THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, August 4, 1995 TAG: 9508040452
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY DALE EISMAN, STAFF WRITER
DATELINE: WASHINGTON LENGTH: Medium: 63 lines
WASHINGTON - The nation's top military leaders are trying to head off a congressional plan that could reduce the future retirement benefits of more than 600,000 active duty and reserve service members.
The proposal, which would change the way benefits are calculated for people who entered the service before 1980, is a ``break of faith'' with those affected, the chiefs of the Army, Navy, Marines and Air Force asserted in a letter released Thursday.
The letter also was signed by Gen. John M. Shalikashvili, the chairman of the Joint Chiefs of Staff, and Adm. William A. Owens, the vice chairman.
The new plan, part of the larger Budget Reconciliation Act moving through Congress, was endorsed earlier this week by the House National Security Committee. It moves to the full House next.
Under the plan, each service member's monthly pension check would be calculated based on his or her average pay for the 12 months preceeding retirement. Currently, those benefits are based on the member's pay at the retirement date.
Though the change appears subtle, it could produce a significant reduction in benefits, the chiefs said. In most cases the move would result in a 3 percent to 5 percent cut in their pensions, but the cut could be as high as 8 percent.
For example, a Navy senior chief petty officer retiring this year after his 26th anniversary in uniform would receive $1,753 a month; that's 8.4 percent less than the $1,914 the retiree would get with the current formula.
Those who have enlisted since 1980 have their pensions figured using a different formula, one based on their average pay for the three years in which they earned the most.
The new plan was endorsed earlier this week by the House National Security Committee. In a statement, committee chairman Floyd D. Spence, a South Carolina Republican, cast the change as necessary to meet the committee's responsibility to help reduce the federal budget deficit.
The Congressional Budget Office estimates the new formula would save taxpayers almost $650 million over the next seven years.
But the service chiefs warned that the formula might actually wind up costing the government more money.
That's because members who now retire at their anniversary date may be motivated to stay in uniform for an extra 12 months, so that their pensions will be based entirely on their new, higher pay.
In such cases, the military will be paying the members' full salaries, along with entitlements such as housing allowances, for an extra year, the chiefs noted.
A committee spokesman asserted Thursday that other retirement changes endorsed by the panel, including a change in the effective date of annual cost of living pension increases, would actually produce a net increase in benefits of more than $1.2 billion over seven years.
The spokesman conceded that the formula change has ``an unfairness to it'' because it would cut benefits to people who joined the service anticipating their pensions would be calculated using the current formula.
The committee ``approved this very reluctantly,'' and is still looking for other alternatives, the spokesman said.
KEYWORDS: MILITARY RETIREES by CNB