[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 112-80]
MILITARY RETIREMENT REFORM
__________
HEARING
BEFORE THE
SUBCOMMITTEE ON MILITARY PERSONNEL
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
HEARING HELD
OCTOBER 25, 2011
[GRAPHIC(S)] [NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PRINTING OFFICE
71-451 WASHINGTON : 2012
___________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer
Contact Center, U.S. Government Printing Office. Phone 202-512-1800, or
866-512-1800 (toll-free). E-mail, gpo@custhelp.com.
SUBCOMMITTEE ON MILITARY PERSONNEL
JOE WILSON, South Carolina, Chairman
WALTER B. JONES, North Carolina SUSAN A. DAVIS, California
MIKE COFFMAN, Colorado ROBERT A. BRADY, Pennsylvania
TOM ROONEY, Florida MADELEINE Z. BORDALLO, Guam
JOE HECK, Nevada DAVE LOEBSACK, Iowa
ALLEN B. WEST, Florida NIKI TSONGAS, Massachusetts
AUSTIN SCOTT, Georgia CHELLIE PINGREE, Maine
VICKY HARTZLER, Missouri
Michael Higgins, Professional Staff Member
Debra Wada, Professional Staff Member
James Weiss, Staff Assistant
C O N T E N T S
----------
CHRONOLOGICAL LIST OF HEARINGS
2011
Page
Hearing:
Tuesday, October 25, 2011, Military Retirement Reform............ 1
Appendix:
Tuesday, October 25, 2011........................................ 25
----------
TUESDAY, OCTOBER 25, 2011
MILITARY RETIREMENT REFORM
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Davis, Hon. Susan A., a Representative from California, Ranking
Member, Subcommittee on Military Personnel..................... 3
Wilson, Hon. Joe, a Representative from South Carolina, Chairman,
Subcommittee on Military Personnel............................. 1
WITNESSES
Davis, John, Director, Legislative Programs, Fleet Reserve
Association.................................................... 7
Penrod, Vee, Deputy Assistant Secretary of Defense for Military
Personnel Policy............................................... 5
Rooney, Dr. Jo Ann, Principal Deputy Under Secretary of Defense
for Personnel and Readiness.................................... 4
Strobridge, Steve, Director, Government Relations, Military
Officers Association of America................................ 6
APPENDIX
Prepared Statements:
Davis, Hon. Susan A.......................................... 31
Rooney, Dr. Jo Ann........................................... 32
Strobridge, Steve, joint with John Davis..................... 38
Wilson, Hon. Joe............................................. 29
Documents Submitted for the Record:
``Modernizing the Military Retirement System,'' the Defense
Business Board's Report to the Secretary of Defense........ 61
Written Statement of the Reserve Officers Association of the
United States and the Reserve Enlisted Association of the
United States.............................................. 96
Witness Responses to Questions Asked During the Hearing:
Mr. Coffman.................................................. 103
Mrs. Davis................................................... 103
Questions Submitted by Members Post Hearing:
Ms. Bordallo................................................. 107
MILITARY RETIREMENT REFORM
----------
House of Representatives,
Committee on Armed Services,
Subcommittee on Military Personnel,
Washington, DC, Tuesday, October 25, 2011.
The subcommittee met, pursuant to call, at 1:08 p.m. in
room 2212, Rayburn House Office Building, Hon. Joe Wilson
(chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. JOE WILSON, A REPRESENTATIVE FROM
SOUTH CAROLINA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL
Mr. Wilson. Good afternoon, and ladies and gentlemen,
welcome.
Today the Military Personnel Subcommittee will address the
subject of military retirement, an issue of immense importance
to service members, and in turn to combat readiness.
I want to thank Congressman Dr. Joe Heck for recommending
that this subcommittee conduct this hearing. Dr. Heck very
astutely recognized that military retirement would be a pivotal
issue in the coming months and that it was essential that this
subcommittee address this issue expeditiously.
Thank you, Dr. Heck, for your insight and call to action.
The Defense Business Board, one element of the Department
of Defense, was quick to present a major retirement reform
proposal that set the tone of the retirement reform debate. The
board's proposal would move the retirement system aggressively
toward a private sector defined contribution system based on
the personal investments of service members. The proposal
received immediate criticism from service members and military
associations.
The proposal is certainly a radical solution that would
result in a significant reduction of retired benefits for all
service members. As could be anticipated, the unveiling of the
Defense Business Board proposal injected considerable
uncertainty into the force, to include troops fighting in the
wars in Iraq and Afghanistan. The proposal created an immediate
morale firestorm as service members feared that senior members
within the Department of Defense and the military departments
were seriously considering its implementation.
We invited the Defense Business Board to testify today to
face the arguments of their critics and explain the merits of
their proposal, but they declined the invitation. I am
concerned that the Defense Business Board knowingly elected to
pursue a very controversial proposal with immediate negative
consequences for morale and combat readiness, and yet they were
unwilling to come before this subcommittee and defend their
actions.
In my view, their failure to appear speaks volumes about
their own lack of conviction that their proposal is deserving
of serious consideration.
Secretary of Defense Leon Panetta has been clear that
retirement reform must be on the table for consideration as the
Department of Defense contemplates the wide array of programs
that will be considered for cuts to meet the budget reduction
goals. I am pleased that the Secretary understood the morale
problem that had been created by the Defense Business Board and
announced his clear support for grandfathering the benefits to
be provided to currently serving service members who have borne
the burden of war over the last 10 years.
We simply cannot betray the trust of the service members
who have performed with such courage and expertise in
Afghanistan and Iraq.
I was disappointed that Secretary Panetta did not disavow
the Defense Business Board proposal. That statement would have
removed a major irritant to the force. I was, however, very
pleased at General Dempsey's statement before the House Armed
Services Committee that recognized the unique requirements of
military service and that strongly asserted that the military
requires a retirement system totally different from any
civilian retirement program.
Today, we hope to learn more about the current positions of
the Department of Defense and the military advocacy groups
concerning the need to reform military retirement. I would like
to welcome our witnesses, Dr. Jo Ann Rooney, the principal
Deputy Under Secretary of Defense for Personnel and Readiness.
Dr. Rooney, this is your first opportunity to appear before
the subcommittee. Welcome. I am certain we will be seeing more
of you in the future.
Next, we have two highly respected professionals that are
longstanding friends of the subcommittee: Ms. Virginia S.
Penrod, the Deputy Assistant Secretary of Defense for Military
Personnel Policy; and Colonel Steven P. Strobridge, USAF,
retired, the Director of Government Relations of the Military
Officers Association of America, MOAA.
Finally, let me introduce Mr. John Davis. He is a Marine,
not a Marine veteran or a former Marine, a Marine. And so, we
appreciate so much you being here today; the Director of
Legislative Programs, Fleet Reserve Association.
Mr. Davis, this is also your first time as a witness before
the subcommittee. Welcome.
Congresswoman Davis, you are recognized for your opening
remarks.
[The prepared statement of Mr. Wilson can be found in the
Appendix on page 29.]
STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM
CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL
Mrs. Davis of California. Thank you. Thank you, Mr.
Chairman.
And Dr. Rooney, welcome. I know that this is your first
time testifying before the subcommittee and so we are glad to
have you.
I also wanted to welcome Ms. Penrod, of course, and Colonel
Strobridge and Mr. Davis. Thank you all.
I look forward certainly to hearing your comments on
potential reform to the military retirement system.
While we all know the concerns about the current state of
our Nation's economy, the discussions on the condition and the
future of military retirement are, once again, being raised. No
surprise, I would suggest. Such discussions are not new. During
previous economic downturns, focus has turned to the
sustainability and the affordability of our military retirement
programs.
However, for the most part, the current military retirement
program was established over 60 years ago. So it is valid, I
think, no matter how difficult, certainly difficult knowing the
nature of the service and the sacrifice of the men and women
who serve, it is still appropriate, I think, for us to ask
ourselves whether the current program still meets the
requirements it was set up to achieve, which, of course, we
know is the focus of today's hearing.
Only 17 percent of the force actually completes a full 20
years of service in order to qualify for a non-disability
retirement. And many have expressed concerns that the current
program does not recognize the sacrifices of those who served
during 10 years of conflict and may not stay the full 20 years
to earn a retirement. Is it fair that that person, who may have
been deployed once and stays to retirement is eligible for a
lifetime benefit, while an individual who may have multiple
deployments in a combat theater does not stay 20 years, that
person walks away with nothing more than the admiration of a
grateful nation.
When the 20-year retirement program was established, the
life expectancy in 1949 for a white male was 66.2 years. For a
black male, it was 58.9 years. Compared to the latest data
available, the life expectancy in 2009 for a white male is 76.2
years and for a black male, 70.9 years.
So there is no doubt that Americans are living longer and
more fuller lives, which means that an average individual who
receives military retirement for 20 years of service will
receive retirement for nearly twice as long in his adult life--
his or her adult life.
In addition, many of those who retire at 20 years of
service have gone on with an ability to seek another full
career in a different field.
Changes to the personnel compensation programs, including
the retirement system, often strikes fear in the force. So it
is important, critically important, that we do not necessarily
undermine the faith of those who are currently serving.
But we do have a responsibility to ensure that the
compensation package that is provided to service members are
meeting the needs of our Nation's national security, and that,
of course, includes looking at the military retirement package.
