NDAA FY2016 Changes to Military Retirement

[webmaster]

Anyone else remember when TSP was first rolled out and we were all told that there would be matching for "critical" specialties; aviation was pitched as one of them....

Yes, I remember, never happened, did it?

 

[Flash]

Flash, I don't have the source document, but inferred from some paragraphs above that the last 1% of matching required 2% contributions, hence the 11% someone else already mentioned (5+6). I won't ever be under this system, but it is a complete erosion of benefits that doesn't come close to the existing plan that benefits service members. For an all volunteer force, part of the benefits package is/was free medical, GI Bill, job security, free training, and retirement pension with payout early in life via a traditional retirement at 20 years, or earlier if under a medical retirement.

I think the inference was probably mistaken in the documents, I would be surprised if it was different than the current civil service match setup.

As for the 'complete' erosion of benefits I disagree. While it is certainly a reduction it keeps the pension intact, albeit reduced. With the DoD paying more into retirement benefits now than active duty pay something had to change.

 

[Flash]

Yes, I remember, never happened, did it?

I honestly never heard this, officially or unofficially. Who was saying it?

 

[webmaster]

I think the inference was probably mistaken in the documents, I would be surprised if it was different than the current civil service match setup.

As for the 'complete' erosion of benefits I disagree. While it is certainly a reduction it keeps the pension intact, albeit reduced. With the DoD paying more into retirement benefits now than active duty pay something had to change.

What does the fine print say on when the retirement pay can be paid out? Last push was for payment starting at 65.

Just running some casual numbers on excel shows a disparity in compensation, ie, you have a smaller benefit if you are going to go the 20 years. If you are going to bail early, then yes, definitely a "win" for you since you can take an extra 1-5% with you to roll into another 401k.

Heck, DoD tried to make REDUX look good with "baked" assumptions that the servicemember would invest that immediately into an alternate retirement investment....

 

[webmaster]

I honestly never heard this, officially or unofficially. Who was saying it?

It was during the dog and pony shows when TSP first came online, "it's an option, up to PERs if we want to use it....", alluded that it could be coming in the future. Various sources, from the Navytimes and from Navy reps if I recall correctly. But I recall many of us being skeptical that that (matching) would never happen. And it didn't.

 

[Rugby_Guy]

I think this will be a killer for our higher enlisted. As it is, a lot of really talented guys get out to go "make more money for less headache". I was an F18 airframer that went MECEP and received a couple cold calls from difference depot level maintence locations, and I know many guys who have went over seas to work on Saudi or Kuwaiti jets to pay off a house or get a nest egg going. By taking the existing retirement option away, I don't see guys having a reason to stay past 10 years, in an Aviation MOS at least. Get all the training you can, duck b-billets and once you've done 10, take your pension and take the GI Bill you can now transfer and pull chocks. It's just my opinion, but I think the ramifications down the road will cause Manpower to have to pay reenlistment bonuses that negate any money they may be saving now.

 

[jtmedli]

I think this will be a killer for our higher enlisted. As it is, a lot of really talented guys get out to go "make more money for less headache". I was an F18 airframer that went MECEP and received a couple cold calls from difference depot level maintence locations, and I know many guys who have went over seas to work on Saudi or Kuwaiti jets to pay off a house or get a nest egg going. By taking the existing retirement option away, I don't see guys having a reason to stay past 10 years, in an Aviation MOS at least.... It's just my opinion, but I think the ramifications down the road will cause Manpower to have to pay reenlistment bonuses that negate any money they may be saving now.

THIS!! The current retirement plan is one of the best retention tools that we have. Keeping talented and hardworking people in at both officer and enlisted pay grades is going to be incredibly difficult when they get out, take some GS job, and make about 5x as much. Why stay in after 10 years making 50k a year that you have pay in to your retirement plan when you can pull chocks, make 3x as much, and get the same or better retirement plan on the outside? I certainly wouldn't hang around for that.

