	Overview

Beginning with the 1948 Hook Commission, few military subjects have generated as much interest or commentary as the military retirement system. The number of reports, analyses and studies aimed at modifying or reforming the system have been voluminous. The Military Retirement System

The military retirement system is a noncontributory, defined benefit system that is viewed as a significant incentive in retaining a career military force. Disability retirement offers a choice between two retirement options: one based on years of service and one on the severity of the disability. In contrast to many private sector plans, the military retirement system also does not provide for the gradual vesting of benefits, it is an "all-or-nothing" proposition based on serving a minimum of 20 years. Under Redux, a member retiring at 20 years of service will only receive 40% of their High-3. Major Legislative Reforms of Military Retirement

Although there has been a military retirement system since 1861, the Army and Air Force Vitalization and Retirement Equalization Act of 1948 established the general framework for today's military retirement system. As explained in the Senate Report on the FY1981 Authorization Act:
The committee recommends this change because of the high and increasing costs of military retired pay and because of the need to increase pay for military personnel while they serve on active duty and instead of after their active duty careers are finished. A $30,000 bonus was added to the Redux retirement program at the 15 th year of service and, most significantly from the perspective of retirement, service members were allowed to choose between Redux and the High-3 programs. Past Administration Proposals

There have been two major administration military retirement reform proposals in the past five years. The committee noted three common criticisms of the current retirement system: (1) it is perceived to be inefficient because it defers too much compensation; (2) it appears to be inflexible because it does not facilitate force management; and (3) it is inequitable because most servicemembers never qualify (or vest) for the retirement benefit. This methodology resulted in minor modifications to the DACMC's proposal but appears to have resulted in a more refined proposal. New Retirement Reform Proposals

The ongoing economic recession, persistently high unemployment, and the growing national deficit resulted in a number of studies and reports during 2010 and 2011 that focused on reducing the cost of government, including defense. 3. The report specifically notes that any recommendations enacted would apply to new entrants only and that military personnel currently serving would be grandfathered. Cost

Most of the new, more recent reform proposals have focused on the cost of the military retirement system and specific cost-cutting initiatives. As noted in Table 1 , in FY2010 there was a total of $50.842 billion paid to 2,271,000 military retirees and survivors from the Military Retirement Fund within the U.S. Treasury. These observers disagree with the military's emphasis on youth and vigor. Consider a Retirement System Similar to that Recommended by the Quadrennial Review of Military Compensation (QRMC)

Using the work of the DACMC and the QRMC to establish the foundation of a reformed retirement system, other options could be added or deleted to reduce costs or provide additional incentives.
Few military subjects have generated as much interest or commentary as the military retirement system and efforts to reform the system have been many. Heightened concern over the national debt crisis, the economic recession, and stubbornly high unemployment has resulted in renewed congressional interest in the cost and effectiveness of the system. This report reviews various reform proposals and presents several potential options for Congress, ranging from maintaining the current system to a national commission to review military compensation, benefits, and retirement.
The military retirement system is a noncontributory, defined benefit plan which guarantees a specific monthly payment after 20 or more years of service. Vesting occurs at 20 years of service, regardless of age, and is therefore an "all or nothing" proposition. Retirement age varies, but most military retirees are young enough to pursue private-sector careers following their military service. Most observers note that ,while effective as a retention tool, military retirement is also very expensive—in FY2010 there were 2,271,000 retirees and survivors receiving a total of $50.842 billion from the federal government. However, because of the way the government accounts for military retirement, the direct cost to the Department of Defense (DOD) is significantly less. In FY2009, DOD paid $17.5 billion to the Military Retirement Fund to fund the future retirement of the military cohort who entered the military during 2009.
Critics of the military retirement system frequently cite several points in addition to cost: (1) It is inefficient because it defers too much compensation until the completion of a military career; (2) It is inflexible because it does not facilitate force management or encourage longer careers; and (3) It is inequitable because most servicemembers never qualify or vest.
The military retirement system has evolved over time (see "Major Legislative Reforms of Military Retirement"). Today, active component servicemembers choose between two retirement systems at their 15th year of service (either High-3 or Redux), reservists are restricted to one system (a modified version of High-3), and disability retirees also have the opportunity to choose between two systems (High-3 or Disability retirement). Many observers have agreed that a reformed retirement system could enhance retention, provide an improved force management tool, and provide an equitable retirement regardless of component or special situation. A review of past legislative proposals finds that they have been controversial, unpopular with DOD and servicemembers, and generally focused on reducing the cost of military retirement. The Redux option, in particular, has become a less attractive option and fewer and fewer servicemembers are selecting it.
The cost factor, combined with the recent emphasis on reducing costs in DOD and the overall federal deficit, resulted in a number of studies, commissions and reports in 2010. However, these efforts did not result in comprehensive policy changes. In addition to the most recent commission and think tank reports, two other efforts within the past five years included detailed recommendations for retirement reform. The 2005 Defense Advisory Committee on Military Compensation (DACMC) established a framework for a comprehensive restructuring of military retirement. This was followed in 2008 by the 10th Quadrennial Review of Military Compensation (QRMC) that further modeled, refined, and amplified on the work of the DACMC. Both efforts supported applying a reformed military retirement system to new entrants only; currently serving and already retired members would be grandfathered.