Battle of the Bilge

Background

One of the most common reactions to the ongoing reports of potential cuts to defense spending since the August debt agreement has been ‘Cut Congressional benefits first’. These comments are usually accompanied by a list of statements regarding Congressional pensions, raises and health benefits. However, the information that is presented in the reactions is rarely accurate and sometimes misleading. In the January 13th edition of MOAA’s Legislative Update, some of the more widely discussed items are evaluated.

That portion of the update, written by Legislative Issues Manager Matt Murphy, is presented below.

Fact or Fiction: Congressional Benefits

Approval ratings for Congress are at a historic low, and our members often ask us what sort of benefits legislators enjoy.

The following information isn’t presented to defend Congressional perks, but only to dispel some myths that perpetually float around the internet. If we’re to have credibility defending military programs, we need to have our facts right.

1) Members of Congress get full pensions for life after serving just one term.

Mostly Fiction. The Congressional retirement system is very similar to that of federal civilians. It’s true that a member of Congress can become eligible for retirement benefits after a minimum of 5 years of service if they’re age 62 or older, but only for a partial pension.

To qualify for a pension a member of Congress must meet one of the following service and age requirements:

5 years of service and age 62
20 years of service and age 50
25 years of service at any age

Like the military retirement system, Congressional retirement pay is calculated on a combination of their average high-three years of salary and a multiplier based on their length of service.

It’s also worth pointing out that members of Congress contribute to their own retirement and pay Social Security taxes. Once retired their Cost of Living Adjustments (COLA) are sometimes held artificially below the Consumer Price Index (CPI) which measures inflation.

Since the Congressional retirement system was overhauled in 1984 (to be less generous) the average annual pension is roughly $40,000.

2) Members of Congress don’t pay for their healthcare.

Fiction. Members of Congress and their staffs are eligible for the same health insurance as federal civilians, and they pay the same premiums. They can enroll in any insurance program offered under the Federal Employee Health Benefits Program (FEHBP).

One of the most popular plans under FEHBP (the Blue Cross Blue Shield Standard plan) costs beneficiaries $430 a month for a family, and $185 a month for individual coverage.

Starting in 2014, members of Congress and their staffs will be required to participate in the health care exchanges created under national health care reform.

3) Legislators receive free health care at military facilities such as Walter Reed.

Fiction. Members of Congress can receive care at the new Walter Reed National Military Medical Center, but the cost of such care is billed to their federal insurance.

4) Congress votes themselves pay increases every year.

Mostly Fiction. The law authorizes Congress a raise every year unless legislators vote to stop it.

Congress voted to forgo a pay raise in 2010, 2011, and 2012. Congressional pay increases are capped lower than the military raise. While military raises are tied to the average American’s (the Employment Cost Index), congressional raises are capped one-half percentage point below that.

In 2012 members of Congress will collect a salary of $174,000 (Congressional leaders receive more).

MOAA Online Help Center

MOAA members and registered guests can now access the Member Service Center’s Online Help Center by visiting here

Please Note: MOAA has established a single landing page for the retirement proposal here: http://www.moaa.org/retirementcuts

Controversial Proposal

In July of 2011, the Defense Business Board presented a revamping of the military retirement structure, based in large part on the findings of the Quadrennial Review of Military Compensation of 2010. The proposal has been met with serious concern and strong opposition by MOAA and other organizations. In simple terms, the proposal would do away with the 20 year service pension plan currently in operation and replace it with a 401k style savings plan that would start at the beginning of a serviceman’s career. We believe that the proposed changes both significantly devalue core career incentives and would harm recruitment and retention efforts. Anyone familiar with the REDUX program, which was so detrimental that it was significantly altered in 2000 and now is offered as an alternative choice of retirement options, can see how this program would play out.

For a look at what the DBB proposed, click here.

MOAA’s Response

MOAA has written about the retirement overhaul proposal several times. From the July 29th Legislative Update:

“MOAA believes the QRMC plan would do grave damage to long-term retention and readiness. By dramatically reducing its financial commitments to servicemembers without any reduction in the enormous sacrifices demanded of career troops and families, it would destroy the sense of reciprocal commitment between member and service.”

From the August 12th Legislative Update:

“The new retirement reform proposals usually envision even more severe cutbacks of guaranteed retired pay amounts, relying more on a contributory Thrift Savings Plan (TSP) system under which services would contribute varying amounts each year depending on service needs for particular skills. Under that system, full retired pay wouldn’t start until age 57 and TSP withdrawals wouldn’t start until age 60.

Just as the Redux cut was applied prospectively (that is, only to people who entered service after the retirement law was changed), most who have endorsed major retirement changes envision applying the new rules only to new entrants.

But a recent retirement task force briefing to the Defense Business Board called that a “high-cost option.” It also highlighted a “lower-cost option” under which all current members would be converted to the new system as of a specific date — grandfathering only service already rendered as of that date.

It’s not clear exactly how that might work. A person with 20 years of service as of the conversion date might have future retired pay capped at 50% of high-three-year average basic pay, even if he or she served another 10 years, with subsequent service earning only some level of TSP deposits. A person with 10 years as of the conversion date who went on to complete a career might end up drawing retired pay capped at 25% of high-three-year average basic pay.

