About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

Military Compensation: Balancing Cash and Noncash Benefits 1 (January 2004)

handle is hein.congrec/cbo9723 and id is 1 raw text is: A series of issue summaries from the Congressional Budget Office JANUARY 16, 2004 Military Compensation: Balancing Cash and Noncash Benefits To attract and retain the military personnel that it needs, the Department of Defense (DoD) must offer a compen- sation package that is competitive with those in the civil- ian sector and that adequately rewards service members for the rigors of military life. The Congressional Budget Office (CBO) estimates that in 2002 (the most recent year for which comprehensive data are available), the av- erage active-duty service member received a compensa- tion package worth about $99,000. Noncash compensation represents almost 60 percent of the military pay package. Cash compensation-basic pay, allowances for things like food and housing, special pay and bonuses, and the tax advantage that service members receive because some allowances are not subject to federal income tax-makes up the other 40 percent (see Figure 1). About 40 percent of noncash compensation consists of subsidized goods and services that can be used immedi- ately-such as medical care, groceries, housing, and child care. The remaining 60 percent of noncash compensa- tion is the accrued cost of retirement pensions and other deferred benefits that service members receive after they leave active duty-including health care for retirees and veterans' benefits.1 Yet only about one-third of officers and 10 to 15 percent of enlisted personnel serve the 20 years needed to retire. This issue brief provides an overview of the military com- pensation package and the issues surrounding the current mix of compensation. The military's traditional use of noncash benefits reflects, in part, a belief that such bene- fits are cost-effective because they support unit cohesion 1. About half of that deferred noncash compensation goes to veter- ans when they leave the military before retirement, and about half goes to veterans who reach retirement. and reduce the costs that service members incur in searching for new schools, stores, and housing as they move among installations. However, today's military in- creasingly emphasizes a more expeditionary force-de- ploying service members overseas without their families for a shorter period of time rather than rotating members and families to and from overseas garrisons for extended tours. Therefore, some analysts believe that a compensa- tion package more heavily weighted toward cash, which would allow service members to choose the goods and services that they valued most, would enable DoD to maintain a larger and even more capable force for the same total cost. At present, the federal budget does not display the total cost of military personnel or show the distribution of that total cost among its different components. Policymakers may therefore find it difficult to evaluate the size of the compensation package or the implications of changing the mix of cash and noncash elements. For example, some recent policy initiatives-including allowing some dis- abled retirees to receive both full retirement pay and tax- free disability compensation-have shifted the overall mix of compensation further toward noncash and de- ferred benefits. Other policy initiatives, such as expand- ing health care coverage for reservists, have shifted the mix for that component of the service as well. The Current Level of and Trends in Noncash Compensation In 2002, noncash benefits for military personnel totaled $78 billion, CBO estimates, or about $56,000 per active- duty service member. Noncash benefits include primarily health care, installation-based benefits, retirement pay, and veterans' benefits.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most