Thank you, Mr. Chairman. This is an important hearing, and
I look forward to our witnesses testifying today.
Thank you.
[The prepared statement of Mrs. Davis can be found in the
Appendix on page 31.]
Mr. Wilson. Thank you, Ranking Member Davis.
I ask unanimous consent that the Defense Business Board
report on their proposal to reform military retirement and a
statement from the Reserve Officers Association be entered into
the hearing record.
Hearing no objection, so ordered.
[The information referred to can be found in the Appendix
on pages 61 and 96.]
Mr. Wilson. And at this time, we will proceed in order with
our witnesses, beginning with Dr. Rooney.
STATEMENT OF DR. JO ANN ROONEY, PRINCIPAL DEPUTY UNDER
SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS
Dr. Rooney. Good afternoon, Chairman Wilson, Ranking Member
Davis and distinguished members of the subcommittee. Thank you
for the opportunity to come before you on behalf of the women
and men who so ably serve in our Nation's Armed Forces.
I am here today to speak to you about the military
retirement system of our uniformed services. Since the military
transitioned to an All-Volunteer Force, military compensation
has been under continuous scrutiny. The primary goals of the
military compensation system are to attract, retain, and
eventually separate members so the United States forces can
support the numerous missions both here and abroad and when
called upon, succeed on the battlefield.
Even though some consider military benefits far-reaching,
we must remain cognizant that they support the brave men and
women who volunteer to defend this great Nation. Over time,
while the military retirement system has remained relatively
constant, pensions in the private sector have changed and more
closely ally to support the more mobile workforce in that
sector.
Unlike the private sector, the military services must grow
most of their military workforce internally. It generally takes
15 to 20 years to develop the next generation of infantry
battalion commanders and submarine captains. As a result, the
Department must ensure military compensation, promotions and
personnel policies all foster greater retention and longer
careers necessary to create these experienced leaders.
This need for greater longevity and continuity suggests
there are valid reasons why mirroring a private sector
compensation package may not necessarily be the proper approach
for the military.
However, the Department does believe that reviewing the
retirement system is both a fair and reasonable endeavor, and
over the past year has begun reviewing such retirement in the
context of a total military compensation system.
The officer, enlisted, and civilian leadership of all
Services, from the Active Duty, Reserve, and National Guard
Components, as well as the U.S. Coast Guard, are participating
in this review. The review is designed to be deliberate,
careful, and pragmatic.
The Defense Business Board proposal is just one of several
concepts that are being reviewed and modeled to determine the
impact on recruitment and retention. The Department is working
to strike the correct balance. This includes weighing the
impact of a new system on recruiting and retention, considering
the welfare of the individual service members and families,
which includes grandfathering our existing force who took their
oath under the current system, and acknowledging our
responsibilities to the American taxpayer.
The Department needs to ensure any proposed changes do not
break faith with the current members, or negatively impact the
current force. Before proposing changes to the military
retirement system or any part of the military pay and benefit
structure, however, the Department is committed to conducting
significant evaluation and in-depth analysis of any proposal.
The Department must ensure its ability to continue
recruiting and retaining the highest quality members, and must
understand to the fullest extent possible the impact of any
changes on the future of the All-Volunteer Force.
Finally, while the Department acknowledges the military
retirement system appears expensive, it is neither unaffordable
nor spiraling out of control, as some would contend. The
Department annually contributes amounts to the military
retirement funds in accordance with the requirements set forth
by the DOD [Department of Defense] Office of the Actuary. The
contributions as a percentage of military basic pay are
projected to remain relatively constant over time.
At this time, the Department does not have any specific
proposals or recommendations ready to offer. Within the last
month the President recommended forming a commission to review
the military retirement system. If this commission is formed,
the Department expects to provide significant input to the
commission. The Department also expects that any proposals
offered will be similarly presented to the Congress and to this
committee for assessment and discussion.
I look forward to continuing to work with each of you as
the Department moves ahead on this issue, and thank you again
for the opportunity to testify, and for your continued support
of our military members and their families.
I look forward to your questions.
[The prepared statement of Ms. Rooney can be found in the
Appendix on page 32.]
Mr. Wilson. Thank you, Dr. Rooney.
We now proceed to Ms. Penrod.
STATEMENT OF VEE PENROD, DEPUTY ASSISTANT SECRETARY OF DEFENSE
FOR MILITARY PERSONNEL POLICY
Ms. Penrod. Good afternoon. Chairman Wilson, Ranking Member
Davis, and distinguished members of the subcommittee, thank you
for the opportunity to come before you to discuss the military
retirement system for our uniformed services.
Dr. Rooney told you that the Department has begun a review
of military retirement, and it is my office that has been
tasked with this tremendously important undertaking. The
purpose is to determine the impact and feasibility of
restructuring the statutory and policy framework for military
retirement.
We are aware that numerous commissions and studies have
criticized the retirement system. However, I would like to
point out that the current system has supported the most
successful All-Volunteer Force in the world. The question now
is whether the current system is still relevant in today's
environment. If not, should it be modified to meet future
requirements, and in a manner more in line with the private
sector?
To ensure that in doing our review we get it right, we are
considering the major aspects of military pay and benefits,
along with the associated personnel and force management
policies that have an impact on recruiting and maintaining the
All-Volunteer Force. We are not looking at retirement in
isolation.
Our work is not yet complete, so I am unable to report to
you on the results of the review. However, I can assure you
that sustaining the All-Volunteer Force and the men and women
that so ably serve our Nation will be at the heart of whatever
we do.
I look forward to your questions.
Thank you.
Mr. Wilson. Thank you, Ms. Penrod.
And Colonel Strobridge.
STATEMENT OF STEVE STROBRIDGE, DIRECTOR, GOVERNMENT RELATIONS,
MILITARY OFFICERS ASSOCIATION OF AMERICA
Mr. Strobridge. Thank you for this opportunity to present
our views on military retirement concerns. We are grateful to
the committee for standing up as champions, both now and in the
past, to ensure military retirement incentives remain
commensurate with the extraordinary demands of career service.
The primary purpose of the military retirement package is
to induce top quality people to serve multiple decades under
conditions few Americans are willing to endure for even one
term. After a decade of war in which career service members
deployed time after time after time with ever-increasing odds
of coming home a changed person, we found it shockingly
insensitive that some now seek to curtail their retirement
package to, ``make it more like civilian workers.''
These are the primary incentives that have sustained the
career force in peace and war. We are very concerned the recent
proposals are aimed mainly at achieving budget savings, with
scant regard to longer term damage to retention and readiness.
The fact is we already have considerable history with military
retirement cutbacks. Enactment of the high 3 year average basic
pay system in 1980 cut retired pay by about 8 percent for
subsequent entrants. Through the 1980s and 1990s, military pay
raises were capped below private sector pay growth nearly every
year, dramatically reducing lifetime retired pay for all the
thousands of people who retired under those depressed pay
tables.
And in 1986, Congress passed the so-called REDUX Retirement
System that cut lifetime retired pay value by more than 25
percent for a 20-year military retiree. At that time, Secretary
Weinberger, Secretary of Defense at the time, warned Congress
that REDUX would inevitably undermine retention and readiness,
which proved true a decade later and Congress repealed it in
1999.
Recent proposals by the Defense Business Board and the 10th
Quadrennial Review of Military Compensation envisioned far more
dramatic cutbacks than REDUX did, delaying most retirement
compensation until age 57 or 60, even though the Services don't
want to keep most people anywhere near that long.
Both also proposed a vesting option for people who choose
to leave early. We believe this is a formula for retention and
readiness disaster. It would have destroyed the career force
had it been in effect over the past 10 years. Some support
vesting on a principle of fairness with private sector workers,
but it is an odd concept in fairness indeed that would
dramatically cut compensation for those who serve and sacrifice
the longest to pay more for those who leave early.
Defense leaders have sought to quell concern in the field
by saying they plan to grandfather the current force. But the
REDUX experience proved that grandfathering doesn't avoid
adverse retention effects, it only shifts them to the laps of
future leaders. And in contrast to Secretary Weinberger's dire
warnings about REDUX' threat to future readiness, current
defense leaders have repeatedly expressed support for
significant retirement cutbacks for future entrants, without a
word about long-term retention risks.
In our view that is an abdication of their responsibility
to protect future as well as current readiness. We are
extremely grateful that this subcommittee and the full
subcommittee have stood up to highlight those retention and
readiness concerns to the ``super committee'' [Joint Select
Committee on Deficit Reduction] when few others seemed so
inclined.
That concludes my portion of the coalition statement, sir.
[The joint prepared statement of Mr. Strobridge and Mr.
Davis can be found in the Appendix on page 38.]
Mr. Wilson. Thank you very much, Colonel.
And now we proceed to Lieutenant Davis.
STATEMENT OF JOHN DAVIS, DIRECTOR, LEGISLATIVE PROGRAMS, FLEET
RESERVE ASSOCIATION
Mr. Davis. Thank you for the opportunity to testify on this
important issue.
The All-Volunteer Force has successfully fought a
protracted war due primarily to the dedication and patriotism
of our men and women in uniform, but we should not
underestimate the pay and benefits keeping the force sustained
during this time of challenge.
