Tag Archives: pension

Best post ever about the military benefits debate

Posted by Mike Grice on

Every once in a while somebody writes a blog post that squarely and utterly nails a discussion.  Amy Bushatz, the managing editor of Military.com’s family blog titled SpouseBuzz, just wrote one of those posts.  She ardently and cogently eviscerates those who feel that military folks are overcompensated whiners when it comes to their pay and benefits.  I could not have possibly said or written it any better! Her great piece is reposted below, and if you would like to see the original, go here.

An Open Letter to Military Benefits Haters

Dear Military Benefits Haters  –

We’ve been having a rough go of it lately, haven’t we?  There you are, a civilian, absolutely convinced that the average servicemember is not worth his weight in pay and benefits.  And here I am, a military family member wondering how we got to this point – and why you are so misdirected about the value of the military.

I think the problem may be that you are confused. You’re there, sitting on your civilian sofa in your civilian house in the town of your choice after coming home from your civilian 9-5 job. You are feeling a little annoyed by the crazy awesome salaries that servicemembers and military retirees score because, in comparison, yours aren’t that amazing. And hey! Your taxes are paying for us to have this fabulous stuff! You are incensed by the very existence of commissaries which, you gleefully note in news articles like this one,  is supported by tax payers all so that military folks can have access to “15 types of ketchup” at Lejeune. You think they should close.

And over here, you proclaim our benefits – the things we get in exchange for the willingness to die for America – as lavish.

It isn’t so much the idea of shutting the commissaries that bothers me. While they do seem like a vital part of life overseas, stateside the argument that they are superfluous at most bases doesn’t seem that farfetched. In most cases, as the author of this peachy story notes, there really are other options. Same thing goes for fitness centers and recreation on bases around the country.

Don’t get me wrong – I love that stuff and I use it all regularly. But I could live without it just fine. If it comes down to bullets or bagels, I’d go with the bullets any day.

What bothers me about these and other stories and columns like them is your tone.

Servicemembers, retirees and their families, the tone says, are acting like privileged brats for expecting, accepting and clinging to the benefits which encourage them to stay military or even to join in the first place.

In fact, the tone says, it is a waste of tax payer money to meet military personnel needs or even give nice-to-haves in exchange for keeping them around.

Servicemembers are overpaid, coddled low-skill workers who should not be given compensation for the inconveniences of military life, but who should still be expected to do their jobs anyway.

It’s a tone that says if you had to join the military to make it through life you are, logically, a substandard American worker and you do not warrant compensation in excess or even equal to the civilian market. Civilians are people who have choices and didn’t take the easy out of Uncle Sam. Military are people who are living off the tax payer.

The tone is supported by the flinging of inaccurate statistics to support your claims or, worse, the promotion sof weeping generalities about who servicemembers are and what they deserve.

Bad Statistics and Comparisons

Here’s this gem from the Post’s story:

“Over the past decade, military salaries have grown at a faster rate than those of civilian workers. The average enlisted soldier now earns more than 90 percent of Americans who have less than two years of college. Most Army captains – the third-most-junior rank of officer – will take home more than $90,000 this year.”

I’m going to disregard that ridiculous first sentence that ignores the fact that we also, over the past decade, have been paid for deployment after deployment and all the tolls of war. Let’s just focus on the compensation “facts.”

Only one in five Americans is even in good enough physical shape to join the Army. That means that to be the “average enlisted soldier” the author talks about, a recruit already had to do something most Americans can’t – be fit. A whole other group of Americans is ineligible because they didn’t graduate high school or because they have a criminal record. He also had to be willing to join the military at all, which puts him in a group with less than one percent of Americans.

After he joins that soldier then holds a more than full time job, often over 80 hours a week, for which he must continue to meet requirements such as staying fit and felony free. He very likely does an intricate task that no average American with less than two years of college could do without months of dedication and training. He probably has also spent more than nine full months multiple times away from his family working around the clock where he put his life on the line and accepted the continuing burdens of war as part of the gig. He’s likely to have held this same job for around five or six years.

Why is it unreasonable that this soldier make more than 90 percent of Americans who have less than two years of college? And how is that a good group of people to compare him to at all?

