Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation

 
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Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
Providing an Enduring Military Retirement Benefit   1

Modernizing Military Compensation:
Providing an Enduring
Military Retirement Benefit
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
2   Providing an Enduring Military Retirement Benefit

               WHO WE ARE
               Business Executives for National Security (BENS) is a unique nonpartisan, nonprofit
               organization of senior executives who volunteer time, expertise, and resources to assist
               defense and homeland security leaders on a variety of national security challenges.

               OUR MISSION
               Apply best business practices to develop, for government officials, solutions to our nation’s
               most challenging problems in national security, particularly in defense and homeland
               security.

               ACKNOWLEDGMENTS
               BENS gratefully acknowledges the members of the BENS Military Compensation & Benefits
               Modernization Task Force for their leadership and support of the Modernizing Military
               Compensation Series. Additionally, we would like to extend our appreciation to our
               subject-matter experts for their thoughtful input as well as acknowledge the BENS Board of
               Directors and general membership for their continued sponsorship of all BENS efforts to
               improve our national security.

                                                                   DISCLAIMER
                 Certain views and information set out in this paper may not necessarily reflect the opinions of individual
                 contributors or their employers. Responsibility for the content displayed within lies entirely with Business
                 Executives for National Security (BENS).
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
Providing an Enduring Military Retirement Benefit   3

        ABOUT THE REPORT
“Providing an Enduring Military Retirement Benefit” is part of Business Executives for
National Security’s (BENS) Modernizing Military Compensation Series. Capitalizing on
the knowledge and experience of current and former private sector executives, this series
examines military compensation programs and offers insights and recommendations for
creating a more sustainable and effective compensation system. This report focuses on the
military retirement benefit. BENS discusses the benefit’s cost and need for reform, as well as
recommends a retirement system that would better suit a 21st century military. BENS shared
the substance of this report with the Military Compensation and Retirement Modernization
Commission on April 9, 2014.
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
4   Providing an Enduring Military Retirement Benefit

                                                        CONTENTS
               Executive Summary..................................................................................................................... Pg. 5

               Introduction................................................................................................................................... Pg. 7

               The Military Retirement System............................................................................................Pg. 10

               Military Retirement Cost..........................................................................................................Pg. 11

               Recruitment and Retention....................................................................................................Pg. 12

               Further Analysis Necessary.....................................................................................................Pg. 13

               Comparison of Various Private and Public Sector Retirement Plans.........................Pg. 14

               Conclusion & Recommendation............................................................................................Pg. 16

               Enclosure: Table of Various Retirement Plans....................................................................Pg. 17

               Works Cited..................................................................................................................................Pg. 18
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
Providing an Enduring Military Retirement Benefit   5
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
6   Providing an Enduring Military Retirement Benefit

