DOD Budget:

Budget Impact of Proposed Reduced Retirement Fund Payments

NSIAD-92-80: Published: Jun 5, 1992. Publicly Released: Jun 5, 1992.

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Pursuant to a congressional request, GAO provided information on the Future Years Defense Program (FYDP), focusing on a DOD proposal to decrease its contributions to the Military Retirement Fund by $11 billion annually.

GAO found that: (1) in February 1991, DOD proposed to change the method for calculating its annual payments to the retirement fund, which would reduce its submissions by $10.7 billion annually for fiscal years 1994 through 1997; (2) subsequently, DOD decided not to enact this change, which generally lacked merit; (3) the second DOD proposal was to reduce payments to the retirement fund based on anticipated assumption changes for long-term interest rates and salaries, which would reduce its January 1992 FYDP submissions by $11 billion, but the actuarial estimate changes have yet to be approved by the Military Retirement Board of Actuaries; (4) the President's 1993 budget proposed a $82.78-billion reduction in defense spending, which would include the $11 billion in reduced payments to the Military Retirement fund; (5) the DOD proposal to reduce retirement fund payments would not reduce total federal spending because the reduced payments would require offsetting increases in Treasury payments to the unfunded liability account; (6) adjustments in DOD retirement fund payment calculations account for a significant part of total reductions in the defense budget; and (7) retirement fund reductions resulting from actuarial assumption changes cannot be considered as reductions in defense programs or in long-term federal retirement obligations.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: DOD Office of the Comptroller officials stated that the fiscal years 1994 through 1999 FYDP will reflect adjustments to retirement fund payments to reflect results of Military Retirement Board of Actuaries.

    Matter: Congress, in its budget deliberations, should consider that: (1) changes in the DOD retirement fund payment calculations account for a significant part of defense budget reductions; (2) retirement fund reductions caused by actuarial assumption changes do not represent reductions in defense programs or in long-term federal retirement obligations; and (3) actuarial estimates used in DOD FYDP have not been approved and will not be considered by the Military Retirement Board of Actuaries until July 1992.

 

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