And then there is his statement about Army captains and what I can only assume must be a gross misuse of the term “take home,” which is generally accepted to mean “income after taxes.”

Army officers – or any officers, for that matter – are compensated at a higher rate based on education and responsibility, at least in theory. While a captain may make “more than $90,000” before taxes in a very high housing allowance area such as D.C., the average captain certainly does not. A little math reveals that a captain with seven years of Army experience living in San Antonio, Texas with dependents, for example, makes about $86,000 before taxes. But a breakdown of average hours worked by our case study during a year in which he does not deploy shows that he earns around $25 an hour.

And no matter how you shake it out, none of these examples are “more than $90,000″ after taxes.

 In 2010 the average male graduate just out of college earned about $22 an hour. After graduating college and spending seven years on the job with countless additional months in training, an Army captain is making about $25 an hour for putting his life on the line, being willing to live wherever the Army sends him and leave his family for months at a time. He also has met all the qualifications of the “average enlisted soldier” that made that person valuable including, again, an interest in joining to start with.

Are high personnel costs really a problem?

As America rolled into sequestration and other budget cuts, DoD leaders decried the high cost of personnel. After all, they said, supporting current and former military members takes up a third of the DoD 2013 budget.  And with the DoD budget as a whole taking up the biggest “single slice of the federal budget at Social Security,” something surely must be done.

But what they fail to note is that personnel costs really aren’t that ridiculous when compared to the normal market. As the Military Officers Association of America (MOAA) points out, in civilian companies with big air fleets (the closest they could get to a military comparison), personnel costs hover at similar levels.

For the United Parcel Service, for example, personnel costs make up 61 percent of the budget. For FedEx, it’s 43 percent. For Southwest Airlines – generally recognized as among the most cost-efficient air carriers – personnel costs comprise 31 percent of operating revenue (which includes profit, so the percentage of expenditures is higher).

The idea that the Defense Budget is so out of control is also misleading, particularly when you look to past trends. This MOAA graph shows that it hovers below 20 percent – whereas in 1962 it was closer to 50 percent.

If it’s so great, where are you?

But here’s the thing that really gets me.

If the pay and benefits for members of the American military are so lavish and such a steal of a deal, where are you, Benefits Hater?

Because that’s the thing that’s so great about the American military. You don’t have to be special or an elitist to hang out with us. You don’t even have to be an American citizen. You just have to meet the requirements and be willing to run while wearing boots.

This isn’t some exclusive club. We like all types of people. We’re cool like that.

So perhaps you don’t join because you can’t meet the qualifications that us low-skill, not worthy of benefits folks met.

Or maybe you just love your freedoms and hate danger. Maybe you like picking where you live. Maybe your spouse has a career she doesn’t want to destroy by moving every three years. Maybe you don’t want to risk getting blown up in the street while driving through a far away land.

Those freedoms? We gave you those and make sure you keep them.

Try remembering that and then see how you feel about military benefits.

Sincerely,

Amy
Amen.

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Tommy Atkins

Posted by Mike Grice on

In a rather disappointing turn of events the Congress has decided that retired veterans will lose the 1% Cost Of Living Adjustment (COLA) that was included in the pension benefit package for those who serve for over twenty years.  Despite the promise made by the nation to those who served the flag for so long, the expedience of the political process has made the cut a fait accompli.  It is not particularly surprising that veterans will surrender benefits to pay the nation’s bills, but what is surprising is that the cut is being made while Soldiers, Sailors, Airmen, Marines, and Coast Guardsmen are fighting and dying in active combat in defense of the nation and its principles.

Unfortunately, it is likely a harbinger of things to come.  It is also far from unprecedented.  Rudyard Kipling, the British adventurer and poet, wrote about how his fickle nation views the military as personified by its ubiquitous soldier, Tommy Atkins:

I went into a public-‘ouse to get a pint o’ beer,

The publican ‘e up an’ sez, “We serve no red-coats here.”

The girls be’ind the bar they laughed an’ giggled fit to die,

I outs into the street again an’ to myself sez I:

    O it’s Tommy this, an’ Tommy that, an’ “Tommy, go away”;

    But it’s “Thank you, Mister Atkins”, when the band begins to play,

    The band begins to play, my boys, the band begins to play,

    O it’s “Thank you, Mister Atkins”, when the band begins to play.

