Reserve Officers Association Legislative Update 6 December 2015 Patrick Air Force Base, Florida
Military Compensation and Retirement Modernization Commission (MCRMC) Established by the FY13 NDAA* to conduct a review of military compensation and retirement systems and to make recommendations to modernize them to: ensure the long-term viability of the All-Volunteer Force by sustaining the required human resources of that force during all levels of conflict and economic conditions enable the quality of life for members of the Armed Forces and the other uniformed services and their families in a manner that fosters successful recruitment, retention, and careers for members of the Armed Forces and the other uniformed services modernize and achieve fiscal sustainability for the compensation and retirement systems for the Armed Forces and the other uniformed services for the 21st century Required to submit a report by February 1, 2015, to the President of the United States and Congress * Pub. L. 112-239, as amended by FY14 NDAA Pub. L. 113-66.
MCRMC Outreach Held 8 town halls across the country with Service members, retirees, their families, and the general public Conducted 8 public hearings with installation commanders, noncommissioned officers, spouses, and representatives of advocacy groups with specific experience in military compensation, health care, and quality of life issues Visited 55 installations throughout continental United States, isolated locations, and overseas Met with 98 Military and Veterans Service Organizations, academic institutions, and other private entities Held more than 50 Commissioner executive session meetings
MCRMC Recommendation 1: Retirement Findings 83% of Service members leave service without any Government-sponsored retirement assets Current Service force profiles can be maintained with a blended retirement system A blended retirement plan is expected to increase the Governmentsponsored assets that Service members have available at 20 YOS (with investment of continuation pay) Service members would benefit from additional choice in structuring their defined benefit annuities Services would benefit from flexibility to create differing force profiles for various career fields
MCRMC Recommendation 1: Retirement Details Defined benefit Maintain vesting at 20 YOS (26 YOS) for standard retirement Set defined benefit multiplier at 2.0 vs. current 2.5 Defined contribution (TSP) Automatic enrollment of Service members to contribute 3% of basic pay at service entry date Automatic Government contributions of 1% of Service members basic pay at service entry date Government matching of Service member contributions of up to 5% (4%) of basic pay from beginning of YOS 3 (2 years and 1 day) through YOS 20 (YOS 26) Vesting at beginning of YOS 3 Continuation pay at 12 YOS to provide midcareer retention incentives Basic continuation pay of 2.5 times monthly basic pay for Active Component (AC) members (0.5 of AC pay for Reserve Component (RC) members) Additional continuation pay from Services as needed to maintain desired force profiles
MCRMC Recommendation 1: Retirement Details (cont) Service member defined benefit annuity choice Active Duty (Reserve Component) choice to receive all or part of pre-social Security age defined benefit annuities as lump-sum payments Full annuities resume at full Social Security receipt age to ensure steady old-age income Service career field flexibility Authority to propose adjustments to YOS to qualify for defined benefit annuity for individual career fields Enables differing force profiles to resolve long-term manpower challenges Requires 1-year waiting period after YOS adjustment is proposed to the Congress Items in red indicate the changes made by the House and Senate Armed Services Committees.
MCRMC Recommendation 1: Retirement Comparison Retirement Plan Annuity Multiplier TSP Govt Contribution Defined 2.5% 0% - automatic (military members can make voluntary contributions) Blended 2.0% 1% - automatic 4% - matching TSP Member Contribution Continuation Pay at 12 YOS (x 1 month pay) 0% - automatic N/A 3% - automatic (military members must opt out each year) 2.5% (Active) 0.5% (Reserve)
Findings MCRMC Recommendation 3: Financial Literacy Lack of choice in current compensation programs result in complacency and insufficient knowledge among Service members with regard to managing their personal finances 90% of Service members indicated they would like to receive more financial education; 82% indicated their spouse should be included Service members appear to be more at risk than the national population when managing financial products Recommendation Increase the frequency and strengthen the content of financial literacy training Provide professional financial literacy training at appropriate career points Assign responsibility for financial literacy training and monitoring to Dep SecDef Provide an online budget planner with automatic updating through DFAS Restructure leave and earnings statement to include TSP balances and value of benefits paid by DoD
MCRMC Recommendation 4: Reserve Component Statuses Findings The current RC status system is complex, aligns poorly to current training and mission support requirements, fosters inconsistencies in compensation, and complicates effective budgeting This complicated status system also causes mobilization difficulties that impede operational commanders who need to employ the RC Simplifying RC statuses has broad support Recommendation Replace the 30 current RC duty statuses with 6 broader statuses* Issue new orders only when an authority changes Amend orders when a duty status, purpose, or funding source changes *Since the Final Report, the total number of duty statuses has increased to 33.
