Why Air Force Pensions are the Way They Are
By JOE KRAUTHAMMER | APRIL 23, 2018 | 8:30 p.m.
ET Air Force pensions are among the most generous in the U.S. Military, but the federal government is taking steps to reform the system.
Air Force Secretary Deborah Lee James said Friday that the Air Force would be “moving toward a system of fully indexed, indexed, and indexed-for-tax purposes that would not impact our ability to provide our personnel with the very best possible value.”
She did not say how the Air National Guard plans to do this.
The Defense Department, however, is taking a different approach.
It is proposing to begin rolling out a plan by 2020 to index its retirement plans for inflation and allow the military to adjust benefits for inflation.
This plan would make Air Force and Marine retirees eligible for a 10 percent reduction in taxable income over a decade.
The proposal is modeled on an indexation plan that was adopted in the military’s civilian pensions, but would not affect the retirement benefits of airmen in the Reserve or National Guard.
Airman retired with $142,955 in retiree health benefits in 2016, compared with $133,944 in 2020.
The Air Force has the third-highest retirement benefits for active-duty personnel in the country, and a plan that is supposed to take effect in 2020 would be the first major reform of this nature.
James has said that she is also proposing to phase out the Air Guard’s 401(k) plan, which currently pays only half the value of a military pension.
The retirement benefits are supposed to be indexed for inflation, so the change would be a boon to retirees.
The plan, however the Air Forces plan, would also allow for changes to the way the military calculates taxable income for retired members, such as adjusting how they pay for their retirement benefits.
“As we continue to focus on a new plan for Air Force retirees, we want to make sure that the benefit levels are consistent with inflation, and not a consequence of how the market rates are,” James said.
Air force retirees will get the benefit reductions for the first time in 2028.
Currently, retired airmen are entitled to the full benefit of the government-mandated 10 percent tax reduction over five years.
The reduction would reduce their retirement contributions by $2,000.
But a new Air Force pension plan would reduce that amount by $1,500 for each year they are in the service.
The change would affect all retirees, but military retirees would get the largest benefit reduction.
The Pension Benefit Guaranty Corp. would replace the current fund management system that provides financial backing to military retirees, including the Air force.
It has long been criticized for its reliance on military retirees to manage their pensions.
The move would be welcomed by the Air forces retirees who have taken to the streets protesting the plan.
“We have seen this kind of pension plan fail in the past.
It does not reflect our commitment to our servicemembers, our military personnel, or our retirees,” said retired Air Force Lt.
Col. Robert Fauci, the current president of the Airmen’s Retirement System Association.
“Our servicemember has sacrificed more to ensure the safety and well-being of our nation, and we need to take steps to improve our pensions,” Faulli said.
The pension system was designed by the Defense Department to protect Air Force retirement and medical benefits, and has been criticized by retired service members and their advocates.
It was designed with military retirees in mind.
James said the Airforce’s plan would address the problems that some service members have with the current system.
She said that the proposal would also “ensure that those in uniform are able to retire and retire the way they have always wanted to, in retirement and with their loved ones.”
The Air Forces Pension Fund, a separate retirement plan for active and reserve members, is scheduled to open for business on July 1, 2019.