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GAO-10-561R: 

United States Government Accountability Office: 
Washington, DC 20548: 

April 1, 2010: 

Congressional Committees: 

Subject: Military Personnel: Military and Civilian Pay Comparisons 
Present Challenges and Are One of Many Tools in Assessing Compensation: 

The Department of Defense's (DOD) military compensation package, which 
is a myriad of pays and benefits, is an important tool to attract and 
retain the number and quality of active duty servicemembers it needs 
to fulfill its mission. Compensation can be appropriate and adequate 
to attract and retain servicemembers when it is competitive with 
civilian compensation. However, comparisons between military and 
civilian compensation present both limitations and challenges. As we 
noted in 1986, exact compensation comparisons are not possible because 
no data exist which would allow an exact comparison of military and 
civilian personnel with the same levels of work experience.[Footnote 
1] Also, nonmonetary considerations complicate military and civilian 
pay comparisons because their value cannot be quantified. 
Specifically, military service is unique in that the working 
conditions for active duty service carry the risk of death and injury 
during wartime and the potential for frequent, long deployments unlike 
most civilian jobs. 

Additionally, there is variability among past studies in how 
compensation is defined (e.g., pay or pay and benefits) and what is 
being compared. Most studies, including those done by the 
Congressional Budget Office (CBO) and RAND Corporation (RAND), have 
compared military and civilian compensation but limited the comparison 
to cash compensation--using what DOD calls regular military 
compensation--and did not include benefits.[Footnote 2] DOD also has 
done studies comparing military and civilian compensation as part of 
its Quadrennial Review of Military Compensation (QRMC)--a review 
required by law, every 4 years, of the principles and concepts of the 
compensation system for members of the uniformed services.[Footnote 3] 
The 2008 QRMC (the 10th) focused its attention on seven compensation-
related areas, including the adequacy of compensation, and 
recommended, among other things, including both cash and some 
benefits, for example health care, when assessing military 
compensation. As a result, the DOD-sponsored review found that 
military compensation compares approximately with the 80th percentile 
of comparable civilian compensation (i.e., that 80 percent of the 
comparable civilian population made less than the military population 
in the comparison). Previously, the 2004 QRMC (the 9TH) found that 
regular military compensation met the 70th percentile of comparable 
civilian cash compensation. 

The National Defense Authorization Act for Fiscal Year 2010 required 
that we conduct a study comparing pay and benefits provided by law to 
members of the Armed Forces with that of comparably situated private- 
sector employees to assess how the differences in pay and benefits 
affect recruiting and retention of members of the Armed Forces. 
[Footnote 4] Specifically, our objectives were to (1) assess total 
military compensation for active duty officers and for enlisted 
personnel; (2) compare private-sector pay and benefits for civilians 
of similar age, education, and experience with similar job 
responsibilities and working conditions of officers and enlisted 
personnel of the Armed Forces; and (3) assess the 10th QRMC 
recommendation to include regular military compensation and select 
benefits when comparing military and civilian compensation to 
ascertain if it is appropriate. 

The focus of this review was active duty servicemembers' perspectives 
on compensation. That is, we focused on cash compensation and the 
value of benefits to servicemembers versus the cost to the government 
of providing compensation. To address our objectives, we identified 
and reviewed studies on compensation by CNA Corporation (CNA), CBO, 
CRS, DOD, GAO, and RAND. We interviewed officials from DOD's Office of 
the Under Secretary of Defense for Personnel and Readiness, including 
the Deputy Under Secretary of Defense for Military Personnel Policy 
and officials within the Directorate of Compensation. We also 
interviewed officials from the Defense Manpower Data Center (DMDC), 
CBO, CNA, the Bureau of Labor Statistics (BLS), and the Military 
Officers Association of America (MOAA). For our first objective, to 
assess total military compensation, we reviewed a 2008 DOD-
commissioned report--completed by CNA--and identified estimated values 
for the elements of military compensation--regular military 
compensation, health care, retirement, and additional tax advantages. 
We also identified the employee benefits available to active duty 
servicemembers and used DOD survey data to identify the utilization 
rates of these benefits by servicemembers. For our second objective, 
to compare military and private sector pay and benefits for civilians 
of similar age, education, and experience with similar job 
responsibilities and working conditions of officers and enlisted 
personnel, we used the DOD-commissioned report conducted by CNA to 
identify estimated values for private-sector compensation--pay and 
benefits--for comparable civilians. In addition, we reviewed the 
methods CNA used to estimate values for several benefits--retirement, 
health care, and additional tax advantages. For our third objective, 
to assess the 10th QRMC's recommendation to include regular military 
compensation and select benefits when comparing military and civilian 
compensation, we conducted a review of recent literature on 
compensation--including regular military compensation and select 
benefits, and conducted interviews with DOD officials and other 
knowledgeable individuals in the fields of compensation and human 
capital management. For our three objectives, we conducted a 
methodological review of the 2008 study completed by CNA. While we did 
not verify the calculations, we found the methodology that CNA used 
reasonable to compare military compensation to civilian compensation-- 
except for the limitations and the areas of comment noted in this 
report. We found that the datasets used by CNA were appropriate, given 
their objectives, and were also appropriate for our purposes to 
estimate total military compensation for active duty and enlisted 
personnel compared with civilian compensation. 

We conducted this performance audit from November 2009 through March 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. Further 
details on our scope and methodology can be found in appendix I. 

Summary: 

