Strategic retirement reform: identifying the broader strategic effects from changes in human capital

Abstract

This project seeks to understand the changes in the decision-making process to stay or leave the military upon adoption of a defined contribution retirement system, and the potential implications of human capital that might follow. Multiple theses have been written regarding potential cost savings of a defined contribution plan and how a change of this nature could affect military personnel retention rates. This project differs from other research in the field in that we assume the Department of Defense will shift the retirement compensation away from a pension system and 20-year vesting of benefits in the near future. This report focuses on the decision-making process that service members use and the potential implications for the services that might follow under a DC plan, and how that decision-making process might change. Specifically, we utilize the unfolding model of voluntary turnover to assess the decision-making process for military personnel and assess the potential impacts from a voluntary turnover, retention, and Human Capital Theory perspective.