Military Personnel
Military and Civilian Pay Comparisons Present Challenges and Are One of Many Tools in Assessing Compensation Gao ID: GAO-10-561R April 1, 2010The Department of Defense's (DOD) military compensation package, which is a myriad of pays and benefits, is an important tool to attract and retain the number and quality of active duty servicemembers it needs to fulfill its mission. Compensation can be appropriate and adequate to attract and retain servicemembers when it is competitive with civilian compensation. However, comparisons between military and civilian compensation present both limitations and challenges. As we noted in 1986, exact compensation comparisons are not possible because no data exist which would allow an exact comparison of military and civilian personnel with the same levels of work experience. Also, nonmonetary considerations complicate military and civilian pay comparisons because their value cannot be quantified. Specifically, military service is unique in that the working conditions for active duty service carry the risk of death and injury during wartime and the potential for frequent, long deployments unlike most civilian jobs. The National Defense Authorization Act for Fiscal Year 2010 required that we conduct a study comparing pay and benefits provided by law to members of the Armed Forces with that of comparably situated private-sector employees to assess how the differences in pay and benefits affect recruiting and retention of members of the Armed Forces. Specifically, our objectives were to (1) assess total military compensation for active duty officers and for enlisted personnel; (2) compare private-sector pay and benefits for civilians of similar age, education, and experience with similar job responsibilities and working conditions of officers and enlisted personnel of the Armed Forces; and (3) assess the 10th Quadrennial Review of Military Compensation (QRMC) recommendation to include regular military compensation and select benefits when comparing military and civilian compensation to ascertain if it is appropriate. The focus of this review was active duty servicemembers' perspectives on compensation. That is, we focused on cash compensation and the value of benefits to servicemembers versus the cost to the government of providing compensation.
DOD provides active duty personnel with a comprehensive compensation package that includes a mix of cash, such as basic pay; noncash benefits, like health care; and deferred compensation, such as retirement pension; however, most studies that have examined the value of military compensation to servicemembers do not assess all components of the compensation package. While a number of organizations, including Congressional Budget Office (CBO), RAND Corporation (RAND), and CNA Corporation (CNA), have assessed military compensation using varying approaches, all of the studies include some components of compensation--for example, cash compensation beyond basic pay to include housing and subsistence allowances, the federal income tax advantage, and, when possible, special and incentive pay. The most recent study, a 2008 DOD-sponsored study-- completed by CNA--assessed military compensation using regular military compensation and some benefits (specifically health care, the military tax advantage, and retirement benefits). In particular, the results of this study state that in 2006, average enlisted servicemembers' compensation ranged from approximately $40,000 at 1 year of service to approximately $80,000 at 20 years of service. Additionally, in 2006 the average officers' compensation ranged from approximately $50,000 at 1 year of service to approximately $140,000 for 20 years of service. Our analysis of CNA's 2008 study on military compensation found that overall CNA used a reasonable approach to assessing military compensation. In general, we agree that when assessing military compensation for the purpose of comparing it to civilian compensation, it is appropriate to include regular military compensation and benefits (as many as can be reasonably valued from the servicemembers' perspective). However, we identified two areas for comment with CNA's approach. First, CNA's methodology for calculating a value for retirement, health care, and tax advantage makes various assumptions that allow the study to approximate a value for these benefits. While the assumptions are reasonable, we note that other, alternate assumptions could have been made. Thus, a different assessment of military compensation could make different assumptions and generate, in some cases, substantially different values. Second, the study omits the value of retiree health care, which is a significant benefit provided to servicemembers. This study and others of military compensation illustrate that valuing total military compensation from a servicemember's perspective is challenging given, among other reasons, the variability across the large number of pays and benefits, the need to make certain assumptions to estimate the value of various benefits, and the utilization of benefits by servicemembers or their dependents.
GAO-10-561R, Military Personnel: Military and Civilian Pay Comparisons Present Challenges and Are One of Many Tools in Assessing Compensation
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GAO-10-561R:
United States Government Accountability Office:
Washington, DC 20548:
April 1, 2010:
Congressional Committees:
Subject: Military Personnel: Military and Civilian Pay Comparisons
Present Challenges and Are One of Many Tools in Assessing Compensation:
The Department of Defense's (DOD) military compensation package, which
is a myriad of pays and benefits, is an important tool to attract and
retain the number and quality of active duty servicemembers it needs
to fulfill its mission. Compensation can be appropriate and adequate
to attract and retain servicemembers when it is competitive with
civilian compensation. However, comparisons between military and
civilian compensation present both limitations and challenges. As we
noted in 1986, exact compensation comparisons are not possible because
no data exist which would allow an exact comparison of military and
civilian personnel with the same levels of work experience.[Footnote
1] Also, nonmonetary considerations complicate military and civilian
pay comparisons because their value cannot be quantified.
Specifically, military service is unique in that the working
conditions for active duty service carry the risk of death and injury
during wartime and the potential for frequent, long deployments unlike
most civilian jobs.
Additionally, there is variability among past studies in how
compensation is defined (e.g., pay or pay and benefits) and what is
being compared. Most studies, including those done by the
Congressional Budget Office (CBO) and RAND Corporation (RAND), have
compared military and civilian compensation but limited the comparison
to cash compensation--using what DOD calls regular military
compensation--and did not include benefits.[Footnote 2] DOD also has
done studies comparing military and civilian compensation as part of
its Quadrennial Review of Military Compensation (QRMC)--a review
required by law, every 4 years, of the principles and concepts of the
compensation system for members of the uniformed services.[Footnote 3]
The 2008 QRMC (the 10th) focused its attention on seven compensation-
related areas, including the adequacy of compensation, and
recommended, among other things, including both cash and some
benefits, for example health care, when assessing military
compensation. As a result, the DOD-sponsored review found that
military compensation compares approximately with the 80th percentile
of comparable civilian compensation (i.e., that 80 percent of the
comparable civilian population made less than the military population
in the comparison). Previously, the 2004 QRMC (the 9TH) found that
regular military compensation met the 70th percentile of comparable
civilian cash compensation.
The National Defense Authorization Act for Fiscal Year 2010 required
that we conduct a study comparing pay and benefits provided by law to
members of the Armed Forces with that of comparably situated private-
sector employees to assess how the differences in pay and benefits
affect recruiting and retention of members of the Armed Forces.
[Footnote 4] Specifically, our objectives were to (1) assess total
military compensation for active duty officers and for enlisted
personnel; (2) compare private-sector pay and benefits for civilians
of similar age, education, and experience with similar job
responsibilities and working conditions of officers and enlisted
personnel of the Armed Forces; and (3) assess the 10th QRMC
recommendation to include regular military compensation and select
benefits when comparing military and civilian compensation to
ascertain if it is appropriate.
The focus of this review was active duty servicemembers' perspectives
on compensation. That is, we focused on cash compensation and the
value of benefits to servicemembers versus the cost to the government
of providing compensation. To address our objectives, we identified
and reviewed studies on compensation by CNA Corporation (CNA), CBO,
CRS, DOD, GAO, and RAND. We interviewed officials from DOD's Office of
the Under Secretary of Defense for Personnel and Readiness, including
the Deputy Under Secretary of Defense for Military Personnel Policy
and officials within the Directorate of Compensation. We also
interviewed officials from the Defense Manpower Data Center (DMDC),
CBO, CNA, the Bureau of Labor Statistics (BLS), and the Military
Officers Association of America (MOAA). For our first objective, to
assess total military compensation, we reviewed a 2008 DOD-
commissioned report--completed by CNA--and identified estimated values
for the elements of military compensation--regular military
compensation, health care, retirement, and additional tax advantages.
We also identified the employee benefits available to active duty
servicemembers and used DOD survey data to identify the utilization
rates of these benefits by servicemembers. For our second objective,
to compare military and private sector pay and benefits for civilians
of similar age, education, and experience with similar job
responsibilities and working conditions of officers and enlisted
personnel, we used the DOD-commissioned report conducted by CNA to
identify estimated values for private-sector compensation--pay and
benefits--for comparable civilians. In addition, we reviewed the
methods CNA used to estimate values for several benefits--retirement,
health care, and additional tax advantages. For our third objective,
to assess the 10th QRMC's recommendation to include regular military
compensation and select benefits when comparing military and civilian
compensation, we conducted a review of recent literature on
compensation--including regular military compensation and select
benefits, and conducted interviews with DOD officials and other
knowledgeable individuals in the fields of compensation and human
capital management. For our three objectives, we conducted a
methodological review of the 2008 study completed by CNA. While we did
not verify the calculations, we found the methodology that CNA used
reasonable to compare military compensation to civilian compensation--
except for the limitations and the areas of comment noted in this
report. We found that the datasets used by CNA were appropriate, given
their objectives, and were also appropriate for our purposes to
estimate total military compensation for active duty and enlisted
personnel compared with civilian compensation.
We conducted this performance audit from November 2009 through March
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. Further
details on our scope and methodology can be found in appendix I.
Summary:
DOD provides active duty personnel with a comprehensive compensation
package that includes a mix of cash, such as basic pay; noncash
benefits, like health care; and deferred compensation, such as
retirement pension; however, most studies that have examined the value
of military compensation to servicemembers do not assess all
components of the compensation package. While a number of
organizations, including CBO, RAND, and CNA, have assessed military
compensation using varying approaches, all of the studies include some
components of compensation--for example, cash compensation beyond
basic pay to include housing and subsistence allowances, the federal
income tax advantage, and, when possible, special and incentive pay.
The most recent study, a 2008 DOD-sponsored study--completed by CNA--
assessed military compensation using regular military compensation and
some benefits (specifically health care, the military tax advantage,
and retirement benefits).[Footnote 5] In particular, the results of
this study state that in 2006, average enlisted servicemembers'
compensation ranged from approximately $40,000 at 1 year of service to
approximately $80,000 at 20 years of service.[Footnote 6]
Additionally, in 2006 the average officers' compensation ranged from
approximately $50,000 at 1 year of service to approximately $140,000
for 20 years of service. Our analysis of CNA's 2008 study on military
compensation found that overall CNA used a reasonable approach to
assessing military compensation. In general, we agree that when
assessing military compensation for the purpose of comparing it to
civilian compensation, it is appropriate to include regular military
compensation and benefits (as many as can be reasonably valued from
the servicemembers' perspective). However, we identified two areas for
comment with CNA's approach. First, CNA's methodology for calculating
a value for retirement, health care, and tax advantage makes various
assumptions that allow the study to approximate a value for these
benefits. While the assumptions are reasonable, we note that other,
alternate assumptions could have been made. Thus, a different
assessment of military compensation could make different assumptions
and generate, in some cases, substantially different values.[Footnote
7] Second, the study omits the value of retiree health care, which is
a significant benefit provided to servicemembers. This study and
others of military compensation illustrate that valuing total military
compensation from a servicemember's perspective is challenging given,
among other reasons, the variability across the large number of pays
and benefits, the need to make certain assumptions to estimate the
value of various benefits, and the utilization of benefits by
servicemembers or their dependents.
In comparing military and civilian compensation, CNA's 2008 study, as
well as a 2007 CBO study,[Footnote 8] found that military pay
generally compares favorably to civilian pay; however, a number of
limitations and challenges exist in making such comparisons.
Specifically, CNA found that in 2006, regular military compensation
for enlisted personnel averaged $4,700 more annually than compensation
for civilians included in the study. Similarly, military officers
received an average of about $11,500 more annually than civilians
included in the study. Further, CNA compared military and civilian
compensation including three military benefits--health care,
retirement, and the additional tax advantage for military members. By
including those three benefits, the estimated result on average was
about $13,360 more annually for enlisted personnel and about $24,870
more annually for officers, where CNA included the difference in the
values for these three benefits. CNA asserted, and we agree, that
including benefits allows comparisons of levels of compensation and
allows one to approximate whether servicemembers are compensated at a
level that is comparable to that of their civilian peers, except as
noted below. While CNA's approach provides a broad comparison of
military and civilian compensation, which can provide some insight
into how well military compensation is keeping pace with overall
civilian compensation, there are limitations and challenges to making
this type of comparison--such things as the mix of skills, education,
and experience can differ between the comparison groups. For example,
while some efforts were made to control for age (as a proxy for years
of experience) and broad education levels (high school and college
graduate), the civilian population is not necessarily an exact match
for individuals with similar job responsibilities and working
conditions as the military. In addition, there are other approaches to
comparing military and civilian compensation, such as comparing
average pay of occupations (e.g., military police and civilian police
officers). However, if an occupational comparison approach is to be
used to generalize to the entire military population, a very detailed
comparison of occupations would be needed--recognizing that many
military occupations would not have a civilian counterpart.
The 10th QRMC's recommendation to include regular military
compensation and select benefits when comparing military and civilian
compensation appears reasonable because it provides a more complete
measure of military compensation than considering only cash
compensation. In considering either a military or civilian job, an
individual is likely to consider the overall compensation--to include
pay as well as the range and value of the benefits offered between the
two options. The challenge with this approach, as mentioned
previously, is how to "value" benefits and which benefits to include
in the comparison. The 10th QRMC also recommended that, among other
things, to maintain the same standard set by the 9th QRMC's 70th
percentile--which includes only regular military compensation--DOD
adopt the 80th percentile as its goal for military compensation--when
regular military compensation and the value of some benefits, such as
health care, are included in the analysis.[Footnote 9] While
comparisons of military and civilian compensation are important
management measures, they alone do not necessarily answer the question
of how appropriate or adequate compensation is. Another measure is
DOD's ability to recruit and retain personnel. Given the fact that (1)
the ability to recruit and retain is a key indicator of the adequacy
of compensation and (2) DOD has generally met its overall recruiting
and retention goals for the past several years, it appears that
regular military compensation is adequate at the 70th percentile of
comparable civilian pay as well as at the 80th percentile when
additional benefits are included. Targeted bonuses, rather than across-
the-board pay increases, may be most appropriate in meeting DOD's
requirements for selected specialties where DOD faces challenges in
recruiting and retaining sufficient numbers of personnel.
In commenting on a draft of this report, DOD provided oral comments.
DOD noted that it generally agreed with the contents of our draft
report. DOD also provided technical comments, which we incorporated,
where appropriate.
Background:
Defining Military Compensation and Trends in Military Personnel Costs:
Military compensation includes a mix of cash, noncash benefits, and
deferred compensation, and has been one of the primary tools used by
DOD to recruit and retain servicemembers since the military
transitioned to an all-volunteer force in 1973. Since transitioning to
an all-volunteer force, the amount of military pay and benefits has
progressively increased. Historically, "basic pay" has been the
largest component of military compensation, and is paid to all
servicemembers according to their respective rank and years of
service. Over the years, Congress has provided for and DOD has
implemented a number of additional benefits--some of which may be
deferred until after the completion of active duty service. For
example, in 2008 Congress enacted the Post 9-11 Veterans Educational
Assistance Act,[Footnote 10] which expanded the educational benefit
for active and reserve component servicemembers who qualify for the
maximum benefit by providing (1) full tuition and fees up to the
amount of tuition and fees regularly charged to in-state students at
the most expensive public institution in a given servicemember's
state, (2) a monthly stipend for living expenses, and (3) an annual
stipend for books and required educational expenses. In addition, this
new benefit allows eligible servicemembers to use it after discharge
or release from active duty and authorizes the Secretary of Defense to
give the service Secretaries authority to allow qualifying
servicemembers to transfer unused educational benefits to spouses and
dependents. We reported in 2009 that the Department of Veterans
Affairs estimates that the net cost of this enhanced educational
benefit will be nearly $78.1 billion from fiscal years 2009 through
2018.[Footnote 11] Figure 1 illustrates the distinctions in the type
of military compensation afforded to active duty servicemembers. See
also appendix II for a select list of active duty compensation--cash,
noncash, and deferred compensation.
Figure 1: Active Duty Military Pay and Benefits According to the Type
of Compensation:
[Refer to PDF for image: illustration]
Compensation:
Cash:
* Basic Pay;
* Housing and Other Allowances;
* Special and Incentive Pays.
Noncash:
* Health Care;
* Educational Benefits;
* Commissary and Exchanges.
Deferred:
* Retirement;
* Veterans‘ Benefits;
* Retiree Health Care.
Source: GAO.
The Under Secretary of Defense for Personnel and Readiness has
oversight of career development, recruitment, and pays and benefits
for active duty personnel and is principally responsible for
establishing active duty compensation policy. DOD sponsors regular
studies on military compensation, called the QRMC, which typically
focus on specific issues like flexibility in compensation.
In 2005 and 2007, we reported on the cost to provide active duty
compensation. Specifically, in our 2005 assessment of active duty
compensation, we raised concerns about the transparency,
affordability, and appropriateness of DOD's compensation system in
light of the nation's increasing fiscal imbalance.[Footnote 12] In
addition, we found that the cost to provide military compensation was
substantial and rising.[Footnote 13] Specifically, between fiscal
years 2000 and 2008 total compensation costs grew because of (1)
health care costs for retirees, (2) special and incentive pays, (3)
basic allowance for housing and, (4) basic pay. For example, we
estimated that basic pay alone has increased 46.1 percent, which
represents an average annual increase of 4.3 percent. We also noted
that a piecemeal approach to compensation involved increasing or
making changes to compensation without completely understanding the
impact that these changes might have on recruitment and retention--
especially given that we found that about half of the cost of
compensation was to provide noncash and deferred benefits. In 2007, we
reported that DOD officials were concerned with their ability to
manage personnel costs, because so many of the costs were in
entitlements such as retirement and health care--items that managers
have little to no control over. As a result, we were uncertain whether
the increasingly costly military compensation system would be
affordable, sustainable, and fiscally sound over the long term.
Moreover, we noted that this challenge was especially acute given the
nation's increasingly constrained fiscal environment and DOD's need to
balance its personnel costs with its desire for new equipment and
infrastructure.
Defining Civilian Compensation and Recent Trends:
According to BLS, civilian compensation is generally comprised of two
components--wages, which comprise about 70 percent of total
compensation, and employer-sponsored benefits,[Footnote 14] which
comprise the remaining 30 percent. Of the benefits package that
civilian workers receive, almost one-third is mandated by law. These
include contributions to programs such as Social Security, Medicare,
workers' compensation, and unemployment insurance, except in the case
of independent contractors.[Footnote 15] The remaining portion of the
benefits package is discretionary and includes such things as paid
leave, retirement benefits, and the provision of health insurance or
medical care. The benefits that an employer chooses to provide its
workers serve a number of purposes, including attracting high-quality
workers, reducing employee turnover, and encouraging productivity.
