Defense Secretary Ash Carter (Obama appointed last year) has sided with the GOP in their efforts to further harm the US Military by removing the pension of Service Members (SM).
The reason is simple:
First off the GOP hates pensions because they are a guaranteed rate of payment each month for as long as you live.
Second off the GOP hates pensions because the money does not get “invested” in Wall Street directly. (Yes, many pension systems invest in the market, but they still have to pay the set amount, while 401K’s if the money is lost, too bad for you.)
Third off the GOP hates the Soldiers in the military. They cost money, add long term commitments the government has to cover and can't get out of with out pissing off voters.
So add all three of these things together and you can see why the GOP would go gunning (pun intended) for military pensions.
One of the main reasons for staying in the military is the retirement. The pay sucks, the work is hard, the benefits are ok, and the damage to your body — even in peace — is harsh. BUT after 20 years you can start drawing your pension the day after you retire. This means you could enlist at age 18, and at age 39, “retire” and start drawing your pension. The catch was, you had to do 20 years. There was no partial pension. And that is where the GOP attacked, with a slight mix of “how unfair it is”.
History
With backing from the Obama Administration, (an attempt to appease the GOP maybe?) the new system will take away the current 50% of your highest three years rank’s pay pension and replace it with a 401k like “Thrift Savings Plan” and “blended” reduced pension.
I should explain that in the military your pay has nothing to do with your job or branch of service or where in the world you are. You are paid based on how long you have been in and what your rank is. If you are a female 2LT in a Combat Engineer bridge company in Korea’s DMZ with 2 years of service, your base pay is the same as the male 2LT Judge Advocate General lawyer in Kansas with 2 years of service. The average rank for an Enlisted SM to retire at 20 years of service is an E-6 (Army/Marines rank of Staff Sergeant, Navy Petty Officer First Class). The base pay for an E-6 (in any service) is around $3,700 a month. Under the current system you would plan on drawing in your pension about 50% of that for 20 years of service, around $22,200 a year.
This was a good thing, you give up your young years, inflicting harm on your body — jumping out of planes, marching with heavy backpacks, climbing and jumping, exposure to the weather, and the ever present danger of harm or death while training — and more so in combat. After 20 years, you and your family that has likely moved seven to 12 times, enters the civilian world. You have very limited business contacts (having not worked in the market for 20 years), a skill set that employers just can’t understand (“I was the S-4 for an Engineer Battalion” — equivalent of manager of a regional distribution center for Target), a skill set that does not translate into civilian work (Route Clearance Platoon Sergeant, “I can spot an IED at 100 meters and am a certified EOCA Sapper.”) Having the knowledge that you are going to have a base income while you go to college to get a civilian degree to do what you already know how to do is a big help in the transition.
It also has a secondary effect of allowing small towns and rural areas to be able to hire qualified people at a pay they can afford. Here is an example: My cousin, an E-6 Army medic (EMT equivalent), retires and moves back “home” — to where he enlisted 22 years ago. The small town has a volunteer EMS system that is unable to staff the service in the day time, the town tax base is not that big and can come up with $30,000 a year for salary and benefits. SSG (ret) Bob Dobbs has ties to the area, can do the job, and since he has his base retirement, $30k on top of that is fine. (he also gets to have Tricare insurance at little to no cost — a change from the single payer system he was under on active duty) The result is the small town gets a very well trained, dedicated, person who can take the needed position at the low rate the town can afford.
Ok, so what did the GOP (and Obama) do?
They have changed the system to a 401k type plan with greatly reduced pension. Effective 1 Jan 2018, all new enlisted SM’s will be in the “blended” system. The Government (the employer) will put 1% of your base pay into the “Thrift Savings Plan” (TSP -a 401k type plan). After 24 months of service, You will be encouraged to put in up to 10% of which the government will match up to 4% more at 50 cents for every dollar you put in. Meaning they will pay 1% to your fund for two years, and then start matching your contributions up to 5% at $1 for every $2 you put in.
Like all 401k’s, you will be able to transfer this money to any other employer retirement fund...but not a self-employment IRA fund, it has to stay a 401k, 403b, (or if you become a pirate a 401ARRR). And you won’t be able to draw from it until you’re 59 ½ with out penalties.
If you stay in for 12 years, AND sign up for another 4, they will pay a bonus to your TSP of 2 ½ months of pay.
But if you stay for 20 years, you can qualify for a reduced pension — under 40% of your highest three years of rank...an improvement over the 25% the GOP was pushing. So the E-6 with 20 years will be looking at around $17,000 a year as a base until they are 59 ½ and can start using their 401K.
And how is this bad?
For starts it is the first step in removing the pension all together, a stated goal of the GOP. When holding hearings on this they would present the very rare case of a 3 star General with 30+ years (getting 75% of base pay) who retires at 48 and takes a job as department head at General Porkbarrel for $350,000 a year and drawing $126,000 in pension a year! Then with crocodile tears, say “and the hard working civilian department head is only getting $350k a year but has to keep working for another 30 years before he can touch his retirement!”
After that they started doing the divid and point fingers by talking how unfair it is that the current system is set that if you serve for 19 years, 11 months, you get no pension. Or how unfair it is that an 18 year old could retire at 38 and not have to work again thanks to the government paying him a pension AND giving him health insurance! And even worse, in their minds, those 38 year olds who get out and then go work for the government for another 20 years to get a pension from them! TWO pensions! How dare they!
This is going to effect several things, there will be less incentive to stay in for a full career. Especially since the percentage of your base pay will be going down over the next several years. (the NDAA initially had a 5% reduction in retirement percentage every five years to 25% but was removed in conference committee)
There will be less incentive to join. Low pay, harsh work, high risk, and a retirement offer that is less than what McDonalds offers its full time employees (you put in 5% they match with 11%). Safer, less moves, easier, and fewer regulations.
But I want a smaller Military.
You may want a smaller Military, but i’m betting you mean budget. The money “saved” by gutting the pensions is going to keep funding all the porkbarrel projects like the F-35. We need a military that is capable of defending the US, and that takes people. Military service is sacrifice for the Soldier and her family. It should be rewarded in a way that helps the nation after they leave the service. Not punished.
We want a military that answers to the People, not to a personality. By making it less attractive to serve, you drive out intelligent caring people and cater to the dregs of the extreme “patriots” and tea party types.
There is still time to change things. Congress (with the President’s approval) did this, it can put it back. IF the GOP was really feeling it was unfair that someone who serves for 19 years gets no pension, they could change it to an adjusted one. Serve 5 years and get 10% of your highest three years of pay, 10 years 15%, etc and to encourage making a career have a jump from 20% at 15 years to 50% at 20 and 75% at 30 (which are the current rates).
I’ve asked the Clinton and Sanders campaigns, as well as Trump, Cruz, and Paul about this issue, I got nothing from Clinton, Sanders campaign sent a nice email saying they were not up on the issue, and would get back to me but that in general Mr. Sanders is in favor of pensions over 401k’s. Trump had no response, Cruz sent me an email with links to donate, and Paul (who had not dropped out at that point and is my Senator) sent an email stating that he did not vote for the NDAA because he did not have time to read it and felt that it was a bad bill because of renewing some of the Patriot Act things.
This makes me hope that Sanders wins, and pushes to re-state the pension system for the military. I’m not going to be effected as i’m “grandfathered” under the current system. But I want what I’ve got for my kids when they join, or better.