Manpower and Personnel Needs for a Transformed Naval Force (2008) / Chapter Skim
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3 Summary and Assessment of Previous Studies
3 Summary and Assessment of Previous Studies
Pages 59-87
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From page 59... ...
Military, RAND Corporation, MR-1556-OSD, Santa Monica, Calif.; Heidi Golding with David Gregory, 2002, Sailors' Willingness to Complete Sea Tours: Does Money Matter? , Center for Naval Analyses, CNADRM 00006886/Final, Alexandria, Va., December.; and James Hosek, Jennifer Kavanagh, and Laura Miller, 2006, How Deployments Affect Service Members, RAND Corporation, MG-342-RC, Santa Monica, Calif.
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From page 60... ...
Changes should be aimed at improving force staffing, force management, motivation, and per Defense Advisory Committee on Military Compensation.
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From page 61... ...
The system is inequitable because most members never reach 20 years of service and thus never receive benefits. It is inflexible because its one-size-fits-all approach leads to an overuniformity of career lengths, which in turn impedes flexible force management.
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From page 62... ...
Such compensation might come in the form of separation or transition pay of limited duration for those who leave after the vesting point; increases in basic pay or bonuses; or "gate pay" for members completing key career milestones, such as at 10, 15, 20, 25, and 30 years of service. Pay for Performance, Pay Table Reform, and Pay Differentials Based on Dependency Status The DACMC found that current policies reward performance almost exclusively through the promotion system, with the main financial incentive being higher basic pay.
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From page 63... ...
Furthermore, some of these amounts have become entitlements, paid without regard to force management considerations. Third, special and incentive pays are the services' main tool for flexible force management, yet they constitute less than 5 percent of immediate cash pay. The DACMC recommended that special and incentive pays be consolidated into a smaller number of categories.
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From page 64... ...
Yet policy makers have little incentive to minimize the cost of pre-65 health care, because any savings from policy changes would not be realized until far into the future. To address these issues the DACMC recommended that premiums and other fees under Tricare Prime, the health maintenance organization option under Tricare, be set for pre-65 retirees to be more consistent with the cost-sharing provisions under typical civilian employer plans.
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From page 65... ...
The DACMC found that many reserve members attempt to maintain continuity of care by keeping their civilian employers' health insurance when they are activated. The DACMC recommended guidelines for setting reserve compensation.
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From page 66... ...
, and the tax advantage that accrues because those allowances are not taxed; and • Special and incentive pays, consisting of enlistment bonuses, selective reenlistment bonuses (SRB) , sea pay, and assignment incentive pay; retirement pay, including the retirement annuity for those who serve for 20 years or more, and the newer Thrift Savings Plan (TSP)
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From page 67... ...
However, it recommended that the Department of the Navy pursue initiatives to improve the effectiveness and flexibility of these compensation tools. Second, it recommended an expansion of special and incentive pays, specifically sea pay, SRBs, enlistment bonuses, and assignment incentive pay (AIP)
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From page 68... ...
CNA finds that the program is consistent with the goals and guiding principles of the HCS. Retirement Pay Drawing from past studies, the CNA report concluded that the military retirement system is not flexible or cost-effective.
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From page 69... ...
The CNA report argues that VSP can help shape the force by facilitating the smooth transition of personnel from service, and that it is flexible because it can be targeted to individuals with specific occupations, years of service, or other desired characteristics. In the near term the report recommended using VSP to offset the lack of force management flexibility inherent in the military retirement system.
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From page 70... ...
Over the longer term the CNA report also recommended shifting a greater share of cash compensation away from basic pay and into targeted special and incentive pays like SRBs and AIP. Like the DACMC, CNA recommends restructuring the pay table to a time-in-grade model.
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From page 71... ...
Since Congress passed the Goldwater-Nichols Act of 1986,13 those who hope to rise to the general officer or flag officer ranks 11 history of military retirement studies, commissions, and associated legislation, focusing on A the past 60 years of proposed reforms, can be found in John Christian, 2006, An Overview of Past Proposals for Military Retirement Reform, RAND Corporation, TR-376-OSD, Santa Monica, Calif. An excellent assessment of the current retirement system, summarizing past studies, and a presentation of options for reform can be found in John T
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From page 72... ...