DOD provides active duty personnel with a comprehensive compensation 
package that includes a mix of cash, such as basic pay; noncash 
benefits, like health care; and deferred compensation, such as 
retirement pension; however, most studies that have examined the value 
of military compensation to servicemembers do not assess all 
components of the compensation package. While a number of 
organizations, including CBO, RAND, and CNA, have assessed military 
compensation using varying approaches, all of the studies include some 
components of compensation--for example, cash compensation beyond 
basic pay to include housing and subsistence allowances, the federal 
income tax advantage, and, when possible, special and incentive pay. 
The most recent study, a 2008 DOD-sponsored study--completed by CNA--
assessed military compensation using regular military compensation and 
some benefits (specifically health care, the military tax advantage, 
and retirement benefits).[Footnote 5] In particular, the results of 
this study state that in 2006, average enlisted servicemembers' 
compensation ranged from approximately $40,000 at 1 year of service to 
approximately $80,000 at 20 years of service.[Footnote 6] 
Additionally, in 2006 the average officers' compensation ranged from 
approximately $50,000 at 1 year of service to approximately $140,000 
for 20 years of service. Our analysis of CNA's 2008 study on military 
compensation found that overall CNA used a reasonable approach to 
assessing military compensation. In general, we agree that when 
assessing military compensation for the purpose of comparing it to 
civilian compensation, it is appropriate to include regular military 
compensation and benefits (as many as can be reasonably valued from 
the servicemembers' perspective). However, we identified two areas for 
comment with CNA's approach. First, CNA's methodology for calculating 
a value for retirement, health care, and tax advantage makes various 
assumptions that allow the study to approximate a value for these 
benefits. While the assumptions are reasonable, we note that other, 
alternate assumptions could have been made. Thus, a different 
assessment of military compensation could make different assumptions 
and generate, in some cases, substantially different values.[Footnote 
7] Second, the study omits the value of retiree health care, which is 
a significant benefit provided to servicemembers. This study and 
others of military compensation illustrate that valuing total military 
compensation from a servicemember's perspective is challenging given, 
among other reasons, the variability across the large number of pays 
and benefits, the need to make certain assumptions to estimate the 
value of various benefits, and the utilization of benefits by 
servicemembers or their dependents. 

In comparing military and civilian compensation, CNA's 2008 study, as 
well as a 2007 CBO study,[Footnote 8] found that military pay 
generally compares favorably to civilian pay; however, a number of 
limitations and challenges exist in making such comparisons. 
Specifically, CNA found that in 2006, regular military compensation 
for enlisted personnel averaged $4,700 more annually than compensation 
for civilians included in the study. Similarly, military officers 
received an average of about $11,500 more annually than civilians 
included in the study. Further, CNA compared military and civilian 
compensation including three military benefits--health care, 
retirement, and the additional tax advantage for military members. By 
including those three benefits, the estimated result on average was 
about $13,360 more annually for enlisted personnel and about $24,870 
more annually for officers, where CNA included the difference in the 
values for these three benefits. CNA asserted, and we agree, that 
including benefits allows comparisons of levels of compensation and 
allows one to approximate whether servicemembers are compensated at a 
level that is comparable to that of their civilian peers, except as 
noted below. While CNA's approach provides a broad comparison of 
military and civilian compensation, which can provide some insight 
into how well military compensation is keeping pace with overall 
civilian compensation, there are limitations and challenges to making 
this type of comparison--such things as the mix of skills, education, 
and experience can differ between the comparison groups. For example, 
while some efforts were made to control for age (as a proxy for years 
of experience) and broad education levels (high school and college 
graduate), the civilian population is not necessarily an exact match 
for individuals with similar job responsibilities and working 
conditions as the military. In addition, there are other approaches to 
comparing military and civilian compensation, such as comparing 
average pay of occupations (e.g., military police and civilian police 
officers). However, if an occupational comparison approach is to be 
used to generalize to the entire military population, a very detailed 
comparison of occupations would be needed--recognizing that many 
military occupations would not have a civilian counterpart. 

The 10th QRMC's recommendation to include regular military 
compensation and select benefits when comparing military and civilian 
compensation appears reasonable because it provides a more complete 
measure of military compensation than considering only cash 
compensation. In considering either a military or civilian job, an 
individual is likely to consider the overall compensation--to include 
pay as well as the range and value of the benefits offered between the 
two options. The challenge with this approach, as mentioned 
previously, is how to "value" benefits and which benefits to include 
in the comparison. The 10th QRMC also recommended that, among other 
things, to maintain the same standard set by the 9th QRMC's 70th 
percentile--which includes only regular military compensation--DOD 
adopt the 80th percentile as its goal for military compensation--when 
regular military compensation and the value of some benefits, such as 
health care, are included in the analysis.[Footnote 9] While 
comparisons of military and civilian compensation are important 
management measures, they alone do not necessarily answer the question 
of how appropriate or adequate compensation is. Another measure is 
DOD's ability to recruit and retain personnel. Given the fact that (1) 
the ability to recruit and retain is a key indicator of the adequacy 
of compensation and (2) DOD has generally met its overall recruiting 
and retention goals for the past several years, it appears that 
regular military compensation is adequate at the 70th percentile of 
comparable civilian pay as well as at the 80th percentile when 
additional benefits are included. Targeted bonuses, rather than across-
the-board pay increases, may be most appropriate in meeting DOD's 
requirements for selected specialties where DOD faces challenges in 
recruiting and retaining sufficient numbers of personnel. 

In commenting on a draft of this report, DOD provided oral comments. 
DOD noted that it generally agreed with the contents of our draft 
report. DOD also provided technical comments, which we incorporated, 
where appropriate. 

Background: 

Defining Military Compensation and Trends in Military Personnel Costs: 

Military compensation includes a mix of cash, noncash benefits, and 
deferred compensation, and has been one of the primary tools used by 
DOD to recruit and retain servicemembers since the military 
transitioned to an all-volunteer force in 1973. Since transitioning to 
an all-volunteer force, the amount of military pay and benefits has 
progressively increased. Historically, "basic pay" has been the 
largest component of military compensation, and is paid to all 
servicemembers according to their respective rank and years of 
service. Over the years, Congress has provided for and DOD has 
implemented a number of additional benefits--some of which may be 
deferred until after the completion of active duty service. For 
example, in 2008 Congress enacted the Post 9-11 Veterans Educational 
Assistance Act,[Footnote 10] which expanded the educational benefit 
for active and reserve component servicemembers who qualify for the 
maximum benefit by providing (1) full tuition and fees up to the 
amount of tuition and fees regularly charged to in-state students at 
the most expensive public institution in a given servicemember's 
state, (2) a monthly stipend for living expenses, and (3) an annual 
stipend for books and required educational expenses. In addition, this 
new benefit allows eligible servicemembers to use it after discharge 
or release from active duty and authorizes the Secretary of Defense to 
give the service Secretaries authority to allow qualifying 
servicemembers to transfer unused educational benefits to spouses and 
dependents. We reported in 2009 that the Department of Veterans 
Affairs estimates that the net cost of this enhanced educational 
benefit will be nearly $78.1 billion from fiscal years 2009 through 
2018.[Footnote 11] Figure 1 illustrates the distinctions in the type 
of military compensation afforded to active duty servicemembers. See 
also appendix II for a select list of active duty compensation--cash, 
noncash, and deferred compensation. 

