Toward Efficient Military Retirement Accrual Charges

📖 The Scoop

"The retirement accrual charge system introduced in 1984 brought visibility to the military retirement liability resulting from current personnel policy decisions. The system produces inaccurate estimates of each service's accrual charge, however. This is because the accrual charge is based on a combined, forcewide retention profile rather than service-specific profiles. Accurate accrual charges are relevant for budgeting, decisions regarding personnel versus non-personnel resources, and decisions regarding the experience mix of personnel. In this report, we present a theoretical model explaining why the current system produces inaccurate estimates of each service's total and marginal accrual charges. We review past critiques of the system and consider their proposals and recommendations for change, and we present empirical estimates of the inaccuracy in each service's total and marginal accrual charges under the current system as compared with a service-specific system. This is done for the current military retirement benefit system and the reformed retirement benefit system recommended by the Military Compensation and Retirement Modernization Commission. The estimates show that the accrual charge is too high for three services and too low for one service. For example, the Army's accrual charge is estimated to be $380 million (in 2015 dollars) per year too high. Implementing service-specific accrual charges with separate charges for officers and enlisted personnel would eliminate these charge inaccuracies."--Publisher's description.

Genre: Business & Economics / Human Resources & Personnel Management (fancy, right?)