Commission: Add 401K-style choices to military retirement

The report calls for adding 401K-style savings plans -- and providing training in financial literacy.
By Frances Burns   |   Jan. 30, 2015 at 10:56 AM
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WASHINGTON, Jan. 30 (UPI) -- A commission set up to examine U.S. military compensation recommended changes it said would be better for service members and taxpayers.

The Military Compensation and Retirement Modernization Commission released its final report Thursday with 15 recommendations that include cutting base retirement pay and adding an option for 401K-like plans that would provide retirement benefits for people who serve less than 20 years.

Those who remain in the military for 20 years would continue to receive full retirement benefits, which would drop from 50 percent of pay to 40 percent. The system would not change for those already serving.

Other recommendations include developing a new system of survivor benefits, streamlining rules governing military reservists, who can now be called to active duty in 30 different ways, and providing more coordination in medical care for active-duty service members and veterans.

Currently, those in the military often face a "lengthy and frustrating process" when they seek medical care, the report said. And those who leave the military often have difficulty obtaining services quickly as they transfer to the VA system.

Military families who include children with special needs often face problems as they transfer to new posts because they are switching between state Medicaid plans, the report said.

The military should also provide training in financial literacy for all service members, the commission said. That would help them with financial planning and protect them from making bad choices like signing up for predatory loans.

The commission was created by Congress and headed by Alphonso Maldon Jr., a former assistant secretary of defense and Army veteran. Maldon estimated the recommendations would shave $12 billion a year from the Pentagon budget.

"I appreciate that the commission gathered input from over 150,000 service members and veterans across the country before formulating its recommendations," Defense Secretary Chuck Hagel said in a statement. "I also appreciate the commission's support for grandfathering current service members and retirees with its recommended changes on retirement pay; its focus on protecting future recruitment and retention; and its attempt to propose savings to ensure our military will be able to field a ready, agile, and modern force capable of meeting present and future threats."

President Barack Obama said in a statement he will review the commission's recommendations in consultation with civilian and military leadership in the coming weeks.

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