COLA Cutback Angers Retirees, Spouses

Ann Wade, the wife of a recently retired Marine Corps pilot, watched the recent budget deliberations in the House and Senate with outrage.

Having said goodbye to her husband twice a she left for combat and raising two children when he trained and deployed elsewhere, she felt betrayed by a Congress that voted to ease the pain of sequester cuts by finding budget savings elsewhere, including $6 billion from future slowdowns in military retirement pay growth.

Now the bill will cause the Wades to lose tens of thousands of dollars in retired pay over the next two decades. For the 0.2 percent of the U.S. population that will retire from the military and go on to continue working, as will the Wades, this translates into huge losses in future buying power.

Wade, who lives near Camp Pendleton, Calif., noted that the White House’s Joining Forces veterans employment initiative has a saying, “You fought for us, now we’ll fight for you.”

“Well, I don’t think so,” she said bluntly. “This sounds like the big screw job.”

The vehicle is the $1 trillion Bipartisan Budget Act on Dec. 18, approved by the Senate, which provides $63 billion in relief from sequester cuts over the next two years. Included in the deal forged by Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., is a reduction to the annual cost- of-living adjustment, or COLA, for military pensions of retirees under age 62.

They would get 1 percentage point below any increase in consumer prices. Atage62, they would get a one-time “catch-up,” under which their retired pay would be restored to the level it would have been without the caps.

They would then get full COLAs from that point on, but the loss of tens of thousands of dollars during their working-age military retirement years would remain.

‘No Honor’

Those who have spent the last12 years fighting two wars, often sacrificing health, marriages and more for their country, had harsh words to describe their pain.

“I’ve never been ashamed of my country until this moment. This country has no honor anymore,” said Air Force Tech. Sgt. Israel Del Toro Jr., who has 16 years of active duty despite having been blown up by a road side bomb in 2005, and receiving severe burns to more than 80 percent of his body.

And it’s not just the troops who feel blindsided. Army Chief of Staff Gen. Ray Odierno said the provision came as a complete surprise, and said the move amounts to Congress having “usurped” the Military Compensation and Retirement Modernization Commission, which is still in the early stages of its work “It’s concerning to us that they made a decision without actually consulting the Pentagon or anyone else. … What’s next? We wanted a total package that we’d be able to look at and agree to,” Odierno said.

Under the deal, the COLA reductions would be phased in over three years: the December 2014 COLA would be reduced by 0.25 percent; theDecember2015COLAwouldbe reduced by 0.5 percent; and the full 1-point reduction would take effect with the December 2016 COLA.

The legislation affects all working- age military retirees – currentonesunderage62, active-duty members nearing retirement and those who are medically retired.

Initially, lawmakers who drafted the bill felt it did not affect disabled veterans because many collect disability compensation from the Veterans Affairs Department, which was unaffected by the legislation.

But a small group of senators figured out that as written, the plan would have an impact on those who have been medically retired with less than 20 years of service. Lawmakers are likely to take up separate follow-on legislation to provide a clear exemption for medical retirees. Whether an effort is made to reverse the entire provision for all retirees remains to be seen, however.

Long Way To Go

Republican Sens. Kelly Ayotte of New Hampshire, Lindsey Graham of South Carolina and Roger Wicker of Mississippi sought to have amendments included in the bill to offset the COLA cuts by identifying similar savings from other sources before it passed the Senate.

Their efforts failed, but a number of lawmakers, in Graham’s words, are now “stumbling over themselves” to address the problem.

Senate Armed Services Committee Chairman Sen. Carl Levin, D-Mich., said a review by his committee, along with the ongoing survey of military retirement and benefits by the Military Compensation and Retirement Modernization Commission, may “further bear on this issue.

“A number of concerns have been raised about the provision in the Murray-Ryan budget agreement,” Levin said. “The Senate Armed Services Committee is going to review this change after we convene next year, before it takes effect in December 2015.”

In an interview with Military Times, Sen. John McCain, R-Ariz., said the same.

“There’s time. … We have an entire commission taking a look at this issue,” he said.

New Hampshire Sen. Jeanne Shaheen and Virginia Sens. Mark Warner and Tim Kaine, all Democrats, also have introduced the Military Retirement Restoration Act, which would offer savings of more than $6 billion by tightening regulations on U.S. companies that shelter funds in foreign tax havens.

House Veterans’ Affairs Committee Chairman Rep. Jeff Miller, R-Fla., also plans to introduce legislation that would offset the COLA cuts.

