A defined contribution plan is something like a 75% cut in retirement benefits over the pension package offered. Setting aside the arguments of fairness, worthiness, etc., the affect on mid level retention is not something to be ignored. You can't just hire a senior captain or major from outside to be a line officer. There hasn't been a good study, that I've seen, that outlines a plan that can make such a massive retirement benefit cut and expect to retain personnel that are needed. If someone knows of one, I'm all ears.
Not sure how you can make that statement without a plan defined. I'll give you the benefit of the doubt and state that if they structure it like a typical 401K, you may be right. But if that were the case then I would expect them to structure it differently, perhaps by changing how they match, or even match 2 for 1 or something. You are definitely correct that if it's not sturctured properly we can kiss our military goodbye because no one will sign up or stay.
If designed like a 401K, it is a massive cut. Modifying the contribution to make it less of a cut still results in high costs and may not even solve the problem.
We should really be asking better questions. Is retirement supposed to be equitable for service? Is the purpose to retain who we want longer? Why do what we do. A good review was done by RAND:
http://www.rand.org/pubs/technical_reports/TR376.html
From this report, I got the general feeling: retirement, while a reward for service to the nation, is also meant to retain and shape the force how we need it. Over and over, "reform" fails, not just because of resistance to cutting benefit, but it was deemed necessary to maintain the force structure. If the AF is having difficulty retaining fighter pilots with a $225K bonus AND "cushy" retirement, what will happen without a DB retirement plan?
Are there options that are potentially effective in shaping the force as well or better? Are they also potentially more equitable as well without imposing large cuts on any one group or siphoning money to one group. I see a DC plan, as modeled like a 401K, largely siphoning money from retirees to junior officers O1-O4 who won't stay to retirement. Junior enlisted are largely unable to contribute or not provided effective information to contribute to a 401K style plan that would largely benefit them in the long run whereas CGOs and O4s will have the resources to really be the winners.
The RAND review had some good proposals. One example is begin vesting at 10 years with pension deferred to retirement age (~62). Don't provide immediate pension benefits until 25 or 30 years. They suggested this might force shape better than a 20-year defined vesting as far as retaining the groups they want (8-12 year cohort), remove the perverse incentive/system that makes undesirable O4s hard to separate involuntarily at the 15+ mark, and provide more equity to those who put in hard time (10+ years) without appreciably ratcheting up future costs.
Personally, I think the priority should be force shaping and then equity. The military isn't a jobs program so retirement benefits should be based on national security need and what force shaping that requires.
A 401k is only a cut if you significantly cut the amount of funding going into the overall plan. And that depends upon the investment options available.
IIRC the accounting for federal government pensions generally consider the funding needed in today's dollars invested in government securities.
Having lived in a generation that started its working career with defined benefit plans that have been ended/modified/etc. to the point where the first half of my "retirement" amounts to chump change as a percentage of my income. The world changed a lot during my life. I've adjusted accordingly, but would love to have had the financial options available to kids today when I was starting out.
The "promise" of a defined benefit pensions that is truly reserved for a percentage of those starting a career is a bad piece of public policy, if having citizens with secure retirements (and we all know that Social Security is NOT a soundly funded retirement "insurance" - it is not a pension if you look at how the benefits are awarded) is a societal goal.
It is the "magical thinking" about the risks that is why we now have ACA (we are requiring participation in the health insurance system). A couple of generations ago the magical thinking about banking and investments and the subsequent depression brought us Social Security as a minimal insurance against poverty in old age (hence my comment above).
We have a certain segment of the American population that has the strong "rugged individual" mentality that wants the government to leave them alone and they will take care of their own medical issues, retirement planning, etc. By an large many of these folks do an excellent job at this, buying appropriate health/life insurance and saving for their old age and investing those funds prudently.
However, we have (and always have had) a larger segment of the population who do not take care of their lives as carefully. They take more risks either out of "magical thinking" or out of sheer ignorance (our schools do a poor job of educating our youth about finances, but for some reason our schools don't want to tell kids their parents are financial morons). They don't buy health insurance until they can't. They don't pay themselves first. They don't understand that capitalism rewards CAPITAL, not labor and the only way to generate income in your old age is to acquire capital (not useless stuff to amuse ourselves with).
The Federal Government is one of the few institutions that CAN afford a defined benefit plan, but because of the way politics plays, it cannot seem to adequately fund them because of "other priorities". So perhaps it is best that the Federal Government change its pensions to 401k type plan. At least those who don't server 20 years in the military or 30 in another agency get something decent out the back end.
And the idiots out there who think 10% of salary is an adequate retirement savings, need to have their heads examined. The actual number given todays longer lifespans and increasing number of years where one is not physically/cognitively able to work is closer to 20%. And given the hard physical toll a military life takes on one's career, the government should engineer compensation to that there is more than that set aside for a service member's retirement.
And that retirement money should not be available for use by "able-bodied" people until they are of "retirement age". So many folks sack their 401k accounts for transitory reasons - "didn't have emergency fund when they got laid off" etc. that we as a society have to manage the behavior of the "grasshoppers" so that they have something to eat when winter comes.
I understand the resentment by those "rugged individuals", but the reality on the ground is that a stable society will not stay stable when large number of grasshoppers ultimately end up raiding the ants' stockpile, which will eventually happen if grasshoppers are left to their own devices.
And perhaps with a little education and some actual funding that they see with their names on it, they may learn to be ants in a few generations. And capitalism with have more capitalists.
My $.02...
