Some Ready to Quit : Military on Defensive in Pension War

As a chief petty officer assigned to the Navy’s destroyer fleet, Harold Burton, 39, puts up with cramped living conditions and tours at sea that separate him from his wife and children for as much as six months at a time.

And he has uprooted his family to move to new assignments nine times in his 19 years of service.

He relishes seafaring--the travel, the excitement, the comradeship. All things being equal, he says, he would like to stay. “I love the Navy,” he says. “I’d like to stay in 30 years if I can.”

These days, however, there is a cloud over Burton’s seascape: the increasing talk in Congress and elsewhere about cutting back the hefty pensions that have become one of the main fringe benefits of a military career but also contribute significantly to the ever-expanding size of the federal budget.

Pension a ‘Golden Egg’

“If Congress cuts our pensions, I will leave the Navy,” Burton declared, his smile fading and his body stiffening at the thought. “The pension is what you call the golden egg, in my opinion. That’s what I’ve worked toward.”

To a growing number of critics, the military retirement system is a golden egg the country can no longer afford. Nine major studies over the last two decades, including a report last year by the Defense Department, have recommended changes that would reduce the cost of the program, which is expected to be $18 billion next year, and a measure that would make some trims has begun moving through Congress.

Under the present system, members of the armed forces may retire with substantial pensions after 20 years in uniform; indeed, under the Pentagon’s “move up or move out” promotion policy, many are forced to retire after 20 or 30 years.

Pursue Second Careers

Because individuals normally begin military careers in their late teens or early 20s, most retire before age 45 and collect pensions while pursuing second careers--often civilian jobs with the Defense Department or private defense contractors.

That can be a very good deal for the individual, a deal that members of the armed forces are understandably reluctant to see changed. But, it is a very expensive deal for the federal government--not just because of the generous size of military pensions but because military retirees are likely to collect pensions far longer than other American workers, who are usually 20 years older when they retire.

Also, advocates of change say, the practice of tying retirement to 20 or 30 years of service means that many men and women leave the military at their peak skill levels.

Consider the case of former Navy Lt. John M. Quesenberry, who was forced to retire after 30 years. He promptly accepted a job with the National Security Agency doing what he had done for the Navy--teaching cryptography--but at higher pay, on top of a pension equal to roughly 75% of his Navy salary.

“It was dumb, absolutely dumb,” said Quesenberry, now 66 and fully retired. “The Navy lost my services, and the government in general was paying me twice.”

For those who retire after 20 years, the system provides 50% of the average base pay they earned during the last three years of active duty. For those like Quesenberry who retire with 30 years in the service, the beginning pension is 75% of base pay. All military pensions increase annually with inflation.

Average retirees today will receive $500,000 in pension benefits over their lifetimes. In 1983, the average annual pension was $9,665 for retired enlisted personnel and $21,915 for officers.

Cost-of-living increases--a feature common to federal pensions but not to all private ones--have driven costs ever higher over the years. Some of the highest-ranking officers who retired in the early 1970s now receive pension benefits that exceed the active-duty base pay for officers of their rank.

Combat-Readiness Cited

Defenders of the system say it is designed to attract persons into the services and to ensure a youthful, combat-ready supply of officers in war.

“We have a lot of tools in our tool bag with which to manage the forces, and retirement is one of them,” said Maj. Gen. Stuart Sherman, a military retirement specialist who is a deputy assistant secretary of defense responsible for manpower and personnel matters involving the armed forces reserves. “People are afraid that, if you agree to change the system, Congress will not do those things that will be necessary to maintain force structure.”

However, as the cost of the system has risen and the federal deficit crisis has become more severe, criticism has grown sharper. Under pressure to cut other programs dear to the hearts of their constituents--including such civilian retirement benefits as automatic cost-of-living adjustments for Social Security--members of Congress have begun to cast unsympathetic eyes on the military retirement system.

“Congress is not willing to pay for this kind of military retirement system much longer,” said a Senate aide involved in budget planning. “There is a lot of restlessness up here about that. Something will be done this year, and comprehensive reform will follow.”

Attack by Stockman

The Reagan Administration has proposed eliminating next year’s regular cost-of-living increase in armed forces pension benefits. And David A. Stockman, President Reagan’s budget director, ignited a storm of protest by denouncing military retirement as a “scandal” and an “outrage” and accusing the armed forces of caring more about military pensions than national security.

The Senate Budget Committee accepted the Administration’s one-year freeze on military pension benefits. More recently, the White House and Senate Republican leaders reached an overall budget compromise that would limit cost-of-living increases, with a guarantee of at least 2%, and force the Pentagon to extend the careers of military personnel, saving $2.7 billion over three years.

The Congressional Budget Office declared last year that the “typical private-sector plan costs employers only about one-third as much as military retired pay costs the taxpayer.” Even the Defense Department estimates that military retirement costs up to twice as much as an average private pension over a retiree’s lifetime.

Families Often Uprooted

And rightly so, the military argues. In its view, the generous pension merely compensates servicemen and -women for years of low pay and difficult working conditions. Many military personnel must uproot their families every three years and bear some or all of the moving costs themselves. And the constant moves make it difficult for civilian spouses to stay in a job long enough to earn promotions or to establish a pension of their own.