But this is only speculation, because no details or decisions have been offered yet.”

It is important to note that the DBB proposal is not the new law, and will only be one of the many possible options that DoD and Congress consider in the coming months and year. But with the debt talks that are ongoing and the requirements of automatic defense reductions that were written into the recently passed debt ceiling deal on the table, retirement benefits are in dangerous territory.

To help illuminate the dangers and inform the public of what is happening with the retirement discussions, MOAA’s Director of Government Relations, Col Steve Strobridge, USAF (Ret.), fielded questions in an interview with the Washington Post on August 11th, and produced the video that you can view below.

In Focus: Retirement Reform from MOAA on Vimeo.

You Can Help

What can you do?

1 – Send your elected officials a MOAA-suggested message urging them to ensure that ongoing budget-cutting efforts don’t undermine the core pillars that are essential to sustaining a high-quality all-volunteer force.

2 – Urge all of your friends and relatives to do the same.

Introduction

A new version of one of the most widely circulated military related emails in history has been given new life. As detailed in full here, the story about a service member’s response to an article written by Cindy Williams (not the actress) in which she decries 4.8% pay raise in 2000 has become part of the internet lore. But the newest version has one additional line that is sure to enrage a whole new group of people. And it is completely untrue.

The New Email Language

The original email can be found at the link above. The new iteration contains the following introduction:

If you get this more than once, feel honored that you know more than one person who supports our military and appreciates what they do. If you don’t forward it, you don’t deserve their sacrifice.
CINDY WILLIAMS was appointed by Obama as an Assistant Director for NATIONAL SECURITY in the Congressional Budget Office…..

Reality

The section in bold in the quotation is simply not true. There is no truth to President Obama appointing her, but she did serve with the CBO as an AD in the National Security Division. She served in that position from 1994 to 1997. Additionally, the Executive branch has no oversight for the staffing of the CBO. That responsibility lies with Congress.

Cindy Williams is currently continuing her role as the Principal Research Scientist of the Security Studies Program at MIT. Her bio can be found here.

This isn’t the only email chain to be given new life recently with a simple alteration of the text. The almost-as-legendary ‘Jane Fonda Honored as Woman of the Century’ email, which dealt with Time magazine’s possibility of listing the scourge of Vietnam era veterans as one of the most influential women of the 20th century, is making the rounds again with a ‘Now Obama is going to honor her’ snippet added in, with references to Time taken out.

Fear of benefit and pay cuts for the military and their families is strong right now, which naturally lends itself to these types of resurgences. But changing the target of the hostility makes them no truer than when they were first issued. The Cindy Williams case shows how long a particularly emotion invoking article can stay in circulation. It also shows that the further down the road you get, the more distortions are likely to pop up.

Discussion

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New Email Regarding Health Care Changes

A new viral email has hit the streets that discusses new taxes on health care provided by private and public employers. While it is rooted in fact, the email leaves out an incredible number of pertinent items, most of all the fact that it won’t go into effect until 2018 and that the actual tax only applies to so called ‘Cadillac’ health insurance plans – those that cost more than $10,500 for individual plans and $27,500 for family coverage. And the tax would only be applicable to anything that exceeds the $27,500 threshold. It also contains a very clear misstatement that the cost of health care will be added to your gross income next year. A response from our Government Relations team follows the viral email.

The Email

You really need to read this……starts nextext year …This is part of the new Health Care Bill.
Contacted my Congressman about House bill HR3590 the health care bill just passed. I asked for a summary of changes.
The aid directed me to go to www.thomas.gov ; enter HR3590 in the search Box and look for summaries.
Starting in 2011 (next year folks) your W 2 tax form sent by your employer will be increased to show the value of what ever health insurance you are given by the company. It does not matter if that’s a private concern or governmental body of some sort. If you’re retired, so what; your gross will go up by the amount of insurance you get.
You will be required to pay taxes on a large sum of money that you have never seen.
Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many it also puts you into a new higher bracket so it’s even worse.
This is how the government is going to buy insurance for 15 % that don’t have insurance and it’s only part of the tax increases.
Not believing this I researched the summaries and here’s what I’m reading:
On page 25 of 29:
TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002. “requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income.”
Joan Pryde is the senior tax editor for the Kiplinger letters. Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what I just told you about.
Why am I sending you this? The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November.

MOAA’s Response

This is a classic case of someone taking a fact and twisting it into something else.

Yes, the new law requires an entry on the W-2 showing the cost of employer-provided care.

But that doesn’t mean the employee will be taxed on it. the purpose of including it on the W-2 is mainly to show the employee what the value of the benefit is. As for the tax aspect:

First off, there isn’t any tax on health benefits value before 2018.

Second, there won’t be any taxes imposed on plans that aren’t deemed “Cadillac” plans (which are defined as those costing more than $10,200 for individual coverage or $27,500 for a family plan)

Third, it’s not the employees, but the insurance companies that provide those plans that will be taxed on part of such value – starting in 2018.

