MCRMC Recommendations Overview

MCRMC Recommendations Overview

Congressional Mandates Established by the FY13 NDAA* to conduct a review of military compensation and retirement systems and to make recommendations to modernize them to: ensure the long term viability of the All Volunteer Force by sustaining the required human resources of that force during all levels of conflict and economic conditions enable the quality of life for members of the Armed Forces and the other uniformed services and their families in a manner that fosters successful recruitment, retention, and careers for members of the Armed Forces and the other uniformed services modernize and achieve fiscal sustainability for the compensation and retirement systems for the Armed Forces and the other uniformed services for the 21st century Required to submit a report by February 1, 2015, to the President of the United States and Congress * Pub. L. 112 239, as amended by FY14 NDAA Pub. L. 113 66. Chart 2

Commission s Process Key Inputs Presidential Principles (Sep. 12, 2013) Deputy Secretary of Defense (DSD) letter outlining DoD s efforts to identify potential compensation efficiencies (Nov. 1, 2013) DSD letter with retirement reform options for the Commission s consideration (Mar. 6, 2014) Chairman Joint Chiefs of Staff (JCS) memorandum providing JCS compensation reform principles (Mar. 6, 2014) Commission survey of more than 450,000 Active Component (AC) and Reserve Component (RC) Service members, plus 1.3 million retirees, with more than 150,000 survey responses Outreach Held 8 town halls across the country with Service members, retirees, their families, and the general public Conducted 8 public hearings with installation commanders, noncommissioned officers, spouses, and representatives of advocacy groups with specific experience in military compensation, health care, and quality of life issues Visited 55 installations throughout continental United States, isolated locations, and overseas Met with 98 Military and Veterans Service Organizations, academic institutions, and other private entities Held 55 Commissioner executive session meetings Interagency Working Groups DoD health care and costing working groups Military Coalition retirement and health care working groups Numerous staff level data gathering meetings Chart 3

Pathway to Recommendations Ensure the Viability of the All Volunteer Force Do No Harm Maintain/Improve Overall Value of Compensation and Benefits to Service Members Maintain/Improve Flexibility of Compensation and Benefits System for Services Overall Design of Compensation and Benefits Package (Status Quo Remains Appropriate) Compensation and Benefit Program Effectiveness and Efficiency Level of Compensation and Benefits (Service Flexibility) Delivering Benefits as Intended? Delivering Benefits Cost Effectively? Clear Path to Modernization? 15 Commission Recommendations

Effects on Retention Current and projected force profiles are virtually identical (other Services/Components show similar results)

Effects on a Leave and Earnings Statement CURRENT ALTERNATIVE CHANGES COMPENSATION COMPENSATION IN SYSTEM SYSTEM COMPENSATION ENTITLEMENTS Basic Pay $3,076.20 $3,076.20 $0.00 Basic Allowance for Subsistence $357.55 $357.55 $0.00 Basic Allowance for Housing $1,152.00 $1,152.00 $0.00 Basic Allowance for Health Care $0.00 $305.00 $305.00 Thrift Savings Plan, Government Automatic Contribution $0.00 $30.76 $30.76 Thrift Savings Plan, Government Matching Contributions $0.00 $92.29 $92.29 TOTAL ENTITLEMENTS $4,585.75 $5,013.80 $428.05 DEDUCTIONS Standard Deductions $844.33 $844.33 $0.00 Thrift Savings Plan, Member Contributions $92.29 $92.29 $0.00 TOTAL DEDUCTIONS $936.62 $936.62 $0.00 ALLOTMENTS TRICARE Dental $32.89 $32.89 $0.00 TRICARE Choice Health Plan $0.00 $236.91 $236.91 TOTAL ALLOTMENTS $32.89 $269.80 $236.91 MONTHLY PAY $3,616.24 $3,807.38 $191.14

Effects on Assets Available for Retirement Assets of a Retiring Active Duty E7, Current vs. Blended Retirement Plans

