Cover image for Reforming the military retirement system
Reforming the military retirement system
Asch, Beth J.
Personal Author:
Publication Information:
Santa Monica, CA : Rand, 1998.
Physical Description:
xix, 81 pages : illustrations ; 23 cm
General Note:
"Prepared for the Office of the Secretary of Defense."

"National Defense Research Institute."

Format :


Call Number
Material Type
Home Location
Item Holds
UB373 .A8623 1998 Adult Non-Fiction Central Closed Stacks-Non circulating

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The authors summarize the principal features of a model of military compensation developed by the authors earlier and use it to analyze the effects of converting the current military retirement system to an alternative system patterned after the Federal Employees Retirement System. The three parts of the alternative system are a retirement plan similar to that for civil service employees, a 7 percent across-the-board pay increase to counteract mandatory contributions under the new plan, and a set of retention bonuses targeted to address any retention problems. Because the alternative system may not create the services' desired seniority profiles, a larger set of pay raises, retention bonuses, and/or separation payments would be added. In addition, the authors recommend that pay raises be skewed--be higher in the higher ranks. The authors consider the implications of this proposal in terms of the effects on cost, force size and structure, productivity, and force management flexibility.

Table of Contents

Prefacep. iii
Figuresp. vii
Tablesp. ix
Summaryp. xi
Acknowledgmentsp. xix
Chapter 1 Introductionp. 1
Chapter 2 Overview of MFERSp. 7
Basic Benefit Planp. 7
Thrift Savings Planp. 9
Social Security Benefitsp. 10
Coupling MFERS with a Pay Raisep. 10
Differences Between MFERS and FERSp. 10
Transitioning to MFERSp. 11
Chapter 3 Overview of the Theoretical and Empirical Modelsp. 13
Theoretical Modelp. 13
Organizational Objectivesp. 13
Individual Productivityp. 14
Individual Decisionmakingp. 15
Organizational Policiesp. 20
Empirical Model Overviewp. 25
Retention and Force Structurep. 26
Computing Ability and Effort Supplyp. 31
Cost Analysisp. 34
Estimating the MFERS Retirement Annuityp. 35
Modeling the Transition to MFERSp. 36
Chapter 4 Steady-State Resultsp. 39
The Current Military Retirement System: REDUXp. 39
MFERS without a Pay Raisep. 41
MFERS with an Across-the-Board Pay Raisep. 43
MFERS with a Skewed Pay Raisep. 45
Chapter 5 Results for the Transition to the Steady Statep. 51
Theoretical Effectsp. 51
Case 1 Grandfatheringp. 51
Case 2 Converting Membersp. 52
Resultsp. 54
Chapter 6 Other Considerationsp. 61
Force Management Flexibilityp. 61
Involuntary Separationp. 66
Portabilityp. 68
Force Stabilityp. 69
Chapter 7 Conclusions and Policy Optionsp. 71
MFERS with Retention Bonusesp. 73
Policy Optionsp. 74
Referencesp. 79