Fourth, the tax won’t be on the total value of the plan. Insurers will be assessed a tax equal to 40% of whatever share of the value exceeds the $27,500 threshold. i.e., if the value of a plan is $30,000, the insurer will be taxed 40% of $2,500 = $1,000.

Discussion

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Editor’s Note

Director of Government Relations, Colonel Steve Strobridge, USAF – (Ret.) wrote an article for his As I See It column that was released this Friday. The discussion and comments were going strong but unfortunately ran up against a required database upgrade that stopped the conversation by shutting down our sign in function. Trust me when I say this is a much needed upgrade and despite the week long (expect the site to be back up on Tuesday, January 26th) freeze it is going to be worth the hassle.

Battle of the Bilge does not have the same restrictions so we have reprinted the article here and the discussion can continue. This is based on multiple email requests, thank you for the feedback and for helping us help you speak out about an important issue.

Warmest personal regards,
Matthew LoFiego

As I See It – Scared Straight on Healthcare

January 14, 2009

By Col. Steve Strobridge, USAF-Ret.

As we enter the second decade of the new millennium, most Americans — and most of the military beneficiary population — are scared to death about the future of health care.

And not without reason. There’s certainly no shortage of very real threats. Those fears are heightened further by the Internet and other electronic media that thrive on hype, hyperbole, and our natural tendency to share seemingly outrageous “facts” (which too often actually are outdated “half-facts” taken out of context or even blatant fabrications) with our friends and family.

Throw in a highly partisan political atmosphere in which Republicans and Democrats and liberals and conservatives endlessly trash each other’s ideas and integrity, and everybody’s blood pressure goes up — especially on such a vitally important topic as your family’s health care.

Let’s start with the real threats.

The most imminent one is the crazy formula in current law that requires compounded cuts every year in Medicare and TRICARE payments to doctors. For each of the past several years, Congress has imposed a one-year moratorium on the cuts, because they know allowing the cuts to happen would cause large numbers of doctors to stop seeing Medicare and military patients.

But Congress’ failure to fix the basic statutory formula has meant the size of the annual cut has grown significantly every year.
Now, if Congress doesn’t act before the end of February, current law will require a 21-percent payment cut as of March 1.

Now that’s scary — scary enough that Congress almost certainly will stop it. But they’ll probably just approve a fix for the rest of 2010. Which means they’ll have to act again before the end of the year to stop a 26-percent cut for 2011. Really scary.

As for the next threat, we know it very intimately. Because that threat is us. Or rather me, and people like me. I’ll be 63 years old in April and am among the leading edge of millions of baby boomers who will become eligible for Medicare in this decade.

And Medicare isn’t ready for us. Under current law, Medicare will run out of money in about seven years. The Medicare trust fund actuary says the health care reform bill passed by the Senate would postpone that crisis for another decade — but only if you believe the optimistic assumptions the bill entails, about which the Medicare actuary is dubious.

That means Congress will have no choice but to make further Medicare changes soon — higher Medicare taxes, reduced benefits, or both. Very scary.

Meanwhile, the budget deficit and national debt are rising at unprecedented levels, which means just having the government borrow more money to fund growing health-benefit needs (like fixing Medicare and the doctor payment problem) is a non-starter.

So there will be tremendous pressure in coming years to cut government spending in virtually every area to free up more funds for those critical needs. And that means tremendous pressure on the defense budget, which means a renewal of all the threats we encountered during the tight budget years of the 1970s, ’80s, and ’90s: force cutbacks, pay-raise caps, COLA delays, higher health care fees, commissary threats, and more.

Unfortunately, those real threats often are obscured by new-age “red herrings” — the electronic equivalent of chain letters circulating on the Internet, Facebook, Twitter, etcetera, that assert some kind of outrageous proposal that we send to all our friends with a note asking, “Can this be true?”

Unfortunately, much of that well-circulated material turns out to be bits of old news that’s no longer relevant, things that were originally written as satirical fiction, or blatantly false assertions that started as a joke or to serve someone’s personal or partisan agenda. Nevertheless, it often acquires a life of its own on the Internet, evolving into ever-more-outrageous forms, as amused or well-intentioned people pass them on for months and years — and as the “Can this be true?” comments change to “This is true!”

Several such electronic chain letters assert there is imminent legislation that would require TRICARE For Life beneficiaries to pay thousands more a year for their coverage.

There actually was such an idea, floated by the CBO back in 2008, but it was never a serious proposal, nor was it supported by anyone in the administration or Congress. Nothing like it is contained in any legislation before the Hill.

Are there legitimate reasons to be scared about our health care future? Yes.

That’s why MOAA has several current legislative alerts asking members to urge their legislators to reverse impending Medicare/TRICARE payment cuts, protect military beneficiaries from adverse effects of health reform, and more.

But let’s stay “scared straight” on our facts, and keep our energy focused on addressing real problems rather than fictional ones.

Another Message from Steve?

Yes. There’s a reason he’s our top mind on legislative issues. He’s extremely smart and sensible. Listen to him, and pass it on to anyone you have in your contact list.

Discussion

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