The Pentagon is considering a drastic overhaul of the military’s retirement system that would change the 50-year-old program into a 401(k)-style pension plan.
According to Fox News, a panel of high-level military advisors, called the defence Business Board, has determined that the current retirement plan is no longer affordable, and radical changes are needed to cut costs.
The change would make a mandatory Thrift Savings Plan (TSP) into which both service members and the Department of defence would make contributions. Members would then decide annually how they’d like to invest their money. Like civilian 401(k) plans, the TSPs would be vulnerable to market fluctuations.
There is already a current TSP in place, though contributions to it are voluntary.
The plan is projected to save $250 billion over 20 years, according to CBS News. It would not affect current retirees.
Proponents of the reform say that, in addition to saving the government money, it would also make the retirement system more equitable. Currently, retirees with less than 20 years of service are ineligible for retirement benefits, something that would change under the new system.
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