Figure 1: Active Duty Military Pay and Benefits According to the Type 
of Compensation: 

[Refer to PDF for image: illustration] 

Compensation: 

Cash: 
* Basic Pay; 
* Housing and Other Allowances; 
* Special and Incentive Pays. 

Noncash: 
* Health Care; 
* Educational Benefits; 
* Commissary and Exchanges. 

Deferred: 
* Retirement; 
* Veterans’ Benefits; 
* Retiree Health Care. 

Source: GAO. 

The Under Secretary of Defense for Personnel and Readiness has 
oversight of career development, recruitment, and pays and benefits 
for active duty personnel and is principally responsible for 
establishing active duty compensation policy. DOD sponsors regular 
studies on military compensation, called the QRMC, which typically 
focus on specific issues like flexibility in compensation. 

In 2005 and 2007, we reported on the cost to provide active duty 
compensation. Specifically, in our 2005 assessment of active duty 
compensation, we raised concerns about the transparency, 
affordability, and appropriateness of DOD's compensation system in 
light of the nation's increasing fiscal imbalance.[Footnote 12] In 
addition, we found that the cost to provide military compensation was 
substantial and rising.[Footnote 13] Specifically, between fiscal 
years 2000 and 2008 total compensation costs grew because of (1) 
health care costs for retirees, (2) special and incentive pays, (3) 
basic allowance for housing and, (4) basic pay. For example, we 
estimated that basic pay alone has increased 46.1 percent, which 
represents an average annual increase of 4.3 percent. We also noted 
that a piecemeal approach to compensation involved increasing or 
making changes to compensation without completely understanding the 
impact that these changes might have on recruitment and retention--
especially given that we found that about half of the cost of 
compensation was to provide noncash and deferred benefits. In 2007, we 
reported that DOD officials were concerned with their ability to 
manage personnel costs, because so many of the costs were in 
entitlements such as retirement and health care--items that managers 
have little to no control over. As a result, we were uncertain whether 
the increasingly costly military compensation system would be 
affordable, sustainable, and fiscally sound over the long term. 
Moreover, we noted that this challenge was especially acute given the 
nation's increasingly constrained fiscal environment and DOD's need to 
balance its personnel costs with its desire for new equipment and 
infrastructure. 

Defining Civilian Compensation and Recent Trends: 

According to BLS, civilian compensation is generally comprised of two 
components--wages, which comprise about 70 percent of total 
compensation, and employer-sponsored benefits,[Footnote 14] which 
comprise the remaining 30 percent. Of the benefits package that 
civilian workers receive, almost one-third is mandated by law. These 
include contributions to programs such as Social Security, Medicare, 
workers' compensation, and unemployment insurance, except in the case 
of independent contractors.[Footnote 15] The remaining portion of the 
benefits package is discretionary and includes such things as paid 
leave, retirement benefits, and the provision of health insurance or 
medical care. The benefits that an employer chooses to provide its 
workers serve a number of purposes, including attracting high-quality 
workers, reducing employee turnover, and encouraging productivity. 
Employers may also choose to provide their workers with specific 
benefits in order to receive favorable federal tax treatment for 
certain forms of compensation.[Footnote 16] Table 1 lists the top five 
discretionary benefits that civilian workers most commonly have access 
to, according to BLS, which tracks data on civilian compensation and 
the incidence and key provisions of employee benefit plans. 

Table 1: Access Rates of Civilian Workers to Select Discretionary 
Benefits, as of March 2009: 

Benefit: Paid holidays; 
Percentage of civilian workers with access to this benefit: 76%. 

Benefit: Paid vacations; 
Percentage of civilian workers with access to this benefit: 75%. 

Benefit: Medical care; 
Percentage of civilian workers with access to this benefit: 74%. 

Benefit: Paid jury duty leave; 
Percentage of civilian workers with access to this benefit: 73%. 

Benefit: Outpatient prescription drug coverage; 
Percentage of civilian workers with access to this benefit: 72%. 

Source: GAO analysis of BLS data from the March 2009 National 
Compensation Survey. 

[End of table] 

In 2006, we reported that recent developments had led employers to 
rethink the types of benefits they provide their workers.[Footnote 17] 
For example, we noted that in recent years increases in the costs of 
benefits have outpaced increases in wages, forcing employers and their 
employees to make trade-offs between wages and benefits. We also noted 
that an aging population with longer life expectancies increases the 
long-term obligations of companies that provide retirement benefits, 
such as defined benefit pension plans,[Footnote 18] and that some 
companies have cited this obligation as a contributing reason for 
terminating those plans, reorganizing, or even declaring bankruptcy. 
Further, we noted that advances in expensive medical technology, 
increased use of high-cost services and procedures, and an aging 
population have contributed to escalating health care costs. 
Consequently, employers continue to look for ways to reduce their 
costs--sometimes by reducing or eliminating the types of benefits they 
offer their employees. 

Percentile Comparisons of Compensation: 

Percentile comparisons of compensation are a compensation policy tool 
that uses market data to compare an organization's salary data against 
a comparable market to determine the competitiveness of a compensation 
structure. For example, if an organization chose to compensate its 
employees at the 70th percentile, it would mean that 70 percent of the 
comparable population makes less than the employees of that 
organization. Percentile comparisons are typically part of an 
organization's overall compensation philosophy. Taking such an 
approach, an organization would, for example, consider if it wants to 
pay its employees at, above, or below "the market level." An 
organization's pay philosophy would likely include consideration of 
the base compensation, as well as any additional compensation and 
benefits. According to one human resources consulting firm, having 
data on market pay allows an organization to determine the 
competitiveness of its pay. Also, according to that firm, using 
percentiles to compare compensation data shows how dispersed pay is 
around the 50th percentile or the median. Most companies aim to have 
pay range midpoints competitive with the market average. Using 
internal midpoints for benchmark jobs and comparing them to the market 
average helps enable organizations to determine if their current pay 
structure is competitive.[Footnote 19] 

There are many factors that could influence organizational decisions 
about salary competitiveness in the market. If an organization is 
going to establish a salary structure based on external market data, 
it is essential for the organization to develop a baseline for each 
occupation's compensation structure. An organization may choose to pay 
at the market level for certain positions and above or below the 
market level for other positions. Minimum and maximum rates for salary 
are usually established around the median compensation value for an 
occupation.[Footnote 20] The resulting range is used to pay employees--
generally, newer or less skilled staff will be paid in the lower part 
of the range, while the higher end of the range will typically be 
reserved for more experienced or skilled employees. Once a salary 
range is established, organizations will typically determine market 
competitiveness by identifying how staff compensation compares to a 
benchmark. According to the aforementioned firm, pay is considered 
competitive when it falls within 10 percent to 15 percent of the 
market median. Organizations may also examine related retention and 
hiring data to assess the adequacy of compensation. However, when 
considering retention statistics as part of a pay philosophy, it is 
necessary to determine whether or not compensation is a relevant 
factor in high or low turnover, or if another factor is influencing 
retention. 

