Panel calls for overhaul of military pensions

WASHINGTON — Troops who don't serve 20 years before leaving the military will receive retirement benefits, according to a report released Thursday by a military panel.

Troops earn annual pensions after serving 20 years. The proposal released Thursday by the Military Compensation and Retirement Modernization Commission would keep much of the military's defined-benefit pension system but add elements of a 401(k-style retirement plan.

The recommendations would save the Pentagon $12 billion annually, said Chairman Alphonso Maldon.

The commission, formed by Congress and approved by President Obama, has 15 recommendations. They include:

• A call for retirement pay to drop from 50% at 20 years to 40%. The saving would allow to extend smaller benefits to those who don't serve 20 years. Under the current system 17% of enlisted troops receive benefits; the overhauled system would extend benefits to 75% of those troops.

• Calls to modify TRICARE, the military's health care system. It would allow troops and retirees to choose commercial plans. Retirees would be required to pay for an increasing share of their health care costs but less than the rates paid by average government employees.

The Senate Armed Services Committee will conduct a hearing on the proposals next week, Sen. John McCain of Arizona, the committee's chairman, announced Thursday.

President Obama thanked the commission for its report.

"The commission's report includes a number of specific proposals that I will review closely over the coming weeks, in consultation with our senior civilian and military leadership," Obama said in a statement. "I look forward to hearing their views and working with Congress to strengthen and modernize our military compensation and retirement systems."

Defense Secretary Chuck Hagel said the commission report is not incorporated into the budget Obama will submit on Monday, but that it will "inform discussions that DoD will have with Congress over the course of this year."

The commission's recommendations are not binding and face long odds of passage by Congress. They do address a burgeoning problem for the Pentagon: Pay and benefits for troops and veterans consume an ever-growing portion of its budget.

But Congress has already acted to rein in compensation costs. They cut pensions for top military brass over concerns from Gen. Martin Dempsey. He urged them to wait until the commission's report came out.

In the last 10 years, the cost per person in the active duty force grew 46%, excluding war funding and adjusting for inflation, the Center for Strategic and Budgetary Assessments found in a recent report. At that rate, and a Pentagon budget that accounts for inflation, personnel costs will consume the entire defense budget by 2039.

Rep. Adam Smith of Washington, the top Democrat on the House Armed Services Committee, said military personnel spending has averaged about 25% of the overall budget, although the size of the military has been cut in half since 1990.

"Those are telling statistics that underscore DoD's financial challenges," Smith said in a statement, adding that there are no easy answers to the problem. He said he hoped the commission's recommendations would give Congress a chance to act.