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

Hearing

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Senator KAINE. Thank you, Mr. Chairman.

I want to maybe take a little different tone than my friend the Senator from Mississippi on this one. I agree completely that this is a provision that needs to be changed and I think we will change it. I agree that we should change it immediately, because it seems
like the thrust of your testimony is why not return to the status quo pending the 2015 report, and we need to change this just to return to the status quo so that we don't send a wrong signal. And whether it's with a pay-for or not, I think we should return to the status quo.

But I do want to take on the bigger picture issue of, instead of kicking ourselves around because we made a mistake, we haven't done a budget in four years. We haven't done a budget in four years. And a divided Congress hasn't done a budget conference since 1986. So we did a budget and the Senate budget did not include this provision. There are at least four members of this committee who are on the Senate Budget Committee. This was not in the Senate budget.

It did come up during the course of the budget conference in the negotiations between the two chairs. I don't want to trash the chairs for coming up with a budget deal that we had to vote on, because no-budget has been hurting our military and hurting our veterans. Sequester, which is what we did when there was no budget deal, has been hurting the military and hurting veterans. Continuing resolutions instead of appropriations bills has been hurting the military and hurting veterans.

So we did in December what legislative bodies do all the time, which is there was a budget deal that was a compromise, that had things in it that I loved, that had things in it that I hated, and that didn't have things in it that I wished were in it. That's what doing a budget deal is.

This is an example of something that, we didn't put it in the Senate budget deal because we didn't like it. We like the grandfathering notion, I think all of us embrace. But the vote that we cast on this--I know it's good to put this whole vote as we were breaking a promise. No. We were trying to do a budget for the United States of America in a Congress that hadn't done a budget for four years, and doing it with the knowledge that there were some pieces that we didn't like and felt like we could fix.

So I think that there's a tendency up here to kick each other around or for one house to kick the other house around or for the Executive to kick the Legislative around or the Legislative to kick the Executive around. Talking each other down is no way out of any of the challenges that we have.

I think the budget deal that we reached in December--I'll just ask you: Are you glad that we have a 2-year budget? Is that a good thing for the military?

Ms. FOX. The Department has been very clear, we needed the stability and we appreciate the stability.

Senator KAINE. And are you glad that we were able to get an omnibus appropriations bill for the full year instead of gimmicks like continuing resolutions?

Ms. FOX. Yes, sir, of course. An appropriation gives us a lot of opportunities to do what we need to do without the CR, which just ties our hands, as you well appreciate.

Senator KAINE. So to me a standard feature of this budget deal--the best part about the deal is that there was a deal, and a standard feature of a budget compromise is that there are some pieces that I don't like and I hope to fix. I wish UI extension had been part of this budget deal. It wasn't. We're trying to figure out a way to fix that.

But the fact that there are pieces of the deal that we don't like I don't think should obscure the issue that when we together passed a budget deal and an omnibus, we did something really good for veterans, we did something good for the military. I live in a State that I'm sure has the most direct military connection in terms of the number of veterans per capita, active duty military, Reserve, DOD civilian, DOD contractor, military installations.

We're the most connected State to the military, I believe, of any in the country. And overwhelmingly, even though there are aspects of this deal that we don't like and want to fix, the fact of the deal is something that I think House, Senate, Democrats, Republicans, inside, outside Capitol Hill, should be glad that we've finally shown we can get it. Not that we can't make improvements, and this is one that I share with everyone around the table that we ought to fix this, and I'm actually very confident we will.

For purposes of those who are watching this who weren't in on the earlier discussion about the composition of the panel, I think it's important and I would like to ask you guys to describe who it is that's around the table coming up with the recommendations that you're intending to make back to Congress in February 2015, because I think it's important to know. Are all viewpoints, enlisted and officer and active and veteran, are all viewpoints sort of being represented?

I'm not talking about the names, but I'm talking about is it a good collection of stakeholders who are making these recommendations, who will look at these issues from a variety of different angles?

Ms. FOX. Senator, just for clarity, are you asking about the process we've used inside the Defense Department, not the composition of the commission? Is that correct?

Senator KAINE. I would actually like to know within the DOD and then composition of the commission. This is more to explain for those who are watching this.

Admiral WINNEFELD. Sir, for the commission, I don't have the actual composition of the commission memorized or with me, but I do recall having looked at it and that it was a good representative commission, panel, that will have a good opportunity to look fairly and thoroughly at retirement in particular. We've got confidence in
this panel. We've had good cooperation with them and they're working hard, and I think they're going to come up with some pretty good information for us.

