Some politicians want to reinvent government. Mark D. Pyle, a lieutenant in the Navy, wants to reinvent military retirement. In a paper at the Naval Postgraduate School in Monterey, Calif., he proposes setting up a 401(k) plan, much along the lines of those in private business. It would provide incentives to motivate talent to join the armed forces, while cutting costs.
The current military retirement system, he suggests, is costly, outmoded and fails as an incentive for the all-volunteer armed forces. Members of the military now qualify to receive a pension after serving 20 years. If they serve less than 20 years, they receive nothing, he writes. That's no way to attract people in the competitive workplace the military faces.
Compensation and benefits make up one of the largest parts of the military budget.
"The military retirement system may be a government function that could be performed by private organizations," he notes in his study.
"Seventeen percent of all service members actually stay in the military for 20 years or more and receive retirement benefits. This is in sharp contrast to the 65% to 90% participation rates of 401(k)s offered by private corporations.
"Several government studies have shown that the value of the retirement benefit to service members far exceeds that received by their civilian counterparts, and the cost to the government has been significantly higher as well."
In 1995, the U.S. government spent an estimated $26.4 billion on military retirement pay, according to the Statistical Abstract of the United States. That's just under half of the $54.7 billion the government spent on military procurement.
In an era of declining defense budgets, the difference is significant. By contrast in 1985, military retirement pay totaled $17 billion, less than a quarter of the $70.4 billion spent for procurement.
His study details how the military could adopt a 401(k), finance its attendant costs and make the transition from its current unfunded system.
"The objective of the military retirement system is to provide adequate compensation to attract and retain high-quality individuals to serve in the armed forces," he writes in his study.
"This objective must not be overlooked in any attempt to redesign the military retirement system. The military must provide competitive compensation to attract the individuals that are needed for today's high technology military. However, there is significant budgetary pressure to reduce military retirement compensation."
"Privatizing the military retirement system may be an option that Congress will consider as part of this process," he continues. "Adopting private sector retirement policies may provide better compensation for all service members at less cost to the government while enhancing the integrity and survivability of the military retirement system."
The "retention of qualified officers and enlisted people is essential to maintaining the military's combat readiness," he writes. The 401(k) could become a powerful weapon in maintaining the armed forces.
One can envision a 401(k) marketing campaign: "Semper Fidelity."