Recommendation 1: Retirement 83% of Service members leave service without any Government sponsored retirement assets Current Service force profiles can be maintained with a blended retirement system consisting of most of the current defined benefit, defined contribution through Thrift Savings Plan (TSP), and continuation pay at 12 years of service (YOS) A blended retirement plan is expected to increase the Government sponsored assets that Service members have available at 20 YOS (with investment of continuation pay) Service members would benefit from additional choice in structuring their defined benefit annuities Services would benefit from flexibility to create differing force profiles for various career fields Recommendation (Details on Following Slide) Grandfather current Service members and retirees, but allow opt in to blended retirement plan Implement automatic enrollment and matching TSP for all Service members Set defined benefit multiplier at 2.0 (40% of base pay for Service members who retire with 20 YOS) Implement continuation pay at 12 YOS to provide midcareer retention incentives Implementation 154 DoD Budget (990) (1,185) (1,238) (1,297) (1,357) (1,894) (1,894) (1,894) Federal Outlays 522 1,564 1,645 1,719 1,792 (4,666) (4,666) (4,666) Chart 8

Recommendation 1: Retirement Details Recommendation Details Defined benefit Maintain vesting at 20 YOS for standard retirement Set defined benefit multiplier at 2.0 vs. current 2.5 Defined contribution (TSP) Automatic enrollment of Service members to contribute 3% of basic pay at service entry date Automatic Government contributions of 1% of Service members basic pay at service entry date Government matching of Service member contributions of up to 5% of basic pay from beginning of YOS 3 through YOS 20 Vesting at beginning of 3 YOS (2 years and 1 day) Continuation pay at 12 YOS to provide midcareer retention incentives Basic continuation pay of 2.5 times monthly basic pay for Active Component (AC) members (0.5 of AC pay for Reserve Component (RC) members) Additional continuation pay from Services as needed to maintain desired force profiles Service member defined benefit annuity choice Choice to receive all or part of pre Social Security age defined benefit annuities as lump sum payments Full annuities resume at full Social Security receipt age to ensure steady old age income Service career field flexibility Authority to propose adjustments to YOS to qualify for defined benefit annuity for individual career fields Enables differing force profiles to resolve long term manpower challenges Requires 1 year waiting period after YOS adjustment is proposed to the Congress Chart 9

Recommendation 2: Survivor Benefit Plan Survivor Benefit Plan (SBP) is a popular, affordable program that provides lifetime monetary benefits to retirees survivors SBP is offset by VA Dependency Indemnity Compensation (DIC) a spouse cannot receive the full amounts of both SBP and DIC benefits In FY 2013, 323,903 survivors received SBP payments; 20.7% also received DIC payments, making them subject to the SBP DIC offset DoD subsidizes SBP benefits; the maximum SBP premium is 6.5% of full retired pay w/o DoD subsidy the premium (in FY 2013) would have been 11.25% Recommendation Maintain the existing SBP program for Service members who want to select subsidized coverage that would remain subject to the SBP DIC offset Implement an additional SBP program for Service members who elect to pay an annually determined unsubsidized premium to ensure survivors receive full SBP and full DIC payments (no offsets) Provide a one time SBP open season for retirees to opt in to the new SBP program Implementation 4 4 DoD Budget (66) (66) (80) (80) (90) (160) (160) (160) Federal Outlays (21) (51) (49) (43) (53) Chart 10

Recommendation 3: Financial Literacy Lack of choice in current compensation programs result in complacency and insufficient knowledge among Service members with regard to managing their personal finances 90% of Service members indicated they would like to receive more financial education; 82% indicated their spouse should be included Service members appear to be more at risk than the national population when managing financial products Recommendation Increase the frequency and strengthen the content of financial literacy training Provide professional financial literacy training at appropriate career points Assign responsibility for financial literacy training and monitoring to DSD Provide an online budget planner with automatic updating and prompting through Defense Finance and Accounting Services Restructure leave and earnings statement to include TSP balances and value of benefits paid by DoD Implementation 10 10 5 DoD Budget 85 85 80 75 75 75 75 75 Federal Outlays 85 85 80 75 75 75 75 75 Chart 11

Recommendation 4: Reserve Component Statuses The current RC status system is complex, aligns poorly to current training and mission support requirements, fosters inconsistencies in compensation, and complicates effective budgeting This complicated status system also causes mobilization difficulties that impede operational commanders who need to employ the RC Simplifying RC statuses has broad support Recommendation Replace the 30 current RC duty statuses with 6 broader statuses Issue new orders only when an authority changes Amend orders when a duty status, purpose, or funding source changes Implementation DoD Budget Federal Outlays Chart 12

