The Military Retirement System: A Proposal for Change

Author:Wener Vieux
Position:Judge Advocate, United States Army
Pages:1-114
 
FREE EXCERPT
MILITARY LAW REVIEW
Volume 218 Winter 2013
THE MILITARY RETIREMENT SYSTEM: A PROPOSAL FOR
CHANGE
MAJOR WENER VIEUX*
You can always count on Americans to do the right
thing—after they’ve tried everything else.1
The credit belongs to the man who is actually in the
arena, whose face is marred by dust and sweat and
blood; who strives valiantly; who errs, who comes short
again and again, because there is no effort without error
and shortcoming; but who does actually strive to do the
deeds;. . . .2
I. Introduction
War. From the rolling fields of Antietam, the trenches of the Marne,
the volcanic sands of Mount Suribachi, the jungles of the Ho Chi Minh
* Judge Advocate, United States Army. Presently assigned as Command Judge
Advocate, 513th Military Intelligence Brigade, Fort Gordon, Georgia. L.L.M., 2013, The
Judge Advocate General’s School, U.S. Army, Charlottesville, Virginia; J.D., 2004,
University of Arizona; B.A., 1999, University of Arizona. Previous assignments include
Knowledge Management Officer, U.S. Army Claims Service, Fort Meade, Maryland,
2011–2012; Chief, Criminal Law, Aberdeen Proving Ground, Maryland, 2008–2011;
Senior Defense Counsel, Camp Victory, Iraq 2007–2008; (Defense Counsel, 2006–2007;
Tax Center Officer-in-Charge, 2006; Legal Assistance Attorney, 2005) Fort Bragg, North
Carolina; Davis-Monthan Air Force Base, Tucson, Arizona, United States Air Force
Enlisted Member 1992–2000. Member of the state bar of Arizona. This article was
submitted in May 2013 in partial completion of the Master of Laws requirements of the
61st Judge Advocate Officer Graduate Course.
1 WILLIAM B. WHITMAN, THE QUOTABLE POLITICIAN 98 (2003) (quote by Sir Winston
Leonard Spencer Churchill (1874–1965)).
2 President Theodore Roosevelt, Citizenship in a Republic, Speech delivered at the
Sorbonne, Paris, France (Apr. 23, 1910), available at http://design.caltech.edu/erik/
Misc/Citizenship_in_a_Republic.pdf.
2 MILITARY LAW REVIEW [Vol. 218
Trail, and in the mountains of Helmand Province, servicemembers have
fought for the ideals of liberty and democracy. These servicemembers
stood and faced the dangers of war. With sweat oozing down their faces,
hands numb from clutching their muskets, carbines, and M16s, their
bodies and minds near or at the point of exhaustion, they have faced this
country’s enemies. They faced their fears because they trusted in their
government to take care of them after it was all over. But today, that trust
is in jeopardy.
The economic recession that started in late 2008, the slow recovery
that began in late 2009, persistent high unemployment,3 the growing
national debt, the fiscal cliff, and the systematic problems with two key
entitlement benefits—social security and Medicare—have made reducing
government spending a key issue.4 In May 2010, Secretary of Defense
Robert M. Gates, citing the “current and projected fiscal climate” and its
impact on the Department of Defense (DoD) effort to modernize military
capabilities, tasked the Defense Business Board (the Board) with
providing recommendations on options that would “materially reduce
overhead and increase the efficiency” of the DoD’s business operations.5
The military retirement system was one of several issues that the Board
identified as an opportunity for budget savings.
The cost of maintaining the retirement system is more than $100
billion a year and has risen steadily over the past ten years.6 The Board
recommended abolishing the twenty-year “cliff” vesting system, which
grants an immediate annuity to servicemembers upon retirement, and
replacing it with a 401(k)-style system similar to the Thrift Savings Plan
3 Christopher J. Goodman & Steven M. Mance, Employment Loss and the 20072009
Recession: an Overview, MONTHLY LAB. REV., Apr. 2011 at 3.
4 Jeanne Sahadi, National Debt: Why Entitlement Spending Must Be Reined In,
