Report: McCain Open to Changing Troop Pay, Benefits

The new chairman of the Senate Armed Services Committee said he's willing to make some changes to troop pay and benefits, according to a news report.

Sen. John McCain, 78, the long-serving Republican from Arizona and former GOP presidential nominee, said the changes would apply to future service members and that troops serving now would be grandfathered under existing benefits, according to a report by Kristina Wong of The Hill.

"I can probably support a number of changes that need to be made," McCain told the newspaper. The military health care system "has to be reformed," he said.

He didn’t elaborate, but added, "Anybody who has already joined the military is eligible for those pay and benefits, but as of a certain date, people joining may be subject to changes in those benefits."

McCain was likely referring to retirement pay, in particular. 

“Military compensation and retirement benefit reform is a critical issue that the Committee will consider while continuing to support and maintain the all-volunteer force," Dustin Walker, a spokesman for the Senate Armed Services Committee, said in an e-mail. 

The congressionally mandated Military Compensation and Retirement Modernization Commission, an independent panel that has spent two years reviewing troop pay and benefits, is expected to release its much-anticipated findings in early February.

"Senator McCain looks forward to thoroughly reviewing the recommendations of the MCRMC, which will be the subject of committee hearings," Walker added.

That coincides with the expected release of the Obama administration's budget request for fiscal 2016, beginning Oct. 1, which will see the return of automatic budget cuts known as sequestration unless Congress agrees on another deficit-reduction plan. It's unclear whether the White House's spending plan will take into account the commission's recommendations.

To trim personnel costs, the Defense Department in fiscal 2015 recommended a smaller military pay raise of 1 percent rather than the 1.8 percent needed to match civilian sector wage growth, an eventual cut of 5 percent to basic allowances for housing, and significant reductions to commissary funding, among other changes.

Lawmakers agreed with the smaller pay raise, but after heavy lobbying from veterans groups, softened the housing allowance cut to 1 percent, preserved funding for commissaries and exchanges, and limited to $3 an increase in co-pays for prescriptions filled at off-base pharmacies. 

Congress has shown a willingness to cut military retirement pay in the past.

As part of the 2013 Balanced Budget Act, lawmakers agreed to a 1 percent cut to the cost-of-living adjustment for future military retirees. But much bigger changes to the military retirement system could be in store, including 401(k)-like plans and lump-sum payments.

To offset a reduction of as much as 10 percent in lifetime retirement benefits, the Pentagon has proposed offering troops cash payments earlier in their careers, including a 401(k)-style benefit at six years of service, a retention bonus at 12 years of service, and a possible lump-sum "transition" bonus at 20 years of service. The options were among those included in a report acting Deputy Defense Secretary Christine Fox submitted last year to commission.

A rising number of career-oriented troops or their spouses would support overhauling the military pension system so long as they receive a lump-sum retirement check, according to a recent online survey conducted by a financial services company.

The Military Officers Association of America, an Alexandria, Virginia-based advocacy group, has argued that military manpower costs as a percentage of defense spending have remained relatively unchanged for the past three decades, at about one third of the base budget, and actually decreased in recent years.

"We look forward to evaluating the findings and recommendations of the Commission to determine what things we can support and identify those items that we feel would have a negative impact on the readiness of the all-volunteer force," Jonathan Withington, a spokesman for the organization, said in an e-mail.

(Story was updated to add quotes from committee spokesman beginning in the sixth paragraph.)

-- Brendan McGarry can be reached at Brendan.McGarry@military.com.