Congress steps toward blended military retirement

Congress on Thursday took a first, perhaps historic step toward phasing out the 20-year-or-bust retirement system the U.S. military has used to shape and retain its career forces since the end of World War II.

The replacement plan, as endorsed by the House armed services’ personnel subcommittee, is a blended system that would cut by 20 percent the value of future force annuities in return for an added tool to build nest eggs earlier — a 401(k)-like Thrift Savings Plan with government matching of service member TSP contributions.

The enhanced TSP, with matching of monthly deposits of up to 5 percent basic pay, would provide something the current High-3 plan cannot: portable retirement benefits available not only to careerists but most of the 83 percent of service members who leave service short of 20 years.

The personnel subcommittee, led by Rep. Joe Heck (R-Nev.), would mandate the revised retirement plan for anyone entering service for the first time on or after Oct. 1, 2017. Members already in service, or reentering the military after that date, would be given the choice to stay under the current High-3 retirement plan or opt in to the blended plan.

For members eyeing longer careers, the House panel also rejected the commission’s premise of ending government matching of TSP contributions at the 20-year mark. The House panel plan would allow matching to continue through 30 years of service. This would lower projected cost savings from the new plan by about $150 million a year.

Still the blended plan, by encouraging both active and reserve component members to use markets to grow part of their own retirement, is expected to lower Defense Department retirement costs by more than $30 billion through 2021. Annual steady state savings, in 2016 dollars, would be $8.5 billion when fully implemented in 2047.

The blended plan would provide only 40 percent of basic pay after 20 years and two percent more for each added year served. Thus the new plan would pay 60 percent of basic pay after 30 years versus 75 percent.

Most current members with 12 or more years of service would be expected to decline the new plan. They wouldn’t be eligible for the continuation payment and older careerists would not have enough service years remaining to build TSP balances big enough to cover the 20 percent hit to immediate annuities after 20 years or more service.

The House panel appears to accept commission arguments that TSP options are relatively safe and conservative, that even careerists stand to gain in total lifetime benefits if they are steady, informed and disciplined fund investors, and that a good education programs will ensure that most are.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:

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