Asch and John T Warner, 1994, A Policy Analysis of Alternative Military Retirement Systems, RAND Corporation, Santa Monica, Calif.; and John T
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17 final advantage is that such an approach could integrate the active and reserve retirement system A under the same plan. See Beth Asch, James Hosek, and David Loughran, 2006, Reserve Retirement Reform: A Viewpoint on Recent Congressional Proposals, RAND Corporation, TR-199-OSD, Santa Monica, Calif.
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From page 74... ...
2002. A Look at Cash Compensation for B Active Duty Personnel, RAND Corporation, MR-1492-OSD, Santa Monica, Calif.
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Both the DACMC and the CNA study recommend increasing the relative share of cash compensation devoted to special and incentive pays. Both argue that pay in the private sector varies much more according to occupation than does military pay.
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From page 76... ...
Without a changed retirement system there may be little incentive to use special and incentive pays more flexibly to manage career lengths differently. Devoting a greater share of immediate compensation to special and incentive pays could reduce members' lifetime earnings, because these pays are not included in the calculation of retirement pay.
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From page 77... ...
As discussed below, BAH might also usefully be replaced by AIP. Health Benefits Both the DACMC and CNA reports highlight an important inefficiency in the military health care benefit, namely, the crowding out of civilian benefits by Tricare for pre-age-65 retirees.
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From page 78... ...
To induce more cost-effective use of health benefits the committee favors some rise in the cost-sharing arrangements. Specifically, copays and premiums should be indexed to the annual cost-of-living adjustment to the military retirement annuity.
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From page 79... ...
Moreover, it is possible that the level of choice inherent in today's system has a positive effect on morale and ultimately retention. Pay Table Reform and Pay for Performance Both the DACMC and CNA reports recommended restructuring the basic pay table from one based on grade and time in service to one based on grade and time in grade.
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From page 80... ...
An additional recommendation that would lower incentives for junior enlisted members to form families would be to pay BAH, regardless of the member's housing arrangement, and charge those living in government housing fair market value for their housing. Junior enlisted living in barracks or onboard ships would receive a net increase in pay because the BAH rate they would receive would be greater than the fair market value for their quarters.
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From page 81... ...
The committee agrees with recommendations to consolidate family separation pay with other special and incentive pays related to deployment. Deployment pay should reflect the arduous nature of deployment and the potential for extra expenses, rather than arbitrary distinctions between members with and without dependents.
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From page 82... ...
The committee believes additional research is needed to determine the benefits and costs of a military flexible spending account, taking into consideration the effects on the Department of the Navy's ability to attract and retain personnel to meet its requirements, and any offsetting costs associated with reduced economies of scale in the provision of in-kind benefits. Reserve Compensation The DACMC recommended that activated and mobilized reservists earn the same pay as active-duty members, that active and reserve compensation be coordinated in a systems approach, and that the reserve components be given a new flexibility to set bonuses by geographic area and unit to reflect the location-specific nature of manning reserve units.
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From page 83... ...
31 See James Hosek and Mark Totten, 1998, Does Perstempo Hurt Reenlistment? The Effect of Long or Hostile Perstempo on Reenlistment, RAND Corporation, MR-990-OSD, Santa Monica, Calif.; James Hosek and Mark Totten, 2002, Serving Away From Home: How Deployments Influence Reenlistment, RAND Corporation, MR-1594-OSD, Santa Monica, Calif.
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From page 84... ...
2006. How Deployments Affect Service Members, RAND Corporation, MG-342-RC, Santa Monica, Calif.
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From page 85... ...
Compensation and Retirement Reform Finding: The current package of immediate compensation is overly complex, lacks flexibility, is not conducive to Navy and Marine Corps force management, and generally costs more than its value to service members. Recommendation: The Secretary of the Navy, the Chief of Naval Operations (CNO)
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From page 86... ...
The leaders should also conduct research to assess the costs and benefits of flexible spending accounts for these programs, including health care. Finding: The current military retirement system impedes flexible force management and is inequitable and inefficient.
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From page 87... ...
To induce more cost-effective use of health benefits, Tricare fees should be indexed to the annual cost-of-living adjustment to the military retirement annuity. Finally, the financing of the under-65 health benefit should be through an accrual fund, as it is for retirees over 65.
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