 

[Spekkio]

The NPV of mil retirement is over $2M according to PERs (not sure how they arrived at that since I calculated ~$1.5M, but I digress...) So unless these retention bonuses exceed $350k-$500k you are not going to be vindicated by costing Uncle Sam more money.

 

[Flash]

What does the fine print say on when the retirement pay can be paid out? Last push was for payment starting at 65.....

I don't know but I would imagine it stays the same or it would have made the news by now.

It was during the dog and pony shows when TSP first came online, "it's an option, up to PERs if we want to use it....", alluded that it could be coming in the future. Various sources, from the Navytimes and from Navy reps if I recall correctly. But I recall many of us being skeptical that that (matching) would never happen. And it didn't.

I think they passing bad gouge/talking out of their ass, I don't think that isn't something that is up to PERS. but they always tell the truth, it is just the truth that changes....right?

 

[Flash]

I think this will be a killer for our higher enlisted. As it is, a lot of really talented guys get out to go "make more money for less headache". ....By taking the existing retirement option away, I don't see guys having a reason to stay past 10 years, in an Aviation MOS at least.....

It hasn't changed that drastically in the grand scheme of things, they would still got get a pension with 80% of the value it has now. Is it as good as the old one? No, but it isn't a complete trash ing of the old system.

 

[Flash]

Flash, I don't have the source document, but inferred from some paragraphs above that the last 1% of matching required 2% contributions, hence the 11% someone else already mentioned (5+6).

I think the inference was probably mistaken in the documents, I would be surprised if it was different than the current civil service match setup.....

After re-reading some more of the reports on retirement changes I came away confused as well. If it comes out as first proposed then it will be like I mentioned but Congress makes the sausage with their own recipe so who the hell knows how it came out, I guess we will just have to wait and see something more definitive.

 

[exNavyOffRec]

The NPV of mil retirement is over $2M according to PERs (not sure how they arrived at that since I calculated ~$1.5M, but I digress...) So unless these retention bonuses exceed $350k-$500k you are not going to be vindicated by costing Uncle Sam more money.

What if you add in the cost of the matching funds that Uncle Sam chips in to those that don't retire at 20? I think at this point it would be a hard number to figure out, and the actual cost to Uncle Sam both in terms of money and personnel won't be known for many years.

 

[Randy Daytona]

What if you add in the cost of the matching funds that Uncle Sam chips in to those that don't retire at 20? I think at this point it would be a hard number to figure out, and the actual cost to Uncle Sam both in terms of money and personnel won't be known for many years.

If these changes were not to save DoD money, they would not be doing them. Expect more "burden sharing" on medical benefits once the new retirement system is established. Can't say I blame the brass, the medical costs are climbing much faster than inflation.

 

[Rugby_Guy]

It hasn't changed that drastically in the grand scheme of things, they would still got get a pension with 80% of the value it has now. Is it as good as the old one? No, but it isn't a complete trash ing of the old system.

I'm not saying that the new system is all that bad. But a guy who is on the fence after 10-12 years has stayed in because he was "over the hump" and might as well walk away with some lasting compensation. If I'm Sgt-SSgt whoever with my CDQAR and I get orders to be a recruiter or drill instructor, I would cut my losses, go to Charles Schwab with my TSP and get in with a new company at 30 years old vs 40 years old. That's just me, and maybe my little thought experiment is flawed, but I see this new retirement system incentivizing those on the fence to get out vice, grind out a few more years and become Maintence Control Chiefs or Division Chiefs.

 

[exNavyOffRec]

If these changes were not to save DoD money, they would not be doing them. Expect more "burden sharing" on medical benefits once the new retirement system is established. Can't say I blame the brass, the medical costs are climbing much faster than inflation.

I don't know, how many times has the DOD done something thinking it would work and then it doesn't? Maybe this will work, maybe it won't, I wonder if they looked at several points in the past not just during a bad economy.