House committee advances military pension reformsReprints
The House Armed Services Committee on Thursday passed a defense spending bill that includes reforms to the military retirement system that encourage defined contribution savings.
The bill, which passed 60-2, incorporates recommendations made in a Jan. 29 report by the Military Compensation and Retirement Modernization Commission.
Those recommended changes, which would start in 2017, trim the pension benefit to 40% of final pay from the current 50% for all participants in the defined benefit plan, while offering an enhanced defined contribution plan estimated to save the Pentagon $4.7 billion annually by automatically enrolling new members in the $439.6 billion Federal Thrift Savings Plan, Washington. New participants would contribute 3% of pay, while the government employer would contribute 1% for the first two years and then 100% match the employee contribution up to 5% of pay after that. Employees could opt out, but they would be automatically re-enrolled at 3% each year.
Current military members, who already may enroll in the TSP but without an employer match, would also be eligible for the match.
New participants whose military careers last 20 years would still receive benefits under the DB plan. Its 20-year vesting requirement is considered an obstacle to recruitment, with 83% of enlisted personnel and 51% of officers leaving with no retirement savings. House Armed Services Committee Chairman Mac Thornberry, R-Texas, said in a statement that he welcomes providing additional options for military members serving less than 20 years and looks forward to bringing the bill to a full House vote in the coming weeks.
A similar bill was referred to the Senate Armed Services Committee on April 28.
Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.