Military Retirement: Background and Recent Developments

Summary

Overview

FY

Retired Pay Recipients and Total Program Cost

Retirees from an Active Duty Military Career

Disability Retirees

Reserve Retirees

Survivor Benefit Recipients

FY2014

FY2013

103,106/ $1.43 billion

FY2012

FY2011

FY2010

FY2009

FY2008

FY2007

FY2006

FY2005

Source: CRS, derived from Title 10, United States Code.

For persons who entered military service before September 8, 1980, the pay base is the final monthly basic pay being received by the servicemember at the time of retirement multiplied by 2.5% for each year of service⁷ The minimum amount of retired pay to which a member is entitled under this formula is therefore 50% of the retired pay computation base (20 years of service times 2.5%). A servicemember who retires at 25 years receives 62.5% of the computation base (25 years of service times 2.5%). Historically, the maximum, reached at the 30-year mark, was 75% of the computation base (30 years of service times 2.5%). However, the John Warner National Defense Authorization Act for Fiscal Year 2007 (P.L. 99-348 §§601 and 642) extended the previous pay table to 40 years, allowed additional longevity raises, and provided additional retirement credit for service beyond 30 years at the rate of 2.5% per year.⁸

The Final Basic Pay cohort that entered the military before September 8, 1980, had 30 years of service in 2010. They have nearly all aged out of the system, and it is expected that all members of this group will be retired by 2016.⁹

Option 1: Pre-Redux

Eligible servicemembers can opt to have their retired pay computed in accordance with the pre-Redux formula, described above as High Three.

Option 2: Redux

Eligible servicemembers can opt to have their retired pay computed in accordance with the Redux formula and receive an immediate $30,000 cash bonus called a Career Status Bonus.¹² Those who select the Career Status Bonus (CSB) must remain on active duty until they complete 20 years of service or forfeit a portion of the bonus.

The Redux Formula

Redux is different from the High Three formula in two major ways.

With the passage of the FY2016 NDAA, servicemembers who have enetered the service but with less than 12 years of service as of December 31, 2017, may opt into the new Modernized Retirement System. The new system will be required for individuals entering the service on or after January 1, 2018. For these servicemembers, the computation base for the defined benefit will be the average of the highest three years (36 months) of basic pay, as in the High Three system; however, the multiplier is reduced to 2.0 from 2.5. This means that the pay base is the high three average at the time of retirement multiplied by 2.0% for each year of service. Therefore a servicemember retiring at 20 years would receive 40% of his/her pay base under the new formula and a 30-year retiree would receive 60% of his/her pay base. The new system also includes, for the first time, defined contributions including government matching contributions that are discussed in more detail in the section "Reforming the Military Retirement System".

The Modernized Retirement System also allows servicemembers to receive a portion of their retired pay in a lump sum. An individual entitled to retired pay may, no later than 90 days before the date of retirement, elect to receive

A lump sum payment of the discounted present value at the time of the election of an amount of the covered retired pay¹⁴ that the eligible person is otherwise entitled to receive for the period beginning on the date of retirement and the date the eligible person attains the eligible person's retirement age.¹⁵

For those who elect to receive a lump sum payment, after reaching the eligibility age for social security, they will again receive 100% their regular monthly annuity, which will be adjusted for annual cost of living increases.

An eligible retiree can elect one of two options for calculating the lump sum.

• A lump sum of 50% of the discounted present value of retired pay between the date of retirement and the date of social security eligibility and a monthly annuity of 50% of the monthly retired pay they are otherwise entitled to. So for example, if a retiree aged 50 was entitled to $4,000 per month in retired pay, and was eligible for social security retirement at age 62, he/she could elect to receive a lump sum of the discounted present value¹⁶ of $2,000 multiplied by 12 months multiplier by 12 years (age 62 minus age 50) plus a monthly annuity of $2,000 per month.
• A lump sum of 25% of the discounted present value of retired pay between the date of retirement and the date of social security eligibility and a monthly annuity of 75% of the monthly retired pay they are otherwise entitled to. So for example, if a retiree aged 50 was entitled to $4,000 per month in retired pay, and was eligible for social security retirement at age 62, he/she could elect to receive a lump sum of the discounted present value¹⁷ of $1,000 multiplied by 12 months multiplied by 12 years (age 62 minus age 50) plus a monthly annuity of $3,000 per month.
• 1. The law also allows retirees to take their lump sum payment as a single payment or in installments.

