Defense Budget Proposals for Military Families in FY 2017

The President and Department of Defense (DoD) released the Fiscal Year 2017 Defense budget proposal requesting $582.7 billion dollars from Congress. The release of the Defense budget kicks off the legislative process for Congress to consider as the National Defense Authorization Act for Fiscal Year 2017 is developed. Keep in mind – these are proposals and we’ll keep you updated as the process unfolds.

What’s in the budget proposal for service members and their families?

Pay Raise – The Defense budget proposes a 1.6% pay raise. It’s the fourth year in a row that the Defense Department has asked to cut the raise below the formula in current law which for 2017 would be 2.1%.

Family-Focused Reforms – The budget proposal fully funds Secretary of Defense Ashton Carter’s recently-announced package of family-focused reforms. The family-focused reforms include 12 weeks of paid maternity leave for service women; 14 days paternity leave for service men, dual service adoption leave; improved mothers rooms on military installations; enhanced hours at child development centers to recognize service members’ often unpredictable schedules; and more. Taken together, these reforms are intended to improve both retention and quality of life for service men and women and their families.

Revisions to the New Blended Retirement System – The Defense Department is seeking changes to new retirement system for service members who enter after January 1, 2018 or for those who have less than 12 years of service on December 31, 2017, and who elect to opt-in to the new system. Currently serving members who have more than 12 years of service and those with less than 12 years of service on December 31, 2017, who do not elect to opt-in, will remain grandfathered under the current retirement system.

DoD proposes the following changes to the new retirement system:

  • Increasing the government contribution matching rate to Thrift Saving Plan (TSP) accounts from 4% to 5% of basic pay.
  • Delaying the start of government matching contributions to an individual TSP account from the third year of service to the fifth year of service.
  • Extending government matching contributions to a service member’s retirement date rather than stopping contributions at 26 years of service.
  • Revising the new retirement system’s mandatory minimum continuation pay for all service members reaching 12 years of service, and allowing each Service the flexibility to set continuation pay based on the needs of the service. The new retirement system provides all troops at 12 years of service with continuation pay equal to 2.5 months of basic pay.

Commissary – The DoD budget proposal would cut $221 million from the commissary budget. Instead of the $1.4 billion allocated to the commissary in FY 2016. The new budget proposal funds the commissary at $1.2 billion. The budget does not provide details about where these savings will come from, but we are concerned about the possible effect on the savings military families receive when shopping at the commissary.

Health Care Reform – Since 2005, DoD has submitted numerous health care “reform” plans to control its health care costs, but also to increase the portion of those costs borne by TRICARE beneficiaries. The FY17 proposal includes the following elements:

  • No change for active duty service members who would maintain priority access in military hospitals without any cost sharing, but would still require authorization for civilian care.
  • Two TRICARE options:
    • TRICARE Select, similar to TRICARE Prime, a managed care option that is Military Treatment Facility (MTF)-centric.
    • TRICARE Choice, similar to TRICARE Standard, is a PPO-like (unmanaged) option offering greater choice at a higher cost.
  • Retirees and their family members would have an open enrollment period and an annual “participation” fee for both TRICARE Select and TRICARE Choice. Those who do not enroll would forfeit coverage for the plan year.
  • Copays will depend on beneficiary category (excluding active duty) and care venue. There would be no copays in MTFs. There would be fixed copays for the TRICARE Choice option if patients use a provider in the network. Higher cost-shares will apply when patients see a provider out of the network.
  • Active Duty Family Members (ADFM) will have a no cost share option regardless of duty location.
  • Catastrophic caps would increase for active duty families and retirees and their families and retiree participation fees would not count towards the cap.
  • Prescription drug copays would also increase; however, there would still be no cost for prescriptions filled at a MTF or for generic drugs through the mail order program.

The Defense proposals set the proposed funding levels and priorities for the year beginning on October 1st. The proposals will only become law if passed by Congress. Our Association is preparing to submit testimony on the budget proposals and we’ve had several meetings with Defense leaders to discuss our questions and concerns. What do you think about the budget proposals?

Posted February 19, 2016


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