Many wrongly believe that the uniformed services receive 50
percent of pay for 20 years of service, but that is not the
reality. The retired pay calculation is based solely on the
basic pay, excluding housing and subsistence allowances.
Personnel with 20 years of service earn retired pay that
replaces 34 to 37 percent of their gross cash pay and
allowances. Any fair share accounting should acknowledge
retirees that have already given under the past budget cuts.
Hundreds of thousands retired under depressed pay tables
between the mid-1980s and the mid-2000s. They have already
forfeited $3,000 to $5,000 a year for the rest of their lives.
Regarding the chained CPI [Consumer Price Index], some
economists believe that the Consumer Price Index overstates
inflation by failing to recognize that consumers change their
behavior when prices rise sharply. When that happens, they say,
people simply buy cheaper substitute products, such as chicken
instead of beef, when the price rises.
It is more complicated with other substitutes. Is a compact
car a substitute for a full-size car? Over time, this leads to
a major change in living patterns. The chained CPI would reduce
lifetime retired pay for an E-7 with 20 years of service by
$100,000. The TMC [The Military Coalition] opposes any kind of
COLA [cost of living adjustment] cuts, because that violates
the very purpose of COLAs, to protect the erosion of benefits
by inflation.
Another proposal is to use the high five in lieu of the
current high three. This would cut retired pay by 6 percent
over 4 years. We oppose this, because it is just another way to
devalue military service. The 10th QRMC [Quadrennial Review of
Military Compensation] report suggests a 401(k)-type retirement
payment starting at age 57 to 60. This would reduce retiree pay
for an E7 with 20 years of service from $24,000 a year, already
a modest amount, to a ridiculous $3,600 a year. This dramatic
change would do grave harm for retention and recruiting.
A recent FRA [Fleet Reserve Association] survey indicates
that 90 percent of respondents believe that if benefits were
delayed until age 60, fewer people would join and they would
serve shorter periods of time. The survey also indicates that
more than 80 percent would leave the military sooner if
military retirement was switched to a 401(k) plan, and 84
percent believe fewer people would join.
Career senior NCOs [noncommissioned officers] are the
backbone of our military, and their leadership and guidance are
invaluable as a result of many years of experience.
Civilianizing benefits likely result in many of them leaving
the military early, and these positions are very difficult to
replace.
But the bottom line is the current retirement system is
that it has worked as intended, sustaining a quality career
force through good and bad budget times, through war and peace.
It only stopped working after Congress cut it back in 1986. And
that is a lesson we shouldn't have to relearn.
Thank you.
[The joint prepared statement of Mr. Davis and Mr.
Strobridge can be found in the Appendix on page 38.]
Mr. Wilson. Thank you very much.
We will proceed now, and each member will have a 5-minute
period of asking questions. And again, we have a person above
reproach, Mike Higgins, who is going to be our timekeeper. And
so, you can almost look at his face and tell when the 5 minutes
is up.
I would like to begin with Dr. Rooney and Ms. Penrod. It is
been widely reported that with the Defense Business Board
reform proposal last summer, that there was a great deal of
distress among career service members. DOD's reluctance to
disavow the proposal has given rise to concern that there is
strong support at DOD for such reforms.
With this report, does DOD intend to support the Defense
Business Board proposal? And then, it has already been
identified by both of you that there are studies underway as to
how this proposal will affect retention. When should we expect
a report on the effect on retention?
Dr. Rooney. Yes, sir. In regards to our posture on the
Defense Business Board, you indicated that early on we did not
come out adamantly against it. But I believe that recent
statements by the Secretary, the Chairman, and even in our
opening statements clearly indicated that we are seeing the
Defense Business Board proposal as just one data point for
consideration in review as we are looking at the overall
retirement and compensation system.
Again, the key factor for us is that any change or any
system, frankly, must ensure that we are able to recruit and
retain the All-Volunteer Force and not at all damage the
current faith that the troops have in us. So that report has
some very strong limitations. It is a data point for us and we
see it just as that, as a data point.
You also asked where are we in terms of a proposal coming
forward. And as Ms. Penrod indicated, we have a group that is
currently looking at a number of alternatives. And we are
working closely with the RAND Corporation to also help us in
the analysis of that, again with the idea that recruiting and
retention are key factors to consider in any kind of proposal.
So at this point we don't have a specific date. However,
with the President's proposed commission, if that would stand
up in the springtime should that go forward, we would be
prepared at that point in time to be very much informing the
conversation with them.
Mr. Wilson. And Ms. Penrod.
Ms. Penrod. Yes. As Dr. Rooney stated, we are working with
RAND to model any proposals or changes to the current
retirement program. We preliminarily have the final report of
the DBB [Defense Business Board], and it does have a negative
impact on retention. That is what it is showing us at this
time. We are not complete with that review, but again, as Dr.
Rooney stated, it is a data point. And we will take that report
and it will inform as our review goes along.
Mr. Wilson. I thank both of you. I was very impressed,
Colonel and Mr. Davis, the facts that you pointed out. People
should know how this affects individuals. And with that in
mind, what is your reaction that the retirement reform is
unavoidable because it is fiscally unsustainable? What would be
your response, each of you?
Mr. Strobridge. The testimony we have heard here today from
the DOD witnesses kind of refutes that, where they said it is
neither spiraling out of control, nor unsustainable. Their
projection is that it is going to be about the same percentage
of basic pay into the future. I think the committee has
statistics that has shown that retirement costs as a percentage
of the DOD budget have been relatively stable over time.
The first time I worked on military retirement was in 1977
and we showed projections at that time that critics were
pointing out that it was going to be the system would go broke
by the year 2000. Well, we are still here and we just fought a
war since the year 2000, so I kind of pooh-pooh those kinds of
ideas.
Mr. Wilson. Thank you.
Mr. Davis.
Mr. Davis. Well, I would certainly agree with everything
Colonel Strobridge just said. And I would just add that, you
know, the price of military retirement, the price of military
benefits, is really part of the cost of fighting a war that we
are currently involved with, and the price of defending our
Nation, and should be put in that category as well.
Mr. Wilson. And I want to thank all of you as I conclude,
because I can see your appreciation of the career NCOs, the
junior officers. We can, ``get new recruits,'' but the
expertise must be maintained for the security of our country,
of our NCOs and junior officers.
Proceed to Congresswoman Davis.
Mrs. Davis of California. Thank you, Mr. Chairman. And
again, thank you all for being here.
I wonder if you could address the issue of fairness? As I
mentioned in my opening statement, that we have certainly
hundreds, thousands of our military personnel who serve out the
20 years, though they may only deploy once, if at all, in a
conflict theater, versus those who deploy on many occasions.
Certainly we know in the last 10 years that is quite common,
and yet do not serve the full 20 years.
How do you think we should go about looking at that issue?
And do you think it is one of fairness, or is it, you know,
just the way it is?
Doctor, do you want to start, or that is fine.
For all of you.
Mr. Strobridge. To me the key purpose on the retirement
system is sustaining the career force. National defense comes
first. I am all in favor of fairness. I have built my career on
arguing issues of fairness. But you have to sustain the system
through peace and war, through good budget times, through bad
budget times.
And we all have seen periods in the past where we have
pulled out all the stops to retain people, when we have had
service conditions so terrible, or an economy that was so
strong, that we had to raise retention bonuses, we had to pay,
you know, extra things. Those are going to happen in the future
as well.
And when we acknowledge that the military service
conditions are unique and vastly different from civilian
conditions, the fact that we can only get 17 percent of
enlisted people to stay for the current system to me speaks for
itself about the arduousness of the career and the few people
who are willing to endure that for a long time.
To then turn around and say, ``But we need to pay more to
people who leave,'' to me, any time you have a vesting system
it by definition detracts from a career incentive. It can't do
anything else. And in bad budget times, it leaves the
Government bidding against itself for their services, which
only drives up costs.
So to me if you want to talk fairness, the first thing we
have to do is be fair to the people who suffer and sacrifice
the longest, and that is the career person. And the last thing
we should be doing is cutting their package to fund a better
package for people who leave.
Mrs. Davis of California. All right.
Dr. Rooney, did you want----
Dr. Rooney. Certainly. When we are looking at fairness, and
you brought up a good point, because you were even talking
about the range of people and deployments and all. And that is
why in my opening statement, and you have heard other comments
from the Department of Defense, that we look at compensation as
a total package of which retirement is only one segment of it.
So across that, whether it is basic pay, hazardous duty
pay, imminent danger pay, all of the different aspects that go
into compensation, that is how we get that balance of fairness.
The other thing in terms of the overall system for fairness
is when people come into the military they understand this
system. They come in knowing what the various pieces are, and
as a result, they are feeling because we are viewing it from
not only basic pay, but all the tenets of compensation up to
retirement, that we do get a balance of fairness.
The point you did bring up though, in terms of should we be
adding a component to retirement to compensate for those people
less than 20 years, that is one of the reasons that we are
saying it is very prudent to be looking at military retirement
as part of the overall compensation to determine if in fact
there is something in that aspect that we need to look at more
closely.
Mrs. Davis of California. Thank you. And in the little time
left, if Mr. Davis, did you want to comment?
Mr. Davis. Yes, I just want to point out that we did a
survey and that was one of the questions that we asked 350
Active Duty personnel, do you think it is fair for people that,
you know, to get a pension, you have to serve 20 years? And 81
percent of them thought it was fair.
