A Twitter chat is like a meeting on Twitter; it has a specific discussion topic and a scheduled start time. Using the hashtag #MilCents at the end of each tweet, MFAN will ask questions to a group of financial experts.
A hot topic among military families these days has been the Bipartisan Budget Act of 2013 and its cuts to military retirees’ pensions through reductions to cost-of-living adjustments (COLA).
COLAs are determined by the consumer price index based on the rate of inflation from the previous year. (For more information about COLAs and the difference between COLAs for active duty and COLA for retirees, visit Military.com’s website.)
So what’s the latest? This week, the Senate Armed Services Committee will convene for a hearing aptly named “Recent Changes to the U.S. Military Retirement System.” During the hearing, senators will hear from two panels of witnesses, including Navy Admiral James A. Winnefeld, Jr., and vice chairman of the Joint Chiefs of Staff, and John H. Tilelli, Jr., retired Army general and chairman of the Military Officers Association of America. We can expect to hear more about the COLA cuts from Congress after the hearing. Meanwhile, here’s a review of what has happened so far, key parts of the bill, what military families have been doing, and what could happen next.
Section 403 of the budget act is what many military families and their advocates take issue with, and for good reason. The section creates an “annual adjustment of retired pay and retainer pay amounts for retired members of the armed forces under age 62.” In other words, Section 403 cuts the COLA for military retirees by 1 percent until they are 62. For instance, if the COLA would in a given year mean a 2 percent increase, under the current bill it would be adjusted to 1 percent. According to the Military Officers Association of America, such cuts could mean a total loss of $82,982 for an E-7 over 20 years, and a total loss of $124,406 for an O-5 over 20 years.
What have military families been doing?
Many in the military family community took part in the Keep Your Promise campaign and took to social media to post messages to Congress and to rally support. Why “Keep Your Promise”? Simply put, our men and women in the Armed Forces were promised that when they retire, they would receive a cost of living increase commensurate with inflation. That promise is now being modified (read: broken) in a way that hurts our military families. As part of the campaign, several military and military family organizations have pushed their members to call their Congress members to explain the real impact that these cuts will have on real military families. The efforts of the campaign got the attention of many including lawmakers, Department of Defense officials, and even some celebrities.
As the COLA cuts are not effective until Dec. 1, 2015, there is still time for Congress to pass legislation that repeals Section 403. Although members of Congress did repeal cuts to military retirement pay for disabled retirees and survivors, attempts repeal cuts for all retirees were overshadowed by the need to pass the budget, and then again by the omnibus bill. One thing is for sure, the decisions related to Section 403 will impact military families. We encourage you to be active: follow the news and the latest updates, reach out to your elected officials, and engage your peers in discussions related to Section 403.
The Senate Armed Services Committee (SASC) held a hearing on January 28 to review the decision to reduce annual cost-of-living adjustments (COLA) of retirement benefits for military retirees. There was general consensus among the bipartisan members that reductions to the COLA, slated to take effect Dec. 1, 2015, should be repealed.
“I believe that the COLA reduction is wrong because it targets a single group, military retirees, to help address the budget problems of the federal government as a whole, ” Committee Chairman Carl Levin (D-MI), said during his opening remarks.
During the hearing other Senators joined Sen. Levin in expressing their opposition to the cuts.
Representatives of veteran and military family groups attended the meeting to voice the grievances expressed by their membership and the military community about reductions to the military COLA. Although recently passed legislation exempts disabled military retirees and survivors from the cuts, the COLA reduction continues to draw strong opposition from members of the military community.
Christine Fox, Acting Deputy Secretary of Defense, addressed the committee, expressing the Pentagon’s opposition to the pending reductions to the military COLA, noting that the Department of Defense was never consulted about the cuts. However, Fox advised the committee to wait until the Military Compensation and Retirement Modernization Commission completes its review of compensation and retirement benefits before it acts. That report is expected to be released in February 2015, two months after the COLA cuts take effect.
Fox also cautioned that current military compensation and retirement levels are “unsustainable,” and warned that military compensation packages may need to be adjusted to provide sufficient funds for military readiness programs.
Sen. Roger F. Wicker (R-MS) expressed opposition to Fox’s recommendations to wait to repeal the COLA adjustment until after the report is released.
“To say we know this should be fixed, we know it was wrong, we regret it, but let’s wait, to me it holds out the potential that it’ll be like sequestration and go into effect despite everyone’s protestations to do the contrary,” Wicker said.
In a joint statement, Navy Adm. James Winnefeld, Vice Chairman of the Joint Chiefs of Staff, and Fox said they would not support a COLA reduction without a grandfather clause exempting current retirees.
It is unclear what will happen next. However, outrage expressed by the military community has certainly caught the attention of many members of Congress.