Military Pension Provisions in Bipartisan Budget Act Are Small But Essential Step

We would like to congratulate Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI) for their work on the Bipartisan Budget Act of 2013 (BBA). In particular, their work on slowing the growth of military pension costs is an important—though small—step forward.

This modest change is just the first move in a series of difficult decisions that the military faces regarding pensions and benefits. According to Adm. Jonathan W. Greenert, chief of naval operations, “About 50 percent of every Defense Department dollar goes to personnel, predominantly as compensation. And if we keep going this way, it’ll be at 60, and then it’ll be at 70 in about a decade plus. . . . I think it’s our responsibility to take a hard look at it.”

The changes to military pensions will affect only retirees who are still of working age. Unlike civil service pensions, military pensions are payable to working-age retirees (as young as age 38, in the case of a servicemember who joined at age 18 and retired after 20 years of service). The Murray-Ryan agreement would reduce the cost-of-living adjustment (COLA) for working-age military retirees to inflation minus 1 percent starting in 2015, generating savings. Once military retirees reach the age of 62, however, pension payments would be restored to what retirees would have received if the lower cost-of-living adjustment had never applied – this is often referred to as a “catch up.”

The impact of this provision would be relatively small. As Chairman Ryan said in his recent op-ed, “If a serviceman enlisted at 18 and retired at 38, under this policy his lifetime benefit would be about $1.7 million instead of $1.8 million. For a service member who retired at the average military retirement age of 44, the difference would be smaller, about $30,000 over his or her lifetime. This is a far more modest reform than other bipartisan proposals, some of which would have fully eliminated the adjustments for inflation for working-age retirees.”

We applaud Chairman Ryan’s decision to stand behind the military retirement provision in the BBA and would like to reiterate the words of four of BPC’s senior military leaders: “Such a change is much needed – but it’s only a first step. Additional reforms to compensation to ensure benefits are both fair and sustainable will be essential to slow the rise of personnel costs and to ensure the military is able to make the necessary investments to maintain sufficient capability to fight and win wars.”

Alex Gold contributed to this post.