Some historic changes are coming to the military retirement system in the next two years. Pensions & Investments reported last week that the Senate approved the military retirement reforms as part of the revised defense spending bill, which passed in a 91-3 vote the day before Veterans Day. The changes come after the Military Compensation and Retirement Modernization Commission recommended in January new methods for expanding retirement coverage to the more than 80 percent of servicemembers who didn't qualify for the old veterans benefits package.
"I would argue this is the most significant reform legislation that has been passed in 30 years," Sen. John McCain of Arizona said of the Senate vote, according to Stars and Stripes. Sen. McCain was the principal force behind the $607 billion National Defense Authorization Act, which will update the 70-year-old military pension system and expand military benefits. The reforms were designed with the idea of improving the Department of Defense's financial situation and laying the foundation for future overhauls.
Retirement changes will not go into full effect until 2018. The two-year period leaves times for details to be worked out, as every new program introduced in the bill is not yet set in stone. Programs which educate servicemembers on subjects like investing and bonuses are still in for a working-through process, the Military Officers Association of America told Stars and Stripes.
Beginning with men and women recruited in October 2017, troops will have 3 percent of their pay automatically invested in a Thrift Savings Plan account. Servicemembers will be able to opt out of the program or be given control over the amount of their contributions after undergoing training in financial literacy and responsibility. Twenty-year pensions aren't going away, but their value will be reduced for future troops.
For those serving currently, but who have 12 or fewer years in uniform, a choice between the old pension system and the new hybrid program will be offered.