The yearly value of a 20-year military retirement would be cut for the current force steadily until age 62 under a COLA cap provision in the budget deal struck by Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.).
The cumulative effective would be to cut the lifetime value of military retirement by roughly $83,000 for a typical enlisted member who retires at age 40 after 20 years’ service. The typical officer retiring at age 42 after 20 would lose about $124,000.
That’s according to retired Air Force Col. Michael F. Hayden, director of government relations for Military Officers Association of America. Hayden also serves are co-chair of The Military Coalition, an umbrella group of more than 30 military and veteran associations that are trying to kill the deal.
Targeted in the Ryan-Murray deal is full inflation protection for “working age” military retirees, those younger than 62. Retirees 62 and older, and those retired on disability, would not be impacted.
Retirees younger than 62 and future retirees, including currently serving members, would see yearly COLAs in retirement cut by one-percentage point below inflation until age 62. At that point they would receive a one-time catch up in their annuity to restore lost purchasing power.
The Ryan-Murray deal, said Hayden, reneges on assurances that any substantive changes to retirement would be “grandfathered” and impact only future generations of members.
The budget deal, said Hayden, “basically shoots the grandfather.”
“I have to think anyone who signed on to this doesn’t understand the full effect it will have on purchasing power of promised retired pay,” Hayden said. The message to the current force and younger retirees, he said, is “they just changed the rules on the benefit you signed up for.”
“You have a group of lawmakers not affiliated with the military that completely backdoored these changes,” Hayden said.
Murray does serve on the Senate Appropriations Subcommittee on Defense and the Veterans Affairs Committee, which she chaired until becoming budget committee chairman last year.
Hayden said The Military Coalition is trying to stop the budget deal, but he wasn’t optimistic.
“They basically are putting a lump of coal in the stocking and running out for the holidays,” Hayden said.
The long-term financial impact is enough to change minds “on whether to stay in the military,” he said.
Congress and the White House seemed unaware of the hornet’s nest they had kicked over inside the military community.
At a press conference Tuesday, Ryan and Murray congratulated themselves on reaching a deal that takes a first step toward reducing the deficit through bipartisan compromise, eases across-the-board sequestration cuts to federal programs, including defense, and protects their “core beliefs.”
“For younger military retirees, we trim their cost-of-living adjustment just a bit,” explains a fact sheet released by Ryan’s committee. “It’s a modest reform for working-age military retirees.”
The smaller COLAs would be phased in, with the January 2015 COLA set a quarter percentage point (.25) below inflation. The next year it would be a half point (.50) below and so on, until year four when CPI-minus-1 percent would become fixed and permanent for younger retirees.
President Obama called the deal “balanced” and “a good first step” to replace sequestration which has “harmed students, seniors and middle-class families and served as a mindless drag on our economy over the last year.”
Murray said the deal would cut $6 billion from military retirement over 10 years and another $6 billion from federal civilian retirement by forcing new hires with fewer than five years’ federal service to contribute an additional 1.3 percent of salary toward their pensions.
“We think it’s only fair that hard-working taxpayers who paid for the benefits that our federal employees receive are treated fairly as well,” said Ryan. “We also believe it’s important that military families as well as non-military families are treated equally and fair.”
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