Recommendation 5: Joint Readiness Primary goal is to maintain the All Volunteer Force A critical element of the Force is joint readiness There are challenges to maintaining readiness capabilities in peacetime For example, in medical readiness: Military medical requirements are not jointly developed and do not have a high level joint focus Beneficiary care does not provide the best training opportunities to maintain clinical skills directly related to medical readiness, which leads to a misalignment of military medical personnel Military Treatment Facilities (MTFs) would benefit from a different case mix, but DoD has limited means to affect workload or access to trauma care cases Flow of health care funding does not allow for distinction between military medical readiness and delivering medical care to beneficiaries Recommendation (Details on Following Slide) Improve the oversight of joint medical readiness with a newly established Joint Readiness Command and a Joint Staff Medical Readiness Directorate Establish Essential Medical Capabilities (EMCs) to ensure certain critical medical capabilities in the military Implementation 20 10 DoD Budget 20 159 298 298 298 298 298 298 Federal Outlays 20 159 298 298 298 298 298 298 Chart 13

Recommendation 5: Joint Readiness Details Recommendation Details Joint Readiness Command (JRC) Functional unified command led by a four star General/Flag Officer Includes a subordinate joint medical function Required structure and personnel may be realigned from current Joint Staff functions Participates in annual planning, programing, budgeting, and execution process J 10 Medical Readiness Directorate Led by a three star military medical officer Current J 4 Joint Force Surgeon billet transitions to the increased authorities of the J 10 Statutory requirement for DoD to maintain Essential Medical Capabilities (EMCs) EMCs defined as a limited number of critical medical capabilities that must be retained within the military Secretary of Defense approves, establishes policies related to, and reports to Congress annually on EMCs JRC identifies EMCs, establishes joint readiness requirements consistent with EMCs, monitors and reports on Services adherence to EMC policies and standards, and monitors allocation of medical personnel to ensure maintenance of EMCs Medical Programs Funding Active duty family, retiree, and RC health care should be funded from the Services MILPERS accounts Medicare Eligible Retiree Health Care Fund (MERHCF) should be expanded to cover health care and pharmacy for non Medicare eligible retirees Create a new trust fund for health care expenditures appropriated in the current year MTFs funded through a revolving fund using reimbursements for care delivered MTF operations that exceed reimbursement for care delivered to be funded from Services operations and maintenance accounts as cost of readiness Chart 14

Recommendation 6: Health Care Benefit TRICARE has a weak health care network because of low reimbursement rates (Medicare rate or less) TRICARE limits family members access to care with a frustrating referral process TRICARE beneficiaries prefer greater choice in health care Structural aspects of the TRICARE program have hindered advancements and efficient operations Recommendation (Details on Following Slide) AC Service members should continue to receive health care through their units or MTFs DoD should establish a health program to offer a selection of commercial insurance plans to other beneficiaries AC family can purchase a plan funded with a new Basic Allowance for Health Care (BAHC) RC members can purchase a plan from the DoD program, at varying cost shares Office of Personnel and Management (OPM) administers the program with DoD input and funding No changes to eligibility for care at MTFs, pharmacy benefit, dental benefit, or TRICARE For Life Increase non Medicare eligible retirees cost shares gradually over 15 years Institute a program of education and benefits counseling Finance health care programs through trust funds $ Millions 2016 2017 2018 2019 2020 2053 2054 2055 Implementation 100 100 DoD Budget (3,900) (3,900) (6,173) (6,234) (6,292) (6,666) (6,666) (6,666) Federal Outlays 100 100 (1,242) (1,374) (1,507) (3,229) (3,229) (3,229) Chart 15