Employers may also choose to provide their workers with specific
benefits in order to receive favorable federal tax treatment for
certain forms of compensation.[Footnote 16] Table 1 lists the top five
discretionary benefits that civilian workers most commonly have access
to, according to BLS, which tracks data on civilian compensation and
the incidence and key provisions of employee benefit plans.
Table 1: Access Rates of Civilian Workers to Select Discretionary
Benefits, as of March 2009:
Benefit: Paid holidays;
Percentage of civilian workers with access to this benefit: 76%.
Benefit: Paid vacations;
Percentage of civilian workers with access to this benefit: 75%.
Benefit: Medical care;
Percentage of civilian workers with access to this benefit: 74%.
Benefit: Paid jury duty leave;
Percentage of civilian workers with access to this benefit: 73%.
Benefit: Outpatient prescription drug coverage;
Percentage of civilian workers with access to this benefit: 72%.
Source: GAO analysis of BLS data from the March 2009 National
Compensation Survey.
[End of table]
In 2006, we reported that recent developments had led employers to
rethink the types of benefits they provide their workers.[Footnote 17]
For example, we noted that in recent years increases in the costs of
benefits have outpaced increases in wages, forcing employers and their
employees to make trade-offs between wages and benefits. We also noted
that an aging population with longer life expectancies increases the
long-term obligations of companies that provide retirement benefits,
such as defined benefit pension plans,[Footnote 18] and that some
companies have cited this obligation as a contributing reason for
terminating those plans, reorganizing, or even declaring bankruptcy.
Further, we noted that advances in expensive medical technology,
increased use of high-cost services and procedures, and an aging
population have contributed to escalating health care costs.
Consequently, employers continue to look for ways to reduce their
costs--sometimes by reducing or eliminating the types of benefits they
offer their employees.
Percentile Comparisons of Compensation:
Percentile comparisons of compensation are a compensation policy tool
that uses market data to compare an organization's salary data against
a comparable market to determine the competitiveness of a compensation
structure. For example, if an organization chose to compensate its
employees at the 70th percentile, it would mean that 70 percent of the
comparable population makes less than the employees of that
organization. Percentile comparisons are typically part of an
organization's overall compensation philosophy. Taking such an
approach, an organization would, for example, consider if it wants to
pay its employees at, above, or below "the market level." An
organization's pay philosophy would likely include consideration of
the base compensation, as well as any additional compensation and
benefits. According to one human resources consulting firm, having
data on market pay allows an organization to determine the
competitiveness of its pay. Also, according to that firm, using
percentiles to compare compensation data shows how dispersed pay is
around the 50th percentile or the median. Most companies aim to have
pay range midpoints competitive with the market average. Using
internal midpoints for benchmark jobs and comparing them to the market
average helps enable organizations to determine if their current pay
structure is competitive.[Footnote 19]
There are many factors that could influence organizational decisions
about salary competitiveness in the market. If an organization is
going to establish a salary structure based on external market data,
it is essential for the organization to develop a baseline for each
occupation's compensation structure. An organization may choose to pay
at the market level for certain positions and above or below the
market level for other positions. Minimum and maximum rates for salary
are usually established around the median compensation value for an
occupation.[Footnote 20] The resulting range is used to pay employees--
generally, newer or less skilled staff will be paid in the lower part
of the range, while the higher end of the range will typically be
reserved for more experienced or skilled employees. Once a salary
range is established, organizations will typically determine market
competitiveness by identifying how staff compensation compares to a
benchmark. According to the aforementioned firm, pay is considered
competitive when it falls within 10 percent to 15 percent of the
market median. Organizations may also examine related retention and
hiring data to assess the adequacy of compensation. However, when
considering retention statistics as part of a pay philosophy, it is
necessary to determine whether or not compensation is a relevant
factor in high or low turnover, or if another factor is influencing
retention.
Active Duty Recruiting and Retention:
To maintain a highly skilled, well-trained, and professional volunteer
military, the services must recruit and retain adequate numbers of
personnel who meet quality standards. Each year, the services set
recruitment quantity goals based on the difference between
congressionally authorized levels of servicemembers and the number of
personnel that each service expects to retain. In addition to quantity
targets, the services also set separate "quality" goals for enlisted
recruit accessions each year.[Footnote 21] The military services
currently measure aptitude and education, the results of which are
used by the services to determine which recruits are considered to be
"high quality." Aptitude is generally determined by the results of a
series of tests that measure word knowledge, paragraph comprehension,
arithmetic reasoning, and mathematics knowledge. Education credentials
of new enlisted recruits are divided into three tiers ranging from non-
high-school graduates to individuals who hold high-school diplomas and
may have completed some college credit.
Retention refers to the rate at which military personnel voluntarily
choose to stay in the military after their original obligated term of
service has ended.[Footnote 22] For retention, much like recruitment,
the military services set annual goals for the number of
servicemembers they want to retain, the goals for which are divided
into categories of selected time periods within servicemembers' length
of service. The military services track retention of servicemembers
because imbalances in the retention rate can cause problems within the
military personnel system. Specifically, if too few servicemembers are
retained, the military will suffer from a lack of experienced leaders
and decreased efficiency, while the retention of too many
servicemembers will limit promotion opportunities and may result in a
higher percentage of involuntary separations. Furthermore, it should
be noted that, unlike nearly all other organizations, the uniformed
services have closed personnel systems; that is, DOD relies almost
exclusively on accession at the entry level (E-1 or O-1), and higher-
ranking members must be retained and promoted from lower ranks. By
contrast, most other organizations can and do hire from the outside at
all levels. Thus, the failure to meet recruiting or retention goals at
lower levels in a given year can have significant consequences for a
service's ability to produce experienced leaders for years to come.
There are a number of factors that impact the military's recruiting
and retention efforts--such as the size of the recruiting force, the
size and characteristics of the youth population, the civilian
economy, the military's recruiting efforts, and the ongoing military
operations since 2001, which has dramatically increased the
operational tempo of the military services and has resulted in
significant battle casualties. To offset some of these factors that
have a negative affect on the military services' ability to recruit,
the services offer enlistment, accession, and reenlistment bonuses.
For example, according to an official in the Office of the Under
Secretary for Personnel and Readiness' Directorate of Accession
Policy, about 47 percent of recruits DOD-wide in 2008 were offered
recruiting bonuses, which vary from $1,000 to $40,000.[Footnote 23]
Further certain specialties are authorized to receive additional
bonuses--such as some in the medical profession including
psychologists and some nurses. Although there have been times when
goals have been missed, and quality has declined, the department has
recently experienced success in overall recruiting and retention. See
table 2 for further information on the enlisted accessions since
fiscal year 2000.
Table 2: Total Enlisted Accessions to Active Duty and Percentage of
"High Quality" Accessions:
Year: 2000;
Objective number of accessions (goal): 202,017;
Actual number of accessions: 202,917;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 57%.
Year: 2001;
Objective number of accessions (goal): 195,324;
Actual number of accessions: 196,355;
Actual number of accessions as a percent of goal: 101%;
"High quality"[A] as percent of total accessions: 59%.
Year: 2002;
Objective number of accessions (goal): 195,526;
Actual number of accessions: 196,473;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 62.3%.
Year: 2003;
Objective number of accessions (goal): 184,366;
Actual number of accessions: 184,879;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 65%.
Year: 2004;
Objective number of accessions (goal): 181,803;
Actual number of accessions: 182,825;
Actual number of accessions as a percent of goal: 101%;
"High quality"[A] as percent of total accessions: 67%.
Year: 2005;
Objective number of accessions (goal): 169,452;
Actual number of accessions: 163,259;
Actual number of accessions as a percent of goal: 96%;
"High quality"[A] as percent of total accessions: 64%.
Year: 2006;
Objective number of accessions (goal): 179,707;
Actual number of accessions: 180,540;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 62v.
Year: 2007;
Objective number of accessions (goal): 180,376;
Actual number of accessions: 181,171;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 59%.
Year: 2008;
Objective number of accessions (goal): 184,186;
Actual number of accessions: 184,841;
Actual number of accessions as a percent of goal: 100%;
"High quality"[A] as percent of total accessions: 59%.
Year: 2009;
Objective number of accessions (goal): 163,880;
Actual number of accessions: 168,968;
Actual number of accessions as a percent of goal: 103%;
"High quality"[A] as percent of total accessions: 64%.
Source: DOD.
Note: DOD missed its overall goal in 2005. In that year, the Army
recruited 92 percent of its goal,
[A] "High quality" means recruit met the criteria as a "high school
diploma graduate" and scored in the top 50th percentile of the Armed
Forces Qualification Test.
[End of table]
Total Military Compensation for Active Duty Officers and Enlisted
Personnel Is Broad and Difficult to Assess:
DOD Provides a Comprehensive Compensation Package:
DOD provides active duty personnel with a comprehensive compensation
package that includes a mix of cash, such as pay and allowances;
noncash benefits, such as education assistance and health care; and
deferred compensation, such as retirement pensions and health care
benefits for retirees.
The foundation of each servicemember's compensation is regular
military compensation--which consists of basic pay, housing allowance,
subsistence allowances, and federal income tax advantage.
Specifically, the amount of cash compensation that a servicemember
receives varies based on rank, tenure of service, and dependency
status. For example, a hypothetical servicemember with 1 year of
service at the rank of O-1 and no dependents would receive an annual
regular military compensation of $54,663. Similarly, a hypothetical
servicemember with 4 years of service at the rank of E-5 and one
dependent would receive an annual regular military compensation of
$52,589.[Footnote 24] Beyond regular military compensation, some
servicemembers may, depending on the conditions of their service,
receive one or more of the authorized special and incentive pays
[Footnote 25] and the combat zone tax exclusion.[Footnote 26]
Therefore, the amount that servicemembers actually receive in their
paycheck can vary and fluctuate based on factors such as deployment to
combat zones, receipt of reenlistment or extension bonuses, or other
changes to their duty conditions.
In addition to cash pay, DOD offers a wide variety of noncash benefits
to current and retired servicemembers. These benefits range from
family health care coverage and education assistance to installation-
based services such as child care, youth, and family programs. To
explain its pays and the value of its benefits, DOD provides active
duty servicemembers with an annual statement of military compensation
(see appendix III for a copy of a blank statement). For example, DOD
estimated the value of the commissary at about $3,280 annually for a
servicemember with three dependents.[Footnote 27] For active duty
servicemembers who serve 20 years, the department provides a pension
and retiree health care for life. Furthermore, DOD provides
servicemembers with the option of an additional retirement savings and
investment plan (i.e., the Thrift Savings Plan)[Footnote 28] to which
they can contribute to while serving on active duty. Retired
servicemembers are also eligible for Veteran Affairs health care.
Most Studies Have Not Valued All Components of Active Duty Military
Compensation:
Many studies of active duty military compensation have attempted to
assess the value of the compensation package; however, most did not to
assess all components of compensation offered to servicemembers. See
appendix IV for an overview of studies that assessed military
compensation and compared it to civilian compensation. For example,
CBO, RAND and CNA have completed assessments of military compensation.
[Footnote 29] The results of these studies differ based on what is
being assessed, the methodology used to conduct the assessment, and
the components of compensation included in the calculations. However,
despite the varying approaches, all of the studies include components
of cash compensation beyond basic pay to include housing and
subsistence allowances, the federal income tax advantage, and, when
possible, special and incentive pays. The most recent study, completed
by CNA in 2008, assessed military compensation using regular military
compensation but also included select benefits, namely health care,
the military tax advantage--servicemembers do not pay Federal
Insurance Contributions Act (FICA) tax and state tax on housing and
subsistence allowances--and retirement benefits. In particular, this
study found that in 2006, the average enlisted servicemembers' annual
compensation ranged from approximately $40,000 at 1 year of service to
approximately $80,000 at 20 years of service. Additionally, in 2006
the average officers' annual compensation ranged from approximately
$50,000 at 1 year of service to approximately $140,000 for 20 years of
service.
Our analysis of CNA's 2008 study on military compensation found that
overall CNA used a reasonable approach to assess military
compensation. In general, we agree that when assessing military
compensation for the purpose of comparing it to civilian compensation,
it is appropriate to include regular military compensation and as many
benefits as can reasonably be valued from the servicemembers'
perspective. CNA's assessment of military compensation primarily
included (1) regular military compensation, (2) health care, (3)
retirement, and (4) tax advantages because these benefits are
unconditionally available to all servicemembers and are a function
only of continued active duty service. The following provides a
general discussion of CNA's approach for each of these benefits:
* CNA's approach to use regular military compensation as a proxy for
the value of cash compensation is a similar approach taken in past
studies. However, CNA chose to exclude special and incentive pays
since they are primarily given for combat, hardship, submarine, or sea
duty, and/or for obtaining special and uncommon skills--such as
munitions, foreign language proficiency, or nuclear power expertise.
* In order to value health care, CNA estimated the difference in value
between military and civilian health benefits because servicemembers
receive more comprehensive health care than most civilians.
Specifically, active duty servicemembers are automatically enrolled in
TRICARE Prime and do not pay premiums or out-of-pocket expenses. In
contrast, many civilians do not receive any health benefit from their
employer and even those that do usually pay some out-of-pocket
expenses and part of the premium. So by calculating the amount that
the typical civilian worker pays for premiums and out-of-pockets
expenses, CNA finds the difference between what civilians and
servicemembers pay. In other words, the benefit servicemembers receive
is avoiding the costs civilians would have to pay to receive
comparable health care.
* To calculate the value of retirement for the servicemember, CNA
determined the probability that the member will stay in the service
long enough to become eligible to receive the benefit and then chose a
discount rate to use to calculate the current value of retirement that
would be received in the future. Regarding civilian retirement, CNA,
pointed out that there are two types of civilian retirement plans--one
in the form of a defined contribution plan, such as a 401K, and
another in the form of a defined benefit plan, like that used for
military retirement.[Footnote 30] Private sector employees under both
of these types of plans are typically vested faster than personnel
under the military retirement system.[Footnote 31]We do note that CNA
used the same discount rates for civilian retirement as for military
retirement, which is reasonable. However, because of the faster
vesting of civilian retirement, the discount rate chosen has a smaller
impact on the calculation of the value of civilian retirement benefits
than for military retirement. Further, given the probability of
military members serving the 20 years necessary to vest under the
military retirement system, the annualized value of the retirement
benefit is higher for civilians than for military members in the early
years of service and then switches as the military member moves closer
to retirement. For the retirement benefit, CNA calculated the
difference between the value of military and civilian retirement and
added it to RMC.
* CNA calculated the tax advantages that servicemembers receive with
regard to the FICA tax and state income taxes. This approach is
similar to the calculation of federal tax advantage that is
incorporated into the traditional measure of regular military
compensation. It is an estimate of the amount of earnings that would
have to be added to the member's net pay if the basic allowance for
housing and basic allowance for subsistence were taxable in order to
equal the same net pay. CNA's calculation takes into account how
servicemembers are distributed by state of residence and relevant
state income tax laws.
While we believe the approach used is reasonable, we identified two
areas for comment regarding CNA's approach. Specifically, we found the
following.
* CNA's methodology to calculate a value for retirement, health care
and tax advantage makes various assumptions that allow the study to
approximate a value for these benefits. While we generally agree that
these assumptions are reasonable, we note that other reasonable
assumptions could have been made. Thus, a different assessment of
military compensation could make different assumptions and generate,
in some cases, significantly different values.
- For one, valuing retirement is difficult in terms of what is the
most appropriate discount rate to apply.[Footnote 32] CNA used a lower
discount rate than others have projected that servicemembers apply
toward the promise of future compensation (e.g., retirement).[Footnote
33] In short, CNA's assessed value of the retirement pension is more
than if higher discount rates had been applied.[Footnote 34] Further,
DOD's retirement is unique compared to most civilian sector plans in
that most active duty servicemembers who serve at least 20 years
become eligible to immediately retire and begin drawing their pension.
[Footnote 35]
- In addition, CNA's methodology to calculate health care assumes that
servicemembers and civilians receive the same quality of medical care.
Since the two groups have access to different doctors and facilities,
this may not be true. Furthermore, it is likely that servicemembers
receive a greater quantity of health care than civilians because they
are not subject to co-pays or deductibles. In other words, there is no
cost associated with an additional doctor visit. Also, the military
health plan also represents a reduction in the uncertainty of medical
expenditures. According to economic theory, people place value on the
reduction of risk, although that value can be difficult to measure.
CNA's analysis assumed that none of these factors were significant,
which is reasonable, but potentially false.
* The study omits the value of retiree health care for life, which
like retiree pensions, is a significant benefit provided to
servicemembers and the prospect of receiving this benefit is an
important retention incentive. Further work would need to be done to
estimate the value of this benefit.[Footnote 36]
Challenges Exist to Value All Components of Military Compensation:
Existing studies of military compensation illustrate that valuing all
components of active duty military compensation from a servicemember's
perspective is challenging, yet it is important to have a
comprehensive assessment of compensation which includes both pays and
benefits. For example, we previously recommended that DOD develop a
comprehensive communication and education plan to inform
servicemembers of the value of their pay and benefits and the
competitiveness of their total compensation package when compared to
their civilian counterparts that could be used as a recruiting and
retention tool.[Footnote 37] However, various factors complicate any
assessment of active duty compensation. As previously discussed, the
active duty military compensation system consists of a large number of
pays, noncash and deferred benefits. Although the foundation of the
system, regular military compensation, is received by all
servicemembers, there is variability in cash compensation based on
factors such as rank, years of service, locality, and dependent
status. In addition, DOD's use of targeted special and incentive pays,
including bonuses, means that not all servicemembers receive these
forms of compensation. Further, although DOD offers a large number of
noncash benefits, the utilization of benefits by servicemembers or
their dependents varies.
As noted previously, the existing studies of military compensation
have valued the components of cash compensation that make up regular
military compensation--basic pay, housing and subsistence allowances,
and the tax advantage. Studies of military compensation also highlight
that the valuation rates of noncash and deferred benefits prove more
difficult to determine than cash compensation because servicemembers
value these benefits differently and varying assumptions have to be
made to assign value. Table 3 provides a list of components that have
been valued in these studies.