 

I went into a theatre as sober as could be,

They gave a drunk civilian room, but ‘adn’t none for me;

They sent me to the gallery or round the music-‘alls,

But when it comes to fightin’, Lord! they’ll shove me in the stalls!

    For it’s Tommy this, an’ Tommy that, an’ “Tommy, wait outside”;

    But it’s “Special train for Atkins” when the trooper’s on the tide,

    The troopship’s on the tide, my boys, the troopship’s on the tide,

    O it’s “Special train for Atkins” when the trooper’s on the tide.

 

Yes, makin’ mock o’ uniforms that guard you while you sleep

Is cheaper than them uniforms, an’ they’re starvation cheap;

An’ hustlin’ drunken soldiers when they’re goin’ large a bit

Is five times better business than paradin’ in full kit.

    Then it’s Tommy this, an’ Tommy that, an’ “Tommy, ‘ow’s yer soul?”

    But it’s “Thin red line of ‘eroes” when the drums begin to roll,

    The drums begin to roll, my boys, the drums begin to roll,

    O it’s “Thin red line of ‘eroes” when the drums begin to roll.

 

We aren’t no thin red ‘eroes, nor we aren’t no blackguards too,

But single men in barricks, most remarkable like you;

An’ if sometimes our conduck isn’t all your fancy paints,

Why, single men in barricks don’t grow into plaster saints;

    While it’s Tommy this, an’ Tommy that, an’ “Tommy, fall be’ind”,

    But it’s “Please to walk in front, sir”, when there’s trouble in the wind,

    There’s trouble in the wind, my boys, there’s trouble in the wind,

    O it’s “Please to walk in front, sir”, when there’s trouble in the wind.

 

You talk o’ better food for us, an’ schools, an’ fires, an’ all:

We’ll wait for extry rations if you treat us rational.

Don’t mess about the cook-room slops, but prove it to our face

The Widow’s Uniform is not the soldier-man’s disgrace.

    For it’s Tommy this, an’ Tommy that, an’ “Chuck him out, the brute!”

    But it’s “Saviour of ‘is country” when the guns begin to shoot;

    An’ it’s Tommy this, an’ Tommy that, an’ anything you please;

    An’ Tommy ain’t a bloomin’ fool — you bet that Tommy sees!

Sadly, although this poem was penned over a century ago it still bitingly resonates.

Finally settling your VA claim, part 2: what it means to your bank account

Posted by Mike Grice on

My VA claim was finally settled a month ago after about two years of waiting.  I know it was settled because the VA sent me a very nice letter saying that it was, and along with my final disability rating came a brief paragraph that indicated that I would be receiving a settlement check from both the Defense Finance and Accounting Service (DFAS) as well as the VA.  Intriguing, thought I.  What exactly did that mean, and more importantly for my bank account, how much money were we talking about?

The way that the system is supposed to work is that you receive any compensation related to your disability rating beginning the day after you leave the military.  That payment is supposed to come directly from the VA, and DFAS should have nothing to do with it.  Except for a couple of cases…

…like mine.

In my case, I received no VA compensation until my case was partially adjudicated some ten months after the claim was filed.  During that time I was receiving my full military pension.

On the tenth month of the life of my disability claim the VA made a partial determination in my case.  They rated me at a low level for a few conditions, but they needed to conduct more examinations to determine if I was eligible for a higher rating.  The bottom line was that now I was eligible to receive some compensation from the VA.

Great!

The devil is always in the details, however, and instead of receiving a check on top of my pension the military deducted the amount of my VA compensation from my pension.  The VA then did send me a check, but for the same amount that was deducted from my pension.  Pretty much a zero sum game, except that the VA compensation is tax free.  Here is an explanation of how it works from a previous post:

Let’s say that you receive a disability rating that results in a payment from the VA of $100.  That $100 is not added to your check for a total of $1600.  Instead, $100 of the $1500 that was paid by the Defense Finance and Accounting Service (DFAS) is now paid by the VA, so the total pension amount stays the same.  What changes is how the taxes are computed.

Now you have $1400 that is taxable, which results in a slightly lower tax bill.  Here is the math:

$1400 x 20% = $280 in taxes.