                            EXECUTIVE SUMMARY
               The military retirement benefit has come under      makers determine the need and impact of
               scrutiny recently due to its rising costs and po-   reform. BENS made three key findings:
               tentially outdated structure. Payments to mili-
                                                                   First, BENS found that while costs are rising,
               tary retirees rose by 49 percent between 2002
                                                                   DoD’s costs are not likely to grow at the rate
               and 2012, and continue to climb. In 2013,
                                                                   experienced in the last decade. Because the
               the Military Retirement Fund (MRF) dispersed
                                                                   military retirement system operates under ac-
               approximately $54 billion to 2.3 million ben-
                                                                   crual funding, DoD’s annual retirement costs
               eficiaries. By 2023, the Congressional Budget
                                                                   are not tied to monthly payouts to retirees,
               Office (CBO) projects spending will rise to
                                                                   but rather the Department’s annual contri-
               $70 billion despite the number of beneficiaries
                                                                   bution to the MRF. DoD’s accrual costs rose
               essentially remaining unchanged.i
                                                                   dramatically from approximately $14 billion
               Additionally, the Military Retirement System        to $22 billion in just six years from 2006 to
               (MRS), which generally provides service mem-        2012, but now stand at $20 billion. DoD
               bers with 20 or more years of service with a        anticipates their accrual costs will level at
               monthly pension, does not reflect changes to        $20 billion through 2017 and gradually rise
               our military and society. Despite a move from       to $23 billion by 2022.ii
               conscription to an all-volunteer force, greater
                                                                   Moreover, while pension payments con-
               parity between military and private sector
                                                                   tinue to steadily grow, rising to $70 bil-
               wages, and increased incidence of post-
                                                                   lion by 2023, these payments are likely to
               military careers that supplement retirement
                                                                   begin to level in the following years. This
               income, the military retirement benefit has
                                                                   is because pension payments are tied to a
               largely gone unchanged since its implemen-
                                                                   service member’s basic pay, and as basic
               tation in the late-1940s. Many organizations
                                                                   pay rises or levels, so too does retirement
               including the Department of Defense (DoD)
                                                                   costs. Congress has signaled that the raises
               have called on Congress to reform the system
                                                                   in basic pay that were seen in the previous
               and modernize the benefit to reflect today’s
                                                                   decade are not likely in the near future, and
               norms.
                                                                   therefore the cost of future payments will
               Reflecting on these issues, BENS convened           also level. The same effect can be attributed
               a group of senior executives to examine the         to the rise in DoD accrual cost several years
               military retirement system. This group used         ago and the leveling that is seen today. As
               their understanding of compensation and             future payments will cost less, the amount of
               its role in recruiting and retaining top talent     accrual funds needed to cover those future
               to provide insights that would help policy-         costs is also less.
Providing an Enduring Military Retirement Benefit - Modernizing Military Compensation
Providing an Enduring Military Retirement Benefit   7

Second, the MRS appears to assist in retain-      of basic pay after two years of service, full
ing individuals beyond ten years of service.      individual ownership of these accounts after
For example, forty-three percent of officers      six years, and a cash retention bonus at 12
who reach the ten year mark remain until          years.iii Similarly, a study by the RAND Cor-
retirement eligible at twenty years of service.   poration in November 2014 concluded that
However, its assumed effect in the recruit-       a new model that offers smaller monthly
ment and retention of younger cohorts is          pensions, but provides lump sum “transition
not well validated.                               pay” immediately upon retirement could
                                                  be popular.iv The results suggest that many
Third, the MRS has not evolved as retirement
                                                  service members would choose to take an
benefits in the larger public and private sec-
                                                  end-of-career payout likely amounting to
tor have. DoD has neither taken advantage
                                                  about two and half years of their annual
of the opportunity to save money through
                                                  basic pay in exchange for smaller monthly
substantial reform, nor establish a benefit for
                                                  checks between the time they retire from
those serving less than 20 years.
                                                  the military until age 65.
Based on these findings, BENS recom-
mends DoD adopt a hybrid defined benefit-
contribution plan that offers portability
and, particularly, flexibility. BENS believes a
hybrid approach that provides some level of
savings, as well as incorporates the appeal of
a defined-benefit in addition to the porta-
bility of a defined-contribution component
would be a more preferable military retire-
ment system. The recommendation of BENS
is consistent with other analytical efforts. In
March 2014, the DoD proposed a plan that
preserves a fixed-income pension for future
20-year retirees that offers a smaller monthly
payout and a lump sum transition payment
upon retirement. This modified pension
plan would be offered alongside a 401(k)-
style defined contribution benefit for all ser-
vice members whereby DoD would provide
an annual direct deposit equal to 5 percent
8   Providing an Enduring Military Retirement Benefit

