Legislation sweetens pot for 2007 pay hikes

By Tom Philpott: Military Update

The 2007 defense authorization bill, which the president is expected to sign this month, will bring better pay and benefits to large segments of the military community. Drilling reservists who lack affordable health care coverage will be pleased. So will medical scholarship students seeking stipend increases.

Others will be upset to see prized initiatives fail again. Reservists won’t see an increase in GI Bill benefits or an easing of the age-60 threshold for retired pay. Disabled retirees rated as “unemployable” won’t see full retired pay restored before 2009.

Survivor benefits will continue to be reduced by VA dependency and indemnity compensation. And there will be no change to the 2008 effective date of the paid-up rule on premiums for Survivor Benefit Plan participants.

But the undisputed champions of compensation for 2007 appear to be the military’s top 161 officers. There is no evidence these officers lobbied for dramatic pay gains, certainly not in wartime. Yet their lifetime compensation is about to get a pleasant jolt.

In January, when most service members will receive a 2.2 percent basic pay raise, their smallest in 12 years, America’s 36 four-star generals and admirals, and its 125 lieutenant generals and vice admirals, will see basic pay climb by 8.7 percent, or $1,100 a month.

More significant are changes in the way their retired pay is calculated. To use one prominent officer as an example, Army Gen. John Abizaid, commander of U.S. Central Command, could see his future retired pay jump by almost $37,000 a year.
The pay gains voted for the most senior officers flow from a four-part packet of changes designed by the Senate Armed Services Committee.

Step one raises the executive pay cap that now impacts only officers in pay grades O-9 and O-10. Currently their basic pay can’t exceed Executive Level III for federal civilians, $12,667 a month. On Jan. 1, that will change to Executive Level II, boosting the basic pay ceiling to $13,767 a month. The ceiling could go even higher when Congress returns after November elections and decides on 2007 federal civilian pay levels.

Three other bill provisions affect future annuities for three- and four-star officers. If Abizaid were to retire today, with 33 years of service, he would get retired pay equal to 75 percent of his basic pay of $12,667 a month. That would total $9,500 a month or $114,000 a year.

But if Abizaid, or indeed any service member with more than 30 years of service retires later, their retired pay multiple might no longer max out at 75 percent level. The Secretary of Defense will have authority to add an additional 2.5 percent for each year served past 30. So an officer with 33 years, for example, could receive 82.5 percent of basic pay in retirement.

Two more factors will boost retired pay even more. Effective Oct. 1, this year, senior officers who retire no longer will have their annuities based on “capped” basic pay. Instead, pay officials will apply the basic pay levels shown for O-9 and O-10 in the military pay chart.

This change alone will be substantial using the 2006 pay chart. But Congress enhanced it by enacting a fourth and final change. In April the military will move to a new 40-year pay chart. It sets new, higher basic pay levels for members who have served more than 30 years, 34 years and 38. This will raise the retired pay of long-serving senior enlisted members too.

Returning to the Abizaid example, his retired pay after 33 years could be 82.5 percent of the new basic pay rate of $15,234 a month for an O-10 with at least 32 years’ service. His monthly retirement check could be $12,568, instead of $9,500, and annual retired pay $150,816, not $114,000.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:
milupdate@aol.com