$1400 (from DFAS) + $100 (from the VA) = $1500 (which is your pension amount).

$1500 (pension + VA Disability) – $280 (taxes) = $1220.

Sooooo…..as a retiree you get an extra twenty bucks in your monthly check.  If you are not a retiree, however, you get the full $100.

In my case, I received the partial claim amount until my claim was settled a whole year later.  Now I became eligible for not only the full VA compensation amount, but also a check that amounts to all of the compensation that I would have been paid had my claim been settled the day I left active duty.  In other words, the VA would write me a check for the full amount of compensation I was eligible for, minus the money that I had already received.  Here is an example of how that works (following the previous example):

To keep things simple, I will use $100 as the partial claim compensation amount and $200 as the final compensation amount.  My claim took 22 months to complete, with a partial settlement issued at month ten.  The math looks like this:

Total amount of VA compensation that the veteran should receive in this case is computed by multiplying the number of months eligible times the final compensation amount, as follows: $200 x 22 = $4400.

The amount of VA compensation that the veteran has received to this point is computed by subtracting the number of months he or she received compensation from the total months eligible, and then multiplying that number by the partial settlement compensation amount, as follows:  22 – 10 = 12 months: 12 x $100 = $1200.

Now that we know how much the total amount of compensation the veteran is eligible for ($4400) and the amount of compensation that he or she has already received ($1000), we can determine the settlement amount from the VA by subtracting the amount received from the total amount:  $4400 – $1200 = $3200.

So the veteran will receive a tax free check for $3200.  Sweet!

But wait, there’s more…

For those veterans who are retired from the military, they are owed the same back pay as shown above, but in addition DFAS is required to pay back the taxes collected on the back pay.  For every month that you should have received a payment from the VA but didn’t, that amount was taxed.  Since VA compensation is tax free, you are due the taxes that you paid.  It is calculated as follows:

From the problem above, you are about to receive a check for $3200 from the VA.  DFAS has already deducted the taxes for the first $1200, but has not done so for the remaining $3200.  In effect, you have been paid that amount and been taxed on it, so DFAS needs to cut you a check for the taxes (assuming a 20% tax rate as used in the problem above): $3200 x 20% = $640.  Unfortunately, since you are retired and not simply out of the service you don’t get $3200.  You get $640.  Not as sweet, but still a nice chunk of change. 

But wait, there is still more!

In cases where your disability compensation rating is 50% or more, you are eligible for Concurrent Receipt of VA Compensation and Retired Pay through a program known as CRDP (Concurrent Retirement and Disability Pay — to learn more about the nuts and bolts of the program follow this link).  Concurrent receipt means that you receive checks from both DFAS and the VA, and that you are entitled to the full amount of eligibility from both.  Now the numbers are quite different when you calculate them using the numbers above:

Since you are eligible to receive both checks, you will receive your full settlement check from the VA as well as back pay for the pension amount that was deducted and replaced by the monthly VA claim amount, less taxes on that amount.  Sounds complicated, but it really isn’t. The math looks like this:  (Full VA settlement amount) $3200 + (Pension amount deducted and replaced by the VA) $1200 – (taxes on the pension amount deducted and replaced by the VA) $640 = $3760.

If your brain hurts, that’s ok.  The bottom line is that the DFAS and the VA are sending you a check that will cover the cost of whole lot of aspirin.

The Gap

Posted by Mike Grice on

Marines don’t serve for the money.  You can’t put a price on the hardships, the time away from your family, the danger, or the camaraderie that comes with wearing the uniform in the defense of the nation.  The pay is enough to live comfortably, but certainly no one in the service is getting rich on their military paychecks.

Although you aren’t becoming wealthy on payday you are getting paid for what you do.  The government does a great job of ensuring that you receive what you are entitled to by dropping half of your monthly salary by direct deposit into your bank twice a month.  Despite the fiscal challenges that the nation faces the thought of not paying the Soldiers, Sailors, Airmen, and Marines who keep the country safe makes lawmakers squirm and infuriates taxpayers.  Suffice it to say that just like clockwork your paycheck will find its way into your bank account on the first and fifteenth of the month (unless those dates are holidays or weekends, in which case you get paid a few days earlier – which is always nice!).