Active Duty Recruiting and Retention: 

To maintain a highly skilled, well-trained, and professional volunteer 
military, the services must recruit and retain adequate numbers of 
personnel who meet quality standards. Each year, the services set 
recruitment quantity goals based on the difference between 
congressionally authorized levels of servicemembers and the number of 
personnel that each service expects to retain. In addition to quantity 
targets, the services also set separate "quality" goals for enlisted 
recruit accessions each year.[Footnote 21] The military services 
currently measure aptitude and education, the results of which are 
used by the services to determine which recruits are considered to be 
"high quality." Aptitude is generally determined by the results of a 
series of tests that measure word knowledge, paragraph comprehension, 
arithmetic reasoning, and mathematics knowledge. Education credentials 
of new enlisted recruits are divided into three tiers ranging from non-
high-school graduates to individuals who hold high-school diplomas and 
may have completed some college credit. 

Retention refers to the rate at which military personnel voluntarily 
choose to stay in the military after their original obligated term of 
service has ended.[Footnote 22] For retention, much like recruitment, 
the military services set annual goals for the number of 
servicemembers they want to retain, the goals for which are divided 
into categories of selected time periods within servicemembers' length 
of service. The military services track retention of servicemembers 
because imbalances in the retention rate can cause problems within the 
military personnel system. Specifically, if too few servicemembers are 
retained, the military will suffer from a lack of experienced leaders 
and decreased efficiency, while the retention of too many 
servicemembers will limit promotion opportunities and may result in a 
higher percentage of involuntary separations. Furthermore, it should 
be noted that, unlike nearly all other organizations, the uniformed 
services have closed personnel systems; that is, DOD relies almost 
exclusively on accession at the entry level (E-1 or O-1), and higher-
ranking members must be retained and promoted from lower ranks. By 
contrast, most other organizations can and do hire from the outside at 
all levels. Thus, the failure to meet recruiting or retention goals at 
lower levels in a given year can have significant consequences for a 
service's ability to produce experienced leaders for years to come. 

There are a number of factors that impact the military's recruiting 
and retention efforts--such as the size of the recruiting force, the 
size and characteristics of the youth population, the civilian 
economy, the military's recruiting efforts, and the ongoing military 
operations since 2001, which has dramatically increased the 
operational tempo of the military services and has resulted in 
significant battle casualties. To offset some of these factors that 
have a negative affect on the military services' ability to recruit, 
the services offer enlistment, accession, and reenlistment bonuses. 
For example, according to an official in the Office of the Under 
Secretary for Personnel and Readiness' Directorate of Accession 
Policy, about 47 percent of recruits DOD-wide in 2008 were offered 
recruiting bonuses, which vary from $1,000 to $40,000.[Footnote 23] 
Further certain specialties are authorized to receive additional 
bonuses--such as some in the medical profession including 
psychologists and some nurses. Although there have been times when 
goals have been missed, and quality has declined, the department has 
recently experienced success in overall recruiting and retention. See 
table 2 for further information on the enlisted accessions since 
fiscal year 2000. 

Table 2: Total Enlisted Accessions to Active Duty and Percentage of 
"High Quality" Accessions: 

Year: 2000; 
Objective number of accessions (goal): 202,017; 
Actual number of accessions: 202,917; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 57%. 

Year: 2001; 
Objective number of accessions (goal): 195,324; 
Actual number of accessions: 196,355; 
Actual number of accessions as a percent of goal: 101%; 
"High quality"[A] as percent of total accessions: 59%. 

Year: 2002; 
Objective number of accessions (goal): 195,526; 
Actual number of accessions: 196,473; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 62.3%. 

Year: 2003; 
Objective number of accessions (goal): 184,366; 
Actual number of accessions: 184,879; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 65%. 

Year: 2004; 
Objective number of accessions (goal): 181,803; 
Actual number of accessions: 182,825; 
Actual number of accessions as a percent of goal: 101%; 
"High quality"[A] as percent of total accessions: 67%. 

Year: 2005; 
Objective number of accessions (goal): 169,452; 
Actual number of accessions: 163,259; 
Actual number of accessions as a percent of goal: 96%; 
"High quality"[A] as percent of total accessions: 64%. 

Year: 2006; 
Objective number of accessions (goal): 179,707; 
Actual number of accessions: 180,540; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 62v. 

Year: 2007; 
Objective number of accessions (goal): 180,376; 
Actual number of accessions: 181,171; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 59%. 

Year: 2008; 
Objective number of accessions (goal): 184,186; 
Actual number of accessions: 184,841; 
Actual number of accessions as a percent of goal: 100%; 
"High quality"[A] as percent of total accessions: 59%. 

Year: 2009; 
Objective number of accessions (goal): 163,880; 
Actual number of accessions: 168,968; 
Actual number of accessions as a percent of goal: 103%; 
"High quality"[A] as percent of total accessions: 64%. 

Source: DOD. 

Note: DOD missed its overall goal in 2005. In that year, the Army 
recruited 92 percent of its goal, 

[A] "High quality" means recruit met the criteria as a "high school 
diploma graduate" and scored in the top 50th percentile of the Armed 
Forces Qualification Test. 

[End of table] 

Total Military Compensation for Active Duty Officers and Enlisted 
Personnel Is Broad and Difficult to Assess: 

DOD Provides a Comprehensive Compensation Package: 

DOD provides active duty personnel with a comprehensive compensation 
package that includes a mix of cash, such as pay and allowances; 
noncash benefits, such as education assistance and health care; and 
deferred compensation, such as retirement pensions and health care 
benefits for retirees. 

