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Pentagon study recommends that a complex four-part retirement plan be tested on a few thousand military volunteers to verify that it would be a more equitable, flexible and efficient system than the prized 20-year benefit used by the military since the end of World War II.

Retired Air Force Brig. Gen. Jan "Denny" Eakle, director of the 10th Quadrennial Review of Military Compensation, is confident the plan she and a small staff designed "will answer the needs of individual service members as well as provide flexibility to the services and best value to the taxpayer."

Completing a 30-month study of pays and benefits, the 10th QRMC, also endorsed higher Tricare enrollment fees for retirees under age 65 and their families, and higher co-pays in Tricare’s retail pharmacy network.

Other recommendations in Volume II of the QRMC report focus on improving recruiting and retention of military doctors and nurses and new quality-of-life initiatives to help service families, particularly by expanding options for childcare and off-base child education.

The report is online at:

Last March, the QRMC released Volume I of its report, on reforming cash compensation. It recommended a new method of comparing military pay with pay of civilian peers, and an increase in housing allowances for members without dependents.

Most QRMC proposals will remain "under study" by Defense officials until a new administration takes office in 2009.

Eakle worked with the RAND Corp. to build a computer program that would measure how members react to various retirement features or deferred compensation options. Her goal was to build a plan that would give the services more options to shape their forces, would allow more members to gain some retirement benefits and would lower overall personnel costs.

The "flexible" retirement plan Eakle presents would apply both to active and reserve component members. All members would come under two of its features — a defined annuity plan and a government-funded Thrift Savings Plan account — with vesting after only 10 years of service.

The annuity uses a familiar formula: 2.5 percent of average annual basic pay for the member’s highest three earning years multiplied by years served. But payments wouldn’t begin until age 60 for members with 10 to 19 years served, or age 57 for those who served 20. Members with 20 or more years could get an immediate annuity, as the current system allows, only at great cost, losing 5 percent for every year they are under age 57.

The TSP account would require no matching contribution by the member. Government contributions would start in the second year of service with an amount set at two percent of basic pay. That would be followed by three percent in the third and fourth years, four percent in the fifth, and five percent each year after. Though members would be vested in the TSP account after 10 years they couldn’t make withdrawals until age 60.

The plan’s final features are gate pays — to entice members to reach specific year-of-service milestones — and separation pay. The timing, size and availability of these would be left to each service and could vary by job skill and years of service. Eakle gave an example of how they might be used: If the Army wanted to keep its current force profile, she said, it could set gate pays equal to 15 percent of annual basic pay at 12 and 18 years of service, and offer a separation pay, equal to a year’s basic pay, to members who retire with 20 to 26 years of service.

The plan lacks the simplicity and transparency of the current system. Critics say it could leave servicemembers uncertain as to the worth of their retirement packages well into their careers.

"The servicemember at the four-to-10 year point, trying to make a career decision, has no way to project any retirement value," said Steve Strobridge, director of government relations for the Military Officers Association of America. "By definition, the gate pays and separation pays are flexible. They may or may not apply to his skill in 10 to 20 years."

The plan appears to have been built "for the convenience of the force planners," Strobridge said, "not from the standpoint of what we owe military people for an arduous career of service."

Defense officials have been asking Congress since 2006 to raise Tricare fees for under-65 retirees, arguing that medical costs have soared while fees for working age retirees have been frozen for more than decade.

The QRMC study makes a different argument for raising fees.

"What we are suggesting here is that there needs to be some parity between our older and our younger retirees," Eakle said. "It is not fair to ask the oldest retirees who make the least to pay far more than [younger retirees] for a benefit that is just somewhat more generous."

Tricare Prime enrollment fees for younger retirees, still $230 a year for individuals and $460 for family coverage, should be reset to equal 40 percent of Medicare Part B premiums, returning to the "proportionality" of fees that existed, by happenstance, back in 1996 when Tricare began.

The report also recommends that retirees using Tricare Standard — a fee-for-service benefit — or Tricare Extra — the military’s preferred provider network — pay an enrollment fee, too, which would be new charges. Their fee should be set at 15 percent of Medicare Part B, Eakle said.

To comment, e-mail, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or visit:

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