Reserve Retirement Reform

A Viewpoint on Recent Congressional Proposals

by Beth J. Asch, James Hosek, David S Loughran

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More intensive use of the reserve components in national defense in recent years has resulted in greater attention being paid to the adequacy and efficiency of the reserve compensation system. Four bills are pending in Congress to reduce the age when reservists can begin to receive retirement benefits. One would allow reservists to begin receiving retirement pay immediately upon completing 20 years of creditable service, with the last six years as a member of a reserve component. Two related proposals would lower the retirement annuity age to 55. Another would set the retirement age on a sliding scale that depended on years of service (YOS); those with more YOS can retire earlier, as early as age 54. This report provides input regarding these proposals and the broader issues surrounding reserve retirement reform. The authors found that the per-capita cost of the current retirement system is dramatically less than the per-capita cost under the immediate annuity and age-55 proposals. The per-capita cost of the sliding-age alternative is the least expensive of the three alternatives, reflecting the low prevalence of new retirees below age 60 with sufficient YOS to qualify for retirement at ages below 60. Although it is important to recognize that deferring some portion of compensation can be cost-effective, the results argue in favor of providing compensation on a current basis rather than on a deferred basis.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Objectives of Reserve Compensation and Retirement

  • Chapter Three

    Congressional Retirement Reform Proposals

  • Chapter Four

    Toward the Development of Retirement Reform Alternatives

  • Appendix A

    The Reserve and Active-Duty Retirement Systems

  • Appendix B

    Principles of Military Compensation

  • Appendix C

    Data

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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