The foundation of each servicemember's compensation is regular 
military compensation--which consists of basic pay, housing allowance, 
subsistence allowances, and federal income tax advantage. 
Specifically, the amount of cash compensation that a servicemember 
receives varies based on rank, tenure of service, and dependency 
status. For example, a hypothetical servicemember with 1 year of 
service at the rank of O-1 and no dependents would receive an annual 
regular military compensation of $54,663. Similarly, a hypothetical 
servicemember with 4 years of service at the rank of E-5 and one 
dependent would receive an annual regular military compensation of 
$52,589.[Footnote 24] Beyond regular military compensation, some 
servicemembers may, depending on the conditions of their service, 
receive one or more of the authorized special and incentive pays 
[Footnote 25] and the combat zone tax exclusion.[Footnote 26] 
Therefore, the amount that servicemembers actually receive in their 
paycheck can vary and fluctuate based on factors such as deployment to 
combat zones, receipt of reenlistment or extension bonuses, or other 
changes to their duty conditions. 

In addition to cash pay, DOD offers a wide variety of noncash benefits 
to current and retired servicemembers. These benefits range from 
family health care coverage and education assistance to installation-
based services such as child care, youth, and family programs. To 
explain its pays and the value of its benefits, DOD provides active 
duty servicemembers with an annual statement of military compensation 
(see appendix III for a copy of a blank statement). For example, DOD 
estimated the value of the commissary at about $3,280 annually for a 
servicemember with three dependents.[Footnote 27] For active duty 
servicemembers who serve 20 years, the department provides a pension 
and retiree health care for life. Furthermore, DOD provides 
servicemembers with the option of an additional retirement savings and 
investment plan (i.e., the Thrift Savings Plan)[Footnote 28] to which 
they can contribute to while serving on active duty. Retired 
servicemembers are also eligible for Veteran Affairs health care. 

Most Studies Have Not Valued All Components of Active Duty Military 
Compensation: 

Many studies of active duty military compensation have attempted to 
assess the value of the compensation package; however, most did not to 
assess all components of compensation offered to servicemembers. See 
appendix IV for an overview of studies that assessed military 
compensation and compared it to civilian compensation. For example, 
CBO, RAND and CNA have completed assessments of military compensation. 
[Footnote 29] The results of these studies differ based on what is 
being assessed, the methodology used to conduct the assessment, and 
the components of compensation included in the calculations. However, 
despite the varying approaches, all of the studies include components 
of cash compensation beyond basic pay to include housing and 
subsistence allowances, the federal income tax advantage, and, when 
possible, special and incentive pays. The most recent study, completed 
by CNA in 2008, assessed military compensation using regular military 
compensation but also included select benefits, namely health care, 
the military tax advantage--servicemembers do not pay Federal 
Insurance Contributions Act (FICA) tax and state tax on housing and 
subsistence allowances--and retirement benefits. In particular, this 
study found that in 2006, the average enlisted servicemembers' annual 
compensation ranged from approximately $40,000 at 1 year of service to 
approximately $80,000 at 20 years of service. Additionally, in 2006 
the average officers' annual compensation ranged from approximately 
$50,000 at 1 year of service to approximately $140,000 for 20 years of 
service. 

Our analysis of CNA's 2008 study on military compensation found that 
overall CNA used a reasonable approach to assess military 
compensation. In general, we agree that when assessing military 
compensation for the purpose of comparing it to civilian compensation, 
it is appropriate to include regular military compensation and as many 
benefits as can reasonably be valued from the servicemembers' 
perspective. CNA's assessment of military compensation primarily 
included (1) regular military compensation, (2) health care, (3) 
retirement, and (4) tax advantages because these benefits are 
unconditionally available to all servicemembers and are a function 
only of continued active duty service. The following provides a 
general discussion of CNA's approach for each of these benefits: 

* CNA's approach to use regular military compensation as a proxy for 
the value of cash compensation is a similar approach taken in past 
studies. However, CNA chose to exclude special and incentive pays 
since they are primarily given for combat, hardship, submarine, or sea 
duty, and/or for obtaining special and uncommon skills--such as 
munitions, foreign language proficiency, or nuclear power expertise. 

* In order to value health care, CNA estimated the difference in value 
between military and civilian health benefits because servicemembers 
receive more comprehensive health care than most civilians. 
Specifically, active duty servicemembers are automatically enrolled in 
TRICARE Prime and do not pay premiums or out-of-pocket expenses. In 
contrast, many civilians do not receive any health benefit from their 
employer and even those that do usually pay some out-of-pocket 
expenses and part of the premium. So by calculating the amount that 
the typical civilian worker pays for premiums and out-of-pockets 
expenses, CNA finds the difference between what civilians and 
servicemembers pay. In other words, the benefit servicemembers receive 
is avoiding the costs civilians would have to pay to receive 
comparable health care. 

* To calculate the value of retirement for the servicemember, CNA 
determined the probability that the member will stay in the service 
long enough to become eligible to receive the benefit and then chose a 
discount rate to use to calculate the current value of retirement that 
would be received in the future. Regarding civilian retirement, CNA, 
pointed out that there are two types of civilian retirement plans--one 
in the form of a defined contribution plan, such as a 401K, and 
another in the form of a defined benefit plan, like that used for 
military retirement.[Footnote 30] Private sector employees under both 
of these types of plans are typically vested faster than personnel 
under the military retirement system.[Footnote 31]We do note that CNA 
used the same discount rates for civilian retirement as for military 
retirement, which is reasonable. However, because of the faster 
vesting of civilian retirement, the discount rate chosen has a smaller 
impact on the calculation of the value of civilian retirement benefits 
than for military retirement. Further, given the probability of 
military members serving the 20 years necessary to vest under the 
military retirement system, the annualized value of the retirement 
benefit is higher for civilians than for military members in the early 
years of service and then switches as the military member moves closer 
to retirement. For the retirement benefit, CNA calculated the 
difference between the value of military and civilian retirement and 
added it to RMC. 

* CNA calculated the tax advantages that servicemembers receive with 
regard to the FICA tax and state income taxes. This approach is 
similar to the calculation of federal tax advantage that is 
incorporated into the traditional measure of regular military 
compensation. It is an estimate of the amount of earnings that would 
have to be added to the member's net pay if the basic allowance for 
housing and basic allowance for subsistence were taxable in order to 
equal the same net pay. CNA's calculation takes into account how 
servicemembers are distributed by state of residence and relevant 
state income tax laws. 

While we believe the approach used is reasonable, we identified two 
areas for comment regarding CNA's approach. Specifically, we found the 
following. 

* CNA's methodology to calculate a value for retirement, health care 
and tax advantage makes various assumptions that allow the study to 
approximate a value for these benefits. While we generally agree that 
these assumptions are reasonable, we note that other reasonable 
assumptions could have been made. Thus, a different assessment of 
military compensation could make different assumptions and generate, 
in some cases, significantly different values. 

