Both the House and Senate defense authorization bills promise to make sweeping changes to military retirement for future generations of servicemembers. They also promise to help current members understand the new plan well enough to decide within a year whether to opt into its more modern features, including a portable 401(k)-like Thrift Savings Plan, or to stay under the current more rigid plan that offers careerists a 20-percent more valuable “defined benefit” for serving at least 20 years.
Though the current force will have time and a lot more information on which to base their decisions, the Congressional Budget Office must predict now how current members will decide in order to give members of Congress a good estimate of costs and savings from enacting the new plan.
CBO has already made a projection for the House-passed plan. It projects that no member with 12 or more years of service will switch to the new plan given their ineligibility for a key feature: a lump-sum continuation pay at the 12-year mark in return for a promise to serve at least four more years.
CBO says 100 percent of members with less than two years’ service will switch to the new plan to gain access to its Thrift Savings Plan with government matching of member contributions up to 5 percent of basic pay.
It also predicts that to sustain current force profiles of skill mix and experience, the services will set continuation pay equal six months of basic pay for active-duty enlisted and 14 months’ basic pay for active-duty officers. Using current pay scales, that would be a taxable payment of $21,400 for an E-6 with 12 years in and almost $98,000 for an O-4.
Likewise, continuation pay for reserve component members should be set at one month’s basic pay for enlisted and six months for officers, which using current pay scales would be almost $3,600 and $42,000 respectively.