The average military man abhors the idea that he may eventually find himself under a contributory retirement system. Traditionally, part of the military man’s pay has been a free retirement program, and he is most reluctant to lose this portion of his income. Unfortunately, however, this coin has two sides, as free retirement has also prevented the military man’s pay scale from being an adequate one for decades. His first reaction when considering contributory retirement is “loss of pay,” but this does not necessarily follow; and this article presents an argument in favor of a contributory retirement program with the sincere belief that the military man would find himself much better off under such a plan.
The pay of the military man has been far below that of federal employees for many years. This is due primarily to the free retirement program, a subsidized medical program, and tax-free allowances that the military man has and the federal employee does not have. These have been strong arguments against “comparability” of military pay for generations. In addition, any raise in pay for the military is reflected in increased costs to the taxpayer now, plus additional increases later due to increased retirement costs. As current retirement costs are in excess of one billion dollars annually and rising, the Congress is naturally hesitant to grant an adequate military pay raise when faced with these economic facts of life. As a result, the military man has not had “comparability” within the government since World War II.
A contributory retirement and medical plan as well as increased tax participation might be just the steps required to achieve “comparability,” and this article proposes a plan containing these features.
A contributory retirement/survivors system would serve a multitude of purposes. It would permit a more realistic computation of take- home pay for the military man rather than impose vague and usually optimistic determinations of this frequently compared “yardstick.” A contributory system would give the military man a vested right to his retirement and contingent retirement benefits, which contributory systems provide and the military system does not, notably survivors’ annuities.
The military man is presently offered the Retired Serviceman’s Family Protection Act (formerly called Contingency Option) to be effective after retirement. This “benefit” consists of the purchase of a term insurance policy late in life and is not underwritten by the government. It is actuarily sound and quite expensive when compared with the civil servant’s survivors’ annuity program—a part of his retirement system which is not actuarily sound and is underwritten by the government. Since women outlive men by a matter of years, the amount of money a civil servant’s widow may expect to receive will usually outweigh the entire amount her husband has contributed to his retirement/annuity program. A contributory retirement system results in a considerable “tax break” after retirement, as the first two to three years’ retirement income is tax exempt. This period can be critical if the retiree is in the process of looking for a job, has children in college, or is in poor health.
Additional disadvantages of the present military system are the 75-per-cent-of-base- pay ceiling on retired pay after 30 years’ service and total loss of retirement and survivors’ income if death occurs after retirement. As civil service retired pay continues to increase up to a maximum of 80 per cent of total pay after 42 years’ service, the military system should be changed to permit general and flag officers to have their retired pay increase as a function of years of service over 30. With a vested right in a retirement program, death after retirement would provide benefits for the man’s survivors.
A share-alike retirement system is not considered here, as the 6J per cent contribution by federal employees does not approach 50 per cent of the amount they can expect to receive from their retirement/survivors’ benefits. For the reasons mentioned previously, however, the advantages of a contributory system are considered in light of the benefits they offer and the comparability the military man achieves by changing to such a system. A contributory retirement system similar, though not identical, to that of federal employees is therefore proposed in this argument, and it is, in reality, a combination retirement/survivors’ plan.
Unlike the federal employees’ system, the contributory system proposed here is not based on the amount an employee has contributed to a fund, but rather on percentages of base and possibly hazardous duty pay. Furthermore, protection would begin immediately instead of five years after participation begins—as the federal employee system is constituted. The contributory system proposed would be administered and funded by, and would be the responsibility of, the government; though the serviceman would be an active participant, as well as recipient.
The problems incident to changing to a contributory system cannot be ignored. Present retirees and survivors would continue to come under the present program. These personnel would offer no administrative problems. Active duty personnel who have been under Social Security would have to make a choice whether to continue under Social Security/Dependency Indemnity or join the contributory retirement program. Those who decide to join the new program would lose their military Social Security credits, and both the serviceman’s and the government’s contributions would be returned to the government. All personnel entering the military after enactment of a contributory program would come under that program in accordance with the new law.
With the above comments in mind, tables of suggested base pay, housing/subsistence allowances, a new contributory retirement program, a new survivors’ program, a 30-year pay plan for a military officer through 0-6 and a federal employee through GS-15 (based on the President’s suggested pay scales of 29 April 1963), and comparisons of the present military program, the proposed contributory program, and the President’s proposed Civil Service program are presented. For this discussion, a suggested pay scale for non-ex-enlisted officers only has been used, but this can easily be extrapolated to the pay scale of the ex-enlisted officer or the enlisted man.
It should be noted that the aggregate take- home pay recommended for the military man is considerably less than that recommended for the civil servant by the President, though the military officer is faced with a selection-out process, many moves and family separations, and probably less retirement pay than that of the federal employee. Also the maximum pay of the GS-14 and GS-15, is still considerably higher, respectively, than that proposed for the 0-5 and 0-6.
