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A Policy Analysis of Reserve Retirement Reform

A Policy Analysis of Reserve Retirement Reform

Beth J. Asch
James Hosek
Michael G. Mattock
Copyright Date: 2013
Published by: RAND Corporation
Pages: 134
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  • Book Info
    A Policy Analysis of Reserve Retirement Reform
    Book Description:

    As the defense burden borne by reserve forces has increased, more attention has been paid to differences between retirement systems for the reserve and active components. This report analyzes the systems, discusses the importance of structuring compensation to enable management flexibility, considers obstacles and how they might be overcome, and provides a quantitative assessment of the reserve retention and cost effects of possible proposals.

    eISBN: 978-0-8330-7812-4
    Subjects: Management & Organizational Behavior, Technology

Table of Contents

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  1. Front Matter
    (pp. i-ii)
  2. Preface
    (pp. iii-iv)
  3. Table of Contents
    (pp. v-vi)
  4. Figures
    (pp. vii-viii)
  5. Tables
    (pp. ix-x)
  6. Summary
    (pp. xi-xvi)

    The greater usage of the reserve components (RC) in an operational capacity to support missions such as those in Iraq and Afghanistan has led members and policymakers to pay more attention to the compensation and personnel systems that support RC management and how those systems compare to those supporting the active components (AC). The research presented in this report focuses on one aspect of RC compensation, the retirement system, which differs from the AC’s. While both reward members who complete 20 years of service (YOS) with a retirement annuity based on years of service and basic pay, some say the...

  7. Acknowledgments
    (pp. xvii-xviii)
  8. Abbreviations
    (pp. xix-xx)
  9. CHAPTER ONE Introduction
    (pp. 1-4)

    Selected reserve forces have been deployed extensively throughout the military operations in Iraq and Afghanistan and in military operations in the 1990s. The nation’s growing reliance on the reserves has led to heightened interest in reserve manpower policy, touching on reserve training, reserve unit cost, personnel turnover in reserve units scheduled for deployment, reserve family support, health benefits for activated reservists, the well-being of children and caregivers of deployed reservists, and others. The adequacy of reserve compensation and reserve retirement benefits has also come into question.

    The reserve component (RC) and active component (AC) compensation systems differ in significant ways,...

  10. CHAPTER TWO Model, Data, and Estimates
    (pp. 5-20)

    We have found that many audiences are unfamiliar with the dynamic programming approach we use, and in this chapter we describe our model, data, estimation technique, and fit. Some readers, however, may want to skip to the next chapter, which presents the policy analysis of the congressional proposals.

    Our model is a stochastic dynamic programming model of AC retention and possible subsequent RC participation. The model focuses on individuals who begin their military service in an active component.¹ It treats the individual as the decisionmaker, assumes he or she faces future opportunities that are partly known and partly uncertain, and...

  11. CHAPTER THREE Analysis of Congressional Proposals
    (pp. 21-42)

    The congressional proposals described in Chapter One increase the generosity of reserve retirement benefits by lowering the age of first receipt to 55, allowing receipt of benefits to begin immediately upon leaving the reserves with at least 20 YOS, or lowering the age of first receipt by one year for every 2 YOS beyond 20 to a minimum of age 53. The proposals can be interpreted as a means to increase the compensation of long-serving reservists in view of the increased use of reserve forces. This chapter presents our simulation results of these three proposals. To establish a context for...

  12. CHAPTER FOUR Reserve Retirement Reform: Discussion of Broader Issues
    (pp. 43-56)

    While the dynamic retention model focuses on the recruiting and retention implications of past congressional proposals, other issues play into the debate over reserve retirement reform, such as equity with the active-duty retirement system. Furthermore, all three of the congressional proposals focused reform on the same area, changing the annuity age of reserve retirement, but there might be alternative proposals that could meet a broader set of reserve compensation goals. In this chapter, we discuss reserve retirement reform in relation to five such goals:¹

    1. Enhancing equity

    2. Recognizing more-frequent and longer deployments

    3. Ensuring an adequate supply of high-quality...

  13. CHAPTER FIVE Reserve Retirement in the Context of Active-Duty Retirement Reform
    (pp. 57-62)

    Concern about the military’s retirement system is not new. Numerous study groups and commissions have discussed reforms to the system to address problems of cost, inefficiency, lack of flexibility, and inequity since the modern retirement system was created after World War II. With the exception of the 6th QRMC, some analysis for the 9th QRMC, and more recently for the 11th QRMC, all of these past groups focused on the active retirement system, yet many of the issues raised by these groups are relevant to the reserves.

    This section discusses some of the reforms recommended by past study groups.¹ We...

  14. CHAPTER SIX Implementation and obstacles to Reform
    (pp. 63-72)

    Despite the many recommendations to change the active-duty retirement system that have been made over the years by studies and commissions, few of the recommendations have been adopted and in fact the system has changed very little. Changes that were made in 1981 and 1986 (see Appendix A) did not respond to the primary concerns expressed by the study groups about equity, flexibility, and the cost of back-loading the system due to the 20-year cliff-vesting provision. As discussed in a later subsection, they were mostly viewed as cost-cutting moves. The change in 2000 restored the pre-1986 retirement system but also...

  15. CHAPTER SEVEN Policy Implications and Conclusions
    (pp. 73-76)

    Our main conclusion is that congressional proposals to reduce the age at which eligible members may begin receiving retirement benefits are not cost-effective means of sustaining or increasing RC retention. The age-55 and sliding-scale proposals we analyzed would cause small changes in reserve retention, tending to increase it overall, but the cost per member would increase. The immediate annuity has large effects on the force profile, increasing retention prior to 20 YOS, as more RC members participate to qualify for immediate RC retirement benefits, but reducing retention after 20 YOS as more RC members leave and claim immediate benefits. The...

  16. APPENDIX A The Reserve and Active-Duty Retirement Systems
    (pp. 77-80)
  17. APPENDIX B The Active/Reserve Dynamic Retention Model
    (pp. 81-88)
  18. APPENDIX C Cholesky Decomposition and the Parameter Estimates
    (pp. 89-94)
  19. APPENDIX D Theory of Successful Reform
    (pp. 95-108)
  20. Bibliography
    (pp. 109-114)