Tuesday, June 15, 2010

Changes to Military Retirement Vesting Requirements

From Federal Daily:

Panel Suggests Changes to Military Retirement Vesting Requirements

DoD could cautiously investigate shorter vesting requirements to address concerns that only a fraction of servicemembers with significant service ever serve the full 20 years that entitle them to receive military retirement benefits, a Government Accountability Office panel said.

In response to specific pay-and-retirement questions from a Senate Armed Services subcommittee, GAO suggested that instead of requiring a full 20 years, the military could allow servicemembers to vest at 10 years, but defer a payout until a later date, such as when they reach 65 years of age. The June 3 GAO letter noted that only 15 percent of enlisted and 47 percent of officers become eligible to receive retirement under the current plan that requires 20 years of service.

It’s difficult to say if reducing the vesting requirement would help in recruiting and retention rates, GAO said, because deferred benefits—like retirement—are a relatively inefficient way to influence recruiting and retention, as compared with cash payouts.

In looking at any changes, GAO warned that DoD should consider all potential effects. Such a change could be costly if higher percentages of officers and enlisted servicemembers vested and received a retirement pension. Plus, it could also cause a strain on military continuity if a large portion of experienced servicemembers took the retirement option and could not be replaced. GAO noted such replacements could be difficult to find because DoD relies almost exclusively on promotions from the lower ranks—there is no private-sector labor market from which the military can hire for unique occupations, such as an infantry battalion commander....

For more information, go here. This is important stuff, so be sure to check it out.

H/T Jane

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