Photo (cc) by The U.S. Army
The U.S. Department of Defense is looking to introduce 401(k)-style retirement plans and change other military benefits to help recruit and retain younger soldiers.
According to the Military Times, Defense Secretary Ash Carter said he supports a blended retirement system, which would include a traditional pension plan as well as a 401(k)-style retirement account for all troops, regardless of how long they’ve served. Carter said:
“Because 80 percent of our troops leave service before 20 years are up. … And in the current system, if they leave before 20 years, they leave with nothing. … So we want to look at that and see if we can create a choice that opens up opportunity and is — allows us to be more similar to other [civilian] institutions and therefore competitive with them in getting people to join us and stick with us.”
Under the proposed 401(k)-style investment account, which was included in a proposal from the Military Compensation and Retirement Modernization Commission, the government would match up to 6 percent of basic pay for soldiers who pitch in their own money. Troops would own that investment, no matter when they leave the military.
In addition to creating new investment accounts for soldiers, the proposal would shrink the size of military pensions by 20 percent, which — not surprisingly — is a controversial component.
The Military Times said the proposal also aims to reward soldiers who devote several years of their life to the military.
The commission’s proposal would also give troops who reach 12 years of service a lump-sum retention bonus in exchange for a new four-year service commitment. The amount would likely vary by service and career field.
In a letter to the compensation commission, President Obama said he supports the proposals.
“I believe the recommendations are an important step forward in protecting the long-term viability of the All-Volunteer Force, improving quality-of-life for service members and their families, and ensuring the fiscal sustainability of the military compensation and retirement systems. Our men and women in uniform and their families deserve nothing less.”
The commission’s proposals also include ditching the military’s current Tricare health coverage and replacing it with private insurance plans similar to those available to civilians, Military Times reports.
Ultimately, Congress has the final say in making any changes to the current laws regarding military pay and benefits. If a new system is approved, it will only pertain to future recruits, not current troops.
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