Army may need bigger retirement plan to maintain officers’ experience levels, study finds
Major-General Allan Elliott receives the honors upon his March 28, 2019 retirement from Army Materiel Command, General Gus Perna, who officiated at the ceremony. The military may have to pay a larger mid-career incentive to retain officers under the new blended retirement system, according to a report by Rand Corp. (Doug Brewster / US Army)
The military may have to pay officers a much larger mid-career incentive under the new blended retirement system if it is to maintain the same mix of experience it has now, according to a report commissioned by the service.
To keep them in active service for at least 20 years, officers heading towards the 12-year service mark may need an average of eight months of pay as continuation pay, a new incentive that doesn’t exist. in the pension scheme inherited from the army. , according to a report by Rand Corp. released earlier this month.
The study comes as the military moves away from its old pension system, which pays soldiers a higher guaranteed amount after at least 20 years of service, to a blended system that pays after less service time and matches plus a soldier’s contributions to a retirement account.
Military personnel who were in uniform before 2018 were vested in the legacy retirement system, but those with less than 12 years of service, or reservists with less than 4,320 retirement points, can opt for the mixed system.
The move to the mixed system creates uncertainty for the military about future costs, exits from active service to the reserve component and “whether the mix of military experience would change in a way that no longer meets requirements. military readiness, ”the Rand report said.
The military must offer a minimum of 2.5 months base salary to active duty soldiers and half a month salary to Reserve and National Guard soldiers as continuation salary, if they participate in the system. mixed retirement.
The minimums would keep enlisted retention at current rates, the study found.
Rand simulations show that the blended system would improve Reserve and National Guard participation among officers at minimum retention rates of pay, “but at the cost of significantly lower mid-career retention.” [regular Army] officers. “
In a scenario that leaves maintenance pay at its minimum, fewer active duty officers complete 20 years of service; meanwhile, the participation of officers in the Reserve and the National Guard increases by 7.2% and 2.1% respectively.
To maintain current levels of retention and experience, an active-duty major with 12 years of service should be offered around $ 140,000 in maintenance pay, rather than the minimum of $ 17,633, the study found. In an optimized scenario, reserve officers would be offered around two months’ salary and National Guard officers would receive a full month’s salary, rather than the minimum of half a month.
The study assumed that the continuation salary would be paid at 12 years of service, although the law allows the military to pay as early as the eighth year of service.
While the additional continuation salary would cost the military more in the short term, over time the service would save money as the more profitable mixed system membership rates would be higher, according to the ‘study.
The mixed system pays a smaller pension than the old scheme, which pays soldiers who have served at least 20 years a fixed amount based on their length of service and the highest three years of base salary. Retirement for reservists is earned under a system that awards points for uniformed activity.
However, in addition to the new wage maintenance benefit, contributions to the mixed system savings plan vest after two years and allow contributions of up to 5% of base salary with a counterpart of 4%.