So, you know, in the ranks of the military, apparently
there is no feeling that, gee, you know, if I serve 10 years
and get out, it is unfair because someone else serves 20 years
and they get a pension and I get nothing.
And I also would like to just point out too, it is not
under the jurisdiction of this subcommittee, but if someone
serves 10 or 12 years, of course, they are not--they are then
under the jurisdiction of the Veterans committee. And they do
have benefits, of course, such as the G.I. Bill and a whole
latitude of things that they can use basically to get benefits
from their service.
Mrs. Davis of California. All right. Thank you.
Yes, Ms. Penrod, did you want to comment?
Ms. Penrod. I think I agree with you, Congresswoman Davis,
that it is the 20-year retirement has sustained an All-
Volunteer Force, but I believe we should look at it. We have a
different cohort coming in every year. How do we know what the
future will look like, what people are looking for in a
retirement system?
It may make the military more enticing to come in if an
individual thinks that they may have something they could take
with them. Also, even though you have the G.I. bill, I think
that is an outstanding benefit, you still have an individual
that will be separated possibly during drawdown with 12 years
of service. And so, I think we need to look at that, and that
is what we are going to do, is look at the whole program.
Mrs. Davis of California. Thank you. Thank you very much.
Thank you, Mr. Chairman.
Mr. Wilson. Thank you.
And we proceed to Mr. Coffman of Colorado.
Mr. Coffman. Thank you, Mr. Chairman.
And I guess my first question is I think some of the
testimony today had referenced that it is a relatively low
percentage of payroll that supports the retirement system. But
nobody has said what that is, and I am wondering if somebody
could give me a percentage number?
Dr. Rooney. At this point, we have some of the numbers. I
would like to take that for the record, please, sir.
[The information referred to can be found in the Appendix
on page 103.]
Mr. Coffman. Very well.
You know, I just think that there are--first of all, I
agreed with the Secretary of Defense, when he testified before
the House Armed Services Committee recently, and he said that
whatever reforms we do, should not affect those who are
currently on Active Duty and went in with the understanding
that this is what the system is when they, in fact, enlisted or
were commissioned in the Armed Forces of the United States.
However, with that said, and myself being a retiree from a
kind of an Active Duty and Reserve combination, that I remember
as I was approaching the 20th year mark--and when you are a
Reservist and if you are injured, not when you are on Active
Duty, it is not considered line of duty, ``not misconduct''
would be the category. And you don't fall into that, you report
back for duty.
I was in the Marine Corps Reserve in that weekend. And if
you are determined that you can't do what they ask you to do,
because you have sustained an injury skiing, then you are
automatically out. And there is nothing there for you. And I
gave up skiing in Colorado as I got closer to that 20-year
mark, just to make sure that nothing happened there, as I got
close to that.
I just think that there--we need to take a look at that--
not so much the Reservists, but I think the Active Duty
Component. And I disagree with the notion that we ought to go
in the direction of all defined contribution. I just think that
we are asking our service members to give a lot. And I think
that there needs to be a component of certainty in that.
So perhaps a more bifurcated approach that would be defined
benefit with an element of defined contribution for those who
would enter the Armed Forces after the effective date of the
new system, when it was put in place. So I just think that this
system needs to be reformed, it needs to be revised.
It is something my father was under this system as a
retired Army master sergeant, was in World War II and Korean
veteran, and I think that as Congresswoman Davis has said,
things certainly have changed since then in terms of life
expectancies and a number of other issues. So I just think that
everything we ought to look at.
But I understand the Defense Advisory Board only looked at
one issue, if I understand that, only came across with one
suggestion, and that was just completely defined contribution.
Is that my understanding?
Dr. Rooney. Yes, that is the only proposal we have seen, is
one that is a defined contribution.
Mr. Coffman. Yes, and I am surprised by that and
disappointed by that. I just think that, I mean, if you look at
the system for Federal civil service, or for Members of
Congress, I think for Members of Congress and their staffs, it
is 1.7 percent a year for the first 20 years. It is 1 percent
thereafter for the next 10 years.
And there is a Thrift Savings Plan, which is the defined
contribution part, which is there for all Federal employees.
And it is a lower, I think, factor. I can't remember what it is
for Federal employees.
But the difference between Federal employees and the
military or members of Congress, if you will--and I am not a
fan of our retirement system. I think it ought to go. But for
the military it is the fact that they don't have--and we don't
really want them to have--the sort of career protections that
Federal civil service has.
And so, when you compare the two retirement systems, I
think you need to recognize that in the military system. And it
has to complement the fact that they are all at-will employees
when making determinations about retirement.
So I look forward to working with you, or all of you, in
terms of coming up with a new system. I am certainly not going
to say that the old system ought to be replicated going
forward. I don't believe that. But coming up with a new system.
And I do believe that we need to look at, in particular, those
folks that serve less than 20 years, that I think that they
ought to accrue something for that.
And I think there ought to, in the new system, again for
those who are not members of the Armed Forces yet, I think we
ought to look at the notion that should you begin drawing the
defined benefit portion of your retirement, right at the end of
the 20-year mark, or whatever the mark is. So I think that
there are a number of issues that ought to be on the table.
With that, Mr. Chairman, I yield back.
Mr. Wilson. Thank you very much.
We now proceed to Congressman Dr. Joe Heck.
Dr. Heck. Thank you, Mr. Chairman. I especially want to
thank you for pulling this hearing together so quickly after my
request.
I want to thank all the panelists for being here today and
providing your testimony.
You know, I agree that it is certainly reasonable to review
the pay and benefits in the retirement system of our Armed
Services, but where I disagree is when the Defense Business
Board's proposal is released publicly without much information
given to our men and women who are currently serving in harm's
way.
And then I receive the e-mails and phone calls from folks
wondering what is going on with their potential retirement and
hearing first-hand what the impact was on morale in theater,
not that they are not already worried enough about whether or
not they are going to get their next paycheck back home, so
their wife can make the mortgage. But now they are worried
about what is going to happen when they hit their 20-year mark
and what is going to go on with their potential retirement.
You know, the question of is the current benefits package
or the current retirement relevant, I think, poses a concern in
that how do you define relevance? You know? And I hope that
that is not a euphemism for the costs associated with the
retirement program, especially when only 17 percent of the
folks who spend their lifetime in, you know, enter the service
wind up qualifying for a full retirement.
I know it is hard enough under these fiscal times when we
are trying to figure out how Department of Defense is going to
meet the $450 billion reductions over 10 years that this
Administration has already called for.
But is this review of benefits and pay taking place in a
vacuum? Or, is it being looked at in conjunction with the
amounts that we spend on basing and facilities and the amount
that we are spending on hardware and weapons systems? Or, is
each one of these things being reviewed in a silo?
Because my concern is we can have the best piece of
equipment, the best weapon system, but if we don't have the
person to gain the site picture or pull the trigger, like the
great pilots I have at Creech Air Force Base, manning the RPAs
[remotely piloted aircraft] now in theater, that weapon system
really doesn't do anything.
So is this being done in a vacuum, or is it being looked at
across-the-board in the entire DOD budget?
Dr. Rooney. Sir, I will be happy to comment on that.
No, it is not being looked at in a vacuum. We are looking
at, as you said, the challenge that we have for budget cuts,
but as not just across-the-board cuts or arbitrary cuts, but
very strategically looking to what does our future force need
to look like? And how then, once we determine that future
force, how do we attract and retain the best people using
compensation as the tool to be able to again support that All-
Volunteer Force, keep our current troops, the faith of them,
but also going forward to attract and retain.
So it is part of an overall strategic look at how we are
going to face not only the budget challenges, but our
challenges as a Department of Defense going forward.
Dr. Heck. Well, and I appreciate what Colonel Strobridge
stated, having lived through the years of having to give
recruitment bonuses or incentive bonuses, and then using stop-
loss to keep people in. And now we are getting to the point
where we are cutting the Active Duty force in both the Army and
the Marine Corps.
So how does that play into this decision? I mean, we are
already trying to downsize the force on purpose, and now we are
talking about potentially changing the retirement program,
which may cause an additional exodus?
Dr. Rooney. Actually, sir, when I was indicating strategic,
I do mean we are taking into consideration that we are doing a
force drawdown. But we are also looking forward and
acknowledging that in addition to keeping the faith with our
current forces, we will be recruiting new forces going forward.
You mentioned some specific capabilities at Creech. So that
is part of the area that we know our forces for the future will
rely on new technologies, and we may have new requirements for
recruiting those folks.
So as we are looking at what does this force look like,
what are the attributes, we just want to make sure that our
overall compensation package, of which the retirement is one,
is the right combination of package.
And that is why we are saying that there is no decision
that has been made on any component of that. But as the
Secretary has said several times, we must put everything on the
table because that is the prudent way to approach this
challenge.
Dr. Heck. And in my limited time just a quick final
question.
Has there been set a dollar figure that is supposed to be
attained, either in retirement or overall in pay and benefits,
in trying to help balance the DOD budget?
Dr. Rooney. Not a specific one.
Dr. Heck. Thank you.
Thank you, Mr. Chair. Again, thank you for holding this
hearing.
And I yield back.
Mr. Wilson. Thank you, Doctor.
We proceed to Congressman Allen West of Florida.
