Turnover at a major D.C. government department is raising questions about local businesses, political contributions and influence in city politics.
A federal advisory board to the Department of Defense is proposing major changes to the military’s retirement system. If adopted, the plan would extend retirement benefits to personnel who serve less than twenty years, while changing the way career soldiers are paid after retirement. We find out why the plan could have far reaching effects on military culture.
- Andrew Tilghman Senior Writer and Pentagon Correspondent; Military Times Newspapers
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, medical marijuana licenses come to the District of Columbia with a catch. But first, Labor Day marks the unofficial end of summer. It's also the day we set aside to honor the contributions workers have made to the strength, prosperity and well being of the country.
MR. KOJO NNAMDIIn these tough economic times, much of the labor force, those fortunate enough to have jobs, have had retirement benefits cut. Perhaps one group alone thought its pension plan would not change, members of the U.S. military. But a new proposal from a Pentagon advisory board could overhaul a system largely left untouched for the past century.
MR. KOJO NNAMDIJoining us in studio to discuss this is Andrew Tilghman. He is a senior writer and Pentagon correspondent for the Military Times Newspapers, which readers know as the Army, Navy, Air Force, and Marine Corps Times respectively. Andrew Tilghman, thank you for joining us.
MR. ANDREW TILGHMANThanks for having me.
NNAMDIMilitary retirement benefits are basically the same today as they were in the 1940s. What is so significant about making it to 20 years in the current system?
TILGHMANWell, this system in particular was developed after World War II. I think it was 1948, it dates back to. And it really comes from a different time when, to be honest, life expectancy was a lot shorter and military skills were not considered to be really transferable to the private sector.
TILGHMANThat's changed a lot, but within the military community, that 20-year mark has a huge cultural and professional significance.
NNAMDISo if I served as a soldier for eight years or for 12 years. what would I get on departure from the military?
TILGHMANIf you leave before 20 years, essentially you get nothing and that's one of the criticisms of the current system. But if you leave after 20, you essentially get half your paycheck for the rest of your life. It's a very generous pension system. When you do your numbers on that, the actual value of that, it's far higher than most people acquire in their 401K.
NNAMDILet's see how our listeners feel about this. Do you think the military's current retirement policy is fair or would you like to see it changed? 800-433-8850. Are you a military retiree or a veteran who left the service before making it to 20 years? Let us know what you think, 800-433-8850. A proposal made in July is stirring up controversy. Where did this overall plan come from and what changes would it bring?
TILGHMANThis comes from something called the Defense Business Board. It's an advisory group that basically makes recommendations to the secretary of defense and it's an important distinction to make. This proposal is not coming directly from the secretary's office and is not part of a piece of legislation yet. But this group has a pretty strong track record of making cost-cutting recommendations. That's basically their mission. They're largely retired corporate executives, very few of them have much military background themselves and they advise the Pentagon on how to be more business-like, how to adopt private sector practices to save money.
TILGHMANThe change is that it would, essentially, end this 20-year pension. As I said, the current system gives you half your paycheck for the rest of your life if you serve until 20 years. This would basically replace that with a traditional -- what most people have as a 401K system where the military would put money into a savings account that a service member would own and leave with regardless of whether they stayed to 20 years or not.
NNAMDISo this is comparable to what people generally know as a 401K or a 403B account or a thrift-savings plan basically?
TILGHMANBasically, the plan that's under discussion would add about 16 percent of your annual salary into the savings account so that's a lot more generous than most people's 401K match, but in principle, it's the same thing.
NNAMDIBut it would make that program, that 401K style savings program that's currently optional, mandatory, is that correct?
TILGHMANRight. The military has something called a thrift-savings plan which operates like a 401K, but since there's no match and the military doesn't put any money in, the motivation is not really there and the participation rate is pretty low. I think it's, you know, less than 20 percent depending on the service.
NNAMDISo there would be a match if it becomes mandatory?
TILGHMANIf under this new plan there would be, there would be a match and the service member would have about, you know, the number under discussion is 16 percent, although they -- that's one of the nuances of the plan is that they would basically dial that up or dial that back depending on what kind of job you had, whether you were deployed a lot. There's a certain flexibility there that this plan would allow.