                                       INTRODUCTION
               The MRS currently consists of a defined-           suited for the previous generation, not the
               benefit plan whereby service members with          current one.x The current system has largely
               generally 20 or more years of service receive      gone unaltered since its implementation in
               a monthly pension immediately upon retire-         1948 – ignoring such changes as a transition
               ment, along with non-monetary benefits             from conscription to an all-volunteer force,
               such as access to installation commissaries        greater parity between military and private
               and medical care. Service members do not           sector wages, longer life expectancy, and
               contribute to this system and Cost-of-Living       increased incidence of post-military careers
               Adjustments (COLA) applied annually protect        capable of substantially supplementing retire-
               retiree pensions from inflation.v                  ment income.xi

               This system is continually under review as part    These organizations call for a modified
               of a law requiring the President to compre-        system that, in addition to being less costly to
               hensively examine the military compensation        the government and recognizing the change
               system every four years,vi but most recently it    to an all-volunteer force, provides greater
               has been under scrutiny due to its growing         flexibility for military leaders to shape the
               cost in today’s austere budget environment         force and is more readily available to more
               and perceived outdated structure. vii Payments     service members. Under the current system,
               to military retirees and benefit recipients rose   83 percent of men and women who serve do
               by 49 percent between 2002 and 2012                not receive retirement benefits due to its 20-
               and continue to climb.viii In 2013, the MRF        year vesting requirement (although “vested”
               dispersed approximately $54 billion to 2.3         short of 20 years members do receive a
               million beneficiaries. By 2023, the CBO esti-      separation benefit).xii Several organizations,
               mates that, despite the number of beneficia-       DBB and Heritage for example, recommend
               ries remaining essentially unchanged, spend-       moving the military system away from the
               ing will rise to $70 billion (See FIGURE 1).ix     existing defined-benefit to a defined-contri-
                                                                  bution plan through expansion of the military
               Organizations such as the Defense Business
                                                                  Thrift Savings Plan.xiii xiv
               Board (DBB), Heritage Foundation, and the
               Center for American Progress argue that the        In consideration of the many concerns that
               military retirement system is outdated and         the current retirement system is out-of-step
Providing an Enduring Military Retirement Benefit   9

with the times, BENS convened a group of         mend an alternative retirement system better
senior executives to examine the need for        suited for today’s military. The group met with
change. This group was selected based on         officials familiar with the military retirement
their understanding of retirement compensa-      system, consultants who have helped private
tion and its role in recruiting and retaining    companies and municipalities transition from
top talent. The group focused its evaluation     a pension-style benefit, as well as public and
on the active component retirement plan due      private-sector actuaries. They also modeled
to its substantially larger share of the wider   the potential savings of a defined contribution
military retirement compensation system.         plan and compared the military’s retirement
Their goal was to provide insights that would    benefit to the benefit offered at high perform-
help policymakers determine the need for         ing companies and public agencies that
and impact of reform. And, if reform was de-     maintain a workforce similar to the military.
termined to be necessary, they would recom-

                                          Figure 1

                 DoD Obligations for Military Retired

                                                   Data: Department of Defense & Congressional Budget Office
10   Providing an Enduring Military Retirement Benefit