There are many similarities between the active and reserve retirement systems. First, reserve component members¹⁹ must also complete 20 "qualifying" years of service to become eligible for a defined retirement benefit. Second, the reserve retirement system also accrues at the rate of 2.5% per "equivalent year" of qualifying service (explained below) at retirement eligibility for those who enter service prior to January 1, 2018, and 2.0% for those who enter on or after January 1, 2018. The primary differences between the two systems are the point system used to calculate "qualifying years" and equivalent years of service, as well as the age at which the retirement annuity begins. Also, Redux is not an option for reservists.

For retirement purposes, a year of "qualifying" service is a year in which a Reserve servicemember earns at least 50 retirement "points." Points are awarded for a variety of reserve activities:

• One point for each day of active service, which includes annual training.²⁰
• Fifteen points a year for membership in the Ready Reserve.
• One point for each inactive duty training (IDT) period.²¹
• One point for each period of funeral honors duty.
• One point for every three satisfactorily completed credit hours of certain military correspondence courses.

With multiple opportunities to earn points, it is relatively easy for a participating member of the selected reserve to accrue the requisite 50 points per year and thus earn a qualifying year for retirement. The maximum number of points per year, exclusive of active duty, has varied over time but is currently capped at 130 points.²² When active duty points are added to this total, the reservist cannot earn more than 365 points a year. The number of points is critical in determining both the number of years of qualifying service and the number of equivalent years of service for retired pay calculation purposes.

A reservist may retire after completing 20 years of qualifying service; there is no minimum age. However, the reservist will usually not become eligible for retired pay until age 60,²³ at which time he or she also becomes eligible for military medical care. Upon retirement, the individual is normally transferred to the Retired Reserve and is entitled to a number of military benefits to include commissary and exchange privileges; access to Morale, Welfare and Recreation programs and facilities; and limited space available travel on military aircraft. Reservists in the Retired Reserve but not yet retired pay eligible are referred to as "Gray Area" retirees. Time spent in the Retired Reserve counts for longevity purposes and ultimately results in higher retired pay. For example, a lieutenant colonel who transitions to the Retired Reserve at age 45 will have their retired pay at age 60 calculated on the basic pay of a lieutenant colonel with an additional 15 years of longevity.

The date the reservist became a member of the armed forces determines whether their retired pay is calculated based on the Final Basic Pay, High Three system, or Modernized Retirement System. Those entering before September 8, 1980, will retire under the Final Basic Pay system while those entering after September 8, 1980 but before January 1, 2018, will retire under the High Three system. Those who first perform Reserve Component service (with no prior regular or reserve service) on or after January 1, 2018, will retire under the Modernized Retirement System.

The actual calculation parallels the active duty system but requires adjustment to reflect the part-time nature of reserve duty. For example, consider a reserve component lieutenant colonel with 5,000 points who joined the military in January 1980, and transferred to the Retired Reserve in 2000 after completing 20 qualifying years of service. In 2015, he turned 60 years of age and became eligible for retired pay. The process for calculating his retired pay is to divide the total points by 360 to convert the points to years of equivalent service (5000 / 360 = 13.89). Next multiply the equivalent years of service by the 2.5% multiplier (13.89 times 0.025 = 0.3472). Using the Final Basic Pay option, the 2015 pay base²⁴ for a lieutenant colonel with 35 years of service (20 years of qualifying service plus 15 years in the Retired Reserve) is $8,762.40 per month. Multiplying the pay base by the retired pay multiplier ($8,762.40 times 0.3472) produces a monthly retirement annuity of $3,042 per month.

