Military Pay May Be Headed for a More Modern Makeover

Compensation review suggests modernizing military pay.

A two-year study may lead to a modernizing of the military pay system, affecting things like training and imminent danger pay.

The 11th Quadrennial Review of Military Compensation recently concluded a two-year investigation into the efficiency of military pay. The study came to numerous conclusions that, if endorsed and enacted, will modernize military pay.

The results were summarized in a blueprint presented to Congress in hopes that a bill will be passed to increase the efficiency of the Department of Defense and the Treasury. Some of the major improvements suggested are replacing combat zone tax exclusions and overhauling weekend drill pay.

Military Careers Fare Well

In the review, the quadrennial wanted to reiterate that the military is still a viable career choice for people entering the workforce. Comparisons between the private sector and military pay show the military ranking highly on many levels. Enlisted pay package sits at the 90th percentile compared to civilian peers and officers, who were on average at the 83rd percentile.

Although the military compares well with the private sector, the director of the review explained their main goal was to revise elements of compensation to effectively sustain the all-volunteer force.

DIC v. SBP

One of the longstanding debates in military compensation concerns the offset between the Survivor Benefit Plan (SBP) and the Dependency and Indemnity Compensation (DIC). SBP is a voluntary enrollment insurance program, and DIC is compensation plan provided to surviving spouses by the VA.

The catch with these two programs is they cannot be paid in full at the same time. Detractors of the rule against dual disbursement argue that the programs are completely separate and DIC payments shouldn’t be limited based on your enrollment in a voluntary insurance program.

The review suggests that survivors of retirees who die of service-related ailments, on active duty or with 100 percent disability ratings are eligible to draw tax-free DIC from the VA as well as receive about half, or their paid portion, of the SBP.

Some find this solution to be inequitable because a survivor of a spouse who paid premiums for 30 years would receive the same percentage payout as one who never paid in, but this relieves the offset in a simple way rather than calculating the individual amount paid for each service member.

This solution is also controversial because of high expense, even though the simplified process as well as savings in other changes will offset the costs.

Reserve Pay & Retirement

The review also discovered an inconsistency in pay for the Reserves and National Guard. In several cases, two-day compensation for training was exceeding what colleagues were paid in combat zones. The revision proposes a standardized pay allowance for both training and active duty service members.

The savings from implementing this plan will go to enhancing reserve retirement plans. The review recommended the retirement age change from 60 to a system allowing retirement funds to be withdrawn by the 30th anniversary of a member first entering the military after 20 years of qualifying service. This means a service member entering at age 18 could potentially start withdrawing funds by age 48.

Compensation review seeks to modernize military pay.

A proposed change updates imminent danger pay into a tiered system.

Combat Zone Tax Exclusion

A big change proposed with this bill would replace the combat zone tax exclusion and the blanket Imminent Danger Pay with a refundable tax credit and multi-tiered danger pay related to the risk individuals face.

This change in IDP summarizes the mission of the review, which was to modernize parts of military compensation that hadn’t yet caught up with the times. To prevent future lapses in efficiency, the review also recommended that the Department of Defense be required to report to Congress every four years on the status and effectiveness of military compensation.

Congress is currently considering which recommendations will be included in a bill to modernize military pay.

Photos courtesy of khawkins & dslrninja