- For one, valuing retirement is difficult in terms of what is the 
most appropriate discount rate to apply.[Footnote 32] CNA used a lower 
discount rate than others have projected that servicemembers apply 
toward the promise of future compensation (e.g., retirement).[Footnote 
33] In short, CNA's assessed value of the retirement pension is more 
than if higher discount rates had been applied.[Footnote 34] Further, 
DOD's retirement is unique compared to most civilian sector plans in 
that most active duty servicemembers who serve at least 20 years 
become eligible to immediately retire and begin drawing their pension. 
[Footnote 35] 

- In addition, CNA's methodology to calculate health care assumes that 
servicemembers and civilians receive the same quality of medical care. 
Since the two groups have access to different doctors and facilities, 
this may not be true. Furthermore, it is likely that servicemembers 
receive a greater quantity of health care than civilians because they 
are not subject to co-pays or deductibles. In other words, there is no 
cost associated with an additional doctor visit. Also, the military 
health plan also represents a reduction in the uncertainty of medical 
expenditures. According to economic theory, people place value on the 
reduction of risk, although that value can be difficult to measure. 
CNA's analysis assumed that none of these factors were significant, 
which is reasonable, but potentially false. 

* The study omits the value of retiree health care for life, which 
like retiree pensions, is a significant benefit provided to 
servicemembers and the prospect of receiving this benefit is an 
important retention incentive. Further work would need to be done to 
estimate the value of this benefit.[Footnote 36] 

Challenges Exist to Value All Components of Military Compensation: 

Existing studies of military compensation illustrate that valuing all 
components of active duty military compensation from a servicemember's 
perspective is challenging, yet it is important to have a 
comprehensive assessment of compensation which includes both pays and 
benefits. For example, we previously recommended that DOD develop a 
comprehensive communication and education plan to inform 
servicemembers of the value of their pay and benefits and the 
competitiveness of their total compensation package when compared to 
their civilian counterparts that could be used as a recruiting and 
retention tool.[Footnote 37] However, various factors complicate any 
assessment of active duty compensation. As previously discussed, the 
active duty military compensation system consists of a large number of 
pays, noncash and deferred benefits. Although the foundation of the 
system, regular military compensation, is received by all 
servicemembers, there is variability in cash compensation based on 
factors such as rank, years of service, locality, and dependent 
status. In addition, DOD's use of targeted special and incentive pays, 
including bonuses, means that not all servicemembers receive these 
forms of compensation. Further, although DOD offers a large number of 
noncash benefits, the utilization of benefits by servicemembers or 
their dependents varies. 

As noted previously, the existing studies of military compensation 
have valued the components of cash compensation that make up regular 
military compensation--basic pay, housing and subsistence allowances, 
and the tax advantage. Studies of military compensation also highlight 
that the valuation rates of noncash and deferred benefits prove more 
difficult to determine than cash compensation because servicemembers 
value these benefits differently and varying assumptions have to be 
made to assign value. Table 3 provides a list of components that have 
been valued in these studies. 

Table 3: Components of Military Compensation Valued in Studies 
Comparing Military and Civilian Compensation: 

Type of compensation: Cash; 
Basic pay; 
Component: 
Allowances (e.g., housing, subsistence); 
Special and incentive pays; 
Bonuses; 
Tax benefit. 

Type of compensation: Noncash; 
Component: 
Dental and health care; 
Commissary benefits. 

Type of compensation: Deferred; 
Component: 
Retirement pension. 

Source: GAO analysis. 

[End of table] 

In addition to these components of compensation, there are many others 
that make up military compensation, such as education assistance; 
morale, welfare and recreation programs; and child and family service 
programs. These other components of compensation, mostly benefits, are 
also difficult to assess in terms of value to the servicemember 
because, among other reasons, the value varies depending on use of 
benefit. For example, a servicemember with no children would value 
child care significantly less than one with children and a working 
spouse. While we and others did not assess these components, we were 
able to identify, as reported by active duty servicemembers as part of 
DOD's Status of Forces Survey, the percentage of servicemembers who 
reported that they used various benefits offered by DOD. Table 4 
provides a list of some benefits and their utilization rates. See 
appendix V for more benefits and corresponding utilization rates. 

Table 4: Self Reported Utilization Rates of Various Components of 
Military Compensation: 

Compensation component: Commissary; 
Utilization rate: 90%. 

Compensation component: Exchange; 
Utilization rate: 90%. 

Compensation component: Personally visited military health care 
provider;
Utilization rate: 85%. 

Compensation component: Personally visited on-base military dentist; 
Utilization rate: 82%. 

Compensation component: Thrift Savings Plan (TSP)[A]; 
Utilization rate: 44%. 

Compensation component: Child care (on base); 
Utilization rate: 37%. 

Compensation component: Tuition assistance programs for college/higher 
education; 
Utilization rate: 34%. 

Compensation component: DOD-run school; 
Utilization rate: 18%. 

Source: DOD's 2007-2009 Status of Forces Survey for Active Duty 
Members. 

Note: The margin of error ranges from +/-1 to +/-3 percent. 

[A] The TSP is a federal-government-sponsored retirement savings and 
investment plan. 

[End of table] 

Studies Conclude that Military Compensation Generally Compares 
Favorably to Civilian Compensation but Challenges Exist with These 
Comparisons: 

Military Compensation Compares Favorably with Comparable Civilians 
Compensation According to Some Studies: 

In comparing military and civilian compensation, CNA's 2008 study, as 
well as another recent study by CBO, found that military pay generally 
compares favorably to civilian pay. Specifically, CNA found that in 
2006, regular military compensation for enlisted personnel averaged 
$4,700 annually more than comparable civilian earnings. Similarly, 
military officers received an average of about $11,500 more annually 
than comparable civilian earnings. Further, CNA compared military and 
civilian compensation including three military benefits--health care, 
retirement, and the additional tax advantage for military members. 
Specifically, it found when values for these benefits were included, 
an average of $8,660 annually for enlisted and an average of $13,370 
annually for officers was added to the differences. This means that by 
including those three benefits, the estimated result on average was 
about $13,360 more annually for enlisted personnel than their civilian 
equivalents compared to $4,700 more annually when only comparing cash. 
For officers, compensation was an average of $24,870 more annually 
than just the $11,500 annually when only comparing cash. 