Recommendation 6: Health Care Benefit Details Recommendation Details Selection of commercial insurance plans For AC families, RC members and families, non Medicare eligible retirees and families, survivors, and certain former spouses Offer an array of health plan options that vary in type, covered benefits, and price, with several choices in every location Beneficiaries continue to be eligible for care at MTFs Leverage OPM's experience to administer the program DoD retains topline for this program (into a trust fund), as well as the tools to influence readiness Basic Allowance for Health Care (BAHC) AC Service members receive BAHC to offset the vast majority of dependent health care costs BAHC based on the costs of median plans available in the family s location, plus average out of pocket costs Part of BAHC used to directly transfer the premium for the plan the family has selected to the respective insurance carrier Remainder of BAHC available to AC families to pay for copayments, deductibles, and coinsurance Establish a program to assist AC families that struggle with high cost chronic or catastrophic conditions until they reach the catastrophic cap RC members able to purchase a plan from DoD program at varying cost shares Reduce cost share to 25% to encourage RC health and dental readiness and streamline mobilization of RC personnel When mobilized, RC members receive BAHC for dependents; select a DoD plan or apply BAHC to current (civilian) plan Non Medicare eligible retirees cost contributions remain lower than the average Federal civilian employee cost shares, but increase 1% annually over 15 years Financed through trust funds MERHCF expanded to cover the health care and pharmacy programs for non Medicare eligible retirees DoD, Department of Homeland Security, Department of Commerce, and Health and Human Services transfer funding to OPM s Employee Health Benefits Fund, in a segregated account New trust fund created and managed by DoD for health care expenditures appropriated in the current year Chart 16

Recommendation 7: Exceptional Families (ECHO) Access to Medicaid home and community based services (HCBS) waiver benefits provided at the state level is a ongoing issue for military families with exceptional family members (EFMs) Many Service members encounter HCBS waiting lists that exceed their time assigned to a location The average waiting period in FY 2012 across all HCBS enrollment groups and all states was 27 months, and 47 months for EFMs with intellectual or developmental disabilities An FY 2013 DoD commissioned study found that military families with special needs rely on Medicaid to obtain specific supplementary services that are either not provided or not fully covered by TRICARE Recommendations Increase services covered through TRICARE Extended Care Health Option (ECHO) to more closely align with state Medicaid waiver programs Examples include custodial care and respite care hours that match state offerings Expanded services should be subject to the existing ECHO benefit cap of $36,000 per fiscal year per dependent Modernizes program to better serve current demographics of the Force Implementation 2 1 DoD Budget 49 96 190 190 190 190 190 190 Federal Outlays 49 96 190 190 190 190 190 190 Chart 17

Recommendation 8: DoD VA Collaboration Findings Collaboration could be improved, which would enhance health care for transitioning Service members Data sharing initiatives face persistent challenges Drug formularies for transitioning Service members continue to differ between the DoD and VA DoD and VA have nonstandardized policies that impair collaboration and reduce cost effectiveness Recommendation Grant additional authorities and responsibilities to the Joint Executive Committee to standardize and enforce collaboration between the DoD and VA to: Oversee electronic health record compliance with national health information technology standards Approve in advance any new DoD or VA medical capital asset acquisition or modernization Define common services and planned expenditures for them, and certify consistent with strategic plan Create a uniform formulary to include all drugs identified as critical for transition from DoD to VA status Establish a standard reimbursement methodology for DoD and VA provision of services to each other Implementation DoD Budget Federal Outlays Chart 18

Recommendation 9: Commissaries and Exchanges Numerous studies have recommended consolidating the three exchanges in pursuit of improved costeffectiveness; similar opportunities exist for combining commissaries and exchanges Organizational boundaries, different cultures and business strategies, competing incentives, and restrictive policies have inhibited the achievement of more substantial cooperation and savings across defense resale activities Recommendations Maintain commissary patrons grocery savings, as well as Services Morale Welfare and Recreation (MWR) funds Achieve efficiencies by consolidating DoD s commissaries and three exchange systems into a single Defense Resale Activity Facilitates consolidation of back end operations and aligns incentives across commissaries and exchanges Allows greater flexibility related to where products are sold and how they are priced Food and other essential items should continue to be sold at cost Implementation 58 93 106 120 89 DoD Budget 17 (78) (184) (313) (426) (515) (515) (515) Federal Outlays 17 (78) (184) (313) (426) (515) (515) (515) Chart 19

Recommendation 10: Child Care Findings As of September 2014, there were more than 11,000 children on waiting lists for military child care DoD has established a goal of providing a viable option for care within 90 days of need Available data indicates that the goal is not being consistently met, particularly for infants and toddlers Responding to demand with appropriate facilities and staff in a timely fashion can be challenging Recommendations Reestablish authority to use operating funds for minor construction projects (up to $15 million) when building, expanding, or modifying Child Development Program (CDP) facilities, with an emphasis on spaces for children up to 3 years of age (authority only not requirement) Establish standardized reporting of child care wait times Exempt child care personnel from future Departmental hiring freezes and furloughs Support current DoD efforts to streamline CDP position descriptions and background checks Implementation DoD Budget Federal Outlays Chart 20