                                   THE MILITARY
                                 RETIREMENT SYSTEM
               The military retirement system is a cliff vesting   until age 62, and then return to fifty percent
               20-year defined-benefit plan that provides a        at 62. Redux, however, is the least popular
               monthly pension payment immediately upon            retirement plan with less than one percent of
               retirement from the active component. The           current retirees selecting this option.xvii
               monthly pension is determined by one of
                                                                   The Congressional Research Service (CRS)
               three methods based on the date a service
                                                                   reported that the overall majority of retirees,
               member first enters service. For members who
                                                                   86 percent as of 2009xviii, qualify for pensions
               entered service before September 8, 1980,
                                                                   based on final pay. CRS also reported that
               the compensation is equivalent to the final
                                                                   with the younger cohort of those members
               base pay (that is, without allowances and
                                                                   still on active duty having reached thirty years
               subsistence payments) received at the time of
                                                                   in 2010, the number qualifying under final
               retirement multiplied by 2.5 percent for each
                                                                   pay will steadily decline.
               full year of service and prorated by one-
               twelfth for each complete month less than           The retirement system for Reservists is similar
               a year.xv In effect, retirees with 20 years of      to active duty, but uses a point system to cal-
               service receive a monthly allotment equal to        culate ‘qualifying years’xix and generally does
               50 percent of the service member’s base pay         not disperse pension payments until age 60.xx
               while in uniform; 30-year retirees receive the      Points are awarded based on various Reserve
               maximum allotment which equals 75 percent           activities.
               of base pay.
                                                                   Disability retirement is also available for those
               For those who entered service after Septem-         who qualify. A service member retired for
               ber 8, 1980, rather than final base pay, the        disability may choose a retirement plan based
               pension is determined based on the average          on years of service or one based on the se-
               of the highest three years of service pay—          verity of the disability.xxi
               known as ‘High Three’. Lastly, for service
               members entering after August 1, 1986, the          Service members can also participate in the
               member can chose either the aforementioned          federal Thrift Savings Plan (TSP), a defined-
               High Three or they can opt for a $30,000            contribution plan similar to a private-sector
               bonus at fifteen years of service and a tiered      401 (k) plan. Unlike many private sector
               retirement pension that pays out one per-           plans, however, the government does not
               cent less for each year of service under thirty     offer matching contributions.xxii Participation
               years when under age 62 and High Three              in the program varies depending on Service
               rates thereafter.xvi Under the latter option        and pay grade – ranging from 11 percent for
               known as ‘Redux’, those with twenty years           enlisted US Army Reserve to 52 percent for
               of service would receive a pension equal to         enlisted active-duty Navy.xxiii
               forty percent of their High Three service pay
Providing an Enduring Military Retirement Benefit   11

                                 MILITARY
                 RETIREMENT COST
One of the key arguments to reform the             they retire. Payments to the MTF for the total
military retirement system is its cost.xxiv Some   future cost of payouts that result from mili-
critics have called the costs unaffordable or      tary service prior to the accrual accounting
unsustainable. However, these projections of-      change come from transfers from the General
ten depart from a baseline starting in FY2000      Fund of the Treasury and are categorized as
through FY2010 when military base pay              an unfunded liability.
averaged a 4.2 percent yearly increase. These
rates translated into a larger contribution the    Some concerns have been voiced about the
Department had to make to the Military Retire-     amount of unfunded liability resident within
ment Fund for future retirees. Since 2011, pay     the MRS. However, as the Congressional Re-
increases have averaged 1.4 percent annually.      search Service points out: “(1) the hundreds
Should constrained budget realities persist as     of billions of dollars of unfunded liability is a
expected and pay increases remain near the         cumulative amount to be paid to retirees over
current rates, the MTF contributions are likely    the next 50 years, not all at once; (2) by the
to level off at about 30 percent of the annual     time some persons first become eligible for
cost of basic pay. This amount is about 2.5        retired pay under the pre-accrual account-
percent of the DoD budget.                         ing system, many others will have died; and
                                                   (3) unlike the private sector, there is no way
Further, when considering the cost of the          for employees to claim immediate payment
military retirement system, it is important to     of their future benefits. An analogy would be
reconcile both the input (the annual cost to       that most homeowners cannot afford to pay
support the Military Retirement Fund) and          cash for a house, so they get a mortgage. If
the output (the annual amount paid out to          the mortgage had to be paid in full, almost
military retirees and beneficiaries). At times,    no homeowners could afford to do so. How-
these accounts are conflated or combined to        ever, spread out over 30 years, the payments
show the total cost of the system. Since 1985,     are affordable. Similarly, the unfunded liability
the DoD budget has included accrual pay-           of federal retirement programs is deemed af-
ments to the MTF sufficient to finance future      fordable when federal retirement outlays are
payouts to current active duty personnel when      spread over many decades.”xxv
12   Providing an Enduring Military Retirement Benefit

