Accession Number : ADA331023

Title :   Funding Military Retirement.

Descriptive Note : Research brief.

Corporate Author : RAND ARROYO CENTER SANTA MONICA CA

PDF Url : ADA331023

Report Date : 1997

Pagination or Media Count : 2

Abstract : For many years, the Defense Department funded military retirement on a 'pay-as-you-go' basis, estimating how much money was needed to write checks for current retirees and adding that amount to the budget. This system worked well as far as paying retirees went, but it did not hold policymakers fiscally responsible for today's decisions affecting the size of the future retirement bill, e.g., increasing the force size. To promote better management, in 1984, Congress directed a switch to an accrual method of funding retirement. Under this procedure, each year the services transfer into a fund the amount necessary to pay for future retirements. The amount transferred is a percentage of the service's basic pay. Thus, if a service implements policies that affect the future value of retirement benefits, it sees the budgetary consequences of that decision immediately in the form of an increase in the amount transferred to the retirement fund. Analysis by Arroyo Center researchers William Hix and William Taylor, reported in A Policymaker's Guide to Accrual Funding of Military Retirement, suggests that the current procedures do not fully capture the intent of the legislation and that changes could eventually save the Army as much as $5-6 billion annually.

Descriptors :   *MILITARY PERSONNEL, *RETIREMENT(PERSONNEL), DEPARTMENT OF DEFENSE, COST ESTIMATES, COST MODELS, SALARIES, RESOURCE MANAGEMENT, BENEFITS, FEDERAL BUDGETS.

Subject Categories : Administration and Management
      Economics and Cost Analysis
      Personnel Management and Labor Relations

Distribution Statement : APPROVED FOR PUBLIC RELEASE