NNAMDIOur guest is Andrew Tilghman. He's a senior writer and Pentagon correspondent for the Military Times Newspapers. You know them as the Army, Navy, Air Force and Marine Corps Times respectively. You can go to our website, if you'd like to join the conversation, at kojoshow.org. Send us a tweet at kojoshow or e-mail to email@example.com
NNAMDIAre you a military retiree or a veteran who left the service before making it to 20 years? What do you think about the proposed changes? If, on the other hand, if you spent 20 years in the military and went on to have a second career, what do you think about the proposal? 800-433-8850, the group proposing these changes says they would make big savings or they would mean big savings for the Department of Defense. How much money are we talking about here, Andrew?
TILGHMANWell, according to the actuaries' office, they would potentially save something upwards of $300 billion over the next decade or so, which is an awful lot of money. You know, people who have been following the defense budget wrangling know that $400 billion is what they're trying to carve out of the budget over the next decade and this would, you know, could potentially be a big part of that.
TILGHMANBut it has an awful lot of critics. And I think that one of the biggest concerns is retention. You know, the military, depending on the service, has had some problems over the past decade of keeping the best and brightest in uniform. And there's a real sense that if that incentive to stay until the 20-year mark is removed that you'll have a lot of people that serve six, eight, ten years and then decide that they can do better in the private sector and leave the service.
NNAMDIHas a change of this magnitude ever been suggested before?
TILGHMANI don't think a change of this magnitude has been suggested before. There have been some other ideas floated. The Simpson-Bowles budget cutting commission from a couple of years ago had a proposal in there and the Pentagon itself back in 2008 had a proposal that would have basically taken the current system and just delayed the time that you start receiving that pension check until a traditional retirement age because, you know, right now, a service member can retire at age 40 and get that pension check for the rest of their life.
TILGHMANThere was a small alternative proposal discussed putting that off until age 57 or 60, but I think that that's the impact of this proposal because it's, in many people's eyes, very extreme, is it's going to make all those other proposals look relatively modest and essentially it really puts military retirement on the table this year as everybody in Washington looks to carve money from the budget.
NNAMDI800-433-8850. I'm now going to go to the telephone. Put your headphones on, Andrew, and we'll hear from Brian in Reston, Va. Brian, you're on the air. Go ahead, please.
BRIANGood afternoon, Kojo. It is a pleasure to speak with you, I appreciate your guest's comments as well. I'm adamantly against this proposal based on the current pay structure within the military. I mean, the reason people stay in for 20 is to take advantage of obviously a long-term retirement plan, but their wage, those earning years while they're in the military, they are paid significantly less than the current market structure would be paying them so that would be my reason for not agreeing with this proposal.
NNAMDIBut if, in fact, you are allowed to participate in this in a mandatory way from the very minute you join the service, wouldn't that make a difference for you?
BRIANWell, not necessarily, you know. I did five years in the service myself and one of the reasons I elected to depart is because the pay structure, you know, outside of the military, I mean, it's significantly better. But the incentive is -- in the military was if you stay ten years, you might as well do another ten years and collect after that so that was the deciding factor.
NNAMDIAndrew, I guess you've been hearing what Brian has just indicated here?
TILGHMANAbsolutely. Brian makes a couple of good points. But it's interesting, Brian, you say that you served five years in the military and left and yet you wouldn't support something like this. But I think that the people that do support it are very quick to point out that under this plan, someone like yourself who's served five years would leave with a small savings account and a nest egg to base a retirement on.
TILGHMANAnd I also would take issue a little bit with you when you talk about the military pay structure being a lot lower. I mean, I think that that's -- it's kind of debatable because the military pay is based not only on cash, but also there are housing allowances and you get paid more if you're married and have children.
TILGHMANThere are some studies that the GAO and the Congressional Budget Office has done that really suggest that that gap that existed ten and 15 years ago has really been filled and that these days, after the past decade when Congress has really ratcheted up the pay and benefits for the service members, that that gap is not nearly what it was years ago.
NNAMDIAnd Brian, I'm looking at some estimates here that says that the average officer leaving after ten years of service would have a nest egg of $93,000 and that the average enlisted member would leave with $48,000. Would that have made much of a difference to you when you left after five years?