Mr. West. Thank you, Mr. Chairman, and Madam Ranking
Member, as well.
And thanks for the panel for being here.
And I guess I am one of those guys that the ranking member
talked about that did do a career in the military and was young
enough to continue on to have a, I guess, a second career.
Which is kind of a laughable hypocrisy, in that 22 years in the
United States military Active Duty I got a 55 percent
retirement. And I believe in 5 years on this side I could get
vested into an even greater retirement. So we can talk about
that later.
But as I sit here today, I am very concerned, and it takes
me back to the quote by George Washington, where George
Washington talked about how future generations will regard
their service to this Nation based upon how well we treat our
veterans.
And I recall my father, who was a World War II veteran,
sitting down and talking to me about how great it would be to
serve a career in the military.
So when I look at a career in the military, when I look at
people that are serving in our military, that is a defined
contribution. And on the backside, I think that we should be
giving them a defined benefit for that contribution because of
what they do.
Now, my first question is, do we still have the Thrift
Savings program, the Thrift Savings Plan, for those men and
women out there who, you know, may just serve, you know, 5
years. And while they are in a combat theater they are allowed
to go into that Thrift Savings Plan, so they can put--start
putting away some money?
Ms. Penrod. Yes, Congressman West, we continue to have the
Thrift Savings Plan.
Mr. West. Okay. Now, when we talk about comparing military
service to the civilian sector, does the private sector,
civilian sector have something that is equal to the Uniform
Code of Military Justice?
Dr. Rooney. No, sir, they do not.
Mr. West. Okay. In the private sector, other than being a
professional athlete, does your position and your ability to
progress through the ranks depend on your physical abilities?
And do we mandate that people have to get up at 6:00 in the
morning regardless of the conditions thereof to participate in
physical training and activity?
Ms. Penrod. Well, Congressman, I cannot comment on private
sector employment. However, I can say that I think we all agree
that the sacrifices are not the same for our military personnel
as they are for our private sector civilians.
Mr. West. And I think that is my biggest concern, is that
what we ask the men and women to do, ever since those men
answered the call of arms at Lexington and Concord, is
different from someone just going to a bank, or different from
someone even coming here to work on Capitol Hill.
So it is a very dangerous road when we start to go down the
comparative analysis of the private sector or business sector
to the United States military. So I ask that we be very careful
about that, because I think that we are already starting to
make some decisions thereof.
How many people in the panel do you remember what happened
after Desert Shield/Desert Storm when we all of a sudden
offered people money to exit the United States military? I do.
Have you all done any research as far as the degradation of
leadership, which is something that General Martin Dempsey
talked about when he came and testified before us up here a
couple of weeks ago? Have we looked at that and what could
happen as far as the progression of leadership?
Dr. Rooney. Yes. I believe General Dempsey used the term
``hollowing of the force,'' and the Secretary has also talked
about that that is something we have learned many lessons from
the past. And we will not do anything to our compensation
system so that we end up with that hollowed force.
Mr. West. Okay. Any comments, Colonel?
Mr. Davis. I would just like to say I know what you are
saying about that. And that, you know, from the enlisted side,
you have, you know, senior enlisted people, a sergeant major,
whatever----
Mr. West. You need first sergeants and sergeant majors.
Mr. Davis. You need first sergeants, to nothing else to
they, those people, combined with the junior officers, have,
you know, a hard-charging junior officer. But you also have a
senior enlisted person who can, you know, have a wealth of
experience with the military, 20 or 30 years, that they can,
you know, explain things to the junior officer, can call on
them for their experience. And that makes a very powerful
combination.
Mr. West. And I will testify to that, as a young stupid
second lieutenant when I first came in.
Colonel, you have anything you want to add?
Mr. Strobridge. Yes, sir. I think so many of these things
and these analyses treat people in the context of, ``human
resources,'' as if they were widgets in a box instead of
thinking, planning human beings.
And when we model--I have got a lot of, you know, doing a
lot of studies, working with RAND. I spent a lot of time
working with RAND.
The problem with all these is the models don't include
things you can't quantify, such as sacrifice, such as time away
from home. They include all the money people spend, you know,
they can measure behavior. But they don't talk about--there is
nothing in the model that accommodates the chance that we might
go to war tomorrow, and you might be going to Iraq every other
year for the next 10 years.
There is nothing in there that accommodates for the fact
that we might do the opposite. We might stop a war or we might
have a budget-driven drawdown and you have built your plans on
staying for a career, and all of a sudden we are going to force
you out.
And those are the kinds of things that, you know, service
leaders are always seeking additional flexibility to be able to
micromanage the force. And the only thing we know about those
kinds of plans is whatever you plan for 5 or 10 years is going
to be wrong, because the world is going to change your plan for
you.
And to us, that is one thing, when you have a very powerful
career incentive like the 20-year retirement plan, it is very
resistant to day-to-day manipulation. And that is a good thing.
Mr. West. Thank you.
And I just hope that our fiscal irresponsibility on this
side does not become borne on the backs of our men and women in
uniform or their families.
And with that being said, I yield back, Mr. Chairman.
Mr. Wilson. Thank you very much.
And Congressman Scott of Georgia.
Mr. Scott. Thank you, Mr. Chairman.
And I am going to focus more on the gentlemen, ladies, with
my questions, if I may.
And I would like to focus, if we could, on the 80 percent--
83 percent that get nothing. And, Colonel, you were just
talking about the potential of somebody to go overseas every
other year for the next 10 years, five tours, and then you have
a drawdown or a force reduction. And the bottom line is that
person would not qualify even though they may have wanted to
stay for 20 years, they would get nothing, is that correct?
Mr. Strobridge. Well, no, I don't think that is correct.
When we have these kinds of drawdowns, for example, Congressman
West was talking about what happened in the 1990s. We had very
special programs to provide additional incentives to try to
entice people to separate voluntarily. For people with 15 to 19
years, Congress authorized an early retirement program.
As difficult as those things are, that was probably the
best example of the kind of thing that can be done.
Now, the challenge is the drawdown that is coming up in
this fiscal environment, I think it is going to be a lot
tougher for Congress to authorize those kinds of programs. So
we are going to be seeing less incentives. There will be some
incentives, but probably less.
Mr. Scott. Of the 17 percent who receive the benefits from
the 20 years, what percentage of them are enlisted?
Mr. Strobridge. The----
Mr. Scott. Seventeen percent of the men and women qualify.
Mr. Strobridge. Of the people who stay for a career?
Mr. Scott. Right.
Mr. Strobridge. What percentage are enlisted? Probably
about 70 percent, I would think.
Mr. Scott. Okay. So 70 percent are enlisted.
I guess my question is, you know, I hear your objection to
having--you object to having any other plan, is that correct?
Mr. Strobridge. No, I don't object to having any other
plan. I object on the face of it to saying that because
civilians do these things, that the military should, too.
The military is a very different system. It is built to
serve a very different purpose. And so to me, it has to start
with that uniqueness and not assume that what happens in the
private sector is in any piece is a good thing. It needs to be
evaluated on its own merits.
Mr. Scott. Well I certainly agree with you that they are
different, but I do think that it is necessary for this
committee and for us as a Congress to do something that helps
that 83 percent who don't qualify under the 20 years. And you
know, there are many of them that have served many tours
overseas. And I understand that we have to have our experience
in our officers and maintaining those things.
But I also I will tell you I do think that we need to
remember those 83 percent of the people who have spent their
time and their family's time and contributed a great deal to
the freedoms that we enjoy in this country. And I see nothing
wrong with them being free to choose a different retirement
plan on their own will.
So we will work on that as time goes on.
I would ask, Mr. Davis, would you give me that math again
that you used, where you said 3,000 was the last number, and
maybe 24,000 was the first in your presentation.
Mr. Davis. That was the 24,600 for an E7 with 20 years as
compared to taking the plan proposed by the 10th QRMC, which
was to put them into a 401(k). But they wouldn't be able to get
that until age 57 to 60. I believe it came out to $3,600 a
year, the 401(k) benefit.
Mr. Scott. How many years would they have contributed to
that 401? Could you just share that math with the committee? I
would like to----
Mr. Strobridge. If I could clarify that calculation?
You are referring to a chart that we made. The $3,600 would
be the initial value of the defined benefit retired pay. In
other words, the 24,000 would be reduced by 5 percent for each
year the person left before age 57.
And assuming an enlisted person leaves at age 40, that
means it would be reduced 85 percent. So the defined benefit
contribution, or the defined benefit portion, would be $3,600 a
year. There would be some additional amount that person would
receive from their Thrift Savings Plan that would be in the
range of $10 to $13,000 that they could start drawing at age
60.
Mr. Scott. But that would be contingent upon how much money
they put into the direct savings plan?
Mr. Strobridge. Correct.
Mr. Scott. I would like, if I could see that math on that?
I would just like to see the math on that.
Mr. Strobridge. Yes, sir, we have a chart on that in our
formal statement. I can get it to you.
Mr. Scott. Great, thank you.
Mr. Wilson. Thank you very much.
We now proceed to Congresswoman Hartzler of Missouri.
Mrs. Hartzler. Thank you, Mr. Chairman, Ranking Member
Davis. Appreciate all of you being here.
