New RAND Study Examines Proposed Changes to Military Compensation Structure
Dec 04 2008
The study, “Assessing Compensation Reform in Support of the 10th Quadrennial Review of Military Compensation: Theory, Estimation, and Policy Analysis,” is available at www.rand.org .
The 10th Quadrennial Review of Military Compensation has proposed an alternative military retirement system to better reflect the need for greater efficiency, increase personnel management flexibility, and address equity issues related to active versus reserve personnel and military personnel versus civilian counterparts.
The new system would include:
- A defined benefit plan with earlier vesting at year-of-service 10
- An early-withdrawal option for the defined benefit plan
- A defined contribution plan vested at year-of-service 10
- “Gate pay,” a multiple of basic pay for those who complete specific milestones, regardless of whether they stay or leave on completion
- Separation pay, vested at year-of-service 20, would be provided to members separating from the military and based on a formula of a multiple of monthly basic pay times years of service
The RAND study, written by RAND researchers Beth J. Asch, James Hosek, Michael Mattock and Christina Panis, analyzes several variants of the 10th Quadrennial Review proposal. The study finds that the proposal would allow the services to maintain the current experience mix of personnel – or change it – and do so at the same or lower cost. It also could increase expected years of service and retention in both early and late careers; provide an incentive to bring more service members to 10 years of service; and address equity concerns and improve force-management flexibility. Consistent with these findings, the 10th Quadrennial Review recommends that the proposal be pilot-tested.
The RAND study also looks at the sustainability of the all-volunteer force; the relationship between compensation structure and the experience and grade structure of the personnel force; and the potential cost and any cost savings of the policy alternatives.