CNNMONEY, Sep. 6, 2011, http://money.cnn.com/2011/09/05/news/economy/national_
debt_spending/index.htm.
5 DEF. BUS. BD., REPORT TO THE SECRETARY OF DEFENSE: MODERNIZING THE MILITARY
RETIREMENT SYSTEM tab A (Oct. 2011) [hereinafter DEF. BUS. BD.].
6 See U.S. DEPT OF DEF. COMPTROLLER, FISCAL YEAR 2012 MILITARY RETIREMENT
FUND AUDITED FINANCIAL REPORT, 1 (Nov. 2012) [hereinafter MILITARY RETIREMENT
FUND AUDIT]. Cost is broken down into three components: (1) normal cost payments as
part of the Department of Defense (DoD) budget and U.S. Treasury; (2) payment from
the U.S. Treasury to cover the unfunded liability; and (3) investment income from the
U.S. Treasury in the form of interest earned from bonds. Id. In Fiscal Year (FY) 2012
total cost consisted of $21.9 billion from the Defense budget and U.S. Treasury; $70.13
billion from the U.S. Treasury; and $12.5 billion from investment income, also from the
Treasury. Id. See also infra Part V.C.1 for additional information on the cost of the
retirement system and payment to retirees.
2013] MILITARY RETIREMENT SYSTEM 3
for the Uniformed Services (TSP).7 Further, the Board, while not
explicitly supporting the option of immediately transitioning active duty
servicemembers into the new plan, estimated that the government would
save more than $100 billion in Fiscal Year (FY) 2034 if troops were
transitioned into the new system.8 The Board’s recommendations caused
an uproar in the servicemembers’ retirement community9 and sparked
fear among active duty servicemembers10 and family members who
would see a retirement system that they have depended on abolished.
The military retirement system is a compact between our nation and
those who have served faithfully and tirelessly. While the system as
currently structured is costly and fails to provide retirement benefits to
the vast majority of servicemembers currently serving in the Armed
Forces, the Board’s proposal to convert the current annuity system into a
401(k)-style plan is extreme, and tramples on the compact between the
nation and servicemembers and their families.
Despite the annuity’s high cost, it is an investment that the country
must make to maintain the best military in the world11 and
servicemembers who exhibit a level of professionalism, skill, and ability
unparalleled by any other force.12 Thus, the challenge is to devise a
modernized retirement system that (1) provides retirement benefits to
more servicemembers (earlier vesting while providing the DoD tools to
7 DEF. BUS. BD., supra, note 5, at 4–5.
8 Id. n.5, at tab C, apps. D, F. Under the current plan, FY2034 cost would be $217
billion. Under the new 401(k)-style system, FY2034 cost would be $112 billion.
9 See Andrew Tilghman, Plan to Cut Retirement Outrages Service Members,
ARMYTIMES, Sep. 1, 2011, http://www.armytimes.com/money/retirement/military-
retirement-plan-troops-react-090111w/. See also James Dao & Mary Williams Walsh,
Retiree Benefits for the Military Could Face Cuts, N.Y. TIMES, Sep. 18, 2011,
http://www.nytimes.com/2011/09/19/us/retiree-benefits-for-the-military-could-face-
cuts.html?_r=0. As a side note, Mr. Dao refers to the health care and military retirement
system as a “big social welfare system.” It is disappointing for someone to belittle the
sacrifice that servicemembers and military family members make in defending this
country. After twenty or more years of service, a health care system and retirement
benefits are earned, not a result of a social welfare system.
10 See Lisa M. Novak, Military Retirement System Broken, Board Says, STARS &
STRIPES, Aug. 7, 2010, http://www.stripes.com/news/military-retirement-system-broken-
board-says-1.113754.
11 See Tyrone C. Marshall, Panetta: U.S. Military Best in World, But Threats Remain,
U.S. DEPT OF DEF., Jan. 20, 2012, http://www.defense.gov/News/News
Article.aspx?ID=66878.
12 See Donna Miles, Obama, Panetta Praise Military Veterans’ Service, U.S. DEPT OF
DEF., Nov. 9, 2011, http://www.defense.gov/News/NewsArticle.aspx?ID=66021.

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