Hearing of the Senate Armed Services Committee - Recent Changes to the U.S. Military Retirement System

Hearing

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Senator REED. Thank you, Mr. Chairman. I think there's two clear issues emerging with broad consensus. One is we have to correct this issue, and my sense is that has to be done very quickly, immediately, for many reasons. One is the issue of what signal we're sending to the forces in the field. I understand--and the chairman may correct me or respond--that we could move such a bill through this committee without a pay-for, because we're not responsible for the pay-for. Is that accurate?

Chairman LEVIN. That is accurate. I think that the one bill which has been referred to the committee--we're doublechecking this, however--is the bill of Senator Hagan and Pryor, I believe, that does not have a pay-for. If there's a pay-for, an offset in other words, then that I believe would be referred to a different committee. But this committee I believe will have the ability to act promptly on a bill, and I hope that we will and not wait for the commission because there is a clear consensus we should clear the air on this issue.

Senator REED. Thank you, Mr. Chairman. I appreciate that clarification. Again, I do sense that this is a consensus across the whole spectrum of the committee.

That does still leave open the question of the role of this commission, which is absolutely critical. We can anticipate--I'll ask you, Admiral Winnefeld, and then Secretary Fox--we can anticipate next year when the commission reports that there will be proposals to us, and we can deliberate upon them thoughtfully and publicly, that will deal with the spectrum of pensions, compensation, benefits, etcetera. And that's necessary because you're reaching a situation where maintaining the operational readiness of the existing force is being squeezed, for want of a better term, because of the obligations of these costs that are building up and have been building up because of Congressional action.

Can you comment on that, Admiral?

Admiral WINNEFELD. The commission will certainly offer its recommendations to the Congress and certainly to this committee on how both pay and compensation and retirement should be structured. So we bnelieve that we should wait until they--I'm not necessarily saying we should wait until we repeal this because that's
a different question. But we do need to look at what they come up with, the various variables on retirement.

On the compensation piece, it's possible that the commission could come up with some structural recommendations to compensation. Any recommendations we would make for the fiscal year 2015 budget would not be structural. They would be fine-tuning the existing system to recruit and retain the best while getting the best value for the taxpayers.

Senator REED. And before I ask the Secretary, the presumption I think within the commission is not only will their recommendations allow us to deliberate and make thoughtful decisions based upon inputs from everywhere, but also in basic fairness that they will be sort of implemented on a basis so that people will not be prejudiced. There will be grandfathered provisions, because without that you have people who served with distinction and with great courage, who their expectations could be radically changed. Is that the presumption?

Admiral WINNEFELD. I would have to doublecheck, but I'm almost certain that the law itself, the legislation that established the commission, directs them to not consider anything other than something that's grandfathered. And we support that.

Senator REED. Secretary Fox, your comment?

Ms. FOX. Yes, sir, Admiral Winnefeld is correct. I actually brought that section with me. The law specifies that any changes be grandfathered. That was as guidance to the commission. And we do want to see the commission's results and they would be brought forward and debated and we look forward to that.

This point about timing. I hear the consensus. We agree, CPI Minus One in the provision is not grandfathered and that's not what we seek. We want any change to retirement, whatever it ends up being, is grandfathered. The only point is that it doesn't happen until December '15. We believe that two things must happen. It needs to change before it's implemented and we need to give space to this commission to allow it to be effective. If that space is repeal and then do something, so be it. If that space is wait and we'll see what the commission has to say and then do it one time, a onetime change, so be it.

But those are the parameters of our consideration.

Senator REED. So your point is that at present, because the effective date is not until December 2015, there is no one who is actually being denied the full benefits that were promised, etcetera.

The other point I think you make is that it is entirely possible that the commission could propose some retirement arrangement, maybe not this one identically, but some arrangement, however that would have to be debated by us, it would have to be grandfathered to protect people, which this provision isn't. So that would provide a much better approach to dealing with the issue of retirement. Is that fair?

Ms. FOX. Yes, sir, that's exactly our position. And the commission now will report out in February 2015.

Senator REED. But it doesn't preclude us and it shouldn't preclude us from taking the action to correct it and then wait for the commission's deliberations.

Just one other point. What is driving this, not entirely, but is the need not only to keep our promises to the retired community, which should be considered invulnerable in my view, but also everyone's commitment to people on active service that they have the best training, the best equipment, that their families have the best opportunities while they serve. That's one of the fundamental tensions we're trying to deal with. Is that accurate, Admiral?

Admiral WINNEFELD. Yes, sir, it is. I would add if I could, the only real interest that I have in deliberately doing this is simply to make sure that if it's repealed it's repealed in a way that doesn't take it off the table in some form of accounting for cost of living, whatever it is, so that this is not taken off the table permanently for the commission. The commission ought to be able to look at all the variables.

If it's repealed in a manner that doesn't mess with that, if you will, the timing is completely up to the Congress, obviously.

Senator REED. Thank you, Mr. Chairman. Thank you.

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