I wanted to start, if I could, with Colonel and ask you to
expand a little bit more on your comment earlier that you don't
think grandfathering in, if there was a new plan, you don't
support, you know, having a new plan and just grandfathering in
current members of the military. And could you expand on your
concerns?
Mr. Strobridge. Sure. I think my point was people look at
grandfathering is a panacea that everything will be okay as
long as we grandfather the current force.
I have a letter. The letter that I referred to that Casper
Weinberger wrote back in 1985 that went to Tip O'Neill
expressing concern about the REDUX plan Congress was about to
enact. And he spoke, that letter spoke very eloquently on
grandfathering. If you don't mind, I would like to read it for
a moment.
It says, ``While the changes we have been required to
submit technically affect only future entrants, we expect an
insidious and immediate effect of the morale of the current
force. No matter how the reduction is packaged, it communicates
the same message, that is, the perception that there is an
erosion in support from the American people for the service men
and women for whom we call upon to ensure our safety.
``It says in absolute terms that the unique and dangerous
and vital sacrifices they routinely make are not worth the
taxpayers' dollars they receive, which is not overly
generous.''
Now, the issue, there was a line in there where he said,
basically, you have two categories of people serving side by
side who each know that they have different benefits. And that
was a very accurate predictor of what happened in the 1990s,
where you had the people who were trying to reenlist people say
either they mislead them and tell them what the benefit they
have which, when the people find out that that wasn't true,
they get particularly upset. Or, you have these people saying,
I am sorry, but the benefit you have is not what your
predecessors have.
There is just no way, as those people go through 20 years
serving together, that that doesn't become a burr under their
saddle.
Mrs. Hartzler. Okay. So you are not for any changes at all?
You want to keep the system the way it is now forever?
Mr. Strobridge. It is probably not realistic to say there
will never be any changes at all. The thing that I think we
would have to--and very frankly, there would probably end up
being budget-driven changes of some type. I think we have to
start from the standpoint that we have tried some of these
things before. The one that we know was a tragic failure was
the REDUX system, which compared to the things that are on the
table today was pretty modest.
Mrs. Hartzler. All right. Could I hear from the Department
of Defense representatives on why you initiated this whole
process? What is--why do you think there needs to be some
changes? What is the rationale?
Dr. Rooney. It is actually multiple purpose. One is that we
are looking to our future force. And again, we talked about
such concepts as we don't want to hollow out the force as we
are changing. We know we are facing drawdowns. We also know
that our future force very much can look different in terms of
the type of force we must recruit, the qualifications, the
technical aspects. So right there is we are doing that review
that prompted us to say are we sure we have the correct pay/
benefits/compensation package going forward?
The timing of that review, and not only the speed, but the
deliberateness of it clearly ties in to our budget concerns
going forward. And the budget we must meet and the reductions
we must meet. So all of that is coming together at the same
time. And again, because we are trying to view all of the
budget reductions strategically, and as though they are
interconnected, this does become part of that discussion, but
is not solely driven because it is a budget exercise.
Mrs. Hartzler. Okay. I wanted to jump to a concern that I
have heard at home and see if any discussion is taking place
with this. There are about 30 seconds left.
But is there any incentive currently in the system, which I
don't believe there is, to encourage people to stay 30 years?
Some of the concerns I have heard from some of my retired
military at home was that right now, we have many people
retiring at 20 years and we are losing that knowledge and all
that experience.
So, is there anything being looked at to encourage people
to stay longer?
Ms. Penrod. Actually, as we look at our review, we look at
the whole force profile, and agree the 20-year retirement pulls
people with 20 and it is cliff-vested. And the force today of
the Services, they have built their force profile around that
behavior.
You continue to earn 2.5 percentage points for every year
you stay in the military up to 100 percent, or over 100
percent. So we do have changes that happened several years ago
as far as retirement. But that will be part of your review. We
have a model, as Steve said, RAND has a very strong model to
look at the impacts on retention, but that just informs the
process.
We also have our senior enlisted advisers are part of the
working group. All Services are represented. Coast Guard is
represented. Guard and Reserve are represented. So that is
where you have that human piece of this review and the
experience.
Mrs. Hartzler. Thank you. And I just encourage all of you
as you go through this process to continue to get input from as
many people as possible affected by this, as well as Members of
Congress. This is a very, very important topic to certainly
people in my district, but to our national security. And so, no
change should be made lightly, obviously.
So thank you for what you are doing. Thank you for the
input, and thank you for your service.
Thank you, Mr. Chairman.
Mr. Wilson. Thank you, Ms. Hartzler.
Mrs. Davis, do you have another question?
Mrs. Davis of California. Thank you, Mr. Chairman. I wasn't
sure if we were going to have another round, but there are a
few questions.
And one is really to Mr. Strobridge and Mr. Davis. I know
how difficult this is in getting input from all the people who
you speak to. But I am wondering within this discussion whether
there are really some priorities, perhaps, that had been
identified? Whether there were some areas in which you feel
that you could find savings? Can you prioritize any of the
benefits for us? What should be protected? What could be
modified, reduced or eliminated?
Acknowledging, of course, that you would rather not see any
reductions at all, and that even the targeting here is
problematic. But are there some areas in which you could define
for the committee that might be helpful?
Mr. Strobridge. Well, I think one thing you have to
recognize is we are here representing 34 organizations, and
that does require a wide diversity. We did have some difference
of opinions on healthcare, on the TRICARE fees. In the end, you
know, the kinds of differences we were talking about were $5 a
month, you know, and those were very significant within the
coalition.
We had a lot of debates over those, you know, whether we
should just say no changes.
I think there are a reasonable number of groups that would
say no changes, the system works. You know, this is what people
were promised, we ought to stick with it. I think there are
people who would be willing to discuss those things, but I
think that it is much tougher on retirement, very frankly, than
healthcare. And even healthcare, when we were talking about
that, we were talking about relatively small differentials.
The kinds of things in healthcare that are on the table
now, which were very disappointing to us who did buy into a $2
increase on pharmacy fees, to then have the Administration turn
around before that even gets enacted and say, you know what,
no. We are going to raise that to $40. That is a big problem.
And that raises some serious credibility issues that, you
know, give, you know, support to the idea that give an inch,
you take a mile. So that is a very significant concern.
Retirement, every retirement plan that has been put forth
for the past 4 or 5 years, when you go back to look at the
Defense Advisory Committee for Military Compensation proposal,
the QRMC proposal, the Defense Business Board proposal, all of
those entailed radical changes, way worse than the REDUX that
failed.
And so, when you see that, I think we all get our arms--
our, you know, hair on fire and say, ``I am sorry, you are just
starting from the wrong place.'' We are starting from how much
money can we take out of it, when what we should be starting
for is what should people earn for a career of service and
sacrifice under conditions that can range anywhere up to and
including deploying every other year for 10 years, or giving up
your life, or coming back with PTSD [post-traumatic stress
disorder] and TBI [traumatic brain injury] and not only your
life, but your family's life is going to be changed forever?
Those are the kinds of things, as Congressman West said,
that we believe have to be counted as the contribution. That is
what people really pay in a career of service and sacrifice.
Mrs. Davis of California. Thank you. I certainly appreciate
what you are saying. I think we all do. I appreciate that. If
there are things that you can offer to us, that is always
helpful.
Mr. Davis, I don't know if you wanted to comment further.
And I had one other question.
Mr. Davis. I just wanted to, you know, second his
information. But also, just to remember when looking at the
retirement system, I think it is important to remember that,
you know, our Armed Services are there to fight wars, and war
is a young man's or woman's profession. And I look back at some
of the stuff I did when I was in the Marines, carrying
artillery shells and all that kind of activity that you do. I
probably couldn't be able to do it today.
So, you know, when you think about it, you know, it is a
young man's or woman's profession and the retirement system
should reflect that.
Mrs. Davis of California. Yes, thank you. If I may just for
our Department of Defense witnesses, and you can do this
certainly for the record, because my time is almost up. Could
you also help us understand where you are looking to address
other increased costs and expenditures that we have in our
contracted services?
I would like to know what we are doing about that, because
the concern, of course, is that we are looking here at
retirement benefits and other benefits to the military, and yet
we see that despite the fact that perhaps you are trying to
look at some of those costs, at the same time we are maybe
doing away with some services from our civilian personnel that
we would have to go back and then contract with the outside.
And I would like to know what else you are doing? How are
you going about addressing those issues so we are talking about
costs across the board? And I know in response to one of the
other questions, you did say this is not the only thing we are
looking at, of course. But I would like to know how you are
going about that and how far along we are in looking at a lot
of the contracted services that also cost us a great deal of
money?
Thank you very much.
Dr. Rooney. Certainly, we will take that for the record,
given our time.
Thank you, Congresswoman.
[The information referred to can be found in the Appendix
on page 103.]
Mr. Wilson. Thank you very much.
During our whole debate, I was impressed several times, it
was referenced about military families. And as we are looking
into the issues of retirement, the military families truly are
of service and sacrifice.
And I just hope that every effort is made to work with
military families and get their input, because they really
truly sacrifice so much, but they are counting on a very
positive career, a very fulfilling career for their spouses and
for themselves.
A question that I would have is for Colonel Strobridge and
Mr. Davis. Has the Department of Defense consulted with your
organizations, Fleet Reserve, MOAA? Or, have they consulted
with other military organizations and associations for their
input on this issue of retirement reform?