Recommendation 11: Service Member Education Substantial duplication between education programs Post 9/11 GI Bill, Montgomery GI Bill Active Duty (MGIB AD), and Reserve Educational Assistance Program (REAP) Post 9/11 GI Bill is typically more generous than MGIB AD and REAP Post 9/11 GI Bill housing stipend was meant to support Service members and their families; the stipend is sometimes nearly twice actual room and board costs when used by dependents Veterans may receive Post 9/11 GI Bill benefits, including the housing stipend, while receiving unemployment insurance payments Recommendations Sunset MGIB AD and REAP Increase Post 9/11 GI Bill transferability requirements to 10 YOS plus an additional commitment of 2 YOS to provide stronger retention incentives Sunset housing stipends for dependents Eliminate eligibility for unemployment insurance for anyone receiving a Post 9/11 GI Bill housing stipend Implementation DoD Budget (17) (17) (17) (17) (17) (17) (17) (17) Federal Outlays 151 (2,102) (4,649) (4,466) (4,535) (4,774) (4,774) (4,774) Chart 21

Recommendation 12: Transition Assistance Unemployment is still a challenge facing far too many of our veterans, especially for veterans aged 18 to 24, who had higher unemployment rates in 2013 than nonveterans of the same age group (21.4 percent and 14.3 percent, respectively) Recommendations Require mandatory participation in the Transition GPS education track for those planning to attend school after separation or those who have transferred their Post 9/11 GI Bill benefits Review the core curriculum for Transition GPS to reevaluate whether the current curriculum accurately addresses the needs of transitioning Service members Encourage states One Stop Career Center employees to attend Transition GPS classes to improve their personal connections with veterans Permit state Departments of Labor to work directly with state VA offices to coordinate implementation of Jobs for Veterans State Grant funds Require a one time joint report from DoD, VA, and Department of Labor regarding the challenges employers face when seeking to hire veterans Implementation DoD Budget 13 13 13 13 13 13 13 13 Federal Outlays 13 13 13 13 13 13 13 13 Chart 22

Recommendation 13: Nutrition Assistance (FSSA) Family Subsistence Supplemental Allowance (FSSA) served only 285 Service members in FY 2013, in large part because Supplemental Nutrition Assistance Program (SNAP) is often more generous and may be perceived to have less stigma or negative effect on a Service member s career U.S. Department of Agriculture estimates that between 2,000 and 22,000 AC Service members received SNAP benefits in FY 2012 Estimates vary widely because States are not required to collect data on the actual number of AC Service members receiving SNAP SNAP is not available to Service members stationed overseas Recommendations Sunset FSSA in the United States, Puerto Rico, Guam, and other U.S. territories where SNAP is available Retain FSSA for Service members in overseas locations Collect and analyze data on Service member households using SNAP on a regular basis Implementation DoD Budget (1) (1) (1) (1) (1) (1) (1) Federal Outlays Chart 23

Recommendation 14: Space Available Travel A 2012 analysis of 678,382 AC Service members from 2001 to 2006 showed that many Operation Iraqi Freedom and Operation Enduring Freedom deployments were for fewer than 120 days Unaccompanied dependents of Service members who are deployed for more than 120 days may fly on military aircraft when there is space available Deployments are a well documented time of stress for military families Recommendation Allow unaccompanied dependents of Service members deployed for at least 30 days to use Space Available travel under their existing priority category Implementation DoD Budget Federal Outlays Chart 24

Recommendation 15: Military Student Identifier Military dependent children experience unique stresses associated with parental deployments and frequent relocations that may adversely affect academic performance Children of Service members cannot currently be identified as a unique group in nationwide reporting of student performance and attendance At least 12 states have implemented, or are in the process of implementing, a military dependent student identifier, but inconsistencies in current implementations are introducing reporting errors Recommendation Establish a national military dependent student identifier Require schools to identify students who have parents or guardians who are AC Service members in reporting for the Elementary and Secondary Education Act Implementation DoD Budget Federal Outlays Chart 25