U.S. military pay reforms could save $12 billion yearly: panel

Reuters News
Posted: Jan 29, 2015 5:09 PM

By David Alexander

WASHINGTON (Reuters) - A congressionally appointed panel on U.S. military compensation recommended overhauling retirement and healthcare benefits on Thursday to improve services offered to troops and families while cutting costs by up to $12.6 billion annually.

The nine-member panel, including former military leaders and lawmakers, recommended the Pentagon broaden its retirement benefits to provide 401(K)-style savings plans for most service members while retaining a slimmed-down version of its current 20-year retirement plan.

It also recommended reforming the health system for military families and younger retirees, replacing much of the current Tricare system with commercial insurance that would improve access to care.

Implementing those two recommendations plus 13 others detailed in a 280-page report would save $31.8 billion over the next five years and $12.6 billion annually by the time they are fully into force in 2053, the report said.

More broadly the panel said the military's overall pay structure was sound and not in need of reform.

The report's release drew a muted response, with President Barack Obama and other senior leaders thanking the panel and promising to study its findings.

Military service groups were slightly more skeptical. John Stroud, head of the 1.9 million member Veterans of Foreign Wars, said the report contained recommendations to increase the fees that retirees pay for the military's Tricare health system.

"But the devil is always in the details, and the VFW will now review the entire report in detail and address our concerns with the United States Congress," he said in a statement.

Military compensation has become a hot-button budget issue at a time of declining U.S. defense spending. The pay and benefits of uniformed and civilian defense personnel consumes about half of the department's $496 billion budget.

Efforts by the Pentagon to reduce military personnel costs have run into opposition in Congress, where lawmakers have often rejected efforts to slow the rate of increase in base pay, increase healthcare fees for retirees or impose other curbs.

The release of the report could give Congress the impetus to implement some cost-savings reforms it has balked at in the past. The compensation commission insisted, however, that cost-cutting was not the driving factor in their deliberations.

"These recommendations respond to the preferences of a new generation of service members by improving choice and flexibility within their compensation package," the panel said, and "offer efficiencies that substantially reduce government expenditures."

(Reporting by David Alexander)