BRIANYeah, it certainly would be factored into the decision-making. Yeah, I was in a (word?) enlisted and there are a number of factors. I think the guest had a really good point, as the medical benefits and so on and so forth. There's obviously a lot of things to factor in there, but overall, I would say I -- my peers at the time when I departed the military were probably making, you know, 40 to 50 percent more across the board. And, you know, when you're a young individual coming out of the military, the first thing you want to do is, you know, buy the house and prepare for your family thereafter. But there are pros and cons to every situation and it was just the way I decided at the time.
NNAMDIOkay, thank you very much for your call, for sharing that with us. On now to Kef in Herndon, Va., your turn. Go ahead, please, Kef.
KEFHi Kojo, love the show. I guess my question would be, I'm a 24-year, still in, chief warrant officer. I did 15 years on active duty. As I progress forward in my career, I wonder how this is going to affect the reservists, the national guardsmen who are required to wait until they're 62 to actually collect on their pension, that grey area retiree thing. I was wondering how they would play out for us, that would be my question.
TILGHMANWell, first of all, if you've already reached a 20-year mark, this plan, even if it was adopted tomorrow by Congress, would not affect you. This is something that, at most, would begin to affect people who were still under that 20-year mark. And you bring up a really good point with the reservists. They haven't really offered too many details on how this would affect the reservists, but what it would do is it would make the reservists -- reservists would have a similar system of a 401K style program and the question would just be how to calculate that match.
NNAMDIAnd Kef, thank you very much for your call.
NNAMDIYou too can call us, 800-433-8850. Do you think the military's current retirement policy is fair or would you like to see it changed? You can also go to our website kojoshow.org, join the conversation there or send us a tweet @kojoshow, I'm Kojo Nnamdi.
NNAMDIWelcome back. We're talking about a proposal to change the system of military retirement with Andrew Tilghman. He is a senior writer and Pentagon correspondent for the Military Times newspapers. Andrew, a clarification, we got an e-mail from Craig who says "I'm a retired Navy lieutenant commander and would like to correct the statement that military members retire with 50 percent of their take-home pay. My actual retirement benefits are 50 percent of my base pay. On the day of my retirement, my actual retirement benefit was about 37 percent of my take-home pay."
TILGHMANWell, lieutenant commander makes a good point. And I think that it just reflects how complex the military compensation is. There is, you know, most of us have a job and we have a salary and we get a check for it and it's that simple, maybe we have some health benefits. But in the military, you have base pay and you can have -- if you're a pilot, you have flight incentive pay. And you have housing allowances and if you have an extra child, it gets ratcheted up a little bit to compensate for that. So he's right, it is 50 percent of your base pay, but he also underscores just how complicated it is.
NNAMDIThe proposal comes from the defense business board about whom you've told us a little. That's an advisory group and their cost saving ideas. The Pentagon has adopted readily in recent years. But who sits on this board and what else has the board done?
TILGHMANThe defense business board is -- in some way, it's a quietly controversial group. It's made up, mainly, of corporate executives, retired corporate executives with just a few exceptions. They really don't have much military experience and they bring, in theory, a set of outside eyes to the Pentagon and advise them on how they can do things differently and try to bring a kind of private sector efficiency to the defense department.
TILGHMANBut I think that -- and I'll also say that the defense business board has a good track record. I think that former Secretary of defense Robert Gates, he shut down joint forces command, down in Virginia...
TILGHMAN...a few months ago. And that was a very controversial decision, but that recommendation originated with the defense business board and they have also made some pretty significant, if kind of arcane, suggestions that have been followed through on. But I think, with service members, the defense business board under -- really underscores an emotional element of this in that they feel like that even discussing this is really a betrayal of their service.
TILGHMANI mean, this -- the military pension system gets to the heart of the social contract between the men and women in uniform and the people that they serve on behalf of. And, particularly, over the past decade, when the military -- there's an increasing sense of separateness in the military from the civilian world. And they feel like the burden of national security is really fallen on them, one percent of the population. And I think when they see the defense business board, which is specifically non-military guys, making recommendations about this, it really strikes an emotional cord.