Table 3: Components of Military Compensation Valued in Studies
Comparing Military and Civilian Compensation:
Type of compensation: Cash;
Basic pay;
Component:
Allowances (e.g., housing, subsistence);
Special and incentive pays;
Bonuses;
Tax benefit.
Type of compensation: Noncash;
Component:
Dental and health care;
Commissary benefits.
Type of compensation: Deferred;
Component:
Retirement pension.
Source: GAO analysis.
[End of table]
In addition to these components of compensation, there are many others
that make up military compensation, such as education assistance;
morale, welfare and recreation programs; and child and family service
programs. These other components of compensation, mostly benefits, are
also difficult to assess in terms of value to the servicemember
because, among other reasons, the value varies depending on use of
benefit. For example, a servicemember with no children would value
child care significantly less than one with children and a working
spouse. While we and others did not assess these components, we were
able to identify, as reported by active duty servicemembers as part of
DOD's Status of Forces Survey, the percentage of servicemembers who
reported that they used various benefits offered by DOD. Table 4
provides a list of some benefits and their utilization rates. See
appendix V for more benefits and corresponding utilization rates.
Table 4: Self Reported Utilization Rates of Various Components of
Military Compensation:
Compensation component: Commissary;
Utilization rate: 90%.
Compensation component: Exchange;
Utilization rate: 90%.
Compensation component: Personally visited military health care
provider;
Utilization rate: 85%.
Compensation component: Personally visited on-base military dentist;
Utilization rate: 82%.
Compensation component: Thrift Savings Plan (TSP)[A];
Utilization rate: 44%.
Compensation component: Child care (on base);
Utilization rate: 37%.
Compensation component: Tuition assistance programs for college/higher
education;
Utilization rate: 34%.
Compensation component: DOD-run school;
Utilization rate: 18%.
Source: DOD's 2007-2009 Status of Forces Survey for Active Duty
Members.
Note: The margin of error ranges from +/-1 to +/-3 percent.
[A] The TSP is a federal-government-sponsored retirement savings and
investment plan.
[End of table]
Studies Conclude that Military Compensation Generally Compares
Favorably to Civilian Compensation but Challenges Exist with These
Comparisons:
Military Compensation Compares Favorably with Comparable Civilians
Compensation According to Some Studies:
In comparing military and civilian compensation, CNA's 2008 study, as
well as another recent study by CBO, found that military pay generally
compares favorably to civilian pay. Specifically, CNA found that in
2006, regular military compensation for enlisted personnel averaged
$4,700 annually more than comparable civilian earnings. Similarly,
military officers received an average of about $11,500 more annually
than comparable civilian earnings. Further, CNA compared military and
civilian compensation including three military benefits--health care,
retirement, and the additional tax advantage for military members.
Specifically, it found when values for these benefits were included,
an average of $8,660 annually for enlisted and an average of $13,370
annually for officers was added to the differences. This means that by
including those three benefits, the estimated result on average was
about $13,360 more annually for enlisted personnel than their civilian
equivalents compared to $4,700 more annually when only comparing cash.
For officers, compensation was an average of $24,870 more annually
than just the $11,500 annually when only comparing cash.
A 2007 study by CBO also found that military compensation fared well
compared to civilian compensation, overall. For example, CBO's report
suggests that DOD's goal to make regular military compensation
comparable with the 70th percentile of civilian earnings has been
achieved.[Footnote 38] The major difference between CBO's and CNA's
studies is how the CNA study defined compensation. CNA asserted, and
we agree, that including benefits allows comparisons of actual levels
of compensation and allows one to approximate whether servicemembers
are compensated at a level that is comparable to that of their
civilian peers, although the caveats that we discuss below should be
considered. We also agree with CBO that including benefits can add
another level of complexity to these analytical studies. Specifically,
the cost of providing benefits may be significantly different from the
value an employee places on those benefits. For example, the age of an
employee may affect the value placed on health or retirement benefits.
Therefore, developing a methodology to "value" benefits requires some
assumptions to be made.
Difficulties in Overall Comparisons of Military and Civilian
Compensation:
A number of variables and challenges exist in comparing military and
civilian compensation. In general, comparisons of levels of military
and civilian compensation provide policy makers in Congress and DOD
with a broad comparison or frame of reference, which can provide some
insight into how well military compensation (either cash or cash and
select benefits) is keeping pace with overall civilian compensation.
However, these broad comparisons may not be a sufficient guide for
determining appropriate military pay levels. Specifically, differences
in average age, demographics (other than age), work experience, fields
of degree, and other characteristics--normally needed in these types
of comparisons--can make direct comparison of salary and earnings
difficult. For example, generally, engineers earn a higher salary than
social scientists, and newer employees earn less than those with more
experience. Some other circumstantial factors that could limit the
usefulness of this analysis include degree combinations and advanced
degrees (such as masters, doctorates, or law degrees), worker
productivity, quality of the school or department from which the
individual received degree(s), quality of the employer, and lifestyle
or family-related choices. Additionally, labor force surveys tend not
to capture information on all individual skill sets, personal
background and attributes, or other variables that may affect
compensation.[Footnote 39] While some efforts were made in the CNA
study to control for age (as a proxy for years of experience) and
broad education levels (some college up to an Associate degree and
Bachelor's degree or better), that study did not include some of the
other factors we mentioned, such as field of degree, demographics
(other than age), and other characteristics that would be needed to
make an adequate comparison. Furthermore, as mentioned previously, the
civilian population data that were available was not an exact match
for individuals with similar working conditions and occupations as
those in the military. Another complicating factor, as discussed
earlier, is the definition of compensation being used for the
military--regular military compensation or regular military
compensation and select benefits.
Moreover, there are nonmonetary considerations that complicate
military and civilian pay comparisons. For example, servicemembers (1)
may be in a different mix of occupations, (2) may have greater
responsibilities than their civilian counterparts, and (3) have had a
continuous work history, whereas civilian workers may be
underemployed--working part-time or having experienced periods of
unemployment. In addition, it may be necessary to enhance military
compensation by a factor--frequently referred to as the "X-factor"--to
compensate for those disadvantages of service life (e.g., working
conditions, risk of death or injury, and, during war, frequent
deployments with long separations from family, and frequent moves
making it more difficult for spouses to establish careers at one
location). In addition, servicemembers must complete their military
service obligation--they cannot resign or change jobs at will.
While the approaches discussed above assess the overall levels of pay,
there are other approaches to comparing compensation, which have
significant limitations and, in some cases, shortcomings. For example,
one could make comparisons between occupations, such as military
police and civilian police officers. While this type of analysis
provides policymakers and others illustrations of how much certain
occupations may earn, it is not an effective tool for making
compensation policy decisions or determining if military pay is
adequate or appropriate because the results of a specific occupation
are not generalizable to the entire military population. However, if
an occupational comparison approach is to be used to generalize to the
entire military population, a very detailed, exhaustive, and time-
consuming comparison of all occupations would be needed--recognizing
that many military occupations would not have an exact civilian
counterpart. See appendix VI for examples comparing select military
occupations to comparable civilian occupations. These comparisons have
limitations and we present examples solely for illustrative purposes.
Along the same lines, other studies have discussed comparisons of
military and civilian pay that tracked the difference between the
Employment Cost Index (ECI) and increases in basic pay over
time.[Footnote 40]This comparison has significant shortcomings in that
regular military compensation is a more inclusive assessment of
military pay than basic pay alone. See appendix VII for more
information on the approach of comparing military and civilian
compensation using the ECI along with a discussion about the
appropriateness of using the ECI as a tool to adjust basic pay
annually.
10th QRMC Recommendation to Include Regular Military Compensation and
Select Benefits When Comparing Military and Civilian Compensation
Appears Reasonable:
The 10th QRMC's recommendation to include regular military
compensation and select benefits when comparing military and civilian
compensation appears reasonable because it provides a more complete
assessment of military compensation. The 10th QRMC noted, among other
things, that previous assessments of military compensation, which
compare regular military compensation and civilian pay, omit several
very important components of the military compensation package,
specifically health care, retirement, and tax advantages. The 10th
QRMC recommended that, among other things, DOD adopt the 80th
percentile as its goal for military compensation, which includes
regular military compensation and the value of some benefits,
including health care and retirement in order to maintain the same
standard set by the 9th QRMC's 70th percentile--which compares only
regular military compensation and civilian pay.[Footnote 41] In
general, when comparing levels of military and civilian compensation,
a more complete or appropriate measure of compensation would include
cash and benefits. Further, the 10th QRMC noted that the benefits
package offered to servicemembers coupled with the tax advantages they
receive have generally been considered more robust than what is
typically offered in the civilian sector. According to that QRMC,
omitting military benefits from the comparison results in an
incomplete analysis that substantially understates the value of DOD's
compensation package. Given the large proportion of servicemember
compensation that is comprised of in-kind and deferred benefits, the
QRMC emphasized that taking these additional components of
compensation into account shows that servicemember compensation is
generous relative to civilian compensation--more so than traditional
comparisons of regular military compensation suggest.[Footnote 42]
Similarly, in 2005 and 2007, we reported that noncash and deferred
benefits made up about half of the total compensation costs to the
federal government.[Footnote 43] While an individual considering
either a military or a civilian job would not likely consider the cost
of compensation to the federal government, the individual would likely
consider the overall compensation package that is available--to
include pay as well as the range and value of the benefits offered
between the two options. That is, a person would not just consider one
aspect of the compensation if the other aspects add value.[Footnote
44] However, the challenge with taking an approach that includes
benefits is how to "value" the benefits and which benefits to include
in the comparison--as we previously discussed.
Although comparisons of military and civilian compensation are
important management tools, they alone do not necessarily answer the
question of how appropriate or adequate compensation is to maintain
recruiting and retention. We have reported in the past that
compensation systems are tools used for recruiting and retention
purposes. Similarly, in 2009, CBO stated that ultimately, the best
barometer of the effectiveness of DOD's compensation system is how
well the military attracts and retains high-quality, skilled
personnel.[Footnote 45] One key reason for comparing levels of
military and civilian compensation is the concern that if military
compensation is significantly below compensation in the civilian
sector, the military will not be able to recruit and retain the
aggregate numbers of personnel it needs, nor will it be able to
attract and retain the skills and quality of people it wants. Senior
officials within the Office of the Under Secretary of Defense for
Personnel and Readiness' Directorate of Compensation told us that, in
setting military compensation, the department concluded that regular
military compensation must be higher than the median civilian pay in
order to take into account a couple of factors specific to DOD.
Specifically, given DOD's emphasis on the quality of the individuals
it recruits, servicemembers must get paid more than the civilians to
attract individuals with traits and abilities the department wants and
to account for the sacrifices servicemembers make--including work in
dangerous environments and lifestyle challenges and frequent moves.
While DOD recognizes that the military's compensation package is not
just a cash package and agrees with the 10th QRMC's recognition that
benefits are important to servicemembers, according to senior DOD
officials, the department does not plan to adopt the recommendation to
include select benefits when comparing military and civilian
compensation. Specifically, senior officials told us that the
department views its compensation as directly related to its ability
to meet recruiting and retention goals. As a result, the department
would rather rely on a known measure--regular military compensation
compared to cash compensation for civilians--than to base its
comparisons on a measure that is unknown and could vary depending on
methodology used to estimate the value of benefits. According to
senior DOD officials, comparing civilian cash compensation with
regular military compensation allows for a more homogeneous comparison
of military and civilian compensation. For example, officials cited
differences in health care availability and coverage as well as other
benefits that may not be offered to civilians. While we acknowledge
the department's concerns, we believe that when making broad-based
comparisons of military and civilian compensation, it is important to
look at the total compensation package--to include both cash
compensation and benefits. This does not, however, eliminate or
minimize the need to understand cash compensation and how it compares
with civilian cash compensation. In fact, we believe it is also
important for DOD to continue to compare its regular military
compensation with civilian pay. For example, as we reported in 2005,
cash compensation tends to spur actions--such as enlisting or
reenlisting. Similarly, CBO reported in 2007 that the relatively low
value that young people place on deferred compensation--combined with
the relatively low probability that a new recruit will stay in active
duty for 20 years to become eligible for retirement--suggest that the
recruiting and retention value of deferred benefits is lower than that
of current cash compensation.[Footnote 46]
DOD officials also told us that the department measures the adequacy
of its compensation by its ability to meet overall recruiting and
retention goals. For example, to sustain its all-volunteer military
force, DOD recruits approximately 180,000 new enlistees each year and
maintains an active duty enlisted force of approximately 1.2 million
servicemembers. Given the fact that (1) the ability to recruit and
retain is a key indicator of the adequacy of compensation and (2) DOD
has generally met its overall recruiting or retention goals over the
past several years, it appears that regular military compensation is
adequate at the 70th percentile of comparable civilian pay, as well as
at the 80th percentile when additional benefits are included. Since
1982, DOD has only missed its overall annual recruiting target three
times--in 1998 during a period of very low unemployment, in 1999, and
most recently in 2005.
Although the services have generally met their overall recruiting
goals in recent years, certain specialties, such as medical personnel,
continue to experience recruiting and retention challenges. Given the
range of recruiting and retention challenges facing the department,
permanent, across-the-board pay increases may not be seen as the most
efficient recruiting and retention mechanism. Our previous work has
shown that the use of targeted bonuses, rather than across-the-board
pay increases, may be most appropriate in meeting DOD's requirements
for critical specialties where shortages exist.[Footnote 47] Senior
officials we spoke with at DOD agreed that targeted bonuses, may be
more appropriate to fill critical specialties experiencing shortages.
[Footnote 48] According to DOD, efficiency is the amount of military
compensation--no higher or lower than necessary--that is required to
fulfill the basic objective of attracting, retaining, and motivating
the kinds and numbers of active duty servicemembers needed. According
to a recent report on recruiting conducted for the Directorate of
Accession Policy,[Footnote 49] cash incentives--such as enlistment
bonuses--designed to induce potential recruits to enlist are extremely
valuable to the services' ability to meet recruiting goals, as well as
for channeling high-quality recruits into hard-to-fill career fields.
The report further notes that enlistment bonuses, unlike a basic pay
increase which must be paid to all enlistees, can be targeted to
particular high-quality recruits who are willing to enlist in skill
areas where there are shortages, making bonuses a much more cost-
effective incentive. According to DOD, bonuses can help to sustain end
strength by selectively controlling attrition and narrowly focusing
assets to retain the necessary balance of skills and grades required
to fill existing and emerging requirements. For example, DOD has also
noted that the Selective Reenlistment Bonus and the Critical Skills
Retention Bonus are among the most effective incentives to attract and
retain qualified personnel in critical military specialties because
these programs allow DOD to influence retention behavior in military
specialties with one or more of the following factors: (1) the
services have recruiting challenges for the specialties; (2) involves
lengthy and/or costly skills training; (3) there is a high demand for
or marketability in the private sector; (4) there are persistent
manning shortages; (5) the specialty is low density and high demand;
and (6) the specialty is crucial to combat readiness. Thus, DOD's use
of these and other pay flexibilities may allow it to more efficiently
meet its recruiting and retention needs because these special pays and
bonuses can be turned on and off as necessary, making them useful in
addressing short-term shortfalls.
Concluding Observations:
Comparisons between military and civilian compensation are important
management tools--or measures--for the department to assess the
adequacy and appropriateness of its compensation. However, such
comparisons, as we have previously noted, present both limitations and
challenges. Specifically, data limitations prevent exact comparisons
of military and civilian personnel. Moreover, these comparisons
represent points in time and are affected by factors, such as the
health of the economy. To illustrate, it is not clear the degree to
which changes in civilian health care availability or retirement
benefits affect the outcome of comparing military and civilian
compensation. In addition, valuing military service is complicated.
While serving in the military offers personal and professional
rewards, such service also requires many sacrifices--frequent moves
and jobs that are arduous and sometimes dangerous. As a result,
ultimately the department's ability to recruit and retain personnel is
an important indicator of the adequacy--or effectiveness--of its
compensation.
Agency Comments and Our Evaluation:
The Deputy Under Secretary of Defense for Military Personnel Policy
provided oral comments on a draft of this report. The senior official
noted that the department appreciated our review and generally agreed
with the contents of our draft report. The official stated that
numerous public and private sector studies have attempted to estimate
the value military members place on noncash and deferred benefits and
that each study has found that identifying relevant assumptions,
valuing these benefits, and finding appropriate benchmarks and
comparisons are significant challenges. The official further agreed
with our evaluation that in conducting a comparison of military and
civilian compensation, different assumptions can generate
significantly different results.
However, because of the variation in the results of these studies, the
Deputy Under Secretary stated that further study is necessary before
the department is willing to consider measuring and benchmarking
military compensation using a measurement that incorporates benefits.
Specifically, the official stated that DOD believes regular military
compensation is the appropriate metric to use in comparing both the
competitiveness and comparability of military compensation with
private sector compensation. The official further said that the
department believes regular military compensation is a well known and
respected metric and noted that it allows for a relatively homogeneous
comparison of military and civilian compensation. Moreover, the
official stated that DOD remains concerned with using any metric that
includes noncash or deferred benefits because of the difficulty in
making a direct comparison between military benefits and corresponding
private sector benefits. Nevertheless, we continue to believe that
when making broad-based comparisons of military and civilian
compensation, it is important to look at the total compensation
package--to include both cash compensation and benefits. As we noted
in the report, this does not, however, eliminate or minimize the need
to understand cash compensation and how it compares with civilian cash
compensation. In fact, we believe it is also important for DOD to
continue to compare its regular military compensation with civilian
pay because, as we reported in 2005, cash compensation tends to spur
actions--such as enlisting or reenlisting.
The Deputy Under Secretary further noted that DOD agrees that our
examples of compensation for selected military and civilian
occupations can be informative but have limited utility and are
unsuitable for making compensation policy decisions. The official
further stated that seemingly similar occupations differ considerably
when one considers the additional impact on the military member due to
working conditions, risk of death or injury, frequent deployments,
separation from family members, and frequent relocations.
The official also noted that, unlike the private sector which can
laterally hire an employee from another organization, the military
must grow its leaders internally because there is no private sector
labor market from which the military can hire for certain unique
occupations--such as an infantry battalion commander. Thus, according
the Deputy Under Secretary, an evaluation of the comparability of
military and private sector compensation must also consider the cost
to the military of growing a replacement member lost to the private
sector or the additional cost to retain a member through a bonus or
other retention payment. We agree and acknowledge these points in our
report. In addition, officials from the Directorate of Compensation
provided us with technical comments, which have been incorporated into
our report, where appropriate.
