Senate Panel Backs Military Retirement Change, Troop Pay Raise of 1.3%

Lawmakers on a Senate panel agreed to overhaul the military retirement system and give troops a less-than-expected pay raise next year.

Members of the Senate Armed Services Committee's Personnel Subcommittee, headed by Sen. Lindsey Graham, R-South Carolina, on Tuesday evening supported legislation that would offer troops 401(k)-style retirement plan by 2017 with matching contributions and full vesting after two years.

Graham praised the panel for backing the retirement overhaul. It was one of 15 recommendations from the congressionally mandated Military Compensation and Retirement Modernization Commission to provide more benefits options while saving the government $12 billion a year by 2040.

"We're going to break some new ground in this mark-up that I think is long overdue," he said, referring to the draft version of the bill. "We're going to try to improve the quality of life for military members and their families and our retirees, but at the same time reform our personnel system to make it more sustainable. It's been decades since anyone has really looked at the retirement system. I'm pleased with the outcome."

The legislation would also include a troop pay raise of 1.3 percent rather than 2.3 percent for fiscal 2016, which begins Oct. 1. The Defense Department proposed the lower figure, which compares to a 1-percent bump in basic pay service members received the past two years. But it's less than the 2.3 percent estimated increase in private-sector wage growth, which military pay is supposed to track by law.

Click here to view the proposed 1.3 percent 2016 military pay increase.

Republicans on the counterpart panel in the House of Representatives supported a higher cost of living adjustment for military members, but didn't specify a figure in their draft version of the legislation, thus leaving the decision up to President Obama.

"Troops deserve the 2.3% pay raise," Joyce Wessel Raezer, executive director of the National Military Family Association, an advocacy group based in Alexandria, Virginia, tweeted on Wednesday.

The Pentagon also proposed increasing pharmacy co-pays in the Tricare health care system and slowing the growth of basic allowances for housing (BAH) by another 4 percent over the next two to three years, in addition to the 1 percent approved for the current fiscal year. If the plan is approved, service members would eventually pay an average of 5 percent of their housing costs.

Graham indicated his subcommittee's legislation supports these proposals. The bill would "modify" Tricare pharmacy co-pays to "help DoD control its drug costs" and "control cost growth" in basic allowances for housing. He suggested the provisions, along with the pay raise, were driven in part by mandatory spending caps known as sequestration.

"Sequestration has caused us to make some difficult choices, draconian choices," he said. "Until we can replace sequestration with more rational cuts, these choices are only going to get worse over time."

The bill would continue to erode pay and benefits for currently serving members and their families, according to the Military Officers Association of America, an Alexandria-based advocacy group. "The subcommittee mark is very disappointing," Norb Ryan, the organization's president and chief executive officer, said in a statement.

The legislation must still be approved by the Senate Armed Services Committee and then the full Senate before both chambers of Congress work out a compromise. But it could lead to a showdown between the Republican-controlled Congress and the Democrat-led White House over reforming the decades-old military retirement system.

Obama has said he backs most of the independent commission's recommendations, but wants more time to study its controversial proposals, including offering troops a 401(k)-like Thrift Savings Plan with matching contributions before 20 years of service -- which would reduce the value of the existing defined-benefit plan, replacing the existing Tricare program with a private health insurance options, and consolidating commissary and exchange stores on military bases, among others.

"With respect to the remaining recommendations, given their complexity and our solemn responsibility to ensure that any changes further the objectives above, we will continue working with the Commission to understand how the following proposals would affect the All-Volunteer Force," he wrote in a letter to lawmakers a few weeks ago.

Sen. Kirsten Gillibrand, D-New York, the highest-ranking Democrat on the subcommittee, noted that the Senate version of the bill doesn't include the commission's recommendation to reform the military health care system.

"While the mark includes numerous provisions that would yield savings in compensation and benefits, including the commission's retirement recommendations, the mark does not included provisions to reform Tricare or establish new enrollment fees for Tricare for Life beneficiaries," she said, referring to the supplemental plan for elderly retirees.

Gillibrand said it does include a number of provisions designed to improve how the military prosecutes sexual assault cases and protects victims of such abuse. The legislation would modify courts-martial rules to protect so-called special victims' counsels from receiving unfavorable evaluations as a form of retaliation and authorize them to assist sexual assault survivors in filing complaints to inspectors general and members of Congress, among other changes, she said.

-- Brendan McGarry can be reached at brendan.mcgarry@military.com