Points of Interest: Addressing the "Redux" Problem

By Tom Philpott

Manpower officials fear that sailors such as March not only are complaining, but they are leaving. With the drawdown at an end, the Navy is getting its first look at steady-state retention rates for mid-careerists, and the numbers are discouraging. Enough alarms are sounding that, for the first time, senior Pentagon officials are weighing whether to ask Congress to improve Redux, or even to kill the plan and move Redux members under a more generous retirement scheme.

Les Aspin, while a Democratic congressman from Wisconsin, became the father of Redux. For more than a decade after the Vietnam War, he complained that military retirement was too generous. In 1985, when he became chairman of the House Armed Services Committee, he did something about it.

Over strong protests from the Joint Chiefs, Aspin pushed through retirement "reform" for entering members. He wanted a system that saved a lot of money, pulled sufficient numbers of members toward 20 years, then enticed a higher proportion of them to stay until 30.

So Redux provides 40%, rather than 50%, of basic pay at 20 years of service. Members who stay thereafter earn 3.5%, rather than 2.5%, of basic pay for each additional year, until topping out at 30 years with 75% of basic pay—the same as under the current plan. Cost-of-living adjustments (COLA) for Redux members are capped at 1% below the annual inflation rate, as measured by the Consumer Price Index, with a one-time catch up raise at age 62, before the COLA cap resumes.

Aspin, President Bill Clinton's first defense secretary, died several years ago. Military leaders now worry that the retirement he forced on the military in 1986 has begun to chip away at morale and retention, just as the Joint Chiefs feared. Rudy DeLeon, Undersecretary of Defense for Personnel and Readiness, met several times with the service personnel chiefs in August to discuss ways to improve Redux and also to begin to close the estimated 13.5% gap between military and private sector wages.

On pay, DeLeon explained that the White House would back a military and federal civilian pay raise for January 2000 that would exceed private-sector wage growth by half a percentage point. The raise would be 4.4% for 2000, on top of a 3.6% increase set for 1999—and that might be only the first in a series of higher pay raises.

On Redux, DeLeon was reviewing a range of options, from doing nothing to asking Congress to repeal the plan. If the plan were repealed, members who entered after 31 July 1986 would move under "High-3," the middle of three current retirement plans. High-3 now applies only to persons who entered service from 8 September 1980 through 31 July 1986. Those who joined before 8 September 1980, including current retirees, fall under Final Basic Pay, the most attractive plan.

High-3 is identical to Final Basic Pay except that annuities are based not on a percentage of final pay but on a percentage of average basic pay over a member's highest three earning years. The difference can lower lifetime benefits 6%-10%. Still, that is a more modest cut than under Redux.

Any attempt to repeal Redux could meet stiff resistance both inside the Clinton administration and on Capitol Hill. Redux has cut the government's obligation to future retirees by $6 billion so far. Savings, on paper at least, accelerate each year, as the first Redux members approach 20 years of service in 2006.

The good news for Redux opponents is that the savings are not real, at least not yet. The only actual dollars saved so far involve Redux members who left early on medical disability. So repealing Redux now would not unbalance budgets or raise government spending—until after 2006. The savings in actual outlays by 2008 will be $100 million but will grow steadily to "spectacular" proportions, said a budget official.

As DeLeon reviews budget options, the Fleet Reserve Association leads an effort to get Congress to repeal Redux. "It's driven by the inequity, by rising concerns about retention, and by the recruiting challenge," says Joe Barnes, the association's legislative director. "There's growing awareness among mid-career folks that their future benefit is going to be a lot less."

What Redux members such as March want to know is why the nation feels it should pay careerists of his generation so much less.

"We need to get [Redux] repealed soon," says March. "Thousands of us are on the brink and need to see some concrete movement toward removal of this plan—or we will leave."

 

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