Mr. Strobridge. Not to date, no sir. I think there are
probably people who would prefer that they didn't.
Mr. Wilson. Well, I hope--and Mr. Davis, your view?
Mr. Davis. Yes, we have not been contacted by them for our
input.
Mr. Wilson. Well, I certainly know what a resource you can
be. And so I hope that you would be contacted, and I know how
broad-based both of your organizations are. And I pay dues to
ROA [Reserve Officers of America] and some others, too. So,
American Legion comes to mind, VFW [Veterans of Foreign Wars].
So, retiree organizations, active. And I would just note that
they would give heartfelt, real-world examples first-hand of
the consequence of any reform effort.
I would like to proceed to Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman.
I was in the military, in the Army, on Active Duty during
the first, well, reduction in force that I can remember, which
was in the early 1970s, post-Vietnam.
Now, fortunately, I don't--there was no separation pay as
was in the early 1990s post-Gulf War and that reduction in
force, where I think they gave a lump sum payment to
separating, I think, senior noncommissioned officers and
officers who were forced out in that process.
And I think that what is stressful for that population in a
reduction in force is that there is no understanding of what
the system is going to be until they receive notice that they
are going to be out. Then there may be a decision that will
help them, and there may not, and that is unfortunate.
And I think that is one reason why I think it is important
to have a reform that reflects some accrued retirement benefit
for people less than 20 years. And I think that is something
that it is important to look at, watch out for. And certainly I
want to reiterate again that I think that whatever system we
put in place should not impact the people currently on Active
Duty.
With that, Mr. Chairman, unless there are any responses
from the panel to what I just said?
Mr. Strobridge. I would just comment, sir, that the
separation pays that you are talking about, at least as far as
the law is concerned, those are deemed--we don't think that is
right, but when you look at the law, it is hard to come to any
conclusion that it is deemed a kind of retired pay payment.
If you take that and then come back in the service and
qualify for retirement, they are going to deduct that
separation pay from your retired pay.
So we don't like that, but that is the way it is. In other
words, under current law, that is the retired pay outlay, the
separation pay.
Mr. Coffman. Just one final point, and that is, on Active
Duty in the Army and the Marine Corps, I served in combat arms,
except for my last tour in Iraq was civil affairs. But, Gulf
War, I was a light-armed infantry military officer, and then I
was mechanized infantry in the United States Army.
And I got to tell you that that pretty much wore me out.
And I think, to the casual observer, they will verify that,
that there is such a wide disparity in occupations in the
military. And I got to tell you, there are a lot of them that
people show up to work in the morning and leave in the
afternoon, and it is not a whole lot different than, quite
frankly, than a civilian job.
And there are those jobs that are just tough. And I believe
that, if we can't recognize that in retirement, we ought to
recognize it in plussing up hazardous duty pay, plussing up sea
duty pay and all those other things that recognize people that
don't punch out on Saturday, on Friday afternoon and go home,
and just, you know, go day after day after day.
And I have done that in theater, in war, twice. And it is
tough stuff. And so I think we need to recognize that.
Certainly, I appreciate everybody who serves in the United
States military, but I also appreciate that there are
differences.
And with that, Mr. Chairman, I yield back.
Mr. Wilson. Thank you very much.
And, Congressman Heck?
Dr. Heck. No further questions.
Mr. Wilson. No further questions?
And, Colonel West?
Mr. West. No further questions.
Mr. Wilson. My goodness, Colonel. And Congressman Scott of
Georgia?
Mr. Scott. No further questions.
Mr. Wilson. Mrs. Davis, any further?
There being no further, thank all of you for being here.
You could tell the high interest and appreciation for your
service. And again, military families--what we are talking
about are consequences far beyond today, and we are looking for
a very strong and positive future.
The meeting is adjourned.
[Whereupon, at 2:24 p.m., the subcommittee was adjourned.]
=======================================================================
A P P E N D I X
October 25, 2011
=======================================================================
PREPARED STATEMENTS SUBMITTED FOR THE RECORD
October 25, 2011
=======================================================================
Statement of Hon. Joe Wilson
Chairman, House Subcommittee on Military Personnel
Hearing on
Military Retirement Reform
October 25, 2011
Today the Military Personnel Subcommittee will address the
subject of military retirement, an issue of immense importance
to service members and, in turn, to combat readiness.
I want to thank Dr. Joe Heck for recommending that the
Subcommittee conduct this hearing. Dr. Heck very astutely
recognized that military retirement would be a pivotal issue in
the coming months and that it was essential that Subcommittee
address the issue expeditiously. Thank you, Dr. Heck, for your
insight and call to action.
The Defense Business Board, one element of the Department
of Defense, was quick to present a major retirement reform
proposal that set the tone of the retirement reform debate. The
Board's proposal would move the retirement system aggressively
toward a private sector defined contribution system based on
the personal investments of service members. The proposal
received immediate criticism from service members and military
associations. The proposal is certainly a radical solution that
would result in a significant reduction to retired benefits for
all service members. As could be anticipated, the unveiling of
the Defense Business Board proposal injected considerable
uncertainty into the force, to include troops fighting the wars
in Iraq and Afghanistan. The proposal created an immediate
morale firestorm as service members feared that senior leaders
within the Department of Defense and the military departments
were seriously considering its implementation.
We invited the Defense Business Board to testify today to
face the arguments of their critics and explain the merits of
their proposal, but they declined the invitation. I am
concerned that the Defense Business Board knowingly elected to
pursue a very controversial proposal with immediate negative
consequences for morale and combat readiness and yet they were
unwilling to come before the Subcommittee and defend their
action. In my view, their failure to appear speaks volumes
about their own lack of conviction that their proposal is
deserving of serious consideration.
Secretary of Defense Leon Panetta has been clear that
retirement reform must be on the table for consideration as the
Department of Defense contemplates the wide array of programs
that will be considered for cuts to meet the budget reduction
goals. I was pleased that the Secretary understood the morale
problem that had been created by the Defense Business Board and
announced his clean support for grandfathering the benefits to
be provided to currently serving members who have borne the
burden of war over the last 10 years. We simply cannot betray
the trust of the service members who have performed with such
courage and expertise in Afghanistan and Iraq.
I was disappointed that Secretary Panetta did not disavow
the Defense Business Board proposal. That statement would have
removed a major irritant to the force. I was, however, very
pleased at General Dempsey's statement before the House Armed
Services Committee that recognized the unique requirements of
military service and that strongly asserted that the military
requires a retirement system totally different from any
civilian retirement program.
Today, we hope to learn more about the current positions of
the Department of Defense and military advocacy groups
concerning the need to reform military retirement.
Statement of Hon. Susan A. Davis
Ranking Member, House Subcommittee on Military Personnel
Hearing on
Military Retirement Reform
October 25, 2011
Given the current state of our Nation's economy,
discussions on the condition and future of military retirement
are once again being raised. Such discussions are not new,
during previous economic down turns, focus has turned to the
sustainability and affordability of our military retirement
program. However, for the most part, the current military
retirement program was established over 60 years ago, so it is
valid to ask ourselves is this program as it currently exists
still meeting the requirements it was set up to achieve, which
is the focus of today's hearing.
Only 17 percent of the force actually completes a full 20
years of service in order to qualify for a non-disability
retirement. Many have expressed concerns that the current
program does not recognize the sacrifices of those who served
during 10 years of conflict and may not stay the full 20 years
to earn a retirement. Is it fair that that person who may have
been deployed once, and stays to retirement, is eligible for a
lifetime benefit, while an individual who may have multiple
deployments in a combat theater, but does not stay 20 years,
walks away with nothing more than the admiration of a grateful
nation?
When the 20-year retirement program was established the
life expectancy in 1949 for a white male was 66.2 years, for a
black male it was 58.9 years. Compared to the latest data
available, the life expectancy in 2009 for a white male is 76.2
years, and for a black male it is 70.9 years. There is no doubt
that Americans are living longer and more fuller lives, which
means that an average individual who receives military
retirement for 20 years of service will receive retirement for
nearly twice as long in her or his adult life. In addition,
many of those who retire at 20 years of service have gone on
with an ability to seek another full career in a different
field.
Changes to the personnel compensation programs, including
the retirement system, often strike fear in the force, so it is
important that we do not unnecessarily undermine the faith of
those who are currently serving. But, we do have a
responsibility to ensure that the compensation package that is
provided to service members is meeting the needs of our
Nation's national security, and that includes looking at the
military retirement package.
[GRAPHIC(S)] [NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
DOCUMENTS SUBMITTED FOR THE RECORD
October 25, 2011
=======================================================================
[GRAPHIC(S)] [NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
October 25, 2011
=======================================================================
RESPONSES TO QUESTIONS SUBMITTED BY MRS. DAVIS
Dr. Rooney and Ms. Penrod. Contracted Services are currently the
largest cost element of the Total Force. The Department is committed to
enhancing its understanding of what we contract for and why. For all
elements of our force, we must look at whether the returns justify the
investments, and if alternative Total Force mix solutions may be less
costly or are more appropriate. As we have seen in the last decade,
expenditures on contracted services have steadily increased, and as an
element of the Total Force, must be comprehensively reviewed to ensure
necessary reductions do not risk readiness and the delivery of critical
capabilities. The Congressionally-mandated Inventory of Contracts for
Services must continue to be improved so that it can be used by
managers for these purposes.
