Budget Deal Hits Military Retirees with Pension Cuts, Federal Retirees Untouched
Cost of living adjustments will decrease for retired military personnel, not for civilian retirees
Military retirees will see a decrease in their pension plans if the bipartisan budget agreement is adopted, while civilian federal employees will be exempt.
Ryan and Murray under the plan military retirees younger than 62 will receive 1 percentage point less in their annual cost-of-living adjustment. New federal employees who are hired after Jan. 1, 2014 will also be required to pay 1.3 percent of their pay more into their pension plans. However, federal retirees will continue to receive their generous pension benefits and current employees will not be required to pay more
Ryan contends lowering the cost-of-living adjustment (COLA) for military retirees under 62 will decrease the deficit by $7 billion over 10 years. The majority of the military prefers the “High Three” plan, which offers a full COLA equal to inflation as measured by the Consumer Price Index (CPI). An alternative plan, the “Redux,” provides a lump sum of $30,000 upon retirement, but the cost-of-living adjustment is equal to inflation minus 1 percent.
According to the Congressional Research Service (CRS) as of 2009, 244,476 military service men and women chose the High Three plan, while only 14,605 opted for the Redux. If the budget agreement is adopted, all military retirees will be forced into a plan similar to the Redux plan, but they will not receive a lump sum upon retirement.
“The military retirement system is a non-contributory, defined benefit system that has historically been viewed as a significant incentive in retaining a career military force,” the CRS said. “The monthly retirement annuity is adjusted annually by a Cost-of-Living Adjustment (COLA) to ensure that the annuity is protected from the adverse consequences of inflation,” Only 15 percent of enlisted personnel will ultimately be eligible for retirement, according to the CRS. Payments to military retirees and survivor benefits totaled roughly $53 billion in fiscal year 2011.
The budget deal would increase spending levels to $1.012 trillion, above the Budget Control Act cap of $967 billion for fiscal year 2014, and reverses $63 billion in automatic sequester cuts. Ryan says, is that it spares the Pentagon from the sequester cuts next year, locking defense discretionary spending at $520.5 billion in fiscal year 2014.
Sources—paul ryan, patty murray, crs,