Senior Chief Radioman Gary Scott, 38, who is stationed at Norfolk, says the pension is “the primary reason” he has remained in the Navy for 21 years.

“I’ve had kids (enlisted men) working for me who qualified for food stamps,” said Scott, whose pay now is about $31,000. “I know somebody who was offered $42,000 by a defense contractor in New England to leave here. He could double his salary.”

Critics charge that today’s pension system not only costs too much but offers military personnel all the wrong incentives. The 1984 Congressional Budget Office study contends that the 20-year eligibility requirement encourages the military to keep on less productive mid-career men and women so that they can qualify for benefits.

At the same time, that study and others maintain, the provision offers little incentive for the most technically skilled to remain after 20 years. Only 10% of officers and 4% of enlisted personnel who make it to 20 years elect to stay for 10 more.

Working ‘for Half Pay’

“If you get 50% of your base pay for nothing, then to continue is to work for half pay,” in the view of former Air Force Maj. Michael Stewart, 46, who as a reserve commissioned officer had to retire after 20 years. He now collects a pension while managing defense contracts as an employee of Hughes Aircraft Co. in Los Angeles.

The military replies that the 20-year cutoff is necessary to maintain a youthful force and open up promotion possibilities. In fact, under current practice, enlisted personnel and officers must retire if they fail to receive sufficient promotions after certain points in their career, starting with 20 years. Otherwise, the military argues, the forces would face the same problems encountered before World War II, when 30- to 40-year careers were common.

“We certainly weren’t prepared (for the war),” Maj. Gen. Sherman said. “And I doubt that we’ll have anywhere near that time to prepare for the next war.”

However, under today’s system, the government frequently buys back the services of those forced to retire. A partial survey showed 148,501 military retirees on the 1982 federal payroll, 83,385 of them in the Defense Department.

As in Quesenberry’s case, the government usually comes out the loser financially, although there are limits. With some exceptions, for example, retired officers working for the federal government may collect no more of their pensions than the first $7,000 and half of the rest. (For example, a retired officer now working for the federal government as a civilian and eligible for a $22,000 Pentagon pension would receive $7,000 plus half of the remaining $15,000, or $14,500.)

And, for all retirees who left active duty after 1979 and went to work for the federal government, combined salary and pension payments are limited to $68,700 while on the job. Retirees receive full civil service and military pensions when they leave their civilian government jobs.

Defense Jobs a Haven

In addition to the government itself, defense contractors provide a haven for retired military personnel. Nearly 2,000 former high-ranking officers informed the Pentagon in 1983 that they had taken jobs with defense contractors--a figure equal to 29% of those who retired in those ranks that year.

James Norkus, 43, who was forced to retire at age 38 after 20 years in the Navy, said that he now receives about $12,000 a year from his pension and works for a private firm in which he is under contract with the Navy to do what he did when he was in uniform--instruct machinists.

“The Navy wouldn’t let me stay,” Norkus said, visiting the Navy base here recently as a private consultant. “They said I was too old, too senior. It doesn’t make any sense, does it?”

Others move on to unrelated fields. Air Force Col. David Wells, 69, of Riverside, Calif., retired at age 48 after 20 years and went to work for Crocker Bank in Los Angeles, eventually becoming a vice president in the trust department. He left the bank at age 65.

His income from his military pension, his private pension and Social Security is more than $50,000 a year, $25,000 of it from his military pension. In addition, he earns income from investments.

But he believes that his career entitles him to those rewards. “You take any executive group and they’re in the so-called fat-cat group because of their income and their ability to contribute to the success of their country,” he says.

Powerful Political Bloc

Pressure from beneficiaries of the present pension system has headed off previous efforts to make substantial changes. And today’s 1.1 million military retirees and 2 million active-duty personnel constitute a powerful political bloc.

“I think it’s pure politics that nothing has been done,” said John Bickerman, who wrote a report this year for the Washington-based Center on Budget and Policy Priorities urging an overhaul of the system. “But I think something may happen this year.”

In addition to the reduction in the cost-of-living adjustment contemplated by the recent Republican budget compromise, congressional committees are considering more fundamental change in the pension system.

House Armed Services Committee Chairman Les Aspin (D-Wis.) has introduced a bill to force the Pentagon to cut $4 billion from the system next year. And, in the Senate, Pete Wilson (R-Calif.), chairman of the Armed Services subcommittee on manpower and personnel, has called for hearings later this year, although an aide, noting that California has a large military population, said that the former San Diego mayor has not reached a position of his own.

Pentagon Pension Study

An internal 1984 Pentagon study suggested a variety of ways in which the military could reduce retirement costs without causing an exodus from the services. The suggestions included reducing cost-of-living increases for retirees under the age of 62 and permitting military personnel to take a lump sum in cash after 20 years instead of monthly benefits.

But the Defense Department leadership, satisfied with the current system and concerned that Congress would simply cut without providing other financial incentives for the military, refused to endorse any of the suggestions. The mere discussion of retirement cutbacks, it maintains, has already created unrest in the ranks.

“It’s sickening,” said Master Chief Petty Officer J. L. Trim, 41, stationed at Norfolk after 24 years of service. “All of my shipmates are talking about it. . . . I’m going to get out as soon as I can before Congress does something. The risk of staying in is too great.”