COLA cap repealed; 'mini-Redux' awaits new entrants
By TOM PHILPOTT | | Published: February 13, 2014
Bowing to colossal pressure from military associations, younger retirees and angry careerists who served through long and nasty wars, Congress has repealed the retiree COLA cap it enacted only six weeks ago.
Cost-of-living adjustments for military retirees under age 62 will not be set a full percentage point below annual inflation, starting in January 2016, as Congress previously approved in bipartisan debt reduction deal.
The COLA cap, however, will stay in effect for new entrants, those who first entered the military on or after Jan. 1 this year and eventually serve long enough to gain a lifetime annuity.
To be able to lift the COLA cap for most members and still save more than $6 billion in federal spending over the next decade, Congress also voted to extend some across-the-board budget cuts, called sequestration, by a year through 2024. This will largely impact Medicare funding, congressional staff explained.
“I can’t call it a clear cut victory because we were looking for full repeal” of the COLA cap, said retired Air Force Col. Michael F. Hayden, director of government relations for Military Officers Association of America. Though the “most egregious” features of the cap are rescinded, he added, it “still affects members of the future force.”
The late-hour decision to retain the COLA cap for new entrants recalled for Hayden how Congress had voted to impose the “Redux” retirement plan on new entrants starting in 1986. Years later, when Redux was blamed for a drop in career force retention, Congress restored more robust retirement plan retroactively, enticing only a portion of careerists to stay under Redux in return for a $30,000 bonus.
Congress now has started a “mini-Redux” generation, Hayden said. The effect over time, he said, could create new retention challenges. In the short term it violates promises made by lawmakers to avoid piecemeal changes to military retirement and await, instead recommendations due next year from a special commission on military compensation reform.
Following a now familiar script for a divided and largely dysfunctional Congress, a few powerful lawmakers again shaped a last-minute solution to sticky problem, behind closed doors when colleagues couldn’t compromise.
It this case the urgent goal was repeal of the COLA cap that many lawmakers said they vehemently opposed, even though they voted for it in December as part of the bipartisan budget agreement negotiated by their budget committee chairmen, privately and on deadline as Christmas neared.
Adding to the urgency to act this time was a massive snowstorm that threatened to ruin lawmakers’ plans for a two-week respite away from Washington D.C. if they spent too long debating how to pay for COLA cap repeal. The final solution was to extend sequestration by a year to replace more than $6 billion in mandatory savings from military retirement.
The COLA cap repeal provision created a new mystery, similar to that surrounding parentage of original COLA cap idea. Recall that House Budget Committee Chairman Paul Ryan (R-Wis.) said the cap idea came from the Department of Defense. Senior Defense officials later denied that.
The new mystery is who added language that keeps the COLA cap in place for members who enter the military for the first time on or after Jan. 1, 2014. Most likely that was Speaker of the House John Boehner (R-Ohio), or a key adviser. Boehner was the first to reveal the feature at Capitol Hill press conference Tuesday morning. The last question was whether a vote to repeal the COLA cap, as planned for later that day, would make military compensation “reform” more difficult for Congress to achieve down the road.
“No, I don’t think so,” Boehner said. “What we’re proposing [is that only] those who enlist from January 1st on will be covered under this new formula.” Boehner called it a “fairer way” to save retirement dollars than by targeting those “already retired” and “already signed up for service.”
Boehner had his modified COLA cap repeal language added to an obscure bill, S 25 from Sen. Orrin Hatch (R-Utah), which the Senate had had approved last year to convey to a local utility in southern Utah access to an electrical distribution system built on nearby federal lands.
As a vehicle to repeal of the COLA cap, S 25 suddenly drew enormous support but also some strong objections. Rep. Adam Smith (Wash.), ranking Democrat on the House Armed Services Committee, complained about the both details of the bill and the process being used by leadership.
“This has been dropped on us at the absolute last minute,” Smith told colleagues during a brief flood debate. “In fact, on a bill that has profound impacts on the budget in a number of different areas, we just moments ago received a broad outline of a [Congressional Budget Office] score of how it is going to impact that budget,” leaving no time to consider its effect.
Critics of the COLA cap, including Hayden, noted that Congress had rushed to approve it in December with perhaps even less consideration.
Smith also criticized replacing nearer-term budget savings from the retiree COLA cap with cuts to other entitlements starting in eight years.
“So we are really simply robbing one group of deserving people to pay another group of deserving people,” Smith said. “That is hardly responsible.”
Dominating House debate, however, was the notion that it was wrong to break a promise to protect retirement benefits for service members who had sacrificed so much for so long in Iraq and Afghanistan. The House passed S. 25 on a 326 to 90.
Senate Majority Leader Harry Reid (D-Nev.) that evening said he opposed the House plan to pay for COLA cap repeal by extending sequestration. By morning, with a snowstorm bearing down and Senate colleagues deadlocked, Reid had changed his mind.
Senate Democrats wanted to repeal the COLA cap and worry later about how to replace the savings. Senate Republicans favored repeal but wanted the savings replaced by closing a “loophole” in federal tax credits that benefitted the children of illegal immigrants.
That showdown was avoided when the Senate passed S 25, as amended, by a resounding vote of 95 to 3, and then promptly adjourned.
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