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Prior to 1984, military personnel force managers had little incentive to control retirement budgets and payments, which equaled $16 billion in 1984,since any decisions made would not be reflected in budgets for 20 or more years. Congress directed the Department of Defense in 1984 to switch to an accrual method for accounting for military retirement in the budget process that would replace the current outlays for retirement in the DoD budget with an amount that reflected the present value of the estimated cost of future retirement benefits earned by each incoming cohort of personnel. The accrual method has helped improve management of retirement benefits and liabilities, but has failed so far to produce either better estimates of retirement costs or effective incentives for better management of the force structure. The authors provide recommendations that would improve cost estimation and increase accountability for force-management decisions.
Table of Contents
Chapter 1
Introduction
Chapter 2
The Objectives and Design of the Military Retirement Accrual Method
Chapter 3
Management Incentives in the Current System
Chapter 4
Strengthening Management Incentives: Recommendations for Change
Chapter 5
Fiscal Impact of Rand Recommendations
Chapter 6
Conclusions
Appendix
Sample Calculation of Normal Cost Percentage
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