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Simpson-Bowles Plan Eliminates Cost-of-Living Adjustments for Working-Age Military Retirees

9:51 AM, Dec 18, 2013 • By JOHN MCCORMACK
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A provision in the Ryan-Murray budget to reduce cost-of-living adjustments (COLAs) for working-age military retirees is the reason a number of Republican senators are voting against the deal. “I’m for pension benefit reform but what they’re doing here is just unacceptable,” Senator Lindsey Graham of South Carolina told The Hill

Graham Lindsey

But the military pension reform in the Ryan-Murray budget is more modest than what is recommended by the Simpson-Bowles deficit-reduction plan--a plan that Senator Graham has embraced.

The Simpson-Bowles plan recommends scrapping COLAs entirely for working-age military retirees: "Defer Cost of Living Adjustment (COLA) for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 increase the benefit to the amount that would have been payable had full COLAs been in effect." 

By contrast, the Ryan-Murray budget reduces annual COLAs by one percentage point less than inflation for military retirees under the age of 62. It includes the same "catch-up" provision recommended by Simpson-Bowles. 

During a November 2012 appearance on CBS's Face the Nation, Senator Lindsey Graham said, "Say yes to Simpson-Bowles, Mr. President. I'm willing to say yes to Simpson-Bowles."

Despite cutting less from military pensions than Simpson-Bowles, the COLA reduction in the Ryan-Murray budget may be reversed next year. Democratic senator Carl Levin of Michigan, the chairman of the Senate Armed Services Committee, has called for a review of the provision, which doesn't take full effect until 2016.

"We delayed this provision so that it doesn't take effect until the year 2016, which gives Congress and the military community time to address the broader compensation issue, including this provision, if people believe there's a better way to solve this problem," Paul Ryan told THE WEEKLY STANDARD on Saturday.

The COLA reduction, which the Pentagon requested in order to save $6 billion in the defense budget over 10 years, has become so controversial not only because it affects veterans, but also because the cut isn't subjected to a means test and current working-age retirees are not grandfathered. Means-testing and grandfathering are hallmarks of Ryan's plan to reform Medicare. 

"We give them a slightly smaller adjustment for inflation because they're still in their working years and in most cases earning another paycheck," Ryan said on Saturday. "Our goal here is to make sure that no other country comes close to matching the U.S. military, and the stress on the budget in the future brings that whole entire notion into question. We still have a Pentagon budget that is not where it needs to be."

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