Under the following contributory retirement plan, all military personnel on voluntary active duty would contribute 65 per cent of their base pay towards a retirement/annuity program, and, for the first 20 years only, 2 per cent of their base pay for medical care, to include dependent care. The government would defray all medical costs for the man and his dependents thereafter. Social Security participation would cease. The man would be credited with a retirement annuity of 30 per cent base pay at the start of his service, and this annuity would, at the end of ten years’ service, appreciate 2 per cent of base pay for each year over ten up to a maximum of 90 per cent. (40 years’ service), regardless of age. Retirements prior to 20 years’ service would be limited to disability retirements only. Personnel who voluntarily depart the service prior to ten years would lose their contribution to the plan, thus reducing the costs to the government and encouraging many to remain in the military who might otherwise leave. This would not be an enforced savings plan for short timers.
The subsistence allowance would be increased to $60 a month and would be taxable. Rental allowances and BAQ for enlisted personnel would remain tax exempt.
As this plan would not involve a fund or accumulated interest, the only administration required would be at the Disbursing/Personnel Office level, where records are already maintained. The administrative costs would, therefore, be minimal. All personnel would be required to participate in the medical care contributory program. The only personnel exempt from participating in the retirement program would be those on duty involuntarily, and if they choose not to participate, they would sacrifice the survivors’ benefits pertinent to the plan.
This contributory program has not been proposed with the philosophy of saving the government money (though it might well do that in years to come)—but as one that might bring comparability in pay and benefits to the military man. It must be agreed that this concept will probably cost the government money now, but not as a result of needless administrative costs, only through a fair and just pay scale with somewhat improved benefits.
If a man should die while on active duty, his widow would receive 45 per cent of his base pay and 60 per cent of his hazardous duty pay (if death results from this duty) for the rest of her unmarried life—in no case less than $1,800 a year—and any surviving children would receive $600 a year each ($1,800 maximum) until they are 19 years old (22 if pursuing an approved course of instruction). Widows whose husbands die in, or as a result of combat, would receive hazardous duty benefits even though their husbands might not be drawing hazardous duty pay. Dependency Indemnity would be terminated, and the six months’ gratuity would be continued for enlisted personnel only. Military personnel would be permitted to participate in the Federal Employees Insurance Program on a gross pay basis.
The Federal Employees Insurance Program is a group insurance plan that permits the employee to purchase an amount of insurance equal to the first thousand dollar level above his basic pay for $6.50 per thousand per year. It is not influenced by health or age, and, after retirement, is gradually reduced to one- fourth the amount of active insurance, at which level it remains throughout the life of the retired employee—at no cost to him. It has a double indemnity feature and eyesight loss and dismemberment coverage. Military personnel on hazardous duty would have to pay an additional premium for this coverage, and a wartime exclusion would be effective. As servicemen have no similar policy available to them, this participation would replace National Service Life Insurance for servicemen who came on duty after April 1951, when the issuance of NSLI was halted, and supplement those NSLI policies presently held by servicemen who entered military service prior to 1951. As this insurance would offer a larger benefit to officers than enlisted men, continuation of the six months’ gratuity for enlisted men only was recommended previously.
After retirement a reduced annuity system would be instituted whereby the retired man would have his retired pay reduced 2| per cent of the first $3,600 and 10 per cent of the remaining amount in order that his survivors might receive up to 55 per cent of his unreduced. retired pay in the event of his death. If he so desired, he could leave a smaller annuity by taking the 10 per cent deduction from a lesser portion of his remaining retired pay. This survivors’ annuity would not be a function of age or physical condition of the retiree, and this program, much more attractive than Contingency Option, and identical to the civil servant’s program, would replace Contingency Option.
Table I is the recommended pay scale for officers under this contributory plan. The promotion pay increases are graduated from $70 to $120. Longevity increases are graduated from $20 to $50. An additional longevity raise is added for the 0-6 at 24 years’ service. This pay scale alone does not make an effort to “buy” junior officers. Rather it gives them a goal to look forward to, and pays them a reasonable and comparable salary while they are in the process of becoming assets to their respective services.
The present philosophy of underpaying junior officers with less than three years’ service is considered ill-advised, and particularly discriminatory against the regular officer. The pay scale proposed under contributory retirement raises the pay of the new 0-1 to a more equitable value, and then presents the 0-2 an “offer” of $2,000 at the end of three years’ commissioned service for future obligated service. The period of this additional service should be at least five years. Two thousand dollars cash is much more enticing to an officer with a young family than raising his pay to a level that in all fairness he should have reached previously. This bonus would be a most effective retention device in addition to being more advantageous to the government tax-wise.