                                           RECRUITMENT
                                      AND RETENTION
               Retirement benefits are designed to recog-          year vesting provides little flexibility in recruit-
               nize and reward those who have served as            ing and retention. The current system incentiv-
               well as provide an inducement to sustain the        ized a force profile for today but it may not
               all-volunteer force. BENS found little evidence     be appropriate for tomorrow’s. As stated, the
               outside of anecdote to support the conten-          Services may not necessarily want more tradi-
               tion that the current military retirement benefit   tional 20 plus consecutive year career troops.
               provides significant influence in the recruit-      Rather, it may prefer highly specialized mem-
               ment and retention process for the demo-            bers, e.g., cyber, to move between civilian
               graphic writ large.                                 and military careers in order to stay relevant in
                                                                   the latest technologies and information. The
               Fewer than twenty percent of enlisted mem-
                                                                   current 20-year vesting provides little flexibility
               bers stay beyond the ten year point; for
                                                                   for rewarding those sought after individuals.
               officers, the rate is about forty percent. For
                                                                   Moreover, it does not reward other in-demand
               officers who reach the ten year mark, forty-
                                                                   fields like special operations.
               three percent then go on to receive retired
               pay. Historically, only thirteen percent of         BENS noted that much of the debate tends to
               enlisted personnel stay in service long enough      focus on those already serving or those who
               to receive a pension. It is hard then to make       have already served and believes the focus
               the connection that the promise of retirement       of retirement reform should solely be on the
               benefits correlates strongly with recruitment       future force. It is largely agreed by most in the
               and retention.                                      debate, to include the BENS executives par-
                                                                   ticipating in this study, that any reform should
               Veterans Services Organizations claim retire-
                                                                   and will grandfather all those currently in uni-
               ment reform will hurt recruitment and reten-
                                                                   form and those who have already retired. A
               tion. The Military Officers Association of
                                                                   commitment was made and precedent should
               America believes that retirement plan changes
                                                                   be followed to not change the benefit ex post
               “would do grave damage to long-term reten-
                                                                   facto. The contention of this report, on the
               tion and readiness. By dramatically reducing
                                                                   other hand, is that the current defined-benefit
               its financial commitments to service members
                                                                   program seems to have been an appropriate
               without any reduction in the enormous sacri-
                                                                   benefit for the past and current force, but it
               fices demanded of career troops and families,
                                                                   may not be appropriate for the future force.
               it would destroy the sense of reciprocal com-
                                                                   We live in a time where priorities and re-
               mitment between member and service.”xxvi
                                                                   sources have shifted, and we should be open
               Nevertheless, if retirement benefits remain         to discussing changes that would adapt and
               a valued tool (and for those who choose a           serve our military force and service members
               career it has influence), the standard twenty-      better going forward.
Providing an Enduring Military Retirement Benefit   13

                                 FURTHER
           ANALYSIS NECESSARY
Having discussed the need to keep faith with       That report, which evaluated the attrition
those currently in uniform, BENS believes it       rates of the Australian Defense Force follow-
is fair to question the value of the retirement    ing their transition from a defined-benefit
system vis-à-vis retention in the future. The      pension with 20-year vesting to a new sys-
impact on retention must be a key consider-        tem with both defined-benefit and defined-
ation for any reform. Upon discussions with        contribution components, found attrition
several subject-matter experts who worked          rates were lower under the 20-year, cliff-
with private and public entities transitioning     vested defined-benefit plan than compared
from traditional pension-style retirement ben-     to the new plan.xxviii The study concluded that
efits to alternative plans, BENS was surprised     the removal of the traditional cliff-vested
to learn that there has been little study of the   benefit had important consequences on re-
effects retirement plans had on retention. In      tention and that further research is needed,
fact, a paper released in November 2014            particularly to determine retention based on
may be the first report that provides empirical    employee quality.xxix This study and its results
evidence on the retention effects of removing      make clear that further analysis is appropri-
the cliff-vesting component of a public sector     ate before substantive reform decisions are
retirement system.xxvii                            made.
14   Providing an Enduring Military Retirement Benefit