Inside DOD, we've had a number of meetings of the Joint Chiefs with the senior enlisted advisers in the room, and we have talked about this for months on specifically the compensation pieces. We're still working through it. We haven't made a budget submission yet, but there's been a thorough vetting with our senior officer and enlisted leadership of the proposals that we might present.

Ms. FOX. Then on top of that, the senior officer, enlisted, as brought through the Joint Chiefs, has come to the Department's leadership right up to the Secretary, spent a lot of time with him, with the military, the civilian, our personnel experts, our Comptroller, our analysts, all in the room together going through these proposed options for change, how we might think about it. That's the process we've done pretty much every year that we've proposed any changes to the Congress for our compensation.

Senator KAINE. Thank you, Mr. Chair.

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Senator KAINE. Thank you, Mr. Chair.

Thank you all for your testimony. I believe we will fix this and fix it promptly. I really want to ask you a question about the next issue down the road, which is as we start to think about what we might hear back from the commission in early 2015, from conversations with primarily new people in the military--I've got a youngster and his colleagues--the way they talk about the compensation and benefits is that they have a feeling that some are promised, almost contracted--retirement after if you serve a full career, that's in the promise zone--some are sort of reasonable expectations. If I'm in the military and I have an injury, there's going to be a VA system there that will be functional and I have a reasonable expectation, without knowing what the budgetary top line is, there's going to be a functioning VA system. And some are sort of less than a promise or even a particular expectation, that there may be a hope or a desire. So for example, what would the premium level be for a retirement health policy, health insurance policy, that I would pay if I get to that. Most are not thinking about those issues. They're not really contracted for at a particular premium level.

So obviously the commission is going to come back with recommendations about all these kinds of things, about things that are sort of in the promise zone--that might be prospective, not retroactive-- things that are sort of in the reasonable expectation zone,
and things that frankly newcomers probably don't think about that much.

I just would be curious and the only question I have is, talk to us about how we ought to be thinking about these issues in prep for getting that report and having to make some decisions a year or so from now.

General TILELLI. If I might, thank you for that question. First, I think what the commission proposes, I think we have to review every aspect of it in full and open review and vetting it. Secondarily, as General Sullivan said, I think we have to look at it in the context of what we want the force to be in the future. We do want an All-Volunteer Force.

But you've focused on an issue which is critical in the surveys that we do to military and military families, and that's health care. Military families and servicemembers believe that military health care or health care is a promise. They don't see that as optional. Certainly, when you're young and you believe that you're immortal, military health care is not as important as when you get to be older and you're looking at it from the family aspects.

So in that context, I think we have to be very careful because it is a slippery slope. We have already cut military health care. We have already increased the copay. We have already increased the pharmacy fees. So we've already done things that are detracting,
if you will, from what servicemembers and their families perceive to be an earned benefit, if you will.

Senator KAINE. General, could I just follow up on that, because that really gets at the nub of my question. If there is a belief that health care is a promise--and I believe that it is, it is a promise-- and those coming in believe, is there also an expectation from your surveys that that promise extends to a particular premium a month or a particular premium that's an annual one that wouldn't change over the course of retirement?

General TILELLI. I don't think we've ever gotten to that point. I do think that reasonableness is a variable that must be considered, and that variable must be considered in the context of retirement and what that individual is going to get in retirement. Think about the context that you've heard today: A sergeant first class, an E7 who's getting a retirement of $23,000 a year and has a family of three or four, he's at the poverty level to start with. So to require him to pay an exorbitant health care fee I think is very problematic.

Senator KAINE. Other comments on my question?

General SULLIVAN. Thanks for the question, Senator. I think if you just take that last business about the medical, the young person who comes into the service today, the concept of retirement might be different than the concept that we had, which was developed in the forties, after all. Life expectancy now is 77, I think, for males anyway.

So there is a model for retirement. Then there's a model for medical. Whatever the model is in my view should be--if there are increases, it should be stated right up front. Those increases will be within the COLA--ah, the world-famous COLA--the CPI such that
whatever increase you pay might be withinside that, as opposed to this wildly fluctuating medical inflation. I mean, very quickly you could take an E7 off the table if you go to medical inflation.

So I think there has to be a model and a concept when they bring their system forward. And as General Tilelli said, we didn't worry about that because it was retire at 50 percent at 20 plus, then after 20 years, and then it was tapped at 30. And medical, we just went and got an aspirin or whatever, Tylenol. A couple of Tylenol and a cup of black coffee and you were golden.

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