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Advisory Committee Recommends Big Changes to Military Pay System

By Donna Miles
American Forces Press Service

WASHINGTON, Feb. 28, 2006 – A committee that's spent the past year studying the military compensation system is recommending sweeping changes that, if approved, would bring military compensation more on par with private-sector compensation.

The Defense Advisory Committee on Military Compensation released details of its recommendations today and is incorporating them in a final report expected to go to Defense Secretary Donald Rumsfeld by late April, the committee chairman told the American Forces Press Service.

The proposed package includes two major ideas, retired Navy Adm. Donald Pilling, former vice chief of naval operations, explained. These include revamping the retirement system so servicemembers receive more pay throughout their careers rather than at their completion, and basing pay on performance rather than longevity and other factors, he said.

Pilling emphasized that any proposed changes to the compensation package would be grandfathered in, so currently serving members would not be affected. The only exception could be in the case that current members are offered the opportunity to voluntarily "opt in" to the new system, he said.

In terms of retirement, the committee recommends:

  • Vesting members at 10 rather than 20 years;
  • Paying graduated retirement plans ranging from 25 percent of base pay at 10 years to 100 percent of base pay at 40 years;
  • Establishing a Thrift Savings Plan with government contributions of 5 to 10 percent of base pay;
  • Providing "gate pays" at specific service milestones, as determined by the individual services; and
  • Delaying payment of the retirement annuity until age 60.

In terms of pay for performance, the committee recommends:

  • Revising the pay charts so pay is based on time in grade rather than years of service; and
  • Eliminating the "with dependents" and "without dependents" provision of basic allowance for housing so all servicemembers in the same pay grade receive the same allowance, regardless of their family situation.
The proposed system would benefit servicemembers, giving them more upfront cash throughout their careers, Pilling said. He noted that most private-sector compensation packages give 80 percent of their cash up front, deferring just 20 percent for retirement. In contrast, the current military compensation package pays about one-half the total compensation up front and defers the rest.

The committee's recommendations help update the current military retirement system that Pilling said was based on a 1940s-era model. At that time, most members served 30 years, retired in their 50s and typically lived into their 60s, he said. Today, it's typical for servicemembers to retire after 20 years of service to start second careers and to live longer lives.

Restructuring the compensation package will provide more options for servicemembers, Pilling said. Rather than offering no retirement benefit short of 20 years, the proposed system would offer a portable retirement system with reduced-level benefits after 10 years, he explained.

Revising the pay tables to reward time in grade will ensure consistent benefits for servicemembers promoted ahead of their peers, Pilling said. And by paying equal housing allowances to all members of equal grade in equal locations, the proposed system will reward people "for their performance, not their marital status," he said.

While bringing the military pay system more on par with systems in the private sector, Pilling said the proposal maintains sight that service in the military is unique. For example, while it calls for greater cost sharing among Tricare recipients, it continues to ensure full medical care after 20 years of service, he noted.

If Rumsfeld approves the plan, it will be subject to congressional review before being introduced, he said.

The secretary established the Defense Advisory Committee on Military Compensation to study the current pay system and come up with ways to bring it more in line with what servicemembers want and operational needs demand.

The seven-member committee spent a year reviewing the military pay package, holding public hearings and developing its recommendations.

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Defense Advisory Committee on Military Compensation

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