                            COMPARISON OF VARIOUS PRIVATE
                    AND PUBLIC SECTOR RETIREMENT PLANS
               One method to assess the validity and worth          percent of the employee’s salary based on
               of the MRS today is to compare it to retire-         what the individual contributes. Almost
               ment packages of private companies, as well          all of the private companies maintained a
               as comparable public sector professions.             vesting period of 3 years with all personal
               The private companies used for this assess-          contributions refundable any time one
               ment represent the top companies within their        leaves the company. Those funds, along
               respective industries as determined by their         with the company match contributions
               rank in the Fortune 500 portfolio of compa-          would then be able to be rolled over
               nies. These companies attract the “best and          into a future 401(k) plan or used at the
               brightest,” and do well at retaining them. The       employee’s discretion if he/she attained
               public service organizations selected for this       the required number of years to be fully
               assessment represent a variety of comparable         vested. Only two of the nine private com-
               professions in populous cities throughout the        panies examined also provide a defined
               United States. The main observations from            benefit retirement plan for employees.
               this comparative examination are below. The          (See ENCLOSURE)
               key difference between both the private sector
                                                                  • Differences between Public Service
               company plans and the public service orga-
                                                                    Organizations’ Retirement Plans and
               nization plans versus the MRS is the ability for
                                                                    the MRS. Two primary distinctions exist
               almost all employees to receive some level of
                                                                    between the MRS and the retirement
               retirement benefit regardless of their years of
                                                                    packages of other public service organi-
               employment in the organization. The great-
                                                                    zations. First, 100 percent of the plans are
               est benefit of the MRS is that unlike the other
                                                                    defined-contribution and are mandatory
               two types of organizations examined, it does
                                                                    for employees. All of them deduct the
               not require any contribution on the part of the
                                                                    contribution directly from employee’s sal-
               service member, and the payout is significant
                                                                    ary before taxes but match their employ-
               and lifelong after retiring.
                                                                    ees’ contributions. Second, 100 percent
                 • Differences between Private Companies’           of the public service organizations
                   Retirement Plans and the MRS. The prima-         considered offer an optional deferred
                   ry distinction between private companies         compensation plan, either a 401(k) or 457
                   and the MRS is the provision of a 401(k)         (a type of non-qualified tax advantaged
                   benefit within the former but not the            deferred-compensation retirement plan
                   latter. Currently, of the nine companies         that is available for governmental and
                   considered, 100 percent of them offer a          certain non-governmental employers.)
                   401(k) defined-contribution plan with a          Few match these plans but offer them as
                   company match, ranging from 4.5 to 6             an additional way for employees to invest
Providing an Enduring Military Retirement Benefit   15

