Barack Obama has been a staunch supporter of defined benefit pensions for government employees, but his administration is now working on a plan to convert at least part of military retiree pensions from defined benefit payments to 401(k)-style defined contribution accounts.  The obvious difference is that most public employees are unionized, but the military is not because their code of honor has no room for strikes and collective bargaining.  After our heroes fought with honor and distinction for 13 years in Iraq and Afghanistan, it is despicable to treat American military retirees worse than other public employees.

The Military Times reported on March 6th that the Obama Administration is planning to cut military pension costs by 10% by converting part of their retirement to 401(k) defined contribution plans from a defined benefit plans. The move follows Secretary of Defense Chuck Hagel’s announcement last month that the administration intends to cut the Army by 125,000 from its wartime peak and recommendations to limit military pay raises, charging higher health-care fees and offer less generous housing allowances.

The Military Times reported that administration documents they reviewed only partially preserve fixed-income pensions after 20 years of military service.  When confronted by the Times reporter about the effect on pension payments, a Pentagon spokesman admitted “it would ultimately provide smaller monthly checks.”  The new 401(k) plan partially substitute lifetime pension payments with cash “retention payments” after 6 and 12 years of service, and then grant a lump-sum “transition pay” after 20 years. 

The Obama administration already cut defense spending from $850 billion in 2011 to $831 billion this year, and only plans to trim spending by 2016 to $807 billion.The large cuts in military wages, benefits and staffing confirm that the Obama Administration’s priorities are preservingpolitically favored expensive weapons systems “investments.”

Barack Obama trumpeted his support of defined benefit pensions for public employees in his 2008 presidential campaign.  He attacked John McCain’s initiative to allow voluntary conversion of government pensions into 401(k) defined contribution accounts and allowing workers “to choose to contribute to a personal Social Security account ” While in the Illinois Senate,Obama had also voted to maintain state defined pensions. (S.B. 1270).  Addressing the National Governors Association at the White House on February 28, 2011, President Obama spoke forcefully in support of his union friends.  “I don't think it does anybody any good when public employees are denigrated or vilified or their rights are infringed upon.” 

President Obama is known for taking his teleprompter everywhere he speaks.  But on July 2, 2008 he deviated from his pre-released script and performing without the teleprompter said: "We cannot continue to rely on our military in order to achieve the national security objectives that we've set. We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded."

President Obama kept his commitment by lobbying for the funds to expand the Department of Homeland Security (DHS) to 240,000 members, while shrinking the military. The major difference at DHS versus the military is that Obama’s strong and powerful civilian national security force has been organized by the American Federation of Government Employees.  Unlike the military, there is no recommendation to force DHS employees into 401(k) retirement accounts, limit compensation, pay higher health-care fees or cut housing allowances because they are unionized.

The author welcomes feedback @ chriss@chrissstreetandcompany.com
Chriss Street is teaching microeconomic at University of California, Irvine this spring from March 31 – June 8, 2014.  Call Student Services at (949) 824-5414 or visit http://unex.uci.edu/courses to enroll!