We are sending copies of this report to the Secretary of Defense and
appropriate congressional committees. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions on the matters discussed in
this report, please contact me at (202) 512-3604 or farrellb@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who
made key contributions are listed in appendix VIII.
Signed by:
Brenda S. Farrell:
Director, Defense Capabilities and Management:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable Norm Dicks:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
In conducting this review, we limited our scope to active duty
officers and enlisted servicemembers. In addition, we focused on cash
compensation and the value of some benefits to the servicemembers
versus the cost to the government of providing such compensation to
the servicemember.
To address our objectives, we identified and reviewed studies on
compensation, comparisons of military and civilian compensation, human
capital, and military benefits and personnel issues--including those
conducted by CNA Corporation (CNA), the Congressional Budget Office
(CBO), the Congressional Research Service (CRS), the Department of
Defense (DOD), GAO, and RAND Corporation. We interviewed or obtained
information from DOD officials in Washington, D.C., from the Office of
the Under Secretary of Defense for Personnel and Readiness: (1) the
Deputy Under Secretary of Defense for Military Personnel Policy, (2)
Directorate of Compensation, (3) Directorate of Officer and Enlisted
Personnel Management, and (4) Directorate of Accession Policy. In
addition, we interviewed officials from DOD's Defense Manpower Data
Center, the Department of Labor's Bureau of Labor Statistics (BLS),
CNA, CBO, the Military Officers Association of America (MOAA). During
the interviews with DOD and others, we obtained and subsequently
reviewed supporting documentation on, for example, historical and
current compensation policy, prior reports, and trends in compensation.
With regard to the 2008 CNA report,[Footnote 50] we conducted a
methodological review of the study. We analyzed the report and its
appendices. We also interviewed the author of the report about the
methodology and the reasoning behind it. We also examined the datasets
used by CNA for appropriateness, along with the sources of the data
and looked for information on survey design, collection mode, and
content. Additionally, we reviewed other select research on the topic
of comparing military and civilian compensation. We found that the
methodology and data used by CNA, such as the Current Population
Survey and personnel data from the Defense Manpower Data Center, were
appropriate for CNA's estimates--with the exception of the limitations
and areas of comment noted in this report. As is the case with any
research of this nature, it is possible that errors exist in CNA's
estimates or that improvements could be made in these calculations.
Furthermore, we note that other reasonable modeling assumptions could
have been made and other alternative sources of data could have been
used, potentially generating different results.
For our first objective, to assess total military compensation,
including pay and benefits, for officers and enlisted personnel, in
addition to the methods listed above, we reviewed CNA's 2008 report
entitled Comparing Military and Civilian Compensation Packages and
identified estimated values for the elements of military compensation--
regular military compensation, health care, retirement, and additional
tax advantages. To provide examples of military compensation for a
hypothetical individual servicemember, we used data from the 2010
Selected Military Compensation Tables to identify a "typical"--meaning
existing in a relatively high proportion among the population--
enlisted and officer pay grade and the associated family size for the
pay grade. We then used DOD's regular military compensation calculator
to estimate compensation levels for an individual with the identified
characteristics. We analyzed data on the utilization of benefits
provided to servicemembers from DOD's Status of Forces Survey of
Active Duty Members. We also identified the employee benefits
available to active duty servicemembers, by leveraging our prior work
on military compensation, reviewing DOD financial management
regulations, service budget documents, military compensation
background papers, DOD and service Web sites, and other department
documents.
For our second objective, comparing military compensation and private-
sector pay and benefits for civilians of similar age, education, and
experience with similar job responsibilities and working conditions of
officers and enlisted personnel, in addition to the methods mentioned
above, we reviewed CNA's report to identify estimated values for
private-sector compensation, including cash pay and benefits. We also
reviewed the methods that CNA used to estimate values for several
benefits--retirement, health care, and the additional tax advantages
received by military servicemembers--which were then used to compare
the pay and benefits received by military servicemembers with that of
comparable civilians. Through these reviews, the methods used by CNA
were deemed acceptable for our purpose of reporting the estimated
values for these benefits. Additionally, we assessed the reliability
of the Employment Cost Index (ECI) by reviewing BLS documentation and
interviewing BLS staff. Based upon these checks, we determined that
the ECI was sufficiently reliable for the purposes of our work.
For our third objective, to assess the 10th Quadrennial Review of
Military Compensation (QRMC) recommendation to include regular
military compensation and select benefits when comparing military and
civilian compensation and determine if it is adequate and appropriate,
in addition to the methods mentioned above, we conducted a literature
review of previously published reports on compensation policy and
management. In addition, we interviewed DOD officials from the
aforementioned offices to determine the department's position on the
9th and 10th QRMC's recommendations related to percentile comparisons,
the adequacy of current military compensation, and percentile
comparisons, in general. Finally, we analyzed the information we
obtained to ascertain if including benefits is appropriate when
comparing military and civilian compensation.
We conducted this performance audit from November 2009 through March
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Selected Active Duty Military Compensation and Benefits:
This appendix summarizes compensation and benefits that relate to
direct cash compensation, indirect cash compensation, and indirect
deferred compensation, which the federal government provides to active
duty servicemembers and their dependents. This appendix is not
intended to be an exhaustive list of all available compensation and
benefits. To compile this list, we drew from several sources,
including Department of Defense (DOD) informational materials,
directives, instructions, and regulations; studies on military
compensation; prior GAO reports; and relevant sections of the U.S.
Code.
Direct Cash Compensation:
Regular Military Compensation:
Basic Pay:
The largest component of regular military compensation. Basic pay
rates are based on rank and years of service with pay increasing as
servicemembers are promoted to higher grades or accumulate additional
years of service.
Basic Allowance for Housing:
An allowance designed to provide military personnel in nongovernment
housing with the resources necessary to live in housing comparable to
their civilian counterparts. A servicemember's allowance is calculated
by their location, pay grade and family status. The Secretary of
Defense may prescribe an overseas basic allowance for housing for a
member of a uniformed service who is on duty outside of the United
States.
Basic Allowance for Subsistence:
A cash payment designed to defray the costs of a servicemember's
meals. There are different monthly rates for enlisted personnel and
officers. Both rates are required to be adjusted annually based on the
increase in food costs determined by the Secretary of Agriculture each
year.
Tax Advantage: Servicemembers receive an income tax advantage due to
the fact that the basic housing allowance and basic allowance for
subsistence are not subject to federal income tax.
Allowances:
Clothing Allowances:
There are many different types of clothing allowances available to
assist eligible servicemembers in covering the cost of obtaining and
replacing prescribed uniforms. These include but aren't limited to the
initial clothing allowance, the cash replacement clothing allowance
and the extra clothing allowance.
Continental United States Cost of Living Allowance:
Servicemembers assigned to high-cost locations in the continental U.S.
and certain servicemembers who have dependents that reside in high-
cost locations in the continental U.S. are paid a Cost of Living
Allowance. The Cost of Living Allowance compensates for a portion of
costs for non-housing expenses incurred in areas that exceed costs in
an average U.S. military location by more than 8 percent. Allowance
rates are based on a number of factors including the servicemember's
rank, duty location, and dependent status. The Continental United
States Cost of Living Allowance is a taxable allowance, and an amount
is added to offset average income tax.
Family Separation Allowance:
Eligible servicemembers may be entitled to a monthly allowance of $250
during qualifying periods of separation from the servicemember's
dependents.
Family Subsistence Supplemental Allowance:
This allowance is intended to supplement an individual's basic
allowance for subsistence to raise it to a level sufficient to remove
that member's household from, or obviate the need for, benefits under
the food stamp program.
Outside the Continental United States Cost of Living Allowance:
A Cost of Living Allowance is authorized to assist a member in
maintaining the purchasing power of the discretionary portion of
spendable income while assigned to a location outside the continental
United States. The allowance is derived by comparing the cost-of-
living in the assigned location with the cost-of-living in the
Continental United States, and varies based on several factors
including the member's rank, duty location, and dependent status.
Bonus, Incentive and Special Pays:
These are additional forms of cash compensation used to attract and
retain personnel into hard-to-fill occupations or specialties, or to
provide extra compensation for hazardous or special duty. The National
Defense Authorization Act for Fiscal Year 2008[Footnote 51] provided
authority to consolidate existing bonus, incentive and special pay
authorities into eight broad categories: general bonuses for enlisted
members; general bonuses for officers; special bonus and incentive pay
authorities for nuclear officers; special aviation incentive pay and
bonus authorities for officers; hazardous duty pay; assignment pay or
special duty pay; skill incentive pay or proficiency bonus; and bonus
and incentive pays for officers in health professions. In addition,
the consolidation includes the 15 year career status bonus and
retention incentives for members qualified in critical military skills
or assigned to high priority units. The Act provided DOD with ten
years to implement the consolidation and transition of all special and
incentive pay programs to the new authorities. The following are among
the more than 60 existing bonus, incentive and special pay authorities:
* Enlistment Bonus;
* Selected Reserve Reenlistment Bonus;
* Accession Bonus for new officers in Critical Skills;
* 15 year Career Status Bonus;
* Critical Military Skills or High Priority Unit Retention Bonus;
* Health Professional Bonuses;
* Nuclear Career Accession Bonus;
* Nuclear Career Annual Incentive Bonus;
* Skill incentive pay or proficiency Bonus;
* Conversion to Military Occupational Specialty Bonus;
* Transfer Between Armed Forces Bonus;
* Volunteer Incentive Bonus for Retired or Reserve Members;
* Acceleration or Deceleration Experimental Subject Pay;
* Air Weapons Controller Flight Pay (AWACS);
* Career Sea Pay;
* Chemicals Munitions Handling Pay;
* Dangerous Organisms or Toxic Pesticides Exposure Pay;
* Demolition Duty Pay; Dental Officers Special Pays;
* Diving Duty Pay;
* Engineering and Scientific Career Continuation Pay;
* Firefighting Crew Member Duty Pay;
* Flight Deck Duty Pay;
* Flying Duty Pays;
* Foreign Language Proficiency Bonus;
* Hardship Duty Pay;
* Hazardous Duty Incentive Pay;
* High or Low Pressure Chamber Duty Pay;
* Hostile Fire/Imminent Danger Pay;
* Judge Advocate Continuation Pay;
* Medical Officer Special Pays;
* Nuclear Qualified Officers Continuation Pay;
* Officers Holding Positions of Unusual Responsibility and of Critical
Nature;
* Parachute Duty Pay;
* Separation Pay (Non-disability);
* Special Duty Assignment Pay;
* Special Pay for Members of Weapons of Mass Destruction Civil Support
Teams;
* Special Warfare Officer Continuation Pay;
* Surface Warfare Officer Continuation Pay;
* Submarine Duty Pay;
* Thermal Stress Experimental Subject Pay;
* Service or Testing of Aircraft or Missiles with Toxic
Fuels/Propellants Pay;
* Veterinarians Special Pay.
Other:
Additional Tax Advantage:
Servicemembers do not pay state, local and Federal Insurance
Contributions Act (FICA) taxes on their housing and subsistence
allowances and can often avoid paying any state taxes depending on
their state home-of-record.
Combat Zone Tax Advantage:
The combat zone tax exclusion allows servicemembers to exclude
compensation received for active service--including basic pay,
bonuses, special pays, and allowances but excluding pensions and
retirement pay--from their gross income for each month during which
any portion is spent serving in a designated combat zone or
hospitalized as a result of wounds, disease or injury incurred while
serving in a designated combat zone. Servicemembers who serve in a
combat zone or have a related hospitalization for a minimum of 1 day
are eligible to receive the combat zone exclusion for the respective
month. Enlisted members' exclusions are not limited. Officers can
exclude up to the maximum enlisted amount received.
Savings Deposit Program:
This program provides the opportunity for eligible members of the
uniformed services to make deposits in special savings accounts,
during qualifying tours of duty, and to earn an annual interest rate
of 10 percent on those funds.
Indirect Noncash Compensation:
Death and Burial:
Burial Benefits:
Among other benefits, the Department of Veterans Affairs or DOD may
provide a casket, a government headstone or marker, or a burial flag
at no cost to a deceased servicemember or veteran. In addition,
servicemembers and veterans who have completed service requirements
are eligible for burial in a Department of Veterans Affairs national
cemetery. Secretaries of the military departments may provide a travel
allowance for eligible family members to attend burial ceremonies for
deceased members who die while on duty.
Burial Costs:
DOD may reimburse up to $8,800 for a member's burial expenses,
depending on the type of arrangements. DOD may provide travel
allowances for eligible next of kin. The Department of Veterans
Affairs will pay a burial allowance of up to $2,000 if the veteran's
death is a result of a service-connected disability, upon the request
of a survivor. In some cases, it may also pay the cost of transporting
the remains of a service-disabled veteran to the national cemetery
with available gravesites that is nearest the last residence of the
deceased.
Continued Health Benefits for Surviving Family Members:
According to TRICARE, surviving family members of a deceased active
duty servicemember remain eligible for health care benefits under
TRICARE at active duty family member rates for a 3-year period
following the servicemember's death, in the case of surviving spouses,
or until eligibility ends, in the case of children.
Continued Military Privileges for Surviving Family Members:
The unremarried surviving spouse and qualified dependents of a
deceased member are eligible for unlimited shopping privileges at
military commissaries and exchanges. Dependents of a servicemember who
dies while on active duty may be eligible for continued housing
benefits.
Death Gratuity Payments:
Eligible survivors of a servicemember who dies while on active duty or
in certain other circumstances receive an immediate cash payment of
$100,000.
Dependency and Indemnity Compensation:
The Department of Veterans Affairs provides a nontaxable payment to
eligible surviving spouses, eligible unmarried children, and eligible
parents of servicemembers who die from a service-connected or
compensable disability.
Survivor and Dependent Education:
Surviving spouses and children are eligible for up to 45 months of
education benefits.
Tax Benefit:
When a member of the Armed Forces dies while in a combat zone in
active service, or as a result of wounds, disease, or injury while so
serving, tax forgiveness rules for federal income taxes apply.
Additionally, favorable tax rules apply when an individual dies as a
result of wounds or injury that was incurred outside the United States
in a terrorist or military action. Generally, benefits received from
the Department of Veterans Affairs by a beneficiary of a deceased
member are exempt from taxation.
Unused Leave:
Survivors of a deceased member may be entitled to payment for the
deceased's unused accrued leave, if any. The amount of the payment is
based on the member's basic pay at the time of death.
Dental and Medical Care:
Continued Health Care Benefit Program:
Members leaving the military before retirement can purchase health
care benefits to cover medical bills incurred by them and their
families while between jobs.
Dental:
Active duty servicemembers are entitled to dental care in more than
400 military dental treatment facilities on a space available basis.
Eligible family members may enroll in the TRICARE Dental Program,
which requires monthly premiums and copayments. The dental program
covers a wide range of diagnostic, preventive, and restorative
services.
TRICARE:
DOD provides health care to active duty members and their dependents
through TRICARE, a managed care program. Care is provided in more than
500 military treatment facilities worldwide, supplemented by civilian
providers. TRICARE offers beneficiaries three health care options:
Prime, Standard, and Extra. Active duty personnel are required to
enroll in TRICARE Prime when it is offered. This program offers care
in military treatment facilities and does not require copayments from
active duty members for care obtained from military treatment
facilities. Dependents may choose to enroll in TRICARE Prime where
available or may elect to receive care under TRICARE Extra, a
preferred provider option, or under TRICARE Standard, a fee-for-
service option. Beneficiaries obtaining care may be subject to
deductibles and a cost share.
Education Assistance:
Educational Benefits:
The Services offer an array of educational benefits that support
members' continuing education while they are in the military and after
they return to civilian life. Examples include the Montgomery GI Bill,
the Post 9-11 GI Bill, federal student loan repayment programs, and
voluntary education programs.
Insurance:
Servicemembers Group Life Insurance:
A government-sponsored program that provides insurance coverage to
members of the Armed Forces and certain dependants of members. Under
the program, active duty members, certain reserve members and eligible
dependants are insured to certain dollar thresholds[Footnote 52] by
default. Members may elect less coverage or no coverage.
Traumatic Injury Protection Program:
This program is a rider to Servicemembers Group Life Insurance that
provides for payment to servicemembers who are severely injured (on or
off duty) as the result of a traumatic event and suffer a loss that
qualifies for payment. Every member who has SGLI also has TSGLI
effective December 1, 2005. This benefit is also provided
retroactively for members who incurred severe losses as a result of a
traumatic injury between October 7, 2001 and December 1, 2005, if the
loss was the direct result of injuries incurred in Operations Enduring
Freedom or Iraqi Freedom. This program will pay a benefit of between
$25,000 and $100,000 depending on the nature of the loss resulting
from the traumatic injury.
Installation-based:
Child and Youth Programs:
Child Development Programs:
This system provides child care services for children aged birth
through 12 years, of DOD personnel provided in child development
facilities, to include contract locations, family child care homes,
and alternative locations. Care may be provided on a full-day, part-
day, or hourly basis. Care is designed to protect the health and
safety of children and to promote their physical, social, emotional,
and cognitive development and to enhance children's readiness for
later school experience. The goals of the child development system
include assisting DOD military and civilian personnel who are parents
of children under the age of 6, or who are full-time students, in
locating at least one affordable option for quality child care;
assisting DOD personnel who are parents of school-aged children in
locating child care; expanding availability of care through use of
resource and referral programs to quality affordable options both on
and off DOD installations; and, whenever possible, supporting the
needs of their personnel for hourly care and preschool programs by
expanding the use of facilities and programs other than the Child
Development Centers.
Exceptional Family Member Program:
The Exceptional Family Member Program (EFMP) is a mandatory program
for all active duty servicemembers with eligible family members. The
program identifies family members with special medical and/or
educational needs, documents the services they require, and takes
those needs into consideration during the personnel assignment process
Additionally, DOD policy allows (but does not require) the military
services to provide family support services specifically for
exceptional family members at family centers on military installations
with an EFMP.When the family centers provide support services for
exceptional family members, the assistance generally includes
providing information about and referrals to programs and services
that can accommodate an exceptional family member.
Youth Programs:
Youth programs are a comprehensive series of planned and self-directed
activities and events responding to the recreational, developmental,
social, physiological, psychological, cultural, and educational needs
of eligible youth. Youth programs are intended to focus on five core
areas: character development and leadership development; education
support and career development; health and life skills; the arts; and
sports, fitness, and recreation.