One of his proposals would eliminate the reduction for all retirees, and another would eliminate it only for those who are medically retired.

Still other lawmakers and analysts are comfortable with the bill in its current form.

Sen. Joe Manchin, D-W.Va., who supported the budget agreement, referred to another deficit reduction plan – Simpson-Bowles – which recommends scrapping COLAs entirely for working-age military retirees.

“This is basically a 1 percent adjustment for healthy people who are probably working other jobs. It’s reasonable and it’s just a COLA, not their direct compensation,” Manchin said.

Not A Breach Of Faith

Writing in Defense One, former assistant secretary of defense Lawrence Korb, a fellow with the Center for American Progress, argued that the plan does not “break faith with the vast majority,” namely because so few people actually serve 20 years in the military – only about17 percent of the force – and those who do typically go on to work at second careers.

“When working-age retirees reach the age of 62, their retired pay would be readjusted back to the full amount they would have gotten if they had received the full COLA each year. … In other words, the COLA reduction is temporary, affecting only those who retire from the military but are still young enough to work,” Korb wrote.

“Even with the proposed slight adjustment in annual cost of living adjustments, military retirees are compensated generously,” Korb added.

But according to calculations by the Military Officers Association of America, the “slight adjustment” translates into an average loss of more than $3,700 a year in retiredpayforanE-7bythetimehe or she reaches age 62, while an O-5 stands to lose more than $6,200 a year.

Kim Costello, the wife of a Marine staff sergeant with12 years of service who deployed to Iraq and Afghanistan three times, is among the group that would be hardest hit by the cuts, facing a total projected reduction of more than $82,000 if her husband retires at 20 years.

“I felt secure in this lifestyle, and now I’m wondering when the other shoe is going to drop. It’s almost not about the money. It’s the broken promise,” Costello said.

Huge Costs

Nearly 2 million former troops are collecting military retirement, including 840,000 of working age and an additional 64,000 medical retirees under 62.

The Military Retirement Fund paid out $54.7 billion in benefits in 2013 to military retirees and survivors, up from $52.5 billion in fiscal 2012.

Questions remain over the ripple effects of the provision – on those who receive a portion of their spouse’s retirement under the Survivor Benefits Plan as well as how Tricare fee increases, allowed each year and tied to COLA increases, will be affected.

One group that specifically is excluded from the reductions is those who already receive a1percentage point COLA reduction under the military’s Redux retirement plan, according to an explanatory report on the bill.

Another group exempt from adjustments is current federal retirees and civilian government workers. The bill requires new hires and future federal employees to pay more of a share of their pension, but current workers are grandfathered in their current plans, a decision that has further irked affected troops and retirees.

“The people who have given the most are being required to give even more. ‘Thank you for your service.’ It’s offensive,” Wade said.

“In all the discussions we’ve had, [Congress] said service members would be grandfathered, and that’s not the case,” Odierno said.

Tip Of The Iceberg

Service members and military and veterans advocacy groups fear the COLA reductions are simply a harbinger of what’s to come, a “tip of the iceberg” in terms of compensation and benefits. “Other cuts will be coming forward, being recommended by the Defense Department. I expect them to go after pay, housing, Tricare, commissaries, all the benefit packages associated with all service members, not just retirees,” said Mike Hayden, director of government relations for the Military Officers Association of America.

Wicker, Ayotte and Graham pledged to continue fighting to undo the legislation before it goes into effect. They worried, however, that the current contentious climate in Congress may hinder efforts.

“It’s mighty hard to change a statute once it gets on the books,” Wicker noted.

Defense Secretary Chuck Hagel reassured troops Dec. 19 that the issue will be thoroughly vetted.

“I strongly support Senator Levin’s efforts to … take a comprehensive … look at military compensation reform. We need to review all options for achieving necessary savings,” Hagel said.

Chief of Naval Personnel Vice Adm. Bill Moran also sought to soothe rankled service members.

“The intentions are to slow the growth in these programs, whether their current pay or future pay, whether it’s current health or future health care … for the active force right now, what we’ve got to worry about are the things that we can control. And we can’t control what’s happening to COLAs for retirees,” Moran said. Some veterans remain nonplussed about the potential loss of benefits. Retired Marine Lt. Col. Justin Constantine, who lost much of his jaw and suffered a brain injury when hit by a sniper in 2006, said he believes “everyone in the country needs to make sacrifices for our economy.”