NNAMDIAnd I think that's what Joyce in Falls Church, Va. would like to talk about. Joyce, you're on the air. Go ahead, please.
JOYCEHi, I have never been in the military, but he's right about that emotional cord. And I've worked for a large private company and when I hear this, you know, this is presented by a bunch of corporate CEOs, they have a conflict of interest. They want less competition for their workers. And if they can bash the public sector -- the public sector and get their benefits reduced and they can bash the military and get their benefits reduced, then it makes it all the easier to -- I mean, they've been banging away at their employees for years.
JOYCEAnd this is just the last bastion of good pension and good health benefits. And they want to wipe it out and then, you know, they're done. There's no competition for their workers. They can pay their workers even less.
JOYCEAnd where is the union representation here to, you know, speak against this?
JOYCE(unintelligible) your show.
NNAMDI...and unions don't often go together, but Andrew Tilghman, the way Joyce is characterized this is as a reduction of benefits. Walter Pincus called this a Pentagon third rail issue in the Washington Post. What are the arguments you're hearing from active and retired soldiers for and against this proposal? And are the arguments against characterizing it in much the same way as Joyce did as a reduction in benefits?
TILGHMANWell, for people that served 20 years, there's no doubt it's a reduction in benefits. I mean, if you ask the defense department actuaries office to do a comparison, which we did in our newspaper, it's really remarkable. I mean, you're talking about, for a senior non-commissioned officer, a comparison of, you know, close to a million dollars, which is the value of the current pension if you were to calculate it in a single sum -- lump sum down to several hundred thousand.
TILGHMANSo clearly, this is a reduction in benefits. Clearly, this is designed to save money and there's no way around that. I...
NNAMDIBut on the other hand, right now, it's my understanding 83 percent of veterans get no pension. So this proposal would actually extend cash retirement benefits to more veterans. Are young military members rallying around this idea?
TILGHMANWell, that's an interesting point. I have heard -- the most vocal opposition I've heard is from the senior careerist guys who are adamantly, viscerally opposed to this. But it does offer a new and unique benefit to the youngest service members and, to be honest, those are the guys that have been fighting in Iraq and Afghanistan.
TILGHMANMost of those guys that go over there are 19, 20, 21 year old Marines who will serve one enlistment and deploy a couple of times and then leave and go on and do something else. And this would provide them with some retirement benefit. And I think that Defense Secretary Leon Panetta pointed that out a couple of weeks ago, that there's an element of fairness here.
NNAMDIJoyce, thank you very much for your call. Here is Morgan in Bethesda, Md. Morgan, your turn.
MORGANHey, Kojo, good afternoon.
MORGANMy question really is, when you ask about fairness, fairness to who? Because I hear you and your guest talking about the benefits of a defined contribution plan versus the benefit of what we currently have as military members, the defined benefit plan. And when I go to Bethesda Navel and I see these young kids with missing limbs and pock marks in their bodies, why are we letting these corporate heads advise a public sector organization with taxpayers who are literally risking life and limb to serve the country and have them tell us how to cut retirement benefits to these people?
MORGANThe fairness is not to the soldier, airman, Marine, Coast Guard or anyone else. It's not right to cut the benefit. Think about the sacrifices these people are making.
NNAMDIWell, one of the arguments that I hear being made and, Andrew Tilghman, of course, knows this issue much better than I do, is that those young people that you see in those institutions are not going to stick around for 20 years and so outside of disability benefits, they won't be getting any retirement benefits, is that correct, Andrew Tilghman?
TILGHMANYeah, it is absolutely correct. I mean, the structure of the force right now is really remarkable in that, I'd say, of the 1.4 million active duty service members, about half of them are less -- have less than five years in. And they will not even come close to reaching retirement. You know, only about 12, 13, 14 percent of enlisted service members will ever reach retirement. So there is a really interesting, you know, curve in the way the force is structured right now that I think people are not quite as aware of.
NNAMDIWhat do you say to that, Morgan?
MORGANThat is (unintelligible) did I misunderstand you? You're saying that people will receive a lifetime retirement after serving four or five years in the service or will they walk away with a lump sum of about $50,000 which won't last?