Discount Shopping:
Commissaries:
Active duty servicemembers, their dependents, and retirees can
purchase discounted grocery items at more than 280 commissaries
worldwide. Because commissaries sell food and household items free of
local sales tax and at cost, plus a 5-percent surcharge to help defray
operational expenses, customers can save more than 30 percent on their
purchases compared to commercial supermarkets.
Exchanges:
Active duty servicemembers, their dependents, and retirees may
purchase a variety of goods and services at 1,522 military exchanges
worldwide. Exchanges are similar to department stores, selling
apparel, footwear, household appliances, jewelry, cosmetics, food, and
other merchandise. Some exchanges offer gas stations, florist shops,
optical shops, fast food restaurants, and liquor stores.
Family Support Services:
Deployment and Mobilization Support:
Deployment and mobilization support programs help servicemembers and
their families prepare for and cope with the challenges associated
with mobilization, remote assignments, and deployments. Programs
address a range of issues that may arise prior to, during, and upon
return from deployments. Programs may include briefings on available
support services; free telephone, video electronic mail, and
teleconferencing calls; and benefits such as a free oil change for the
family's personal vehicle. Upon return from deployment, workshops may
be held to help members and their families readjust to life together.
Family Advocacy Programs:
Family Advocacy Programs (FAPs) are designed to address prevention,
identification, evaluation, treatment, rehabilitation, follow-up, and
reporting of family violence. FAPs consist of coordinated efforts
designed to prevent and intervene in cases of family distress, and to
promote healthy family life.
New Parent Support Program:
The New Parent Support Program is a standardized prevention program
using an intensive, voluntary, home visitation model developed
specifically for expectant parents and parents of children from birth
to 3 years of age to reduce the risk of child abuse. The Healthy
Parenting Initiative is a part of the New Parent Support Program that
is described as a user-friendly, diverse set of materials to help
military parents with young children increase their parenting
effectiveness, and to inform parents about topics related to parenting
in the context of deployment, relocation, and dangerous work, as well
as general parenting information.
Personal Financial Management Programs:
Personal Financial Management Programs are conducted by trained
counselors who provide personal and family financial planning
education, information services, and assistance, including but not
limited to, consumer education, advice and assistance on budgeting and
debt liquidation, retirement planning, and savings investment
counseling.
Relocation Assistance Programs:
The Relocation Assistance Programs provide the information and
services necessary to support DOD personnel and their families who are
undergoing a permanent change of station. The programs provide pre-
move destination information, relocation counseling, and settling-in
services. Typical programs address information on the shipment and
storage of household goods, financial planning, permanent change of
station entitlements, and child care. A special Web site provides
information about more than 300 military installations. The services
may offer additional seminars and programs tailored to members' needs.
Such programs include information seminars for spouses and new
military families and the loan of household items for use prior to the
arrival of personal household goods.
Employment Assistance Program:
The Employment Assistance Program provides career related services
such as assessments, career counseling, resume preparation services,
job guidance services, seminars, and personalized career assistance on
career research, and is available to military spouses.
Transition Assistance Program:
The Transition Assistance Program provides services to departing
military members to help them adjust to civilian life and obtain jobs.
Services include pre-separation counseling, individual transition
planning, employment assistance, excess leave and permissive temporary
duty, and relocation assistance for personnel overseas. In 2001, DOD
launched a Web site that offers courses on conducting job searches,
writing resumes, and using the Internet to find jobs.
Leave:
Annual Leave:
Members accrue leave at the rate of 2-1/2 days per month of active
service, excluding certain specified periods. Leave accumulated in
excess of 60 days is lost at the end of a fiscal year, although
current law permits members to keep up to 75 days (until September 30,
2013). Other exceptions authorize a member to maintain more than 60
days of leave as of the end of a fiscal year, several of which involve
circumstances during which it is unlikely that leave will be used.
Other Leave:
Members may be eligible for other forms of leave, including:
Convalescent Leave; Education Leave of Absence; Graduation Leave;
Public Holidays.
Other:
Adoption Expenses:
Federal law authorizes reimbursement for qualifying adoption expenses
for eligible members. Members may be eligible for a maximum of $2,000
per child, not to exceed $5,000 per calendar year.
Legal Assistance:
Eligible servicemembers and their families can receive free legal
advice and assistance from judge advocates or civilian attorneys for
many personal, civil legal matters.
Privileges at Military Facilities (Morale, Welfare, and Recreation):
Servicemembers and their families have access at installations to
morale, welfare, and recreation programs. These programs include
fitness centers, golf courses, movie theaters or free movies,
automotive skills development, crafts and hobby programs, guest
quarters, swimming pools, enlisted clubs, game rooms and arcades,
coffeehouses, intramural sports, bowling centers, libraries, rifle and
pistol ranges, and outdoor recreation.
Space Available Travel:
Space Available Travel permits military members and their families to
travel free,[Footnote 53] under certain conditions, on military
transportation, space permitting. For example, family members may use
this benefit to accompany an active duty servicemember on immediate
family emergencies and on house-hunting trips related to a pending
permanent change of station move.
Mass Transportation Benefit Program:
Active duty servicemembers may be eligible to receive benefits to
offset commuting costs associated with using public transportation.
Veterans Affairs - Home Loan:
Members may obtain guaranteed home loans from the Department of
Veterans Affairs in order to purchase homes, make home improvements,
and refinance home loans.
Indirect Deferred Compensation:
Retirement:
Military members presently are covered by one of three separate
retirement systems, depending on when they joined the military. All
three systems require no contribution from the servicemember, and
ordinarily allow retirement after 20 years of service.[Footnote 54]
Benefits received are based on years of service and salary.
Retiree Dental and Health Care:
Members retiring from active duty are eligible to reenroll in TRICARE
and pay an annual enrollment fee to maintain continued health
coverage. In addition, DOD offers other benefits including a voluntary
Retiree Dental program and a pharmacy program.
Survivor Benefit Plan:
The Survivor Benefit Plan provides members who reach retirement
eligibility an opportunity to leave a portion of their retired pay to
their survivors.
Thrift Savings Plan (Uniformed Services Plan):
Servicemembers may contribute a percent of their basic pay into this
government retirement savings and investment program that offers
participants the same type of savings and tax benefits that many
private corporations offer their employees under "401(k)" plans. The
retirement income that servicemembers receive from their accounts
depends on the amount contributed during working years and the
earnings on these contributions.
Veterans Affairs - Health Care:
Eligible retirees may enroll in the Veterans Affairs health care
system.
[End of table]
[End of section]
Appendix III: Sample of a Personal Statement of Military Compensation:
Personal Statement Of Military Compensation:
This statement outlines the total value of your military pay,
allowances and benefits. By making your compensation more "visible,"
this statement could be useful when applying for credit or loans
(including home loans) from businesses or lending institutions.
Another way this summary could be used is to help determine whether
specific civilian employment offers would let you maintain the same
standard of living you had while serving in the military. Start with
the Total Direct Compensation on page 1, add the Federal Tax advantage
from page 2, and then add any additional expense a civilian employer
would expect you to pay for health and life insurance, retirement
contributions, etc. This will tell you approximately what level of
civilian salary you must earn in order to maintain a similar standard
of living as that provided by your military take home pay. Each
section of this statement contains an explanation. However, if you
have any questions, please contact your local pay office.
Summary:
A. Basic Military Compensation as of March 2009: $V.00;
B. Special Pay and Bonuses: $AA.00;
C. Expense allowances: $AF.00;
Total Direct Compensation: $AM.00.
Added value of Service-estimated indirect compensation: $AO.00;
Added considerations/programs (Your estimate):
Total Compensation:
The following information provides more details on the value of your
personal compensation. Adding the indirect compensation and additional
considerations to your direct compensation should provide a clearer
picture of your total military compensation package.
Direct Compensation As Of March 2009 (Note 1):
A. Basic Compensation. Describes the basic elements of compensation
paid to all military members. This includes Basic Pay, the value of
living in government quarters or receiving Basic Allowance for Housing
(BAH), and the value of meals furnished or received Basic Allowance
for Subsistence (BAS). Your basic compensation is:
Basic Pay:
Monthly: $.00 J;
Annual: $.00 K.
BAH or quarters valued at actual BAH for your location, rank and
dependency status (see Note 2):
Monthly: $.00 L;
Annual: $.00 M.
BAS
Monthly: $.00 N;
Annual: $.00 0.
Total Basic Compensation:
Monthly: $.00 U;
Annual: $.00 V.
B. Special Pay And Bonuses. Describes pay in addition to Basic
Compensation for people in certain skills and assignments. As an
example, Special Duty Assignment Pay is a monetary allowance to
compensate personnel who serve in designated duties involving the
performance of extremely difficult duties or duties demanding an
unusual degree of responsibility. Another example is Foreign Language
Proficiency Bonus (FLPB); it is a monetary incentive paid to eligible
and qualified military personnel possessing foreign language
proficiency. The objective of FLPB is to encourage the acquisition,
maintenance, and enhancement of foreign language skills vital to
national defense.
Special and Incentive Pays:
Monthly: $.00 W;
Annual: $.00 X.
Bonuses:
Monthly: $.00;
Annual: $.00 Y.
Total Special Pay And Bonuses:
Monthly: $.00 Z;
Annual: $.00 AA.
C. Expense Allowance. Some individuals receive allowances to help
compensate for extra expenses they incur based on the location of
their duty assignment These include overseas housing allowance (OHA),
cost of living allowance (COLA) (Note 1) only payable in certain
areas, family separation allowance (FSA), and clothing replacement
allowance (CRA). Your total expense allowances are:
Total Expense Allowances:
Monthly: $.00 AE;
Annual: $.00 AF.
Note 1: Pay items on your March 2009 LES, marital status and
dependents taken from your personnel records. Annual rates for COLA
are for 365 days, not 12 times the March rate.
Note 2: If BAH was not in effect in March 2009, we assumed you
received quarter's worth about as much as BAH. If you received partial
BAH, we assumed that the partial BAH and value of quarters together
roughly equal full BAH.
Service-Estimated Indirect Compensation:
Other programs supplement your direct compensation. These have a cash
value to you in terms of spendable income. They are an important part
of your compensation and should be considered in adding up your real
pay value.
A. Medical Care. As an active duty member, the military provides you
and your family with comprehensive medical care. TRICARE is the name
of the Defense Department's regional health care program. TRICARE has
three health plan options: TRICARE Prime (all active duty are
automatically in Prime, but family members may also choose to enroll
in this HMO-type plan); TRICARE Standard (an indemnity plan, formerly
called CHAMPUS); TRICARE Extra (a Preferred Provider Organization
plan). Under TRICARE Prime, you will have an assigned military or
civilian primary care manager who will manage all aspects of your
care, including referrals to specialists. Prime has no deductibles,
cost-shares, or co-payments (unless the Point of Service option is
used) except a nominal co-payment for prescriptions filled at a retail
pharmacy or through the National Mail Order Pharmacy program. TRICARE
Standard offers more choice of providers, but requires an annual $150
deductible/person or $300/family (E-1 to E-4: $50/person, $100/family)
plus a 20% cost-share for outpatient care and a $15.65/day ($25.00
minimum) charge for inpatient care. TRICARE Extra offers the same
benefit as Standard, but when you elect to use a network provider, the
outpatient visit cost-share is only 15%. Please contact the
Beneficiary Counseling and Assistance Coordinator at the nearest
military treatment facility for additional information. The personal
costs experienced by you or your family will vary depending on the
TRICARE option you select For more information, visit www.tricare.mil.
B. Federal Tax Advantage. This represents the amount of additional
Federal tax you would have to pay if your quarters (BAH), and meals
(BAS) allowances were taxed. Your tax advantage is based on SINGLE 0
DEPN(S). P Q R
Monthly Rate: $.00 S;
Annual Rate: $.00 T.
Service-Estimated Indirect Compensation (A + B):
Monthly Rate: $.00 AN;
Annual Rate: $.00 AO.
Additional Considerations (As You Estimate):
When adding up the total worth of your compensation package, you
should also consider the many other programs and privileges you have.
Their worth will be different for each person depending on use. This
page is presented for you to determine the yearly value/savings you
estimate each of these programs has been worth to you.
A. Your Retirement Benefit is a combination of your military pension
and the Thrift Savings Plan (TSP).
1) Military Pension. One of the most attractive incentives of a
military career is the retirement system that provides a monthly
retirement income for those who serve a minimum of twenty years. There
are currently, three retirement plans in effect -- Final Basic Pay,
High-3, and Choice of High-3 or Redux with $30K Career Status Bonus
(CSB). A description of each follows. Information on all three plans
is available at http://www.afoc.randolph.af.mil/. Additional
information on the new High-3 and Redux/$30K CSB choice is available
at: http://www.defenselinkmil/home/features/2007/EmpRes/index.html.
Plan: Final Basic Pay;
Eligible (as determined by DIEUS) (Note 1): Entered service prior to 8
Sep 80;
Retired Pay Formula (Notes 2, 3 & 4): 2.5% times the years of service
times final basic pay;
Cost-of-Living Adjustment (COLA) (Note 5): Full inflation protection;
COLA based on Consumer Price Index (CPI).
Plan: High-3 (Note 6);
Eligible (as determined by DIEUS) (Note 1): Entered service on or
after 8 Sep 80 and before 1 Aug 86;
Retired Pay Formula (Notes 2, 3 & 4): 2.5% times the years of service
times the average of the highest 36 months of basic pay;
Cost-of-Living Adjustment (COLA) (Note 5): Full inflation protection;
COLA based on Consumer Price Index (CPI).
Plan: High-3 Choice;
Eligible (as determined by DIEUS) (Note 1): Entered service on or
after 1 Aug 86; or:
Redux/CSB Choice: Instead of retiring under High-3, members may choose
to receive a $30,000 (Note 7) "Career Status Bonus" at 15 years of
service in exchange for agreeing to serve to at least 20 years of
service and then retiring under the less generous Redux plan
Retired Pay Formula (Notes 2, 3 & 4): High-3: 2.5% times the years of
service times the average of the highest 36 months of basic pay; Or:
Redux/CSB option: 2.5% times the years of service, minus one;
percentage point from the product for each year less than 30 years,
times the average of the highest 36 months of basic pay. At age 62,
retired pay is recalculated without deducting the one percentage point
for each year less than 30, which allows it to catch up to what it
would have been without the Redux penalty.
Cost-of-Living Adjustment (COLA) (Note 5): High-3: Full inflation
protection; COLA based on Consumer Price Index (CPI); Or:
Redux/CSB option: Partial inflation protection; COLA based on Consumer
Price Index (CPI) minus 1 percent. At age 62, retired pay is adjusted
to reflect full COLA since retirement. Partial COLA then resumes after
age 62.
Note 1: Date initially entered uniformed service (DIEUS) refers to the
fixed date the member was first enlisted, appointed, or inducted. This
includes cadets at the Service Academies, students enrolled in a
reserve component as part of the Services' senior ROTC programs or
ROTC financial assistance programs, students in the Uniformed Services
University of the Health Sciences, participants in the Armed Forces
Health Professions Scholarship program, officer candidates attending
Officer Training School, and members in the Delayed Entry Program.
Note 2: The maximum multiplier is 75 percent times basic pay.
Note 3: Members should be aware that the Uniformed Services Former
Spouses Protection Act allows state courts to consider military
retired pay as divisible property in divorce settlements. The law does
not direct state courts to divide retired pay; it simply permits them
to do so.
Note 4: Retired pay stops upon the death of the retiree unless he or
she was enrolled in the Survivor Benefit Plan. See "Survivor Benefit
Plan (SBP)" on page 3 for additional information on this program.
Note 5: COLA is applied annually to retired pay.
Note 6: High-3 is a reference to the average of the high three years
or, more specifically, the high 36 months of basic pay as used in the
formula.
Note 7. Effective 28 Dec 01, members may elect one of 5 options to
receive the $30K CSB: one lump sum payment of $30IC; two annual
payments of $15K; three annual payments of $10K; four annual payments
of $7.5K; or five annual payments of $6K.
(For Retirement-Eligible Personnel) If you were to retire in your
present grade, your initial gross monthly retired pay would be $.00 AG
increased annually for inflation. For each year you continue to stay
on active duty, you will receive an additional 2.5% of your basic pay
up to a maximum of 75%. Your retirement represents a considerable
value over your life expectancy. While retired pay stops upon death,
you can ensure your survivors receive a portion of it by enrolling in
the Survivor Benefit Plan when you retire (see below). Retired pay
calculation is for illustration only. It does not consider any active
duty service commitment or time-in-grade requirement, which may
preclude your retiring immediately in your present grade. Further, the
date used to determine years of service in your actual retired pay
computation (the "1405" date) will be determined by the MPF from paper
records and could be different than the total active Federal military
service used in this example.
2) Uniformed Services Thrift Savings Plan (TSP): You can gain
additional tax deferred advantages through participation in the TSP.
You are authorized to contribute up to 100% of your base pay, special
and incentive pays, and bonuses, up to the annual contribution limits
identified below. If you perform duty in a designated combat zone,
your contributions to TSP may be tax-exempt (versus tax deferred) and
not count against your tax deferred limits. The combination of your
tax-exempt and tax deferred contributions is limited by the Internal
Revenue Service to $55,000 for 2009. More information can be found at
http://www.tsp.cov/.
Year: 2009 +;
% of Base Pay: (unlimited);
Total Annual Tax Deferred Limits: $16,500.
B. Death And Survivor Programs. If you die on active duty, your
survivors are eligible for life insurance and other payments.
1) Serviceman's Group Life Insurance. You may buy life insurance in
$50,000 increments up to $400,000 at a very low cost. You are
currently paying premiums for SGLI coverage of $400,000 AU on yourself
and $.00 AV on your spouse.
2) Death Gratuity, Va Dependency And Indemnity Compensation (DIC),
Housing. In the event of your death, your dependents would receive a
death gratuity payment of up to $100,000 and monthly non-taxable
Dependency and Indemnity Compensation (DIC) payments (non-taxable) of
$1,067 for the surviving spouse and an additional $250 for each
surviving child. DIC is adjusted annually for inflation. More
information can be found at http://www.vba.va.gov/. In addition, a
Basic Allowance for Housing (at the rate that is payable for members
of the same grade and dependency status as the deceased member for the
area where the dependents are residing) may be paid to the dependents
of a member of the uniformed services who dies while on active duty
and shall terminate 365 days after the date of the member's death.