Table II is the pay plan under contributory retirement for 30 years showing an officer’s time in grade, yearly gross pay, number of dependents, income tax, retirement contribution, medical contribution, take-home pay, and total take-home pay in grade for his entire 30-year career. As income tax figures are assumed for a proposed number of children with a standard 10 per cent deduction, the resulting tax figures are somewhat low for the junior grades and high for the senior grades when compared with the national median of taxes paid.
Table III is similar to Table II in that it shows the yearly pay of the civil servant during his 30-year career with his deductions for retirement and income tax, his take-home pay, and total take-home pay in grade. This table does not use the pay scale of the professional employee (engineers and scientists) and is therefore conservative. The promotion schedule used in Table III might have been optimistic in the 1940s, but it is quite realistic in light of current promotion opportunities. The Honorable Roswell L. Gilpatric, Deputy- Secretary of Defense, in his testimony before the House Post Office and Civil Service Committee on 10 May 1962, discussed promotion opportunities for federal employees in Defense: “Trainees with bachelor’s degrees are appointed at GS-7; those with at least a year graduate work come in at GS-9. Those coming in at GS-9 can, if their work so merits, expect advancement to GS-14 in five to six years—a promotion which under present law nearly doubles their salary and which represents the maximum rate of permissible advancement. This promotion rate, which is exceptional for government, although not for industry, has been followed as an added inducement to attract trainees into the program.”
The Bureau of Naval Weapons Engineering Trainee Program calls for an average college graduate to advance to GS-12 in three years and an exceptional graduate to advance in two and one-half years. A trainee with an advanced degree advances still more rapidly. The accompanying chart shows the number of employees in grades 11 through 14 in BuWeps as of December 1962. It also presents the number of promotions to the next higher grade during the last six months of 1962 and the yearly rate. Finally, it shows the average years in grade for each grade. These averages readily justify the promotion schedule used in Table III.
Table IV compares the present military retirement and survivors’ programs with the proposed contributory retirement program. Almost without exception the contributory program proposed is an improvement over present benefits, particularly when participation in the Federal Employees Insurance program is considered. Senior officers are rewarded for their long service rather than having their retired pay decrease with years service due to increased costs of survivor protection with advanced retirement age. Only very young officers’ widows (with children), whose husbands were not on hazardous duty or in combat, suffer by comparison. Statistically, this condition is rare.
Table V is a comparison of retired pay and childless widows’ (of retired officers) benefits under the present military system, under the contributory plan proposed herein, and under the President’s proposed Civil Service program. Even under the proposed contributory system, the military man still does not achieve comparability, but he would be far better off than he is today.
The present military retirement/survivor program has two highly desirable benefits— adequate protection for widows over 61, and increased retirement pay at age 62. Both of these benefits, it should be noted, come from Social Security primarily and only partially from military benefits alone. Military retired pay is not comparable with Civil Service retired pay, however, even when Social Security is considered.
The question arises then; why terminate Social Security participation? The answer is that Social Security benefits are not totally prohibited—merely delayed until after retirement for most men. Servicemen who retire when comparatively young (and most of them do) are forced to continue working in order to support their families in addition to maintaining their Social Security base. Full Social Security coverage can be acquired within ten years or less after retirement. So under the contributory plan proposed, most military retirees can still earn Social Security without costing the government anything. Under present law, if the military retiree does not work under Social Security after retirement, his Social Security base goes steadily down.
Under the contributory program proposed here, officers who retire late in life will not require Social Security protection, and a young officer’s survivors are well protected, particularly if he dies as a result of combat or hazardous duty—as many do.
The major defects of the existing survivors’ program are extremely low benefits for widows under 62 without dependent children and for all widows of retired personnel. This proposed plan rectifies these inequities and drastically reduces the cost of retired survivor protection.
This article has suggested a contributory retirement and medical plan, a revolutionary revamping of military pay scales, increased income tax participation, and a completely new (to the military at least) survivors’ annuity plan. The new pay scales result in a take-home pay that is still less than that of the federal employee, notwithstanding the removal of three stumbling blocks to comparability—free retirement, free medicare, and tax-free subsistence. This contributory plan gives the military man a vested interest in his retirement and benefits thereafter. It increases his retirement “base” by increasing his base pay and allowing credit for 40 rather than 30 years’ service. Furthermore, the government will realize over one billion dollars annually from military personnel as a result of this contributory retirement, contributory medicare, Social Security termination, and increased income taxes resulting from the proposed raise in both base pay and taxable subsistence.
If the military man contributes to his own retirement and medical care and loses part of his tax exemption, he, too, might become “comparable” in the somewhat distant future. Thoughtful consideration of the merits of such a contributory program is perhaps long overdue as a result of emotionalism and lack of understanding on the part of the military man.