Defense Secretary Chuck Hagel wants to wait until next year before asking Congress to make fundamental changes to the current military retirement system, a Pentagon spokesman said Friday.
One day after the Defense Department released detailed proposals for military retirement reform, Hagel’s spokesman said that the politically sensitive suggestions should not be considered formal recommendations.
“No one of these options is a favorite. No one is preferred. These are just options that are teed up to be considered,” Rear Adm. John Kirby said during a press briefing Friday.
The proposals were developed by the Defense Department’s Personnel and Readiness Office and sent to both Capitol Hill and the Military Compensation and Retirement Modernization Commission.
Before making any formal recommendations for how Congress should change military retirement laws, Hagel wants to wait for the commission to complete its study and submit its report to Capitol Hill, due in February 2015.
Hagel “has been consistently clear that he wants to work this through the commission,” Kirby said. “That is the forum he believes is the appropriate one to deal with these issues.”
The proposals would preserve the current system’s defining feature of a 20-year, “cliff-vesting,” fixed-income pension. But it would ultimately provide smaller monthly checks.
To compensate for that, the new proposals would offer three new cash payments to be provided long before old age — a 401(k)-style defined contribution benefit awarded to all troops who serve at least six years; a cash retention bonus at around 12 years of service; and a potentially large lump-sum “transition pay” provided upon retirement to those who serve 20 years or more.
Hagel said retirement reform must eventually be put on the table for potential cost cutting, Kirby said.
“The Secretary believes that we’ve got to get a handle on compensation, pay and benefits for the military, soon,” Kirby said.
“He has been very clear that the longer we wait, the harder this gets going forward and the larger the crash is going to be 10 or 20 years from now when it becomes unsustainable,” Kirby said.
“He wants all options considered — to include retirement benefits.”