3) Survivor Benefit Plan (SBP). All pay stops when a member dies.
However, if you die on active duty, in the line of duty, your
surviving spouse and children are automatically protected by the SBP--
at no cost to you. The surviving spouse will get an annuity equal to
the difference between the dependency and indemnity compensation DIC
payment, paid by the Department of Veterans Affairs, and the SBP
payment that would be paid if you had been retired on the date of your
death. In some cases, if it would be beneficial to the family, the
Secretary of the Air Force may authorize payment of the SBP to the
children instead of the surviving spouse. To determine the amount of
the SBP, the maximum applicable rate of retired pay that would be due
you will be used. The only way retirees can guarantee their survivors
receive a share of their retired pay is to enroll in SBP before they
retire. The maximum annuity is equal to 55% of retired pay until the
spouse attains age 62. Beginning 1 Apr 2009, there will no longer be a
reduction to the SBP annuity that was originally required when
surviving spouses attained age 62. The SBP annuity for your survivor
is adjusted each year by the same percentage increase given to
military retired pay. Additional information can be found at
http://ask.afpc.randolph.af.mil.
C. Pay Growth. Pay raises each year, longevity increases, and
competitive promotion opportunities.
D. State/local Tax Advantage. Besides being exempt from Federal taxes,
your BAH, BAS, and overseas allowances and in-kind housing may be
exempt from State and Local taxes, depending upon the state you claim
as a legal residence. Relative to the tax laws of your legal
residence, this can save you hundreds of dollars each year.
E. Discounted Services And Benefits.
1) Commissary. Studies have found that commissary shoppers save an
average of 31.1% or more on their grocery purchases, amounting to
about $3,354.00 annually for a family of four. If you spend the
following, your savings will be approximately:
Monthly Grocery Purchases:
Supermarket: $200.00;
Commissary: $137.80;
Savings: $62.20;
% Savings: 31.1%.
Supermarket: $300.00;
Commissary: $206.70;
Savings: $93.30;
% Savings: 31.1%.
Supermarket: $400.00;
Commissary: $275.60;
Savings: $124.40;
% Savings: 31.1%.
Discover your benefit. Find your nearest commissary through the
locations link at www.commissaries.com.
2) Army And Air Force Exchange Service (AAFES). Now in our second
century of service, the Army and Air Force Exchange Service (AAFES)
remains committed to serving you, the "best customer in the world".
Your exchange provides products and services to authorized customers
worldwide and generates reasonable earnings to supplement appropriated
funds for Army and Air Force morale, welfare, and recreation (MWR)
programs. Earnings fund new and improved stores with most of the
profits going to MWR programs ” about $272 million in 2007 and more
than $2.4 billion over the past 10 years. AAFES' shelf prices provide
you an average of 20 percent overall savings compared to off post/base
retail operations. While you and your family can enjoy your exchange
benefit at your home station, in many ways AAFES' greatest value is
our pledge to "Go Where You Go." Your Exchange currently operates over
317 stores and fast food outlets in Iraq, Afghanistan and other
contingency locations, all run by AAFES Associate volunteers. And
remember, AAFES offers 24/7 convenience through its website
'www.aafes.com' where you can "Find, Click, and Save."
3) Federal Long-Term Care Insurance Program (FLTCIP): The FLTCIP is
the only long term care insurance program sponsored by the Federal
Government. It is managed by the Office of Personnel Management and
offered by two insurance leaders--John Hancock and MetLife. It
provides comprehensive benefits to included home care, informal care,
and inflation options at competitive group premiums. The FLTCIP helps
preserve your retirement savings should a long-term care need arise.
Those eligible for the FLTCIP include all Federal Employees (Uniformed
Service members), their spouses, adult children (including natural,
adopted & step), parents, parents-in-law, and stepparents.
Call 1-800-LTC-FEDS (1-800-582-3337) or visit the web site at:
http://www.LTCFEDS.com.
4) Education Programs. Members in accredited schools pursuing degree
programs receive up to 100 percent of tuition costs, up to a maximum
of $250.00 per semester hour, $4,500 per fiscal year, paid by the
Government through the Military Tuition Assistance Program. Search
tools to find military-friendly colleges are on the Air Force Virtual
Education Center (AFVEC) through the AF Portal. Members who had
established an account in the Veterans Educational Assistance Program
(VEAP) by contributing $25-$100 each month or by lump sum payment (up
to $2700), have a Government $2 for $1 matching contribution for a
total of up to $8,100. Members must serve on active duty for at least
181 continuous days, and enlisted for the first time between 1 Jan
1977 and 30 Jun 1985 inclusive, and signed up prior to 1 Apr 1987 to
make contributions. Members who elected to participate in the
Montgomery GI Bill upon entering active duty (after 30 Jun 1985), and
agreed to payroll reduction of $100 per month for a total of 12
months, can receive a benefit of $47,556 with yearly increases as
determined by the consumer price index.
5) Services Activities. Provide conveniently located, low-cost,
professionally managed activities and entertainment. You and your
family members receive significant savings when you participate in
Services programs such as fitness, libraries, child development and
youth programs, arts and crafts, auto skills, outdoor recreation
activities, golf, bowling, clubs, equipment checkout, aero clubs, etc.
6) Counseling And Assistance Programs. Military members and their
family members can receive free personal financial management
counseling, relocation services assistance, transition counseling,
spouse employment consultation, and assistance from a wide range of
other services available from Airman and Family Readiness Centers. Air
Force Aid Society provides zero interest emergency loans, grants,
education assistance and community enhancement programs to members who
qualify (total assistance given in 2007 was $19,300,000 in all
programs). Below are some estimated costs if services were procured in
the civilian sector:
Personal Financial Counseling/Education: $250.00;
Spouse Employment Counseling: $250.00;
Transition Assistance Services: $4,200.00;
Non-medical Counseling: $100.00.
7) Legal Counseling. Military members and dependents estimated costs
if services were procured in the civilian can get free basic estate
planning, legal counseling and assistance. Below are some estimated
costs if services were procured in the civilian sector:
Consultations with an attorney: $200.00;
Wills: $250.00;
Notaries: $5.00;
Advance Medical Directives: $75.00;
Client Correspondence: $50.00;
Powers of Attorney: $50.00.
8) Space Available Travel. Space available travel for Uniformed
Services members can provide substantial savings over commercial
airline fares. Space available travel is defined by DoD policy as a
privilege (not an entitlement), which accrues to Uniformed Services
members as an avenue of respite from the rigors of Uniformed Services
duty. Under one of the categories of space available travel, members
on leave can travel with one dependent on permissive TDY house hunting
trips. For additional information on this special privilege, consult
the AMC Space Available web page at
http://www.amc.af.mil/questions/topic.asp?id=380.
9) Tricare Dental Program (TDP). TDP eligibility includes spouses and
eligible children of active duty members of the Uniformed Services,
Selected Reserve and Individual Ready Reserve. Additionally, the
Selected Reserve and Individual Ready Reserve members themselves are
eligible for the TDP. Enrollees may be treated in both CONUS and
OCONUS locations. TDP monthly premiums for Selected Reserve members
and family members of active duty are cost-shared by the Department of
Defense (DoD) (i.e., the government pays 60% of the premium, sponsor
pays 40%). The sponsor's monthly premium payment is $11.58 for a
single enrolled family member and $28.95 for families with two or more
members enrolled. Basic preventive, diagnostic and emergency services
are covered at 100%; the plan pays 50%-80% of the cost for certain
specialized services such as restorations, orthodontics, and
prosthodontics. Moreover, DoD cost-shares other specialty care
(periodontic, endodontic, and oral surgery) at a higher percentage for
E-1s to E-4s.
(Add this amount to Summary Total on page 1):
Total:
Contents:
V ” Monthly BP X 12.
AA - Includes all Special "Pays". Annual amount paid for Special Pays
such as FLPP and SDAP, etc.
Includes all Bonuses. Annual amount paid for Bonuses such as ACIP,
Medical, Dental, Re-enlistment, enlistment, etc.
AF - Includes expense allowances such as OHA, COLA, FSA, Annual
Clothing/CRA, etc.
AM - Annual total of the entitlements above.
AO - These figures are the addition of the Medical Amount and the Tax
Advantage. The Medical amount is from the figures provided by the
Service (this year 0). The tax advantage is the computed amount of
what the member would be taxed if all his pay and allowances were
taxable, based on his marital status and number of dependents. The
annual amount is the monthly amount multiplied by 12.
J - The Monthly amount of Basic Pay.
K - Amount of J X 12.
L - The Monthly amount of BAH.
M - Amount of L X 12.
N - The Monthly amount of BAS.
O - Amount of N X 12.
U - Total Monthly amount of BP, BAH, and BAS.
V - Total Annual amount of BP, BAH, and BAS.
W - Monthly amount of Special Pays such as FLPP and SDAP, etc.
X - Annual amount of Special Pays such as FLPP and SDAP, etc.
Y - Annual amount of all Bonuses paid such as ACIP, Medical, Dental,
Re-enlistment, enlistment, etc.
Z - Monthly total amount of Special Pays.
AA - Annual amount of Special Pays and Bonuses.
AE - Monthly amounts paid for OHA, COLA, FSA, Clothing/CRA, etc.
AF - Annual amounts paid for OHA, COLA, FSA, Clothing/CRA, etc.
P,Q,R - Your W-4 declared marital status and number of exemptions
S - The actual monthly tax advantage realized by not taxing BAS and
BAH.
T - The actual annual tax advantage realized by not taxing BAS, and
BAH.
AN - The actual monthly tax advantage realized by not taxing BAS, BAH
and Medical care.
AO - The actual annual tax advantage realized by not taxing BAS, BAH
and Medical care.
AG - The monthly amount of the member's estimated retired pay (based
on grade and number of years service). Amount will only
be present if member is over 20 years.
AU - Amount of SGLI coverage for member (i. e. $400,000.)
AV - Amount of SGLI coverage for spouse (i. e. $100,000.)
[End of section]
Appendix IV: Overview of Studies Comparing Military and Civilian
Compensation:
Over the years, there have been a variety of public and private sector
studies on the parity of military and civilian compensation and the
role of compensation in recruiting and retaining military personnel.
Specifically, organizations such as RAND Corporation (RAND),[Footnote
55] the Congressional Budget Office (CBO),[Footnote 56] CNA
Corporation (CNA),[Footnote 57] and the Congressional Research Service
(CRS)[Footnote 58] have compared military and civilian compensation
and studied the extent to which a pay gap exists between military and
civilian pay. Although the methodology and results of these studies
vary, they similarly recognize the complexities of conducting such a
comparison. The first of these four studies was conducted by RAND,
which reported in 2002 on the role played by the different components
of military pay in total cash compensation and how cash compensation
varies according to rank, service, occupational group, and years of
service.[Footnote 59] Specifically, RAND found that considerable
variation existed among the services in the incidence and average
amounts of non-regular military compensation pays and allowances;
however, these differences are overshadowed by the similarity in the
average amount of regular military compensation.
In June 2007, CBO issued a report in which it discussed common
problems with comparing the compensation of active-duty enlisted
personnel to civilian sector pay and benefits.[Footnote 60]
Specifically, CBO noted that evaluating the comparability of military
and civilian jobs can be difficult because the extent to which job
security, autonomy in performing tasks, group solidarity, and other
intangible rewards are valued, may differ. Further, CBO noted that the
inclusion of employment benefits further complicates assessments of
compensation comparability in that (1) qualitative differences between
military and civilian benefits may be difficult to measure, (2)
private employers offer a wide variety of non-cash compensation, thus
making it difficult to identify the "average" civilian benefit
package, and (3) the cost of providing these benefits may
significantly differ from the perceived value placed on those benefits
by an employee. In addition, CBO identified four ways to assess the
comparability of military and civilian pay, including (1) comparing
cumulative increases over time in private-sector wages and salaries
and in military basic pay, (2) comparing levels of military and
civilian pay, adjusted for people's years of experience and education,
(3) comparing total compensation including non-cash and deferred cash
benefits, and (4) comparing military and civilian trends in cash
compensation--including special pays and bonuses--for selected
occupations. CBO reported that estimates made using each of the four
methods suggest that, as of 2006, DOD has achieved its goal to make
regular military compensation comparable with the 70th percentile of
civilian earnings.
A third study was conducted by CNA, which in March 2008 issued a
report on the findings from its analysis of the comparability of
civilian and military pay.[Footnote 61] Specifically, the CNA report
highlighted the complexity of estimating compensation benefits but
also noted that without the inclusion of benefits, the value of a pay
comparability study is limited. For example, CNA suggested that
servicemembers value each benefit differently, depending on their own
unique needs, interest, and personal circumstances. Furthermore, CNA
found that it is difficult to analyze the value of such benefits, due,
in part, to a lack of consistent data on the extent to which benefits
are utilized. Based on its analyses, CNA concluded that regular
military compensation compared quite favorably with cash compensation
of the 70th percentile of civilians and the 80th percentile when three
select benefits were included.
In December 2009, CRS also reported on the challenges of military-
civilian compensation comparisons, similar to those identified in the
previously mentioned reports.[Footnote 62] Specifically, CRS noted
that it is difficult to find a common index or indicator on which to
base a comparison of the dollar values of military and civilian
compensation because (1) military compensation applies to multiple
branches of the Armed Forces, whose receiving population and
taxability vary widely, (2) the various ranks and pay grades of
military personnel complicate a comparison of compensation within the
Armed Forces, much less conducting a comparison with comparable
civilians, (3) with some exceptions, the conditions of military
service are frequently more arduous than those of civilian employment,
even in peacetime, for both military personnel and their families, (4)
comparisons between and the use of different sets of military pay
compensation statistics can yield very different results, and (5) the
level of specificity used in a pay comparison can lead to sharply
differing results.
[End of section]
Appendix V: Benefits and Corresponding Utilization Rates Reported in
DOD's Status of Forces Surveys:
Benefits represent a significant portion of The Department of
Defense's (DOD) overall compensation package for active duty
servicemembers. Valuing benefits from a servicemember's perspective
presents a number of challenges because, for example, the military
compensation system includes a large number of pays and noncash and
deferred benefits. Specifically, to determine how servicemembers view
some of the benefits DOD provides, we reviewed the results of DOD's
Status of Forces Survey for Active Duty Servicemembers. That is, we
looked at self-reported utilization rates of various benefits. Table 6
provides a list of benefits we reviewed and corresponding utilization
rates.
Table 5: Self-Reported Utilization Rates of Various Components of
Military Compensation:
Compensation component: Commissary;
Utilization rate: 90%.
Compensation component: Exchange;
Utilization rate: 90%.
Compensation component: Child care (on-base);
Utilization rate: 37%.
Compensation component: Tuition assistance programs for college/higher
education;
Utilization rate: 34%.
Compensation component: Adult continuing education/counseling;
Utilization rate: 19%.
Compensation component: Basic skills education;
Utilization rate: 10%.
Compensation component: Technical/Vocational programs;
Utilization rate: 6%.
Compensation component: DOD-run School;
Utilization rate: 18%.
Compensation component: Thrift Savings Plan;
Utilization rate: 44%.
Compensation component: Personally visited military health care
provider;
Utilization rate: 85%.
Compensation component: Family member used military health care
provider;
Utilization rate: 86%.
Compensation component: Personally Visited On-Base Military Dentist;
Utilization rate: 82%.
Compensation component: Family member used military dental care;
Utilization rate: 46%.
Compensation component: Bowling center;
Utilization rate: 56%.
Compensation component: Outdoor recreation programs or facilities;
Utilization rate: 53%.
Compensation component: Libraries;
Utilization rate: 46%.
Compensation component: Community center programs or facilities;
Utilization rate: 45%.
Compensation component: Information ticket and tours services;
Utilization rate: 39%.
Compensation component: Military lodging program;
Utilization rate: 38%.
Compensation component: Do-it-yourself Automotive Facility;
Utilization rate: 27%.
Compensation component: Golf course;
Utilization rate: 26%.
Compensation component: Recreation programs for deployed
servicemembers;
Utilization rate: 18%.
Compensation component: Arts and crafts skill development programs or
facilities;
Utilization rate: 14%.
Source: DOD's Status of Forces Survey for Active Duty Members.
Note: These results are from the 2007-2009 Status of Forces Surveys.
The margin of error ranged from +/-1 to +/-3 percent.
[End of table]
[End of section]
Appendix VI: Examples Comparing Select Military Occupations to
Comparable Occupations and Limitations of Such Comparisons:
Comparisons of compensation of select enlisted and officer occupations
to comparable civilian occupations face many limitations. For example,
if an occupational comparison approach is to be used to generalize to
the entire military population, a very detailed, exhaustive, and time-
consuming comparison of occupations would be needed. However, such
comparisons of military and civilian occupations are still lacking
because many military occupations do not have an exact civilian
counterpart and other characteristics and attributes may not be
adequately reflected or recognized in this type of comparison because
of data limitations, as discussed below. Since these, and other
limitations, would exist, a comprehensive occupational comparison
would still not answer the question, "Is military pay adequate
compared to civilian pay or which sector receives more compensation?"
Furthermore, for the occupations that are being compared, a number of
assumptions must be made to assign monetary values, for example the
discount rate used to calculate retirement values. These assumptions,
while they may be reasonable, produce approximations of values for
each side of the comparison and these values could significantly
change if other reasonable assumptions were made. As we discussed in
other sections of the report, the examples comparing compensation of
select enlisted and officer occupations do not present the value of
all components of the compensation system--only those for which we
were able to assign value during the course of this engagement.
In addition to the numerous assumptions being made (see table below
for the specific assumptions we made), there are data limitations that
cannot be overcome. These limitations prevent one from controlling the
characteristics of the civilian selected for each comparison. For
example, we could not identify existing data of civilian earnings by
the selected occupations that contained a representative sample
population with demographic information on the sample population.
Thus, we could not provide earnings data for a civilian within the
selected occupations that exactly matched the characteristics of
military personnel to include years of experience, family size, and
tax filing status.
Further, it is worth noting that many question whether a military job
is comparable to a civilian job since the working conditions of
military personnel may require different risks and levels of
responsibility, among other differences. From this perspective,
examples showing occupational comparisons of civilian and military
compensation, such as that presented in table 7, is somewhat limited
in its usefulness. As a result, these examples are presented solely
for illustrative purposes.