A 2007 study by CBO also found that military compensation fared well 
compared to civilian compensation, overall. For example, CBO's report 
suggests that DOD's goal to make regular military compensation 
comparable with the 70th percentile of civilian earnings has been 
achieved.[Footnote 38] The major difference between CBO's and CNA's 
studies is how the CNA study defined compensation. CNA asserted, and 
we agree, that including benefits allows comparisons of actual levels 
of compensation and allows one to approximate whether servicemembers 
are compensated at a level that is comparable to that of their 
civilian peers, although the caveats that we discuss below should be 
considered. We also agree with CBO that including benefits can add 
another level of complexity to these analytical studies. Specifically, 
the cost of providing benefits may be significantly different from the 
value an employee places on those benefits. For example, the age of an 
employee may affect the value placed on health or retirement benefits. 
Therefore, developing a methodology to "value" benefits requires some 
assumptions to be made. 

Difficulties in Overall Comparisons of Military and Civilian 
Compensation: 

A number of variables and challenges exist in comparing military and 
civilian compensation. In general, comparisons of levels of military 
and civilian compensation provide policy makers in Congress and DOD 
with a broad comparison or frame of reference, which can provide some 
insight into how well military compensation (either cash or cash and 
select benefits) is keeping pace with overall civilian compensation. 
However, these broad comparisons may not be a sufficient guide for 
determining appropriate military pay levels. Specifically, differences 
in average age, demographics (other than age), work experience, fields 
of degree, and other characteristics--normally needed in these types 
of comparisons--can make direct comparison of salary and earnings 
difficult. For example, generally, engineers earn a higher salary than 
social scientists, and newer employees earn less than those with more 
experience. Some other circumstantial factors that could limit the 
usefulness of this analysis include degree combinations and advanced 
degrees (such as masters, doctorates, or law degrees), worker 
productivity, quality of the school or department from which the 
individual received degree(s), quality of the employer, and lifestyle 
or family-related choices. Additionally, labor force surveys tend not 
to capture information on all individual skill sets, personal 
background and attributes, or other variables that may affect 
compensation.[Footnote 39] While some efforts were made in the CNA 
study to control for age (as a proxy for years of experience) and 
broad education levels (some college up to an Associate degree and 
Bachelor's degree or better), that study did not include some of the 
other factors we mentioned, such as field of degree, demographics 
(other than age), and other characteristics that would be needed to 
make an adequate comparison. Furthermore, as mentioned previously, the 
civilian population data that were available was not an exact match 
for individuals with similar working conditions and occupations as 
those in the military. Another complicating factor, as discussed 
earlier, is the definition of compensation being used for the 
military--regular military compensation or regular military 
compensation and select benefits. 

Moreover, there are nonmonetary considerations that complicate 
military and civilian pay comparisons. For example, servicemembers (1) 
may be in a different mix of occupations, (2) may have greater 
responsibilities than their civilian counterparts, and (3) have had a 
continuous work history, whereas civilian workers may be 
underemployed--working part-time or having experienced periods of 
unemployment. In addition, it may be necessary to enhance military 
compensation by a factor--frequently referred to as the "X-factor"--to 
compensate for those disadvantages of service life (e.g., working 
conditions, risk of death or injury, and, during war, frequent 
deployments with long separations from family, and frequent moves 
making it more difficult for spouses to establish careers at one 
location). In addition, servicemembers must complete their military 
service obligation--they cannot resign or change jobs at will. 

While the approaches discussed above assess the overall levels of pay, 
there are other approaches to comparing compensation, which have 
significant limitations and, in some cases, shortcomings. For example, 
one could make comparisons between occupations, such as military 
police and civilian police officers. While this type of analysis 
provides policymakers and others illustrations of how much certain 
occupations may earn, it is not an effective tool for making 
compensation policy decisions or determining if military pay is 
adequate or appropriate because the results of a specific occupation 
are not generalizable to the entire military population. However, if 
an occupational comparison approach is to be used to generalize to the 
entire military population, a very detailed, exhaustive, and time-
consuming comparison of all occupations would be needed--recognizing 
that many military occupations would not have an exact civilian 
counterpart. See appendix VI for examples comparing select military 
occupations to comparable civilian occupations. These comparisons have 
limitations and we present examples solely for illustrative purposes. 
Along the same lines, other studies have discussed comparisons of 
military and civilian pay that tracked the difference between the 
Employment Cost Index (ECI) and increases in basic pay over 
time.[Footnote 40]This comparison has significant shortcomings in that 
regular military compensation is a more inclusive assessment of 
military pay than basic pay alone. See appendix VII for more 
information on the approach of comparing military and civilian 
compensation using the ECI along with a discussion about the 
appropriateness of using the ECI as a tool to adjust basic pay 
annually. 

10th QRMC Recommendation to Include Regular Military Compensation and 
Select Benefits When Comparing Military and Civilian Compensation 
Appears Reasonable: 

The 10th QRMC's recommendation to include regular military 
compensation and select benefits when comparing military and civilian 
compensation appears reasonable because it provides a more complete 
assessment of military compensation. The 10th QRMC noted, among other 
things, that previous assessments of military compensation, which 
compare regular military compensation and civilian pay, omit several 
very important components of the military compensation package, 
specifically health care, retirement, and tax advantages. The 10th 
QRMC recommended that, among other things, DOD adopt the 80th 
percentile as its goal for military compensation, which includes 
regular military compensation and the value of some benefits, 
including health care and retirement in order to maintain the same 
standard set by the 9th QRMC's 70th percentile--which compares only 
regular military compensation and civilian pay.[Footnote 41] In 
general, when comparing levels of military and civilian compensation, 
a more complete or appropriate measure of compensation would include 
cash and benefits. Further, the 10th QRMC noted that the benefits 
package offered to servicemembers coupled with the tax advantages they 
receive have generally been considered more robust than what is 
typically offered in the civilian sector. According to that QRMC, 
omitting military benefits from the comparison results in an 
incomplete analysis that substantially understates the value of DOD's 
compensation package. Given the large proportion of servicemember 
compensation that is comprised of in-kind and deferred benefits, the 
QRMC emphasized that taking these additional components of 
compensation into account shows that servicemember compensation is 
generous relative to civilian compensation--more so than traditional 
comparisons of regular military compensation suggest.[Footnote 42] 

Similarly, in 2005 and 2007, we reported that noncash and deferred 
benefits made up about half of the total compensation costs to the 
federal government.[Footnote 43] While an individual considering 
either a military or a civilian job would not likely consider the cost 
of compensation to the federal government, the individual would likely 
consider the overall compensation package that is available--to 
include pay as well as the range and value of the benefits offered 
between the two options. That is, a person would not just consider one 
aspect of the compensation if the other aspects add value.[Footnote 
44] However, the challenge with taking an approach that includes 
benefits is how to "value" the benefits and which benefits to include 
in the comparison--as we previously discussed. 