(as of September 2014)

Army

Air Force

Navy

Marine Corps

Total

Final Pay

599,991

539,243

368,717

85,747

1,593,698

High Three

178,554

131,333

116,624

34,979

461,490

Redux

17,238

15,348

15,852

3,710

52,148

Total

784,548

684,924

501,193

124,436

2,107,336

Servicemembers determined to be unfit for continued service and who have a permanent and stable disqualifying physical condition may qualify for disability retirement, commonly referred to as a Chapter 61 retirement. Eligibility is based on having a permanent and stable disability, rated at 30% or more by DOD, and the disability was not noted at the time of entrance on active duty.²⁶ As a result, some disability retirees are retired before becoming eligible for longevity retirement while others have completed 20 or more years of service.

A servicemember retired for disability may select one of two available options for calculating their monthly retired pay:²⁷

• 1. Longevity Formula. Retired pay is computed by multiplying the years of service times 2.5% or 2.0% (for those joining on or after January 1, 2018) and then times the pay base (either final pay or high three, as appropriate).
• 2. Disability Formula. Retired pay is computed by multiplying the DOD disability percentage by the pay base.

The maximum retired pay calculation under the disability formula cannot exceed 75% of basic pay.²⁸ Disability retirees are not authorized to receive a lump sum payment under the Modernized Retirement System.

Current military personnel do not contribute a portion of their salary to help pay for military retirement benefits. However, they have paid taxes into the Social Security trust fund since January 1, 1957, and are entitled to full Social Security benefits based on their military service. Military retired pay and Social Security are not offset against each other. Military retirees receive full Social Security benefits in addition to their military retired pay.

Military retired pay is not subject to withholding for Social Security tax. However, all non-disability retired pay is subject to withholding of federal income tax. A portion of the Social Security benefit may also be subject to federal income tax for individuals who have other income.

Monthly pay for most military retirees has been accomplished through direct deposit to a financial institution on the first day of the month. However, if the first day of the month was a weekend or national holiday, the pay would not be deposited until the first business day of the month, which could actually be the second or third day of the month.

In response to numerous complaints from military retirees about not receiving their pay on the first and with support from veterans' service organizations, the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (P.L. 111-383 §646) required that military retiree pay be processed on the first day of the month. When that day falls on a weekend or holiday, the pay date is moved to the previous business day. This change resulted in calendar year 2011 having 13, rather than the normal 12, military pay dates and the potential tax implications associated with increased annual income. From tax year 2012 and beyond, military retirees will receive their normal 12 payments.

Year

COLA

Year

COLA

2006

2007

2008

2009

2010

For military personnel who first entered military service before August 1, 1986, each December a COLA equal to the percentage increase in the Consumer Price Index (CPI) between the third quarters of successive years will be applied to military retired pay for the annuities paid beginning each January 1. For example, assume that the CPI rises from 400.0 in the period July through September 2010 to 414.4 in the period July through September 2011, an increase of 14.4 points or 3.6% of 400.0. The monthly retired pay that accrues beginning December 2011, that will actually be paid to retirees on January 1, 2012, would be increased by 3.6% above that amount paid the previous month.

For those personnel who first entered military service on or after August 1, 1986, their COLAs will be calculated in accordance with either of two methods, as noted below.

Those personnel who opt to have their retired pay computed in accordance with the pre-Redux (High Three) formula will have their COLAs computed as described above for pre-August 1, 1986, entrants.

