The military pension cut, in perspective

  • Article by: PAUL LINNEE
  • Updated: December 20, 2013 - 6:33 PM

It’s a percentage point from a percentage increase — which is to say, not that much. All while still of working age.

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Regarding the patriotic chest-beating rants voiced by some senators during the debate on the compromise budget, more context is needed.

The now-adopted compromise budget reduces the annual cost-of-living adjustments (COLA) for the military pensions being paid to retirees under age of 62.

The rationale (in addition to saving several billions of dollars) is that these retirees are “of working age” and that most of them retire from the service to enter the regular workforce. They are not dependent on military pensions as their sole source of income. The act reduces the rate by which their pension could increase in a given year to 1 percentage point below the annual COLA for older retirees. Once they reach age 62 (at which point they could also claim the early Social Security annuity), this 1-percentage-point rate-increase reduction dies.

For 2014, military pensions are being increased by a 1.5 percent COLA. For any person covered by this new provision, the increase would presumably be 0.5 percent.

For purposes of context, an enlisted person (private, corporal, sergeant) who entered the service at age 18 (as many do) could retire after 20 years of service (at age 38) and be eligible for an immediate lifetime pension. At the E-7 pay grade (sergeant first class, a common rank for 20-year retirees), the pension would be 50 percent of whatever a person of that rank and seniority on active duty would receive. That amounts to 50 percent of $4,281 per month (based on 2013 pay) or $2,140.50 per month ($25,686 per year).

For a commissioned officer at the rank of lieutenant colonel (a common rank for 20-year officers) retiring at age 40 after 20 years of service, the monthly pension would be 50 percent of $8,118 per month (their active-duty pay) or $4,059 per month ($48,708 a year).

Under the new law, our E-7 would see the COLA for 2014 reduced (until turning 62) from $32.11 per month to $21.41 per month ­­— an annual reduction of $128.40. Our lieutenant colonel would see a 2014 COLA reduction from $60.89 per month down to $40.59, a reduction (until turning 62) of $20.30 a month or $243.60 per year. All this while each of them is free to earn whatever they can in the civilian workforce, many with unique civilian opportunities having been opened to them due to the specialized skills they learned after 20 years in the military.

As the recipient of a military pension myself (who is far beyond age 62 now, and therefore unaffected by this law), I can’t say I don’t appreciate the COLA I am eligible for each year. But it does seem that from a “fiscal restraint and sanity” perspective, this is a modest and well-reasoned approach, undeserving of the outrage of a few senators who look to pander to the veterans.

 

Paul Linnee lives in Minneapolis.

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