Incorporating private sector ideas into military retirement reform: a cash balance plan approach
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Authors
Holley, G. Steele
Subjects
Retirement
Military Retirement
Cash Balance Plan
Defined Benefit
Defined Contribution
Military Retirement
Cash Balance Plan
Defined Benefit
Defined Contribution
Advisors
Gates, William
Landry, Steven
Date of Issue
2014-06
Date
Jun-14
Publisher
Monterey, California: Naval Postgraduate School
Language
Abstract
Since 1948, a number of commissions have attempted to reform the military retirement system. Today’s military retirement system, however, still remains largely the same as then. Previous reform proposals attempted to alleviate the four primary criticisms of the retirement system: growing cost, inequity to those with fewer than 20 years of service, hindered force manning, and a lack of civilian comparability. Hybrid defined benefit plans called cash balance plans are increasing in popularity in the private sector and contain defined contribution aspects. These cash balance plans provide a more conservative approach to retirement by placing more of the risk on the employer. This thesis presents an alternative approach to retirement system modernization that addresses the four primary criticisms. By incorporating a cash balance system in lieu of a defined contribution component and maintaining an old age annuity, a plan is proposed that still provides comparable retirement income to today’s system. The proposed system provides a higher present value than the current system and a system that the Department of Defense proposed in March 2014 for any discount rate above 4.85 percent. The proposed alternative system requires lower outlays than the current system and provides higher undiscounted lifetime earnings than the current system. The alternative system proposed in this thesis offers a viable modernization alternative for military retirement.
Type
Thesis
Description
Series/Report No
Department
Graduate School of Business & Public Policy (GSBPP)
Organization
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NPS Report Number
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Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.