TILGHMANThe latter. They will...
TILGHMAN...a per -- a Marine that serves five years between the ages of, say, 19 and 24, would leave with something that would probably be valued at about, maybe, $50,000, maybe less. And that might not even be available to him until he's 60.
MORGANThat's nowhere near a retirement especially given the topsy-turvy behavior of the corporate private run stock market.
NNAMDIOkay. But I guess the point that the board would make is that right now, that three to five year veteran would get nothing.
MORGANOh, my God. That -- again, we're talking retirement, not lump sum or not lump-sum small amount of money.
MORGANAnd all I'm advocating is that we maintain the combined, excuse me, the defined benefit plan versus the defined contribution plan.
MORGANWhich is inherently wrought with risk.
NNAMDIOkay, Morgan, thank you very much for your call. We move onto Bob in Alexandria, Va. Bob, your turn. Go ahead, please.
BOBThank you, Kojo. I appreciate the program and I congratulate Mr. Tilghman for giving, what I believe is, a forthright and square answers to the questions he's been asked. My concern is that I think to compare military retirement with civilian retirement is a pretty poor yard stick. I mean, civilian retirement is a poor yard stick to gauge military retirement.
BOBThe all volunteer force really depends on us being able to attract and retain people that are willing to move every three years, people that are willing -- and go places they don't want to go, Afghanistan, Iraq, face live fire. To get people to be willing to sign up and stay onboard for that requires that we compensate the men -- and I see this military retirement system as a part of that compensation, a part of the attraction to the military career. I worry that if we go through with this thing that this defense business board has recommended, we'll lose a lot of that leverage. That's it for me.
NNAMDIOkay, Bob. Thank you very much for your call. So far we're -- the board's proposal here is batting zero, at this point, in terms of the callers we've been getting.
TILGHMANWell, you know, Kojo, that's an interesting point. And I think that it just goes to show how much more vocal the older careerist group is. You know, the younger enlisted crowd that would be, arguably, most benefiting from this does not have a strong lobby in Washington. They don't have a strong single national voice.
TILGHMANIn fact, I called the Iraq and Afghanistan veterans of America group here in Washington, which is probably the closest they would have to being a group that represents non-retirees. And they didn't have any strong comment on this which was very, very different than most of the military associations in town, which have been just sounding the alarm as much as they can over the past few weeks.
NNAMDIHere is Nancy in Culpeper, Va. Nancy, you're on the air. Go ahead, please.
NANCYThank you very much. I'm the widow of a retired military person who served 43 years on active duty and many of those years were in harm's way. I can certainly understand the need to make some adjustments for -- to at least consider adjusting for age and differences today as when the system was first put in place.
NANCYBut we have to keep in mind that we don’t want to de-incentivize those that do stay in and -- even though we do need to do something for the younger people. But when this goes to Congress, if it goes to Congress, I will be very interested in seeing how Congress reacts when they get such an ungodly retirement for no minimum time of service whatsoever. I just don't see how Congress could address modifying the military retirement when these people did put their lives in harm way.
NNAMDIAndrew Tilghman, what's the process here after the board makes its recommendations to the department of defense? What happens after that? What's the process?
TILGHMANWell, the board makes its formal recommendation and that will go to the secretary of defense's desk. And they are an advisory group so in some official way, that's where it ends. What the secretary may or may not do is send it -- this proposal or a variant of it, down to the defense department's office of legislative affairs and see to it that this be written up as proposed legislation on Capitol Hill.
TILGHMANLeon Panetta has -- the defense secretary has expressed some initial reluctance to support this program because this would affect the benefits of today's active duty service members. And I think that that's really a third rail right now is to sort of say to a 10-year sergeant who might be deployed in Afghanistan, hey, you are not going to get the pension that you thought you were going to get.
NNAMDIWell, to an outside observer, this may not seem like that big of deal. It may even sound like a good deal for some. But I want to get back to a point you made earlier and to have you reemphasize it, that this could dramatically change the culture of the military.
TILGHMANAbsolutely. It would -- could change the culture in so many ways. You know, on the one hand, the 20-year mark defines the way career patterns are structured in the military right now. You know, people stay until 20 to get their pension and the other end, the military doles out promotions just before the 20-year mark as an incentive for people to stay beyond that. You know, they like to signal to people around the 20-year mark that maybe they're eligible for, maybe a flag or general officer in a senior leadership position.