Table 7: Examples Comparing Select Military Occupations to Comparable
Civilian Occupations (For Illustrative Purposes Only):
Occupation: Truck driver[G]: Civilian;
Earnings[A]: $37,270;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $37,270;
Health care[D]: -$3,692;
Retirement[E]: $766;
Commissary[F]: n/a;
Total benefits: -$2,926;
Total compensation: $34,344.
Occupation: Truck driver[G]: E-4, with 4 years, married, filing
jointly, no other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $24,574;
Regular military compensation[B]: Housing allowance: $13,524;
Regular military compensation[B]: Subsistence allowance: $3,533;
Regular military compensation[B]: Federal tax advantage: $2,459;
Regular military compensation[B]: Tax advantage: $1,413;
Total cash: $45,502;
Health care[D]: $0;
Retirement[E]: $309;
Commissary[F]: $2,075;
Total benefits: $2,384;
Total compensation: $47,886.
Occupation: Police: Civilian:
Earnings[A]: $51,410;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $51,410;
Health care[D]: -$3,692;
Retirement[E]: $766;
Commissary[F]: n/a;
Total benefits: -$2,926;
Total compensation: $48,484.
Occupation: Police: E-4, with 4 years, filing single, no dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $24,574;
Regular military compensation[B]: Housing allowance: $11,172;
Regular military compensation[B]: Subsistence allowance: $3,533;
Regular military compensation[B]: Federal tax advantage: $2,595;
Regular military compensation[B]: Tax advantage: $1,218;
Total cash: $43,092;
Health care[D]: $0;
Retirement[E]: $309;
Commissary[F]: $1,131;
Total benefits: $1,440;
Total compensation: $44,532.
Occupation: Automotive service technician/mechanic: Civilian;
Earnings[A]: $35,100;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $35,100;
Health care[D]: -$3,692;
Retirement[E]: $766;
Commissary[F]: n/a;
Total benefits: -$2,926;
Total compensation: $32,174.
Occupation: Automotive service technician/mechanic: E-4, with 4 years,
married, filing jointly, no other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $24,574;
Regular military compensation[B]: Housing allowance: $13,524;
Regular military compensation[B]: Subsistence allowance: $3,533;
Regular military compensation[B]: Federal tax advantage: $2,459;
Regular military compensation[B]: Tax advantage: $1,413;
Total cash: $45,502;
Health care[D]: $0;
Retirement[E]: $309;
Commissary[F]: $2,075;
Total benefits: $2,384;
Total compensation: $47,886.
Occupation: Fire fighter: Civilian;
Earnings[A]: $44,260;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $44,260;
Health care[D]: -$3,692;
Retirement[E]: $766;
Commissary[F]: n/a;
Total benefits: -$2,926;
Total compensation: $41,334.
Occupation: Fire fighter: E-4, with 4 years, filing single, no
dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $24,574;
Regular military compensation[B]: Housing allowance: $11,172;
Regular military compensation[B]: Subsistence allowance: $3,533;
Regular military compensation[B]: Federal tax advantage: $2,595;
Regular military compensation[B]: Tax advantage: $1,218;
Total cash: $43,092;
Health care[D]: $0;
Retirement[E]: $309;
Commissary[F]: $1,131;
Total benefits: $1,440;
Total compensation: $44,532.
Occupation: Registered nurse: Civilian;
Earnings[A]: $62,450;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $62,450;
Health care[D]: -$3,648;
Retirement[E]: $1,776;
Commissary[F]: n/a;
Total benefits: -$1,872;
Total compensation: $60,578.
Occupation: Registered nurse: O-3, with 10 years, married, filing
jointly, two other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $61,884;
Regular military compensation[B]: Housing allowance: $19,656;
Regular military compensation[B]: Subsistence allowance: $2,433;
Regular military compensation[B]: Federal tax advantage: $3,898;
Regular military compensation[B]: Tax advantage: $1,830;
Total cash: $89,701;
Health care[D]: $0;
Retirement[E]: $4,679;
Commissary[F]: $3,280;
Total benefits: $7,959;
Total compensation: $97,660.
Occupation: Civil engineer: Civilian;
Earnings[A]: $74,600;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $74,600;
Health care[D]: -$3,481;
Retirement[E]: $1,602;
Commissary[F]: n/a;
Total benefits: -$1,878;
Total compensation: $72,722.
Occupation: Civil engineer: O-3, with 8 years, married, filing
jointly, no other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $60,026;
Regular military compensation[B]: Housing allowance: $19,656;
Regular military compensation[B]: Subsistence allowance: $2,433;
Regular military compensation[B]: Federal tax advantage: $3,898;
Regular military compensation[B]: Tax advantage: $1,830;
Total cash: $87,843;
Health care[D]: $0;
Retirement[E]: $2,978;
Commissary[F]: $2,075;
Total benefits: $5,053;
Total compensation: $92,896.
Occupation: Electrical engineer: Civilian;
Earnings[A]: $82,160;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $82,160;
Health care[D]: -$2,705;
Retirement[E]: $1,439;
Commissary[F]: n/a;
Total benefits: -$1,266;
Total compensation: $80,894.
Occupation: Electrical engineer: O-3, with 6 years, married, filing
jointly, no other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $57,157;
Regular military compensation[B]: Housing allowance: $19,656;
Regular military compensation[B]: Subsistence allowance: $2,433;
Regular military compensation[B]: Federal tax advantage: $3,898;
Regular military compensation[B]: Tax advantage: $1,830;
Total cash: $84,974;
Health care[D]: $0;
Retirement[E]: $1,894;
Commissary[F]: $2,075;
Total benefits: $3,969;
Total compensation: $88,943.
Occupation: Computer and information systems manager: Civilian;
Earnings[A]: $112,210;
Regular military compensation[B]: Basic pay: n/a;
Regular military compensation[B]: Housing allowance: n/a;
Regular military compensation[B]: Subsistence allowance: n/a;
Regular military compensation[B]: Federal tax advantage: n/a;
Regular military compensation[B]: Tax advantage: n/a;
Total cash: $112,210;
Health care[D]: -$2,705;
Retirement[E]: $1,439;
Commissary[F]: n/a;
Total benefits: -$1,266;
Total compensation: $110,944.
Occupation: Computer and information systems manager: O-3, with 6
years, married, filing jointly, no other dependents;
Earnings[A]: n/a;
Regular military compensation[B]: Basic pay: $57,157;
Regular military compensation[B]: Housing allowance: $19,656;
Regular military compensation[B]: Subsistence allowance: $2,433;
Regular military compensation[B]: Federal tax advantage: $3,898;
Regular military compensation[B]: Tax advantage: $1,830;
Total cash: $84,974;
Health care[D]: $0;
Retirement[E]: $1,894;
Commissary[F]: $2,075;
Total benefits: $3,969;
Total compensation: $88,943.
Source: GAO analysis of Bureau of Labor Statistics (BLS), Department
of Defense (DOD), and CNA data.
Note: Compensation is presented in 2008 constant dollars. Some totals
may not add due to rounding.
[A] Earnings include pays and production bonuses. These data are the
median earnings figure for the occupation from the BLS Occupational
Employment Statistics. The experience level of the civilian worker is
not known; therefore, it is unknown if the median earnings correspond
to the years of service of the selected military scenario.
[B] For each of the components of regular military compensation, the
value is calculated by using the demographics of the military
personnel selected for comparison. While location is a factor that
determines the value of the basic housing allowance, the scenario was
calculated using the average basic allowance for housing for
continental U.S. locations. In addition, special and incentive pays
are not included in the analysis due to the difficulty of determining
whether or not all service military specialties within a select
occupation group were entitled to a special or incentive pay.
[C] The Federal Insurance Contributions Act (FICA) tax advantage is
not defined as being a part of regular military compensation. FICA is
included under tax advantage for the purpose of visual presentation.
[D] The health care value is based on CNA's differential analysis of
what it would cost for a civilian to obtain similar health care as
what is offered by DOD. These numbers are calculated based on years of
experience for the civilian equivalent of an enlisted and officer. We
note that this number is based on an aggregate assumption about
employer-sponsored health care. However, a more accurate estimation of
the value of health care would have taken into account that employer-
sponsored health care most likely varies by occupation.
[E] The retirement value is based on CNA's analysis of retirement for
years of experience for enlisted and officer and their civilian
counterparts.
[F] The value of the commissary benefit is based on a DOD analysis of
savings by family size. According to DOD, the estimates provided may
underestimate the value of commissary savings because non-food items
were not included in the Defense Commissary Agency's original
calculations.
[G] The full standard occupational classification for truck driver,
according to BLS, is "Truck Driver, Heavy or Tractor Trailer."
[End of table]
In order to compare pay and benefits for civilians with pay and
benefits of enlisted and officers in comparable occupations, we
identified criteria for selection of occupations based on factors such
as ability to crosswalk a military occupation to a civilian
occupation, military occupations with a large population based on
percentage of force, and inclusion of some military critical
specialties. We selected four enlisted occupations and four officer
occupations. We reviewed existing data on the active duty force by
primary military occupation to confirm the size of these populations.
Using a crosswalk of military occupations--prepared by DOD's Defense
Manpower Data Center (DMDC)--to the standard occupational
classification system used by the Bureau of Labor Statistics (BLS), we
identified the various service-specific occupations codes that
crosswalked to the select occupations. Next, we identified large
groups of personnel by rank and years of service within these
occupational groups, through queries provided by DMDC of the Active
Duty Strength file. We selected the personnel defined by rank and
years of service with the largest distribution to calculate the
military scenario compensation. In addition, the DMDC queries included
information on the number of dependents of these personnel. We made
assumptions that married personnel would file taxes jointly. Using
this information, we calculated basic pay, basic housing allowance,
and basic allowance for subsistence using information contained in the
2008 Selected Military Compensation tables prepared by DOD's
Directorate of Compensation. DOD provided the values for the federal
income tax advantage[Footnote 63] (i.e., the value of allowances for
housing and subsistence not being subject to income tax) and
additional FICA tax advantage for each of the military personnel
scenarios. Although special and incentive pays are part of cash
compensation, we did not make assumptions about entitlement that could
be generalized to all service military specialties within a select
occupation.
For civilian cash compensation within a select occupation group, we
used BLS's Occupational Employment Statistics to obtain median
earnings. These figures include pay and production bonuses. However,
the Occupational Employment Statistics does not contain demographic
information on civilian employees. For this reason, we were unable to
include salary information that matched the age, education, and
experience of the military personnel included in the study. For other
data on civilian compensation included in the comparison, we included
information that matched the years of service of the military
personnel.
In order to include values for health care and retirement for
civilians and military with similar years of experience, we included
values calculated by CNA from a 2008 commissioned study to compare
military and civilian compensation packages. We converted the 2006 CNA
values into 2008 dollars. For military retirement, we inflated using
the percentage increases to basic pay in 2007 and 2008. For civilian
retirement, we adjusted by increases in the 2007 and 2008 ECI for
salaries. Finally, civilian health care expenditures were adjusted
using the percentage increase in 2007 and 2008 in the medical care
expenditure category of the Consumer Price Index for All Urban
Consumers. We note that we reviewed CNA's methodology and found it to
be reasonable. However, we did not verify the calculations underlying
CNA's estimates of value. Finally, to include the value of the benefit
to servicemembers for the commissary, we used DOD calculations of
savings based on family size. We reviewed DOD's methodology and found
it to be reasonable. However, we did not verify the calculations
underlying DOD's estimates of value.
[End of section]
Appendix VII: Reasonableness of Using the Employment Cost Index to
Adjust Basic Pay Annually and Use of Employment Cost Index as an
Approach to Compare Military and Civilian Compensation and Its
Shortcomings:
The Employment Cost Index (ECI), a nationally representative measure
of labor costs for the civilian economy, is used by businesses and
other organizations to, among other things, adjust wage rates to keep
pace with competitors; and while it has it strengths and weaknesses,
it is generally reasonable to use the measure to adjust basic pay.
However, comparing changes over time in the ECI with changes over time
in the rates of basic pay does not show whether there is a difference
or "pay gap" in military and civilian compensation, because among
other things, the analysis assumes that basic pay is the only
component of compensation that should be compared to changes in
civilian pay.
ECI Is Generally Reasonable to Adjust Basic Pay Annually but
Shortcomings Exist When Comparing Increases in Basic Pay and Changes
in the Employment Cost Index for Civilian Compensation:
Using the ECI for the purpose of determining the amount of the annual
basic pay raise has both strengths and weaknesses but is generally
reasonable to use to adjust basic pay annually. On the one hand, the
ECI is a nationally representative measure of labor costs for the
civilian economy. The ECI is also produced in a consistent fashion,
using a transparent methodology.[Footnote 64] In addition, the ECI
provides separate data series for different occupational groups,
industries, and geographic areas.[Footnote 65] On the other hand, the
ECI is not tailored to the specific segments of the civilian economy
most relevant to DOD--for example, those occupations and industries
that the military services primarily compete with for workers.
[Footnote 66] Also, because the ECI is constructed from data collected
from surveys of employers, it does not provide data about the
demographics of the civilian workforce--such as workers' education and
experience--both of which are important factors that are often taken
into account when setting employee pay. Nevertheless, we have
previously reported that creating more tailored indices would be
challenging.[Footnote 67] Further, none of the experts whom we
consulted, nor any reports published by other organizations that we
reviewed during the course of our review, suggested that any other
existing indices or data series would provide more useful data than
what are already provided by the ECI.[Footnote 68]
The ECI is a measure of changes in wages and employer costs for
employee benefits.[Footnote 69] Created in the mid-1970's, the ECI is
published quarterly by the Bureau of Labor Statistics and is part of
the Bureau's National Compensation Survey program, which provides
measures of occupational wages, employment cost trends, and benefit
incidence and detailed plan provisions. Closely watched by economists,
the ECI is one indicator of cost pressures that could lead to price
inflation for finished goods and services. Organizations use the ECI
to inform their decision making in a variety of ways--for example, to
adjust their wage rates to keep pace with what their competitors pay
or to adjust wage rates in collective bargaining agreements. The
federal government also uses the ECI to inform its decision making.
For example, Congress included a provision in the National Defense
Authorization Act for Fiscal Year 2004 tying the annual basic pay
raise to the ECI.[Footnote 70] That law contains a provision allowing
the President to propose alternative pay adjustments to Congress, in
certain circumstances, if the President deems the standard increase
required by the law to be inappropriate.
Shortcomings of Comparing Annual Increases in Basic Pay and the
Employment Cost Index:
While the ECI helps inform a variety of decision making with regard to
setting compensation, comparing changes in the ECI with changes in the
rates of basic pay does not show whether there is a difference, or
"pay gap," in compensation between the two, nor does it facilitate
assessing how military pay rates compare with what civilian employers
provide. For example, one approach that is sometimes taken to
illustrate a "pay gap" between basic pay and civilian pay is to
compare the annual increase in basic pay with the corresponding
increase in the ECI. Using this approach, the reported "pay gap" for
each year is the cumulative difference between the two increases,
expressed as a percentage of the cumulative increases in basic pay.
However, conducting this type of analysis does not reveal a "pay gap"
because it assumes that basic pay, which servicemembers receive on a
regular basis,[Footnote 71] is the only component of compensation that
should be compared to changes in civilian pay. While basic pay
represents the largest portion of compensation, servicemembers may
also receive basic allowance for housing and basic allowance for
subsistence.[Footnote 72] By excluding such elements, such an analysis
simply illustrates how a portion of military compensation--basic pay--
and civilian compensation has changed over time. Because the ECI is a
measure of the change in the cost of labor, a more appropriate and
analogous comparison of changes in military compensation to the ECI
uses regular military compensation-
-which includes basic pay, the allowances for housing and subsistence,
and the federal tax advantage.
The Congressional Budget Office, in a 1999 report[Footnote 73]
discussing what the "pay gap" between military and civilian
compensation means, described three other shortcomings of conducting
such an analysis. Specifically, the Congressional Budget Office noted
that such an analysis (1) selects a starting point for the comparison
without a sound analytic basis, yet the results of the pay-gap
calculation are very sensitive to changes in that starting point, (2)
does not take into account differences in the demographic composition
of the civilian and military labor forces, and (3) compares military
pay growth over one time period with a measure of civilian pay growth
over a somewhat different period.
In undertaking a similar analysis as described above, but comparing
the total average change in military compensation--a weighted average
of basic pay and the housing and subsistence allowances--to the ECI,
different results may be obtained. However, the shortcomings discussed
above also apply to such an analysis. The key difference is that
comparing the total average change in military compensation to the ECI
includes the three major components of military cash compensation, all
of which have changed over time.
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov:
Acknowledgments:
In addition to the individual named above, Ronald S. Fecso, Chief
Statistician; Joseph Applebaum, Chief Actuary; Marion A. Gatling,
Assistant Director; Lori A. Atkinson; Stacy M. Bennett; Margaret
Braley; Timothy J. Carr; Patrina Clark; Grace A. Coleman; Patrick M.
Dudley; K. Nicole Harms; Wesley A. Johnson; Susan C. Langley; Kimberly
Mayo; Tom McCool; Charles W. Perdue; Jennifer L. Weber; and John Van
Schaik made key contributions to this report.
[End of section]
Footnotes:
[1] GAO, Military Compensation: Comparisons with Civilian Compensation
and Related Issues, [hyperlink, http://www.gao.gov/products/NSIAD-86-
131BR] (Washington, D.C.: June 5, 1986).
[2] Regular military compensation is the sum of basic pay, allowances
for housing and subsistence, and the federal income tax advantage--
which is the value a servicemember receives from not paying federal
income tax on allowances for housing and subsistence. It was initially
constructed by the Gorham Commission in 1962 as a rough yardstick to
be used to compare military and civilian-sector pay.
[3] 37 U.S.C. §1008.
[4] Pub. L. No. 111-84, §606 (2009).
[5] CNA was commissioned by the 10th QRMC to conduct a study comparing
military and civilian compensation. The results of the study were used
by the QRMC. Typically, discussions of the military tax advantage
focus on the savings that arise because the allowances for housing and
subsistence are not subject to federal income tax. However, CNA's
study also included an estimation of the expected annual tax advantage
that servicemembers receive because they do not pay state and FICA
taxes on their housing and subsistence allowances and can often avoid
paying any state income taxes depending on their state home-of-record.
[6] We did not verify the calculations underlying CNA's reported
estimates of the value of these select benefits.
