Modernizing Military Compensation

Military personnel costs have grown considerably over the last decade or so, with the military pension program for example doubling in cost in just the last ten years and the military healthcare costs mushrooming from $19 billion in 2001 to $52.8 billion in 2012. While these costs have largely been absorbed due to nearly equitable increases to the overall Defense budget, continued growth in personnel cost will have to be better controlled to meet today’s more austere environment – particularly if the military would like to retain the current budgetary mix where 2/3 of the budget is dedicated toward operations and readiness.

Fortunately, the military personnel benefit system is ripe for changes that could curb costs all while recruiting and retaining the ideal force for the 21st century. A ten-member BENS Task Force examined military compensation – particularly retirement, health care, and the commissary benefit – and offered perspectives and recommendations aimed at helping policymakers better understand where improvements are available and needed. Among their recommendations is that the Department of Defense should adopt a hybrid, defined benefit-contribution retirement plan that takes into account savings, portability, flexibility, and retention and the military health care system should adopt evidence-based best practices that reduce variation. Collectively, these recommendations could save the military billions annually.

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The Task Force recommendations were presented to the Military Compensation and Retirement Modernization Commission (MCRMC) in April 2014. The MCRMC was a blue-ribbon panel mandated to conduct a comprehensive review of military compensation and retirement systems and to offer the President and Congress recommendations to modernize such systems. The MCRMC released their final report in January 2015 and Congress specifically reformed military retirement later that year.

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