Those personnel who opt to have their retired pay computed in accordance with the Redux formula, and receive the $30,000 cash bonus, have their COLAs computed using a different formula. Annual COLAs are held one percentage point below the actual inflation rate. Retirees covered by this COLA formula thus receive a 2.6% increase (rather than 3.6%) in their military retired pay under the hypothetical example described in the preceding example for Pre-August 1, 1986, entrants. When a retiree reaches the age of 62, there is a one-time recomputation of his or her annuity to make up for the lost purchasing power caused by the holding of COLAs to the inflation rate minus one percentage point. This recomputation of COLA, in combination with the recomputation of the retired pay multiplier (discussed earlier), restores the member's retired pay to that of a similarly retired member who did not take the Bonus/Redux option. After the recomputation at age 62, however, future COLAs continue to be computed annually on the basis of the inflation rate minus one percentage point.

Section 631 of the FY2016 NDAA repealed the reduced cost of living adjustments for members under the age of 62.

The MCRMC did not make any recommendations changing the 20-year eligibility for retirement; however, it recommended that the Secretary of Defense be given authority to modify the year of service requirement to shape the force profile as long as it does not impose involuntary changes on existing servicemembers. DOD expressed opposition this proposal and Congress did not adopt a provision based on this MCRMC recommendation. The 20-year eligibility remains in current law.

Existing servicemembers in active duty, reserve status, and retirees will be "grandfathered" into whatever retirement system they currently have selected; however, those with 12 or fewer years of service on December 31, 2017, would have the opportunity to opt into the new system. The logic behind this eligibility requirement is, for those with more than 12 years of service, opting into the new system might put them at a financial disadvantage as they would see a reduction in their multiplier at 20 years of service, but have not had the benefit of matching government contributions into the TSP system. However, servicemembers at the beginning of their career, particularly if they are unsure of completing a 20-year career, would likely benefit from opting in to the new system.

The commission recommended changing the current system from a defined benefit system to a blended system which includes a defined contribution element. In the resulting legislation, the defined benefit in the Modernized Retirement System would remain similar to the High Three system, but the multiplier would be reduced from 2.5% to 2.0% per year of service. Thus, an active duty servicemember with 20 years of service under the new system would receive 40% of base pay (2.0% times 20) rather than 50% (2.5% times 20) under the current system. For reserve component personnel, the same multiplier would be used although reserve years of service would continue to be calculated under the points system mentioned earlier in this report.

The defined contribution element is intended to make up the shortfall incurred with the new multiplier and would be deposited through the Thrift Savings Plan (TSP). Under the new system, the services would begin monthly contributions of 1% of basic pay automatically into the servicemember's TSP account beginning on or after 60 days from when the member first enters uniformed service and continuing until 26 years of service are accrued. In addition, the services would make matching contributions of up to 5%³⁹ of the servicemember's basic pay from two years and one day after the member first enters service and ending at 26 years of service. The servicemember would be fully vested after two complete years of service and would be able to take ownership of the 1% contributions as well as any matching contributions. The servicemember would be fully vested in individual TSP contributions immediately.

The services would also automatically enroll new servicemembers in the TSP program at a default amount of their basic pay unless the servicemember opted out. The servicemember would automatically be enrolled every year at the default amount unless they actively opt out.

Another change proposed by the MCRMC and adopted in the FY2016 NDAA was that servicemembers could choose to receive their retirement annuity in various forms as discussed in the previous section "Calculating the Lump Sum Payment":

• A monthly payment beginning at their retirement date;
• A 50% discounted lump sum amount at retirement, combined with a reduced monthly payment until eligibility for full social security payments, at which point the full monthly annuity would begin; and
• A 25% discounted lump sum amount at retirement, combined with a reduced monthly payment until eligibility for full social security payments, at which point the full monthly annuity would begin.