Those checks just keep on coming, at least until your last day in uniform.  Then things get a little more complicated.

The military pay cycle is pretty simple.  In employment terms, all military personnel are government employees who are paid a base monthly salary in addition to any additional benefit payments that they are entitled to.  The base salary is taxed at the normal federal and state rates, but the benefits are not.  Examples of benefits include things like Basic Allowance for Housing (BAH, which subsidizes off-base housing) and Basic Allowance for Subsistence (BAS, which is a meal stipend).  There are many more, like jump pay (for those who find falling out of perfectly good airplanes on a regular basis as part of their job description) and combat pay (that not-so-huge amount of extra money you receive for going to places where bad people shoot at you).

So, all of these things are added up, resulting in your gross monthly pay.  Taxes and any other allotments (allotments being automatic withdrawals from your pay for things like Serviceman’s Group Life Insurance or savings bonds) are then subtracted, and the result is the money that is due to you for your service.   That amount is divided into two equal payments, which are in turn dropped into your bank account on payday.

It is important to remember that the month is divided into two portions, with the first half of the month being paid for on the fifteenth and the second half of the month being paid on the first of the following month.  This is very important to remember as you transition, because if your last day in uniform is the end of the month then your last paycheck is due the next day, and it will include all of your service up to the day of transition.

Well, it’s supposed to.  It’s not that simple.

Your last paycheck most likely will not show up when you expect it to.  Unless you are very fortunate, it will be delayed for a few days or weeks.  Although each service has slightly different regulations on your final mustering out pay, they all have the same basic requirements: the final paycheck must include all pay and benefits due to the separating servicemember minus any obligations that he or she owes the government.

This can be pretty surprising if you don’t expect it.  What obligations can you owe the government?  The obvious ones are any fines that you incurred by getting in trouble, but if you stayed on the straight and narrow you should be good, right?

Not necessarily.  The bean counters hold your final paycheck in their possession until all of the possible ways that you could owe money are doublechecked.  These include (but are not limited to) charges for any equipment that you may have lost (remember turning in all of your gear to the Consolidated Issue Facility?) or adjustments to benefit payments (for example, it is not uncommon for your combat related payments to be properly adjusted for a few months after you return from theater, and any overpayments will be recouped by the government).  Your final paycheck will also settle up any additional amount that the government owes you for things like unused leave.  The long and the short of it is that your final settlement paycheck is most likely not going to show up on the same schedule as you are accustomed to.

If you are relying on that check to pay for necessities then you are in for a rude surprise.  No amount of begging or complaining will make that paycheck show up any faster.  You can help yourself, though, by making sure that all of your ducks are in a row as you check out.  Make sure that all of your gear is turned in, for example, and include the receipt showing a zero balance with your checkout paperwork.  Stop by your admin shop and make sure that your pay and allowances are correct before you check out- deal with any problems up front and you won’t have to wait as long for your final paycheck because you are making the bean counter’s job that much easier.

In my case, my final paycheck took 26 days from when my terminal leave expired and it showed up in my bank.  Welcome to “the gap”.

The retirement pay cycle is monthly, as opposed to the bi-monthly system that active duty personnel enjoy.  Your first retired check is due on the first of the month after you retire, which means that you are not going to receive a paycheck at all until a full month after you get out.

This can be quite disconcerting if you don’t plan for it.  When you retire you are going to have a month without a paycheck so make sure to be ready!  Don’t put yourself and your family in the sad position of having to eat sawdust and oatmeal until you retirement check shows up.  Sock a little extra into savings ahead of time or mooch a few bucks from your relatives to bridge the gap, but make sure that you are prepared to go for a month without a paycheck.

Don’t say I didn’t warn you…

__________

Lessons learned:

1.  Your final paycheck will be held up as the accountants settle up all of your accounts.  If you are relying on it to cover immediate expenses then you are in for a tough financial time.  Plan ahead!

2.  Your final paycheck will be reduced by any payments you owe the government and increased by any payments the government owes you, so it will most likely be an amount that may differ significantly from your normal pay amount.

3.  Unlike the bi-monthly active duty pay cycle, your pension is paid monthly with your retirement check arriving the first of the following month.