  money. Mandatory employee contribu-               erally match their employees’ deferred
  tions to their retirement fund are refund-        compensation plan contributions, they
  able any time the employee leaves the             do mandate contributions to their per-
  service, and the contributions of the or-         sonal pension plans, which the organiza-
  ganization can also be withdrawn by the           tions either match or increase through a
  individual if the specified vesting period        competitive interest rate. Those contribu-
  is attained prior to departure. Employees         tions also give employees the benefit of
  that leave early usually have the option to       “options” should they leave prior to their
  defer the payment of the fund until their         minimum service requirement because
  normal retirement time or receive the             the funds are refunded or can be rolled
  refund immediately. The MRS offers only           over into a pension plan if they achieve
  a defined-benefit plan that, while it does        vesting mandates. The MRS lacks major
  not require service member contribution,          similarities to the other two sector plans.
  cannot be redeemed by anyone who de-              However, while the contribution method
  parts military service prior to 20 years in       is different, it does offer a pension plan
  uniform. Additionally, the MRS does not           similar to the public service organiza-
  contain provisions for a deferred compen-         tions and a small number of the private
  sation plan, which must be done through           sector companies, but at no cost to
  the individual’s personal initiative. (see        employees other than through years of
  ENCLOSURE)                                        service.
• Similarities between Private, Public,         While the MRS was a typical retirement plan
  and the MRS. The majority of both the         in the past, it is largely atypical today. Private
  private sector and public service organi-     companies and public service organizations
  zations require employee contributions        moved toward their present models as a cost
  to their own retirement accounts. While       saving measure and have benefitted accord-
  most of the private sector companies do       ingly. Defined contribution plans not only
  not require employee contributions into       save the employer money, but also allow the
  their 401(k) plans, they incentivize them     individual who departs before vesting to do
  to contribute by offering a match. Their      so with money in their pocket.
  plans also offer the benefit of “options”
  with not only their personal contributions
  but also their companies’ contributions
  available to them should they leave prior
  to reaching retirement age. While the
  public service organizations do not gen-
16   Providing an Enduring Military Retirement Benefit

                                  CONCLUSION &
                                RECOMMENDATION
                      In summary, BENS concludes that:

                           • The costs of the MRS are not as prohibitive as they may be perceived.

                           • The current MRS appears to assist in retaining individuals
                             in years 10-20 of service, however its assumed effect in the recruitment
                             and retention of younger cohorts is not well demonstrated.

                           • The MRS has not evolved as have retirement benefits in the larger
                             public and private sector.

                           • DoD has not taken advantage of the opportunity to save money and
                             provide an enhanced benefit to those serving less than 20 years.

                      Based on our conclusions and findings, BENS recommends DoD adopt a hybrid
                      defined benefit-contribution plan that offers portability and, particularly, flexibility.
Providing an Enduring Military Retirement Benefit   17

                              ENCLOSURE
                             Comparison of Private Sector Retirment Plans

* BrightScope is an independent provider of retirement plan ratings and investment analytics to participants, plan sponsors, asset
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  plan market and adds additional value and insight by quantitatively rating 401k and 403b plans across critical metrics.

                            Comparison of Public Sector Retirement Plans
18   Providing an Enduring Military Retirement Benefit