In order to provide mid-career retention incentives under the new system, the MCRMC proposed continuation pay for members who reach 12 years of service, in return for a four-year service obligation. The FY2016 NDAA adopted this proposal. The law would allow active duty (regular component) servicemembers to receive continuation pay equal to 2.5 times their monthly basic pay at 12 years of service, plus an additional amount, at the discretion of the Secretary concerned, that would be the amount of monthly basic pay multiplied by no more than 13. For example, using current pay scales, an active duty O-4 with over 12 years of service could receive continuation pay of at least $17,476.50 (2.5 times monthly base pay of $6,990.60) and at most $101,363.70 ($17,476.50 plus 13 times monthly base pay of $6,990.60).⁴⁰ An active duty E-6 with over 12 years of service could receive continuation pay of at least $8,914.50 (2.5 times monthly base pay of $3565.80) and at most $55,269.90 ($8,914.50 plus 13 times monthly base pay of $3565.80). This flexibility awarded to military department secretaries on the amount of additional continuation pay is intended to aid force-shaping by allowing the Secretaries to offer higher continuation payments to those in occupational specialties that are in high demand.

Under the modernized system, Reserve Component members at 12 years of service would receive continuation pay equal to at least 0.5 times the basic pay of an active component member of similar rank and longevity, plus an additional amount at the discretion of the Secretary concerned that would be the amount of monthly basic pay multiplied by no more than six. For example, a Reserve O-4 with over 12 years of service would receive continuation pay of at least $3,495.30 (0.5 times monthly base pay of $6,990.60) and at most $45,438.9 ($3,495.30 plus six times monthly base pay of $6,990.60). A Reserve E-6 with over 12 years of service would receive continuation pay of at least $1,782.90 (0.5 times monthly base pay of $3,565.80) and at most $23,177,7 ($1,782,90 plus 6 times monthly base pay of $3,565.80).

The commission also proposed that the services budget additional funds for continuation pay in addition to the recommended basic continuation pays to maintain the current force profile and to allow flexibility in adjusting force profiles to meet future changes in manpower requirements. Based on the retention model used by the commission, it projected a need to offer continuation pay of up to 4.8 times basic pay for active component enlisted personnel and up to 15.9 times basic pay for officers.⁴¹ The commission also recommended that all base and additional continuation pay should be paid from an authority used only for the purpose of continuation pay and should be budgeted as a new budget line item.

Final Basic Pay

High Three

Redux

Modernized Retirement System

Applies to

Servicemembers entering before September 8, 1980

Servicemembers entering from September 8, 1980, through July 31, 1986, and persons entering after July 31, 1986, but opting not to accept the 15-year Career Status Bonus

Servicemembers entering after July 31, 1986, and accepting 15-year Career Status Bonus with additional five-year service obligation

Servicemembers entering on or after January 1, 2018, and those with 12 or fewer YOS on December 31, 2017, who choose to opt in.

Basis of Computation

Final rate of monthly basic pay

Average monthly basic pay for the highest 36 months of basic pay

Average monthly basic pay for the highest 36 months of basic pay

Average monthly basic pay for the highest 36 months of basic pay

Defined Benefit Multiplier

2.5% per YOS

2.5% per YOS

2.5% per YOS, less 1% for each year of service less than 30 (restored at age 62)

2.0% per YOS

Defined Contribution

Individual contributions to TSP, no matching

Individual contributions to TSP, no matching

Individual contributions to TSP, no matching

1.0% minimum contribution into TSP from Service with up to 5.0% total government contributions including matching

Lump Sum Option

Monthly annuity only

Monthly annuity only

Monthly annuity only

Option for partial lump sum payment at retirement with full monthly annuity restored at eligibility age for full social security payments

Additional Continuation Benefit

$30,000 CSB payable at the 15-year anniversary with a five-year obligation to remain on active duty

Minimum incentive pay of 2.5 times monthly base pay for AC and 0.5 times monthly base pay for RC at 12 YOS with a four-year service obligation

The FY2016 NDAA includes a provision that would sunset the 15-year career status bonus under the Redux system. After December 31, 2017, no new bonuses would be paid under the Redux program.

The law establishing the Modernized Retirement System requires DOD to develop and submit an implementation plan to Congress not later than March 1, 2016, and establishes January 1, 2018, as the data when the new system will go into effect.