TILGHMANIt would really redefine the shape of the force. It would allow the military to say to a guy who has 15 years in, we're not happy with your work, or your job is not as important as it used to be. We'd like to show you the door. And on the other hand, it -- 20 years has really defined what it is to be retired military, if you meet older people and they identify themselves as retired military. And what that means, simply, is they hit that 20-year mark, to make this 20-year mark more ambiguous and, you know, to let some people leave at 18 years and some people stay 'til 22 years and it's really not clear what really -- what the criteria is for the public perception of what does it mean to serve a full career in the military.
NNAMDIHere is Kendrick in Quantico, Va. Kendrick, you're on the air. Go ahead, please.
KENDRICKHello, good afternoon, Kojo. My name is Kendrick and I'm an active duty Marine here at Quantico and I listened to your guest and I'm trying to understand exactly what he's saying. I used to have 50 marines that works for me. I've been deployed three times and if you don't know already, but Marine Corp is already downsizing. You know, you have Marines that's getting out for all different types of issues, medical, psychological.
KENDRICKFor my young Marines who this was proposed, I would say, a quarter of them, these are first termers, second termers, sergeants, their answer to a proposal was, you know, why stay in? And why stay in for 20 years and to get my pension? I might as well get out and have my four-year mark and, you know, do something else? So it is affecting young Marines as well.
KENDRICKMy second point, Mr. Kojo, is, I believe, if it is -- if this proposal is -- does come to a fruition, what happened is it will be a stove pipe. A lot of senior enlisted, senior officers, will cash in. They will cash their 20 years leaving a vacuum of leadership.
KENDRICKAlso, it's affecting people on different type of levels. I mean, I've seen, you know, marriage end. I've seen, you know, the Marines come and go, Marines die. And, I think, you know, this country should be, you know, have our back right now when, you know, when Marines retire.
NNAMDIKendrick, thank you very much for your call. It seems to me that Kendrick makes some excellent points from...
NNAMDI...a first person perspective.
TILGHMAN...Kendrick does makes some good points. And I think that that, from a practical standpoint, is the biggest criticism of this proposal right is it's gonna have a -- potentially a devastating impact on retention, and retention has been something the military struggled off and on for years.
NNAMDIAny incentives -- are there any incentives to keep retention rates stable in this proposal?
TILGHMANWell, they -- the military has a number of levers, they can offer your retention bonuses and give you -- for the past decade or so they've offered people, you know, 40, 50, 60 plus thousand dollars to sign on the dotted line for another four years. I mean, there are incentives, but the 20-year pension was always the ultimate incentive. I mean, I thought there was -- our newspaper had a funny cartoon this week where it had a soldier, you know, lighting a match and he saw a sign in front of him that said, due to budget cuts, the light at the end of the tunnel has been turned off.
TILGHMANAnd, uh, this is really the -- the pot of gold at the end of the rainbow, and I think right now with the economy really struggling, it's easy to think that that's not gonna be too much of an issue, but when the economy is doing well, retention is a huge issue, and in fact, several years ago I wrote a piece about officer retention in the Army. The Army's had a very, very difficult time keeping officers in, and those are your general officers of the future, you know. That can have an impact 10, 20, and 30 years out.
NNAMDIThe final report on this proposal has been delayed. When do we expect it now?
TILGHMANWell, I think it's just a bureaucratic process of the board putting this together and sending it over to the secretary. I mean, they voted in July unanimously to approve this as, you know, one of their recommendations to the Pentagon, so it's just a question of how the building receives this and whether it makes its way over to the hill.
NNAMDIAndrew Tilghman is a senior writer and Pentagon correspondent for the Military Times Newspapers. You know them as the Army, Navy, Air Force and Marine Corps. Times respectively. Andrew Tilghman, thank you very much for joining us.
TILGHMANThanks for having me.
NNAMDIWe're gonna take a short break. When we come back, medical marijuana licenses come to the District of Columbia, but there's a catch. I'm Kojo Nnamdi.
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