                                       WORKS CITED
          i
              Congressional Budget Office, “CBO’s April 2014 Baseline for the Military Retirement Trust Fund,” April 14, 2014,
          https://www.cbo.gov/sites/default/files/cbofiles/attachments/43886-2014-04-Military_Retirement.pdf
          ii
               Department of Defense Office of the Actuary, “Valuation of the Military Retirement System,” September 30, 2012,
          http://actuary.defense.gov/Portals/15/Documents/MRF_ValRpt2_2012.pdf
          iii
               Andrew Tilghman, “Overhauling Retirement Pay: A Military Times Special Report,” Military Times, March 2014.
          iv Andrew Tilghman, “New military retirement system might be popular, study says,” Military Times, November, 12, 2014,
          http://www.militarytimes.com/story/military/benefits/retirement/2014/11/12/new-rand-retirement-report/18923279/
          v
               Congressional Research Service, “Military Retirement: Background and Recent Developments,” David Burrelli, March
          27, 2010.
          vi
               Presidential memorandum, “Subject: Eleventh Quadrennial Review of Military Compensation,” December 11, 2009.
          vii
                Committee on the Budget: US House of Representatives, “The Need to Reform Military Compensation,” HBC Publica-
          tions, December 10, 2013, http://budget.house.gov/news/documentsingle.aspx?DocumentID=364048
          viii
                 Ibid.
          ix
               Congressional Budget Office, “CBO’s April 2014 Baseline for the Military Retirement Trust Fund,” April 14, 2014,
          https://www.cbo.gov/sites/default/files/cbofiles/attachments/43886-2014-04-Military_Retirement.pdf
          x
               Lawrence Korb, et al., “Reforming Military Compensation,” Center for American Progress, May 2012, http://cdn.ameri-
          canprogress.org/wp-content/uploads/issues/2012/05/pdf/military_compensation.pdf
          xi
               Ibid.
          xii
                Ibid.
          xiii
                 Baker Spring, “Time to Meet the Challenge of Updating the Military Retirement System,” The Heritage Foundation,
          September 29, 2011.
          xiv
                 Richard Spencer, et al., “Report to the Secretary of Defense: Modernizing the Military Retirement System,” Defense Busi-
          ness Board, July 21, 2011.
          xv
                Congressional Research Service, “Military Retirement: Background and Recent Developments,” David Burrelli, March
          27, 2010.
          xvi
                 Ibid.
          xvii
                  Ibid.
          xviii
                   Ibid.
          xix
                 Ibid.
          xx
                Congressional Budget Office, “Costs of Military Pay and Benefits in the Defense Budget,” November 2012, https://
          www.cbo.gov/sites/default/files/11-14-12-MilitaryComp_0.pdf
          xxi
                 David Burrelli, “Military Retirement: Background and Recent Developments,” Congressional Research Service, March
          27, 2010.
          xxii
                  Congressional Budget Office, “Costs of Military Pay and Benefits in the Defense Budget,” November 2012, https://
          www.cbo.gov/sites/default/files/11-14-12-MilitaryComp_0.pdf
          xxiii
                  Office of the Secretary of Defense, “Cost and Impact on Recruiting and Retention of Providing Thrift Savings Plan
          Matching Contributions,” Department of Defense, February 2010, http://www.tspstrategies.com/wp-content/up-
          loads/2012/04/Cost-and-Impact-on-Recruiting-and-Retention-of-Providing-Thrift-Savings-Plan-Matching-Contributions.
          pdf
          xxiv
                  Congressional Budget Office, “Cost of Military Pay and Benefits in the Defense Budget”, Government Printing Office,
          November 2012.
          xxv
                  Congressional Research Service, “Military Retirement: Background and Recent Developments, May 28,2014,
          http://digital.library.unt.edu/ark:/67531/metadc306566/
          xxvi
                  http://www.moaablogs.org/battleofthebilge/2011/08/the-defense-budget-board-retirement-proposal/comment-page-
          1/#sthash.GIBozHp8.dpuf
          xxvii
                    Jesse Cunha, et al., “The retention effects of high years of service cliff-vesting pension plans,” Economics Letters 126
          (2015), www.elsevier.com, November 13, 2014, http://www.sciencedirect.com/science/article/pii/S0165176514004248
          xxviii
                    Ibid.
          xxix
                  Ibid.
Providing an Enduring Military Retirement Benefit   19

                                                                                                 Prepared by the
                                               BENS MILITARY COMPENSATION & BENEFITS
                                                           MODERNIZATION TASK FORCE
                                                                                               Reginald Brack

                                                                                         Richard Rosenberg

                                                                                             Theodore Carter

                                                            Major General Mario Montero, USA (ret.)

                                                    Brigadier General Robert Osterthaler, USAF (ret.)

                                                                                                Dr. Paula Shaw

                                                                                            Dr. Roger Shedlin

                                                                                                   Nigel Sutton

                                                                                                 Blaine Sweatt

                                                                                              John R. Thomas

                                   BENS Staff                                                    Contributions
                                   Brian Collins                                                    Virginia Gibson
                                  Henry Hinton                                                    Keiko McKibben
                                   Clinton Long                                                          Mark Ritter
                               Susan Maybaum                                                          Josie Sullivan
                                James Whitaker

                With additional assistance from:
Mitchell Freddura, James Jarosz and Rob Matsick
20   Providing an Enduring Military Retirement Benefit

1030 15th Street, NW
Suite 200 East
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