Military retirement costs, which include all payments to current retirees and survivors, have been rising modestly each year, due to a predictable, slow rise in the number of retirees and survivors coupled with cost of living increases. All DOD budgets through FY1984 reflected the costs of retired pay actually being paid out to personnel who had already retired. That is, Congress appropriated the amount of money required to pay current retirees each year as part of each annual defense appropriations bill, commonly referred to as "pay-as-you-go" or "PAYGO."

Since fiscal year 1985, the "accrual accounting" concept has been used to budget for the costs of military retired pay. The unfunded liability resulting from the change in accounting practices is discussed in the next section. Under the accrual accounting system, the DOD budget for each fiscal year includes not the amount of retired pay actually paid to retirees, but rather, a contribution to the military retirement fund sufficient to finance future retirement payouts to current uniformed personnel when they retire. These annual "accrual" contributions accumulate in the military retirement fund, along with interest earned on them.

The amount that the Defense Department must contribute each year to cover future retirement costs is determined by an independent, presidentially appointed, Department of Defense Retirement Board of Actuaries, which decides how much is needed to cover future retirement costs as a percentage of military basic pay. Once military personnel retire, payments to them are made from the accumulated amounts in the military retirement fund, not from the annual Department of Defense budget.

Author Contact Information

Footnotes

Vesting in the military retirement system is commonly referred to as "cliff vesting." Until the 20-year point, there is generally no vesting. At 20 years, the servicemember becomes fully vested. However, individuals can receive retirement benefits with fewer than 20 years of service under the disability retirement system and under Temporary Early Retirement Authority (Section 4403, P.L. 102-484, October 23, 1992).

These figures are for all of DOD non-disability retirees, excluding reserve retirees.

The "pay base" is either the amount of basic pay being received at the time of retirement (for those in the Final Basic Pay System) or the average of the highest 36 months of basic pay received (for those in the High-3 System). See 10 U.S.C. §§1406 and 1407. Basic pay is the principal element of Regular Military Compensation (RMC). The other elements include the Basic Allowance for Housing (BAH) and the Basic Allowance for Subsistence (BAS), which are nontaxable allowances. Basic pay is between 65% and 75% of RMC. RMC excludes all special pay and bonuses, reimbursements, educational assistance, and any value associated with nonmonetary benefits such as health care, commissaries, and post exchanges. For additional discussion of military pay and RMC, see CRS Report RL33446, Military Pay: Key Questions and Answers, by [author name scrubbed] and [author name scrubbed].

This is also frequently referred to as regular non-disability retirement.

Partial years of service are credited as well, with each month equivalent to one-twelfth of a year. Military Retirement Reform Act of 1986, Section 1405(b), P.L. 99-348, July 1, 1986.

In the FY2015 Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act. (P.L. 113-291 §622), Congress reinstated a cap on retired pay of general and flag officers at the Executive Level II salary ($183,300 for 2015). This change applies only to years served after December 31, 2014.

Department of Defense, Valuation of the Military Retirement System, September 30, 2006, DOD Office of the Actuary, November, 2007, p. 12.

Department of Defense, Military Compensation Background Papers: Compensation Elements and Related Manpower Cost Items, Their Purposes and Legislative Backgrounds, April 2005, p. 707.

U.S. Congress, Senate Special Committee on Aging, Developments in Aging: 1999 and 2000, Volume 1, 107^th Cong., 2^nd sess., S.Rept. 107-158 (Washington, DC: GPO, 2001).

37 U.S.C. §354. The bonus can actually be paid in several annual installments if the recipient so wishes, for tax purposes.

Note that this change is an increase in monthly retired pay, not a lump sum at the age of 62.

Covered retired pay is defined as retired pay under title 10, title 14, the National Oceanic and Atmospheric Administration Commissioned Officer Corps Act of 2002 (33 U.S.C. §301 et seq.), and the Public Health Service Act (42 U.S.C.§201 et seq.)

P.L. 114-92 §633. "Retirement age" has the meaning given to the term in Section 2016(1) of the Social Security Act.

