Panetta Confirms Pentagon Considering Replacing Military Retirement With 401(k) Plan

August 16, 2011 1:03 pm

In a rare joint appearance with Secretary of State Hillary Clinton at the National Defense University Tuesday, Secretary of Defense Leon Panetta confirmed a CBS News report that the Pentagon is considering a dramatic plan to overhaul the military’s once sacrosanct retirement plan.

According to CBS, the plan “would eliminate the familiar system under which anyone who serves 20 years is eligible for retirement at half their salary. Instead, they’d get a 401k-style plan with government contributions.”

Panetta largely confirmed the report, with a key caveat.“That report came as the result of an advisory group that was asked by my predecessor Bob Gates to look at the retirement issue,” he said.

And they have put together some thoughts, they’re supposed to issue, actually, a more complete report the latter part of this month. No decisions have been made with regards to that issue…it’s the kind of thing you have to consider in terms of retirement reforms in the broad form, but you have to do it…in a way that doesn’t break faith, again, with our troops and with their families. If you’re going to do something like this you’ve got to think very seriously about grandfathering in order to protect the benefits that are there.

Under the plan, drafted by the Defense Business Board, retired service members would have to wait until standard retirement age before touching their pensions. It would reportedly save $250 billion over two decades.

The plan illustrates the extent to which the mad rush to cut budget deficits and the universal GOP opposition to any tax increases have put government obligations once thought untouchable on the chopping block. And it raises a host of questions: Would the military be able to retain troops for decades without the promise of an immediate, guaranteed benefit retirement plan? Is the current system, that provides no retirement guarantees for less experienced service members, unfair? Should reforms necessarily take the form of a defined contribution pensions?

The Pentagon is already preparing for over $350 billion in cuts over the next decade, a significant share of which is expected to come out of service member benefits.

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