In accordance with the FY11 authorization and appropriations acts,
my office is working with all DOD organizations, to move towards
collecting data from the private sector firms providing services for
the Department. It is important that we have information on contracted
services that can be translated to units of measure that are comparable
to the other elements of our workforce (military and civilian
personnel) in order to make these critical value and planning
judgments.
In the past few years, we have seen the Army make judicious and
highly cost-effective decisions regarding contracts governance by
relying on both their inventory process and internally-developed
information system. P&R has engaged to assist the Departments of the
Navy and Air Force to enhance their service contracting governance
ability by leveraging the Army system, as directed in the FY11
appropriations act. Additionally, we are also assisting the Defense
Agencies, Field Activities, and Combatant Commands as they report their
plans to collect this information. This year, the Components will
prepare an improved FY2011 Inventory of Contracts for Services by
relying on the best information they have available in their internal
systems as opposed to the Federal level aggregated reporting system,
while leveraging the Army's proven processes and data.
Finally, my office has drafted guidance that will be soon released
Department-wide. This guidance will require, in addition to an improved
inventory, that each DOD Component complete a thorough review and
analysis of the contracted services for which they are the requiring
activity, and will require the Component Head to submit a letter to my
office certifying completion of such review, delineating the results in
accordance with all applicable Title 10 provisions. This additional
accountability will ensure each DOD Component can report workforce mix
decisions and that contracted services are validated against mission
requirements that justify current and proposed expenditures during
annual program and budget reviews, and that corrective action is taken
when functions at risk of inherently governmental performance or
involving unauthorized personal services are identified. [See page 22.]
______
RESPONSE TO QUESTION SUBMITTED BY MR. COFFMAN
Dr. Rooney. The Defense Department annually contributes into the
Military Retirement Fund a portion of the actuarially determined amount
required to pay retired pay to future military retirees; the Treasury
Department pays the remainder of the actuarially determined amount.
For the 2012 fiscal year, the Defense Department contributed an
amount equal to 34.3 percent of active component military basic pay to
fund retired pay for future active duty retirees and 24.3 percent of
reserve component military basic pay to fund retired pay for future
reserve component retirees. It is projected that these contributions,
as a percentage of military basic pay, will remain relatively constant
well into the future.
In FY 2012, the Treasury Department contributed to the Military
Retirement Fund 8.8 percent of active component military basic pay and
3.6 percent of reserve component military basic pay. The Treasury
Department's portion represents the cost of ``concurrent receipt''
benefits first enacted in 2004. [See page 12.]
?
=======================================================================
QUESTIONS SUBMITTED BY MEMBERS POST HEARING
October 25, 2011
=======================================================================
QUESTIONS SUBMITTED BY MS. BORDALLO
Ms. Bordallo. How can the Department consider ``breaking faith''
with the troops and propose drastic reforms to retirement and benefits
to the military's all-volunteer force to meet declining budgets, while
at the same time failing to achieve a realistic accounting of
expenditures on contracted services, which have increased drastically
in the past decade? In fact, for nearly half of that decade, the
Department has failed to implement a required inventory of contracts
for services, directed by Congress in FY08 NDAA. P&R was directed,
twice in fact, in the most recent legislative cycle to take specific
and deliberate actions to move the Department forward in that area.
Without this critical tool, how can the Department control costs in a
time of fiscal austerity, reducing military and civilian end-strength,
but ignore the work performed by contractors? Wouldn't this be a more
natural first choice for identifying budgetary savings than at the
expense of ``breaking faith'' with our dedicated men and women in
uniform?
Dr. Rooney. While it is accurate that possible retirement and
compensation reforms are being considered, the Department is still in
the very early stages of developing any potential options for such
reform and no decisions have been made. The Secretary and I, along with
many other senior leaders, take very seriously the commitments we've
made to our men and women in uniform and we will not break faith with
those service members. Any proposed reforms and changes to retirement
will contain a requirement for grandfathering.
I agree that work performed by contractors comprises a significant
portion of the Department's budget that must be reviewed in order to
achieve balanced, meaningful and lasting savings and cost reductions.
To that end, we are committed to enhancing our understanding of the
services we contract for and why, and how much we spend on those
services. The Inventory of Contracts for Services must continue to be
improved so that it can be used as a tool by managers for these
purposes. In accordance with the FY11 NDAA and the recent
appropriations bill, my office is working with all DOD organizations to
move towards collecting data related to level of effort and costs from
all private sector firms providing services for the Department. On
November 22, the Department delivered to the Congressional defense
committees a plan that delineates both short and long term actions to
be taken by the Department to begin collecting data from private sector
firms and fully comply with requirements of sections 235 and 2330a of
title 10, United States Code. It is important that we have information
on contracted services that can be translated to units of measure that
are comparable to the other elements of our workforce (military and
civilian) in order to make critical value and planning judgments. With
the right data, opportunities for savings can be identified, thus
ensuring that returns justify investments. The data will also assist in
promoting alternative workforce solutions that may be less costly and
more appropriate, or eliminating or reducing in scope those services
determined to be no longer required or of low priority.
Ms. Bordallo. In this hearing there was a lot of discussion about
comparison between the military and private sector employment,
specifically the specialized training, physical attributes, and
sacrifices made by uniformed men and women that ensure a constant state
of readiness. As we reduce our operational tempos overseas, and
drawdown those force levels, what is the Department doing to ensure
that military men and women are not being placed into jobs that do not
contribute promote unit readiness or further their careers, and
consequently generate a hollow force? This is of particular concern as
the Department operates under a civilian personnel constraint and there
are thousands of control grade officers in headquarters or
administrative type functions that may be better suited for civilian
performance?
Dr. Rooney. The Department's ``sourcing'' of necessary functions
and work between military, civilian, and contracted services must be
consistent with workload requirements, funding availability, readiness
and management needs, as well as applicable laws. As operational tempos
in Iraq and Afghanistan decrease and the Department makes force
structure adjustments, military personnel availability will certainly
be a consideration in workforce structure decisions to most effectively
and efficiently perform the missions, including those at headquarter
staffs and of an administrative nature. In making such staffing
decisions, the Department must be mindful of using military personnel
to perform tasks that could limit their availability to perform the
operational missions or maintain a required state of readiness.
Consistent with DOD policies, tasks that are not inherently
governmental or military essential in nature must be designated for
Government civilian personnel or contract performance unless military-
unique knowledge and skills are required for performance of the duties;
military incumbency is required by law, executive order, treaty, or
international agreements; military performance is required for command
and control, risk mitigation, or esprit de corps; and/or military
manpower is needed to provide for overseas and sea-to-shore rotation,
career development, contingencies or wartime assignments.
My staff has currently begun a study to review the grade/billet
appropriateness and allocation of control grade officers. This study
may result in more in depth reviews of military billets at headquarters
and administrative functions and activities across all organizations of
the Department. Among other things, consideration for military to
civilian conversions or organizational efficiencies that will reduce
military personnel performing overhead activities will reduce the
likelihood of hollowing the force.
Ms. Bordallo. Much attention has been paid to the role of
contractors in theater--as well as the sustainment, infrastructure, and
maintenance support provided to the Department by the private sector.
However, as we shape the force of the future and discuss the likely
impact the possibility of retirement and compensation reforms will have
on the Department's ability to recruit and retain a ready and capable
force, what steps are being taken to ensure that the future mix of the
Department's workforce is appropriately balanced? Declining end-
strengths and civilian personnel limitations would seem to lead to a
``default'' of contracted support to meet future operational needs
(similar to the post 1990s drawdown). What controls are being
implemented, related to contracted service levels, to preclude favoring
one element of the Total Force overt another?
Dr. Rooney. As a result of fiscal constraints and declining
budgets, the Department is assessing all aspects of its Total Force,
including contracted support. These assessments may result in force
structure changes, organizational realignments and restructuring,
workload prioritization, and the identification of lower priority
mission/functions for elimination. As part of these assessments,
workforce structure decisions must be consistent with workload
requirements, funding availability, readiness and management needs, and
applicable laws. Decisions regarding the use of military personnel,
Government civilians, or contract support must follow workforce mix and
risk guidance in DOD Instruction 1100.22, ``Policy and Procedures for
Determining Workforce Mix'', and, when appropriate, cost considerations
in accordance with Directive Type Memorandum 09-007, ``Estimating and
Comparing the Full Costs of Civilian and Military Manpower and Contract
Support.''
In addition, the Department has prepared policy reiterating and
reinforcing statutory prohibitions against converting work currently
performed (or designated for performance) by military and civilian
personnel to contracted services. This policy highlights the importance
of preventing the inappropriate conversion of work, or ``default'' to
contract performance.
Lastly, the Department is committed to enhancing its understanding
of current and planned services contracts. On November 22, the
Department delivered a plan to the Congressional defense committees
that delineates both short and long term actions for the collection of
data from private sector firms. These actions will improve the
Department's ability to assess contracted services in a manner
comparable to the other elements of our workforce in order to make
critical value and planning judgments, as well as precluding
unjustified or unintended growth in this sector of the Total Force.
|
NEWSLETTER
|
|
Join the GlobalSecurity.org mailing list
|
|
|