This will be calculated by the Secretary of Defense using average personal discount rates in accordance with accepted actuarial principles and taking into consideration cost-of-living-adjustments.

This will be calculated by the Secretary of Defense using average personal discount rates in accordance with accepted actuarial principles and taking into consideration cost-of-living-adjustments.

Also referred to as nonregular retirement. For additional information on reserve pay and benefits, see CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers, by [author name scrubbed] and [author name scrubbed].

Reserve component generally describes the six reserve components of the Department of Defense: the Army National Guard, the Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air National Guard and the Air Force Reserve.

Annual training is a two-week period of active service that usually results in 14 or 15 retirement points.

A day of inactive duty for training typically includes two Unit Training Assemblies (UTAs). The normal drill weekend consists of four UTAs and therefore results in four retirement points. A year of weekend drills earns 48 UTAs/retirement points.

P.L. 110-181 §648

Section 648 of the FY2008 National Defense Authorization Act reduced the age for receipt of retired pay by three months for each aggregate of 90 days of specified duty performed after January 28, 2008 (the date of enactment of the FY2008 NDAA). This authority was not made retroactive to September 11, 2001. The retired pay eligibility age cannot be reduced below 50 and eligibility for medical benefits remains at age 60.

2015 Military Pay Chart at http://www.dfas.mil.

For additional information on DOD's disability process, see CRS Report RL33991, Disability Evaluation of Military Servicemembers, by [author name scrubbed] and [author name scrubbed].

10 U.S.C. §1201 (b) (3) (B). Prior to the FY2008 NDAA (P.L. 110-181 §1641), disability retirement required at least eight years of service or a disability that resulted from active duty or was incurred in the line of duty during war or national emergency.

10 U.S.C. §1401.

10 U.S.C. §1401.

26 U.S.C. §104.

The actual index used to adjust COLA is the CPI-W; the index for urban wage earners and clerical workers. It represents the buying habits of approximately 32% of the noninstitutional population of the United States, Military Compensation Background Papers, Seventh Edition, November 2011, p. 637.

For a discussion of proposed and actual COLA changes from FY1983 to FY2005, see CRS Report 98-223, COLAs for Military Retirees: Summary of Congressional and Executive Branch Action, 1982-2004 (FY1983-FY2005).

For more information on military retirement COLAs and the Bipartisan Budget Act of 2013, see CRS Report R43393, Reducing Cost-of-Living Adjustments for Military Retirees and the Bipartisan Budget Act: In Brief, by [author name scrubbed] and [author name scrubbed].

37 U.S.C. §1008(b).

Presidential memorandum, Subject: Tenth Quadrennial Review of Military Compensation, August 2, 2005.

Report of the 11^th Quadrennial Review of Military Compensation, June 2012.

National Defense Authorization Act for FY2013, P.L. 112-239 subtitle H, 126 Stat. 1632, 1787 (2013).

Military Compensation and Retirement Modernization Commission Final Report, January 2015. p. 23.

The Employee Retirement Income Security Act (ERISA) requires firms to vest employees in company-provided defined benefit retirement plans either gradually over a period of seven years or by five years for cliff-vesting. In addition, a defined contribution plan must cliff vest within three years or up to six years for gradual vesting.

This includes the 1% contribution therefore the total government contribution would not exceed 5% of the member's basic pay.

2015 Military Pay Chart at http://www.dfas.mil.

MCRMC Final Report, pp. 29-30 and Table 2. The commission projected the Navy would require the highest multiples of continuation pay for enlisted personnel (4.8 times monthly basic pay) and the Air Force would require the highest multiples of continuation pay for officers (15.9 times monthly basic pay) to maintain their active component force profiles.

Department of Defense, FY2013 Valuation of the Military Retirement System, Office of the Actuary, May 2014.

Department of Defense, FY2013 Valuation of the Military Retirement System, Office of the Actuary, May 2014.