The Bipartisan Budget Act of 2013 was passed by Congress and signed by President Obama in late December. The bill establishes the federal government’s budget and helps prevent future government shutdown threats for another two years. It erases cuts to the military that were made in the automatic so-called “sequester” cuts a year ago. The bill also makes changes to military pension rules that many Minnesotans have asked me about.
Under current law, the Secretary of Defense annually adjusts military retirement pay to mirror changes in the Consumer Price Index (CPI), which helps adjust for inflation. This new budget bill would subtract 1 percent from the increase military retirees receive called the Cost of Living Adjustment (COLA), but would not allow a negative COLA. That means, if the CPI increased by 2% from one year to the next, the COLA increase for retirement pay would only result in a 1% increase. This change does not impact all military retirees.
These changes go into effect in December, 2015, meaning no COLA rates would be altered until at least 2016. This will have the largest effect on retirees drawing retirement pay prior to age 60, as this group will see lower COLA every year until then. However, all retirees will see a one-time COLA “catch-up” increase at age 62 which will increase their pension as if it was adjusted every year. Some experts predict this will reduce vested veteran pensions for many retirees by a significant amount which concerns me.
Our retired veterans and their families were promised fair pensions which I believe should be untouchable by Congress. It isn’t fair to cut pensions after soldiers have already served. If long-term changes need to be made for pensions of those military in the future, that would be a different story. The savings from cutting these pensions over time will make only a tiny dent in national spending but a noticeable dent in retirement earnings for our nations heroes. These pensions should not be a bargaining chip when budget negotiations reach gridlock and I am concerned they could be used more and more in the future.
I want you to know that I am following this issue closely from a state perspective. I plan on again offering legislation this spring to stop imposing state taxes on the retirement pay of Minnesota veterans. We are one of only a handful of states that still impose this penalty.
If you have any other questions or would like more information, please contact me.
Rep. Bob Dettmer (R-Forest Lake)