Monday, June 1, 2015
Dual-Service Couples Could See Their BAH Slashed
Many of the 40,000 dual-service couples in the military — members married to other service members – have for years drawn combined housing allowances stateside that more than cover their rent and utility costs.
The philosophy has been that Basic Allowance for Housing (BAH) is a key element of military compensation needed to keep pace with civilian worker salaries, so it should not reduced or eliminated based on what dual-service couples actually pay for housing.
The Senate Armed Services Committee has inserted language in its version of the fiscal 2016 defense authorization bill that takes a different view. It seeks to end what some lawmakers perceive as an income windfall for dual-service couples by linking BAH payments to what these families actually pay to rent housing at new and future assignments.
If the full Senate and, later this summer, the full House were to agree to this change, it would be a dramatic compensation cut for dual-service families whose total numbers have grown over the last several years with military recognition of gay and lesbian marital status.
Under current law, a dual service couple with no children assigned to the same locale can each draw BAH at a lower “without dependents” rate. If the couples have a child or children, the more senior ranking member can draw BAH at a higher “with dependents” rate while the other member continues to draw BAH at the lower “without” rate.
The Senate bill, in both circumstances, would allow only the higher-ranking member in dual-service marriage to draw any BAH, though at the higher with-dependents rate. The other member would be ineligible for BAH.
To prevent couples from circumventing this proposed change in law by living in separate residences while assigned to the same area, the Senate committee would direct that the new BAH limit apply to couples “who are assigned within normal commuting distance from each other.”
The impact of this change would be significant. Consider an enlisted dual-service couple, an E-7 and E-6 with a child, who moves to Fort Bragg, N.C. Under current law the E-7 would get BAH at the with-dependents rate and the E-6 would get BAH at the without dependents rate, so their combined BAH per month would be $2628 (or $1518 plus $1110).
Under the Senate plan, only the E-7 would receive BAH, lowering the couple’s income by $1110 a month or $13,320 a year.
Consider now married officers, O-4 and O-3, with no other dependents and they move to Colorado Springs, Colo. Under current law, each could draw BAH at the “without’ rate for combined BAH ($1587 plus $1470) of $3057 monthly. The Senate committee language would allow only the O-4 to draw BAH but at a higher “with dependents” or $1944 a month. So this couple would see total BAH fall by $1113 a month or $13,356 a year.
For any stateside area, the proposal would be a more significant cut for officers than for enlisted, and deeper for all ranks in higher cost housing areas of the country such as San Diego, Calif., or Washington D.C.
Other language in the Senate bill would curb BAH for service members who reside together to save on housing costs. Service members in pay grade E-4 and higher who live together would see their BAH capped at 75 percent of “their otherwise prevailing rate” for their pay grade or at the E-4 “without dependents” rate, whichever is greater.
Both dual-service couples and members living together would see the described BAH reductions for the first time only after they move from current assignments. As the committee explains in its report on the defense bill, current BAH levels would be protected “so long as they maintain uninterrupted eligibility to receive BAH within a particular housing area.”
The proposed BAH changes originated inside the Senate Armed Services Committee chaired by Sen. John McCain (R-Ariz.) and its personnel subcommittee led by Sen. Lindsey Graham (R-S.C.). These cuts weren’t part of the Obama administration’s plan to curb spending on BAH, which has grown dramatically since 2001 to exceed $1 billion annually.
As reported here last week, the Senate bill also does support the administration’s call to dampen BAH annual adjustments over the next several years until BAH recipients are paying five percent of rent and utility costs out of pocket.
The House-passed defense authorization bill takes no action to curb BAH rates. So assuming the Senate committee’s BAH initiatives survive floor debate next month and clears the full Senate, their fate would be decided by a House-Senate conference committee tasked to reconcile any differences.
RETIREMENT CHOICE FORECAST
Both the House and Senate defense authorization bills promise to make sweeping changes to military retirement for future generations of service members. They also promise to help current members understand the new plan well enough to decide within a year whether to opt into its more modern features, including a portable 401(k)-like Thrift Savings Plan, or to stay under the current more rigid plan that offers careerists a 20-percent more valuable “defined benefit” for serving at least 20 years.
Though the current force will have time and a lot more information on which to base their decisions, the Congressional Budget Office must predict now how current members will choose in order to give members of Congress a good estimate of costs and savings from enacting the new plan.
CBO has done so already for the House-passed plan. It projects that no member with 12 or more years of service will switch to the new plan given their ineligibility for a key feature: a lump-sum continuation pay at the 12-year mark in return for a promise to serve at least four more years.
CBO says 100 percent of members with less than two years’ service will switch to the new plan to gain access to its Thrift Savings Plan with government matching of member contributions up to 5 percent of basic pay.
It also predicts that to sustain current force profiles of skill mix and experience the services will set continuation pay equal six months of basic pay for active duty enlisted and 14 months’ basic pay for active duty officers. Using current pay scales that would be a taxable payment of $21,400 for an E-6 with 12 years in and almost $98,000 for an O-4.
Likewise, continuation pay for reserve component members should be set at one month’s basic pay for enlisted and six months for officers, which using current pay scales would be almost $3600 and $42,000 respectively.
CBO predicts the House-passed retirement plan would lower the Defense Department’s future retirement cost obligations by $4 billion through just 2020 and retirement savings would accelerate thereafter.