MCRMC Recommendation 6: Health Care Benefit Findings TRICARE has a weak health care network because of low reimbursement rates (Medicare rate or less) TRICARE limits family members access to care with a frustrating referral process TRICARE beneficiaries prefer greater choice in health care Structural aspects of the TRICARE program have hindered advancements and efficient operations
MCRMC Recommendation 6: Health Care Benefit Recommendations Selection of commercial insurance plans Offer an array of health plan options that vary in type, covered benefits, and price, with several choices in every location Beneficiaries continue to be eligible for care at MTFs Leverage OPM's experience to administer Basic Allowance for Health Care (BAHC) AC Service members receive BAHC to offset the majority of dependent health care costs BAHC based on the costs of median plans available in the family s location, plus average out-of-pocket costs Part of BAHC used to directly transfer the premium for the plan the family has selected to the respective insurance carrier Remainder of BAHC available to AC families to pay for copayments, deductibles, and coinsurance Establish a program to assist AC families that struggle with high-cost chronic or catastrophic conditions until they reach the catastrophic cap
MCRMC Recommendation 6: Health Care Benefit Recommendations (cont) RC members able to purchase a plan from DoD program at varying cost shares Reduce cost share to 25% to encourage RC health and dental readiness and streamline mobilization of RC personnel When mobilized, RC members receive BAHC for dependents; select a DoD plan or apply BAHC to current (civilian) plan Non-Medicare-eligible retirees cost contributions remain lower than the average Federal civilian employee cost shares, but increase 1% annually over 15 years Financed through trust funds
Findings MCRMC Recommendation 11: Service Member Education Substantial duplication between education programs Post-9/11 GI Bill, MGIB-AD, and REAP Post-9/11 GI Bill is typically more generous than MGIB-AD and REAP Post-9/11 GI Bill housing stipend was meant to support Service members and their families; the stipend is sometimes nearly twice actual room and board costs when used by dependents Veterans may receive Post-9/11 GI Bill benefits, including the housing stipend, while receiving unemployment insurance payments Recommendations Sunset MGIB-AD and REAP Increase Post-9/11 GI Bill transferability requirements to 10 YOS plus an additional commitment of 2 YOS to provide stronger retention incentives Sunset housing stipends for dependents Eliminate unemployment when receiving a Post-9/11 GI Bill housing stipend
ROA Legislation for 2016 - Authorizations Active Duty: Resolve inequities in crediting of active duty toward early retirement. Ensure all involuntary activation periods of duty (including duty performed under 10 USC 12304b) are included in the definition which qualifies Reserve Component servicemembers for early retirement. Education: Resolve inequities in qualifying for the Post 9-11 GI Bill. Provide the same active duty authority for Guard and Reserve to qualify for the Post 9-11 G.I. Bill after the Student Loan Repayment Program Obligation is satisfied. Health Care: Provide a health care plan regardless of military orders in order to remove the disruption of care when families move between civilian and military medical programs. Offer health care for Guard and Reserve members, including the Individual Ready Reserve and technicians, which will enable them to stay in one health care program regardless of the type of order they may be performing. Military Compensation and Retirement Modernization Commission (MCRMC): Remove the unintended consequences of the new blended retirement that would result in Guard and Reserve members losing retirement benefits. Exempt 401(k) contribution limits for Guard and Reserve employee and government amounts from the MCRMC blended retirement for the Thrift Savings Plan (TSP). Provide a 2.5 percent calculation for retirement points when a Guard or Reserve member receives points only credit for service that does not qualify for TSP matching contributions.
ROA Legislation for 2016 Authorizations (cont) Survivor Benefit Plan-Inactive Duty Training (SBP IDT): Establish the same survivor annuities for Guard and Reserve when they die in the line of duty. Eliminate the unequal treatment of Reserve Component members under SBP based solely on duty status; and resolve the same inequity with respect to payment of an SBP annuity to a dependent child or children when there is no eligible surviving spouse. Veteran Status: Confer veteran status on Reserve Component Members. Confer veteran status for purposes of federal hiring veterans preference on Reserve Component members after 180 cumulative days on active duty versus consecutive days on active duty.
ROA Legislation for 2016 - Appropriations End Strength: Increase levels to support strategic and operational requirements. Restore end strength so the reserve components can continue to meet strategic and operational requirements. Equipment: Fund National Guard Reserve Equipment Account (NGREA) in order to reduce equipment shortages and replace equipment currently being used beyond their functional life. Fund the National Guard Reserve Equipment Account in the base budget to ensure this valuable account remains stable thereby allowing the Reserve Components to meet mission requirements with needed equipment. Equipment: Reduce Army and Marine Corps equipment shortages that increase risks in their job performance. Reduce the equipment shortage for the Army National Guard, Army Reserve and Marine Corps Reserve which are currently the highest among the services. Security: Provide security at armed forces facilities that will prevent loss of life or injury as a result of domestic or foreign terrorist attacks. Congress and the services should provide the authority and funding to secure vulnerable military facilities from domestic and foreign terrorist attacks. Training: Fully resource training to ensure Guard and Reserve members are capable of performing duties during peacetime and contingencies. Provide funding to support the reserve component strategic and operational requirements which are currently not funded at 100 percent of need.