service members;
* DoD automatically contributing an amount equal to 1 percent of a service member’s basic pay to the Thrift Savings Plan account from entry into service through separation or retirement, with vesting after completion of two years of service and additional matching contributions of up to 5 percent of basic pay starting after completion of four years of service and continuing through separation or retirement; and
* Each service having the ability to offer a bonus, called Continuation Pay, to members with eight to 16 years of service, with each service setting the rate of Continuation Pay.
“This change to a blended retirement system is a key step in modernizing the department’s ability to recruit, retain and maintain the talent we require of our future force,” Warren said. “We know that future service members will require more choice and flexibility in compensation and retirement.”
Attracting and Managing the Future Force
The proposal also provides additional options for attracting and managing a military force that requires ever-increasing, diverse and technical skill sets in an evolving global economy, he added.
Navy Lt. Cmdr. Nate Christensen, a Defense Department spokesman, said that under the plan, about 85 percent of service members who enter the force will receive some form of a portable retirement benefit.
Future service members would receive 80 percent of the current defined benefit – retirement pay, which effectively is a pension – if they serve for 20 years, and would have the opportunity to achieve nearly equivalent or better retirement benefits when they reach retirement age, he added.
“This plan enables us to recruit and retain our superb all-volunteer force in the 21st century,” Christensen said.