[RETVET-INFO] Hagel, Ryan defend retiree COLA caps, except for disabled
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- Date: Thu, 26 Dec 2013 12:16:19 -0600
Hagel, Ryan defend retiree COLA caps, except for disabled
By Tom Philpott
Special to Stars and Stripes
Published: December 26, 2013
Defense Secretary Chuck Hagel and Rep. Paul Ryan, R-Wis., chairman of the House
Budget Committee, appear to be in sync in defending the controversial cap that
Congress has imposed on cost-of-living adjustments for "working age" military
retirees starting in January 2016.
They should be, Ryan is suggesting, because the idea for the COLA cap came to
him from the Department of Defense. And the budget deal he struck will help to
ease automatic defense spending cuts from sequestration that military leaders
said were decimating force readiness.
Hagel and Ryan also agree, however, that it was a mistake for Ryan and his
negotiating partner, Sen. Patty Murray, D-Wash., chairman of the Senate Budget
Committee, not to have shielded more than 100,000 servicemembers retired on
medical disability from the planned COLA caps.
Therefore, even as Congress forwarded the Bipartisan Budget Act on to President
Obama to be signed into law, Ryan said he and Murray will work to amend it so it
excludes those medically retired and their survivors from the COLA caps "well
before" they are to take effect.
Ryan wrote this in a guest editorial in the USA Today.
At a Pentagon press conference, Hagel embraced the Ryan-Murray budget deal after
it passed both the House and Senate by comfortable margins. Defense leaders, he
said, are "prepared to engage the Congress in achieving compensation reform. But
any changes to cost-of-living adjustments should not apply to medically disabled
retirees. These retirees need to be exempted from the changes in the budget
agreement."
The vast majority of retirees are non-disabled, but the COLA cap provision in
the Bipartisan Budget Act makes no distinction. Unless the law is amended, COLAs
for all military retirees under age 62 will be capped after 2015 at one
percentage point below annual inflation as measured by the government's Consumer
Price Index or CPI.
At age 62, full COLAs would be restored and annuities reset to levels retirees
would have seen at that age had full COLAs been in effect since retirement.
Impacted retirees, however, would never get back money lost annually before 62
under the CPI-minus-one-percent formula.
The Congressional Budget Office estimates savings to the Department of Defense
of $6.3 billion over the first decade the COLA cap is in effect. The impact on
individuals will vary based on rate of inflation.
For example, if an enlisted member in pay grade E-7 retirees at age 40 with an
initial annuity of $23,000, and if cost of living climbs an average of three
percent a year, then by age 62 the COLA capped of two percent would cut $83,000
off the total value of E-7 retired pay. However, if inflation averages two
percent a year, the loss by age 62 falls to $72,000.
An officer who retirees as an O-5 at age 42, with an initial annuity of $43,000,
stands to lose more than $124,000 by age 62 with a CPI-minus-1 COLA, assuming
average inflation of three percent. If inflation, however, averages two percent,
the COLA cap would dampen retired pay for that officer by $109,000 by age 62.
Military Officers Association of America, which prepared these estimates, also
produced numbers showing the effect of the COLA cap on some few members forced
to retire early on medical disability.
An E-6 who retires at age 32, after 12 years of service, due to injury or
illness would lose more than $45,000 in retired pay by age 62 if inflation were
to average three percent. An O-3 officer medically retired at 34 after 12 years
would lose more than $63,000 in retired pay by age 62.
The Senate followed the House by a week in approving the budget deal, as a dozen
Republicans joined every Senate Democrat in voting for the bill despite a rising
chorus of criticism from military retirees, careerists nearing retirement and by
military association and veterans' groups.
The intensity of the political heat encouraged a number of lawmakers to
introduce bills immediately that would replace the COLA cut with cost-cutting
alternatives their constituents might find more palatable.
For instance, Sens. Mark R. Warner, D-Va. and Tim Kaine, D-Va., introduced
legislation to replace the COLA cap with language that would block companies
from using foreign tax havens to avoid U.S. taxes. That idea isn't popular with
Republicans who oppose any kind of tax increase.
Rep. Mike Fitzpatrick, R-Pa., instead wants to replace the COLA cuts with a bill
to tighten the Refundable Child Tax Credit program so illegal immigrants can't
abuse it and receive fraudulent payments. Fitzpatrick cited recent findings from
the Treasury Department's inspector general of billions of dollar being paid
improperly to undocumented workers.
The budget deal Ryan and Murray struck softens the effect of budget
sequestration by $63 billion across 2014 and 2015, with half of it bringing
budget relief to the Department of Defense. It shelves about one third of
across-the-board defense spending cuts expected those years from the
sequestration mechanism adopted in the 2011 Budget Control Act.
Hagel said the deal restores some predictability to defense spending near term
but DOD still faces "very difficult budget decisions." With defense budgets
still capped $70 billion below requested levels for 2014 and 2015, Hagel said,
DOD still must make deep cuts to overhead and infrastructure costs, "tough
choices on force structure" and reform military compensation.
Even as Murray moved to distance herself from the COLA cap provision in the deal
she negotiated, Ryan defended it. He called current retirement benefits generous
and said most retirees to be impacted by the COLA caps will be working in second
careers anyway. He also echoed warnings from Hagel and the Joint Chiefs about
the perils of rising personnel costs.
"For me, there's simply no choice between responsible reforms of military
compensation and making what our military leadership has called
'disproportionate cuts to military readiness and modernization,' " Ryan
explained. "Every time we kick the can down the road, we put our troops' combat
readiness at risk."
Send comments to Mr Philpott at Military Update, P.O. Box 231111, Centreville,
VA, 20120, email milupdate@xxxxxxx or twitter: Tom Philpott @Military_Update
NOTE: To send an E-Mail message to Rep Ryan, send it to
Budget.Republicans@xxxxxxxxxxxxxx
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http://www.stripes.com/news/us/hagel-ryan-defend-retiree-cola-caps-except-for-di
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SOURCE: Stars and Stripes article at
http://www.stripes.com/news/us/hagel-ryan-defend-retiree-cola-caps-except-for-di
sabled-1.259339
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