[7] For example, when applying discount rates to value retirement
benefits, the rate assumed affects the value of the retirement. To
illustrate, if a person is to receive $100 in 20 years, the present
value of that money is: $3.65 using 18 percent, $10.37 using 12
percent, or $31.18 using 6 percent.
[8] CBO, Evaluating Military Compensation (Washington, D.C.: June
2007).
[9] According to senior officials in the Office of the Under Secretary
of Defense for Personnel and Readiness' Directorate of Compensation,
DOD has not yet adopted the 10th QRMC's recommendation of including
benefits in comparing military and civilian compensation; thus,
setting the department's overall compensation goal at the 80th
percentile of comparable civilian employees.
[10] 38 U.S.C. §§ 3301-3324.
[11] GAO, Military Personnel: Reserve Compensation Has Increased
Significantly and Is Likely to Rise Further as DOD and VA Prepare for
the Implementation of Enhanced Educational Benefits, [hyperlink,
http://www.gao.gov/products/GAO-09-726R] (Washington: D.C.: July 6,
2009).
[12] GAO, Military Personnel: DOD Needs to Improve the Transparency
and Reassess the Reasonableness, Appropriateness, Affordability, and
Sustainability of Its Military Compensation System, [hyperlink,
http://www.gao.gov/products/GAO-05-798] (Washington, D.C.: July 19,
2005).
[13] GAO, Military Personnel: DOD Needs to Establish a Strategy and
Improve Transparency over Reserve and National Guard Compensation to
Manage Significant Growth in Cost, [hyperlink,
http://www.gao.gov/products/GAO-07-828] (Washington, D.C.: June 20,
2007).
[14] Employer-sponsored benefits are benefits provided to employees
that are provided by the employer. Examples include pension plans,
health insurance, and paid leave.
[15] In general, a person is considered an employee if he or she is
subject to another's right to control the manner and means of
performing the work, while independent contractors are individuals who
obtain customers on their own to provide services (and who may have
other employees working for them) and who are not subject to control
over the manner by which they perform their services. Unlike
employees, independent contractors are generally responsible for
paying their own Social Security and Medicare tax liabilities and do
not pay unemployment taxes because they are not eligible to receive
unemployment insurance benefits.
[16] For example, while workers' wages are taxed immediately, employer
contributions to a qualified retirement plan and investment earnings
on their contributions are typically not included when determining the
employee's income tax liability until benefits are received. The
employer is also entitled to a current deduction (within certain
limits) for contributions to a tax-qualified plan even though
contributions are not currently included in an employee's income. As
another example, federal tax policies contain significant tax benefits
for employer-sponsored health insurance and medical care.
[17] GAO, Employee Compensation: Employer Spending on Benefits Has
Grown Faster Than Wages, Due Largely to Rising Costs for Health
Insurance and Retirement Benefits, [hyperlink,
http://www.gao.gov/products/GAO-06-285] (Washington, D.C.: Feb. 24,
2006).
[18] Defined benefit pension plans typically offer periodic payments
over a specified period beginning at retirement age.
[19] Benchmark jobs are standard jobs used for making pay comparisons.
Pay data for benchmark jobs are generally readily available from the
surveys firms such as the consulting firm cited above.
[20] Unlike an average, or the mean, having data on the median level
of pay--that is the middle item in a group of data, in this case pay,
when the data are ranked in order of magnitude (from smallest to
largest)--prevents data from being skewed by a small number of
employers paying extremely high or extremely low salaries.
[21] In the case of the active component, "accessions" are individuals
who have actually begun their military service, as distinguished from
those who have signed a contract to serve but who have not yet begun
their service. Accession for active component personnel usually occurs
when an individual is "shipped" to basic training.
[22] The obligated term of service for enlisted personnel is
determined by their initial enlistment contract. The normal service
obligation incurred is 8 years, which may be service in the active
component, reserve component, or some combination of both.
[23] According to an official in the Office of the Under Secretary of
Defense for Personnel and Readiness' Directorate of Accession Policy,
enlistment bonuses range from a total amount of $1,000 to $40,000 and
can be divided up over several years with a maximum of up to $10,000 a
year, which means that a servicemember receiving a $40,000 bonus would
receive $10,000 over a 4 year period. In addition, the military
services vary in the amounts they award. For example, the Navy bonuses
range $4,000 to $40,000, the Marine Corps ranges from $5,000 to
$25,000, the Army from $1,000 to $40,000, and the Air Force gives
$13,000 for a 6 year enlistment in a select skill.
[24] These estimates come from DOD's regular military compensation
calculator, available at [hyperlink,
http://militarypay.defense.gov/mpcalcs/Calculators/RMC.aspx].
[25] DOD has more than 60 different special and incentive pays
including reenlistment bonuses and hazardous duty pay, as well as
other pays for specific duties like aviation and medical, and
incentives for servicemembers to take certain assignments among
others. Because most compensation is determined by factors such as
tenure, rank, location, and dependent status, these special pays and
allowances are the primary monetary incentives DOD has for
servicemembers other than promotions and are used to influence certain
behaviors such as extending a service contract or filling critical
shortage occupations.
[26] The combat zone tax exclusion allows servicemembers to exclude
compensation received for active service--including basic pay,
bonuses, special pays, and allowances but excluding pensions and
retirement pay--for each month during which any portion is spent
serving in a designated combat zone or hospitalized as a result of
wounds, disease, or injury incurred while serving in a designated
combat zone. Servicemembers who serve in a combat zone or have a
related hospitalization for a minimum of 1 day are eligible to receive
the combat zone exclusion for the respective month. Enlisted members'
exclusions are not limited. Officers can exclude up to the maximum
enlisted amount received.
[27] Additionally, DOD has estimated that a single servicemember saves
about $1,131 annually, while a couple with no dependents saves about
$2,075 annually.
[28] The Thrift Savings Plan (TSP) is a federal-government-sponsored
retirement savings and investment plan. The Floyd D. Spence National
Defense Authorization Act for Fiscal Year 2001 extended participation
in the TSP, which was originally only for federal civilian employees,
to members of the uniformed services. The TSP offers the same type of
savings and tax benefits that many private corporations offer their
employees under so-called "401(k)" plans. The retirement income
received from an employee's TSP account will depend on how much money
is contributed to the account during working years and the earnings on
those contributions.
[29] See CBO, Evaluating Military Compensation (Washington, D.C.: June
2007); RAND Corporation, A Look At Cash Compensation for Active-Duty
Military Personnel (Arlington, VA: 2002); and James E. Grefer, CNA,
Comparing Military and Civilian Compensation Packages (Alexandria, VA:
March 2008).
[30] In general, defined benefit plans promise a specified benefit
based on years of service, annual earnings, and a payment formula
chosen by the firm. Under defined contribution plans, employers and
employees or both make periodic contributions into individual accounts
for each worker and benefits are based on the size of these accounts
at retirement.
[31] The Employee Retirement Income Security Act of 1974, commonly
known as ERISA, protects the interest of employees in private sector
employee plans. It requires employers who offer retirement benefits to
vest their employees under one of two vesting schedules. Under the
first schedule, the employee's benefits are fully vested after five
years of service. Alternatively, an employee's benefits may vest under
a graded vesting schedule--for example, employees under this schedule
vest to 20 percent after 3 years and an additional 20 percent every
year thereafter until, at seven years of service, the employee is
fully vested at 100 percent. These two private sector vesting
schedules are unlike the military retirement system which requires 20
years of service to vest.
[32] A discount rate is based on the economic assumption that a dollar
today is more valuable than a dollar received in the future. When
calculating the value today, or the present value, a future dollar
amount is "discounted" or its value is reduced by a discount rate,
which is an interest rate.
[33] CNA used discount rates of 10.5 percent for officers and 12.5
percent for enlisted. While the study acknowledges there is much
uncertainty surrounding the estimation of personal discount rates, it
justifies using lower rates for several reasons, including that its
review of the literature suggested that people apply lower discount
rates to retirement savings than they do for high-risk decisions
inherent in experimental games, which some studies used to estimate
discount rates, or for severance packages, which some of the studies
used to estimate discount rates. For example, John T. Warner and Saul
Pleeter, "The Personal Discount Rate: Evidence From Military
Downsizing Programs," American Economic Review (March 2001) also
estimated discount rates for servicemembers and found them to range
from 10.4 to 18.7 percent for officers and 35.5 to 53.6 percent for
enlisted.
[34] These assumed personal discount rates should not be confused with
the interest rate projections that DOD uses to calculate how much it
costs to set aside for future retirement benefits. These rates are
based on the cost of borrowing to the government, and tend to be lower
than the personal discount rates used by CNA and other researchers who
have studied how future compensation is valued by servicemembers. If
these rates were used, the value of retirement would be much higher
than CNA's estimate.
[35] While DOD's retirement plan represents a significant cost to the
department, according to the department's Office of the Actuary, only
15 percent of enlisted and 47 percent of officers become eligible to
receive retirement.
[36] While CNA did not attempt to value retiree health care as it did
retiree pension, DOD's Office of the Actuary is required by statute to
review valuations of the fund and to report periodically at least once
every four years, to the President and Congress on the status of the
fund. The board is required to include recommendations for changes
that, in the Board's judgment, are necessary to protect the public
interest and maintain the Fund on a sound actuarial basis. For
example, the board estimates that about $5,700 should be set aside to
fund retiree health care for each servicemember in fiscal year 2011.
This amount is based on a number of assumptions including but not
limited to the cost of health care for current retirees, health care
cost trends and interest rate projections that DOD uses to calculate
how much it costs to set aside for future benefits.
[37] [hyperlink, http://www.gao.gov/products/GAO-05-798].
[38] CBO, Evaluating Military Compensation (Washington, D.C.: June
2007).
[39] There are various data sets available that present information on
the civilian labor force. For example, the Current Population Survey
and American Community Survey are surveys of households that contain
information on respondents' labor market activities. These surveys
provide data on the demographic characteristics (e.g., age, sex, race,
and educational attainment) of individuals who are surveyed. However,
because survey respondents who are employed are classified into
hundreds of occupations, the number of respondents will be large
enough to permit a statistically meaningful analysis only for selected
occupations. As another example, the BLS Occupational Employment
Statistics program is a survey of employers that collects information
on a larger number of employees, permitting meaningful analysis of
wages and benefits for particular occupations. However, it does not
provide any demographic data on the individuals in these occupations.
[40] The ECI is a nationally representative measure of labor cost for
the civilian economy and measures changes in wages and employers'
costs for employee benefits.
[41] According to senior officials in the Office of the Under
Secretary of Defense for Personnel and Readiness' Directorate of
Compensation, the department has not yet adopted the 10th QRMC's
recommendation of including benefits in comparing military and
civilian compensation; thus setting the departments overall
compensation goal at the 80th percentile of comparable civilian
employees.
[42] According to 2005 and 2007 GAO reports, about half of active duty
compensation costs are comprised of benefits compared to about 18
percent in the private sector and about 33 percent for federal
civilian employees (see [hyperlink, http://www.gao.gov/products/GAO-05-
798] and [hyperlink, http://www.gao.gov/products/GAO-07-828]).
Similarly, in 2004 CBO estimated the cost of active duty compensation
and also found that benefits comprise over half of the costs of
compensation.
[43] Noncash and deferred benefits include such things as health care
for the servicemember and dependents, Veteran Affairs health care and
compensation and pensions for veteran members after leaving the
service, retirement payments and health care for military retirees or
those who become disabled. In addition, military members and their
families can receive subsidized child care, they can use fitness
center and recreational facilities, and they can use the commissaries
and exchanges.
[44] If the various military benefits are valued at zero by
servicemembers, this raises the question of why the government is
spending money on benefits that are valued at zero by servicemembers.
Further, only considering cash in comparisons of military and civilian
compensation suggests that other benefits--those other than cash--have
a zero value.
[45] CBO, Statement of Matthew S. Goldberg: Long-Term Implications of
the Department of Defense's Fiscal Year 2010 Budget Submission
(Washington, D.C.: Nov. 18, 2009).
[46] A sum of money received in the future is worth less than the same
sum received today. To estimate the value of a future sum in terms of
today's money, analysts use discounting. Specifically, in discussing
discount rates for the military a 2001 study by John T. Warner and
Saul Pleeter, The Personal Discount Rate: Evidence from Military
Downsizing Programs, found that servicemembers in general had a high
discount rate, which would imply a lower value for deferred benefits.
[47] GAO, Human Capital: Effective Use of Flexibilities Can Assist
Agencies in Managing Their Workforces, [hyperlink,
http://www.gao.gov/products/GAO-03-2] (Washington, D.C.: Dec. 6,
2002); Military Personnel: Observations Related to Reserve
Compensation, Selective Reenlistment Bonuses, and Mail Delivery to
Deployed Troops, [hyperlink, http://www.gao.gov/products/GAO-04-582T]
(Washington, D.C.: March 24, 2004); Military Personnel, DOD Needs More
Effective Controls to Better Assess the Progress of the Selective
Reelinstment Bonus Program, [hyperlink,
http://www.gao.gov/products/GAO-04-86] (Washington, D.C.: Nov. 13,
2003); and Military Personnel: DOD Needs More Data to Address
Financial and Health Care Issues Affecting Reservists, [hyperlink,
http://www.gao.gov/products/GAO-03-1004] (Washington, D.C.: Sept. 10,
2003).
[48] According to DOD, it has relied on the practice of using certain
pay flexibilities to target and fill critical specialties since 1973.
[49] Strategic Analysis, Recruiting an All Volunteer Force: The Need
for Sustained Investment in Recruiting Resources--An Update
(Arlington, VA: December 2009).
[50] James E. Grefer, CNA, Comparing Military and Civilian
Compensation Packages (Alexandria, VA: March 2008).
[51] Pub. L. No. 110-181, § 661, 662 (2007).
[52] CBO, Evaluating Military Compensation (Washington, D.C.: June
2007).
[52] $400,000 in the case of a member, $100,000 in the case of a
member‘s spouse, and $10,000 in the case of a member‘s child.
[53] Under certain circumstances, a fee is sometimes assessed for
space available travel. For example, baggage over a certain size,
weight, or quantity will result in an additional fee.
[54] Enlisted personnel in the Navy and Marine Corps with more than 20
and less than 30 years of creditable service, are not eligible for
voluntary retirement. Instead, at 20 years of service they may request
a transfer to the Fleet Reserve or Fleet Marine Corps Reserve, and
draw ’retainer pay“ which is computed on the same formula as
retirement pay. When a Fleet Reserve or Fleet Marine Corps Reserve
member completes 30 years of service they are then transferred to the
’retired list“ and receive retirement pay.
[55] RAND Corporation, A Look at Cash Compensation for Active-Duty
Military Personnel (Arlington, VA: 2002).
[56] CBO, Evaluating Military Compensation (Washington, D.C.: June
2007).
[57] James E. Grefer, CNA, Comparing Military and Civilian
Compensation Packages (Alexandria, VA: March 2008).
[58] CRS, Military Pay and Benefits: Key Questions and Answers
(Washington, D.C.: Dec. 29, 2009).
[59] RAND Corporation, A Look at Cash Compensation for Active-Duty
Military Personnel (Arlington, VA: 2002).
[60] CBO, Evaluating Military Compensation (Washington, D.C.: June
2007).
[61] James E. Grefer, CNA, Comparing Military and Civilian
Compensation Packages (Alexandria, VA: March 2008).
[62] CRS, Military Pay and Benefits: Key Questions and Answers
(Washington, D.C.: Dec. 29, 2009).
[63] The tax advantage calculation includes adding the amount of
earnings that would have to be added to the member's net pay if the
basic allowance for housing and basic allowance for subsistence were
taxable in order to equal the same net pay.
[64] There are adjustments in the methodology from time to time. For
example, in 2006 the Bureau of Labor Statistics changed the way the
ECI classified industries and occupations to reflect new industry and
occupational classification systems and rebased the index, among other
changes.
[65] To be included in the ECI, employees in occupations must receive
cash payments from their employer for services performed and the
employer must pay the employer's portion of Medicare taxes on that
individual's wages. Agricultural workers, federal employees, the
military, the self-employed, and individuals who set their own pay
(for example, owners, major stockholders, and partners in
unincorporated firms), among others, are excluded.
[66] In 2007, Congressional Budget Office pointed out that the sample
of civilian worker included in the ECI survey is older than military
personnel, on average, and more likely to have a college degree.
[67] See GAO, Poverty Measurement: Adjusting for Geographic Cost-of-
Living Difference, [hyperlink,
http://www.gao.gov/products/GAO/GGD-95-64] (Washington, D.C.: March 9,
1995) and Developing a Consumer Price Index for the Elderly,
[hyperlink, http://www.gao.gov/products/GAO/T-GGD-87-22] (Washington,
D.C.: June 29, 1987). In the 1990s, researchers at RAND Corporation
developed a more tailored index called the defense employment cost
index; however, the index did not gain the acceptance of the Office of
Management and Budget or Congress and was never adopted by DOD.
[68] The Congressional Budge Office pointed out that Bureau of Labor
Statistics publishes a variant of the ECI called the employer costs
for employee compensation (ECEC) index, which is based on the same
underlying surveys of employers as ECI, but also reflects changes in
the occupational mix in the civilian economy more frequently. However,
it is not clear whether ECEC would represent an improvement over ECI
for the purpose of setting military pay, because it shares the same
limitations as ECI discussed here.
[69] Specifically, the ECI is an employment-weighted measure of change
in the cost of employing a fixed set of labor inputs. Labor inputs
measured by the ECI include wages, salaries, and employer costs of
employee benefits. The ECI relates to payroll periods, including the
12th of March, June, September, and December, and the data are
presented as index levels as well as 3-month and 12-month changes.
[70] Pub. L. No. 108-136, § 602 (2003), codified at 37 U.S.C. § 1009.
The law requires that all eligible servicemembers' monthly basic pay
be increased annually by the annual percentage increase in ECI, except
for fiscal years 2004, 2005, and 2006 when the law required that
servicemembers' basic pay increase be equal to the annual percentage
increase in the ECI, plus an additional one half percentage point.
[71] The amount of basic pay that a servicemember receives depends on
the member's pay grade and length of service.
[72] The housing and subsistence allowances are paid to all
servicemembers not living in military housing or eating in military
dining facilities or using field rations.
[73] CBO, What Does the Military "Pay Gap" Mean? (Washington, D.C.:
June 1999).
[End of section]
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