Although comparisons of military and civilian compensation are 
important management tools, they alone do not necessarily answer the 
question of how appropriate or adequate compensation is to maintain 
recruiting and retention. We have reported in the past that 
compensation systems are tools used for recruiting and retention 
purposes. Similarly, in 2009, CBO stated that ultimately, the best 
barometer of the effectiveness of DOD's compensation system is how 
well the military attracts and retains high-quality, skilled 
personnel.[Footnote 45] One key reason for comparing levels of 
military and civilian compensation is the concern that if military 
compensation is significantly below compensation in the civilian 
sector, the military will not be able to recruit and retain the 
aggregate numbers of personnel it needs, nor will it be able to 
attract and retain the skills and quality of people it wants. Senior 
officials within the Office of the Under Secretary of Defense for 
Personnel and Readiness' Directorate of Compensation told us that, in 
setting military compensation, the department concluded that regular 
military compensation must be higher than the median civilian pay in 
order to take into account a couple of factors specific to DOD. 
Specifically, given DOD's emphasis on the quality of the individuals 
it recruits, servicemembers must get paid more than the civilians to 
attract individuals with traits and abilities the department wants and 
to account for the sacrifices servicemembers make--including work in 
dangerous environments and lifestyle challenges and frequent moves. 

While DOD recognizes that the military's compensation package is not 
just a cash package and agrees with the 10th QRMC's recognition that 
benefits are important to servicemembers, according to senior DOD 
officials, the department does not plan to adopt the recommendation to 
include select benefits when comparing military and civilian 
compensation. Specifically, senior officials told us that the 
department views its compensation as directly related to its ability 
to meet recruiting and retention goals. As a result, the department 
would rather rely on a known measure--regular military compensation 
compared to cash compensation for civilians--than to base its 
comparisons on a measure that is unknown and could vary depending on 
methodology used to estimate the value of benefits. According to 
senior DOD officials, comparing civilian cash compensation with 
regular military compensation allows for a more homogeneous comparison 
of military and civilian compensation. For example, officials cited 
differences in health care availability and coverage as well as other 
benefits that may not be offered to civilians. While we acknowledge 
the department's concerns, we believe that when making broad-based 
comparisons of military and civilian compensation, it is important to 
look at the total compensation package--to include both cash 
compensation and benefits. This does not, however, eliminate or 
minimize the need to understand cash compensation and how it compares 
with civilian cash compensation. In fact, we believe it is also 
important for DOD to continue to compare its regular military 
compensation with civilian pay. For example, as we reported in 2005, 
cash compensation tends to spur actions--such as enlisting or 
reenlisting. Similarly, CBO reported in 2007 that the relatively low 
value that young people place on deferred compensation--combined with 
the relatively low probability that a new recruit will stay in active 
duty for 20 years to become eligible for retirement--suggest that the 
recruiting and retention value of deferred benefits is lower than that 
of current cash compensation.[Footnote 46] 

DOD officials also told us that the department measures the adequacy 
of its compensation by its ability to meet overall recruiting and 
retention goals. For example, to sustain its all-volunteer military 
force, DOD recruits approximately 180,000 new enlistees each year and 
maintains an active duty enlisted force of approximately 1.2 million 
servicemembers. Given the fact that (1) the ability to recruit and 
retain is a key indicator of the adequacy of compensation and (2) DOD 
has generally met its overall recruiting or retention goals over the 
past several years, it appears that regular military compensation is 
adequate at the 70th percentile of comparable civilian pay, as well as 
at the 80th percentile when additional benefits are included. Since 
1982, DOD has only missed its overall annual recruiting target three 
times--in 1998 during a period of very low unemployment, in 1999, and 
most recently in 2005. 

Although the services have generally met their overall recruiting 
goals in recent years, certain specialties, such as medical personnel, 
continue to experience recruiting and retention challenges. Given the 
range of recruiting and retention challenges facing the department, 
permanent, across-the-board pay increases may not be seen as the most 
efficient recruiting and retention mechanism. Our previous work has 
shown that the use of targeted bonuses, rather than across-the-board 
pay increases, may be most appropriate in meeting DOD's requirements 
for critical specialties where shortages exist.[Footnote 47] Senior 
officials we spoke with at DOD agreed that targeted bonuses, may be 
more appropriate to fill critical specialties experiencing shortages. 
[Footnote 48] According to DOD, efficiency is the amount of military 
compensation--no higher or lower than necessary--that is required to 
fulfill the basic objective of attracting, retaining, and motivating 
the kinds and numbers of active duty servicemembers needed. According 
to a recent report on recruiting conducted for the Directorate of 
Accession Policy,[Footnote 49] cash incentives--such as enlistment 
bonuses--designed to induce potential recruits to enlist are extremely 
valuable to the services' ability to meet recruiting goals, as well as 
for channeling high-quality recruits into hard-to-fill career fields. 
The report further notes that enlistment bonuses, unlike a basic pay 
increase which must be paid to all enlistees, can be targeted to 
particular high-quality recruits who are willing to enlist in skill 
areas where there are shortages, making bonuses a much more cost-
effective incentive. According to DOD, bonuses can help to sustain end 
strength by selectively controlling attrition and narrowly focusing 
assets to retain the necessary balance of skills and grades required 
to fill existing and emerging requirements. For example, DOD has also 
noted that the Selective Reenlistment Bonus and the Critical Skills 
Retention Bonus are among the most effective incentives to attract and 
retain qualified personnel in critical military specialties because 
these programs allow DOD to influence retention behavior in military 
specialties with one or more of the following factors: (1) the 
services have recruiting challenges for the specialties; (2) involves 
lengthy and/or costly skills training; (3) there is a high demand for 
or marketability in the private sector; (4) there are persistent 
manning shortages; (5) the specialty is low density and high demand; 
and (6) the specialty is crucial to combat readiness. Thus, DOD's use 
of these and other pay flexibilities may allow it to more efficiently 
meet its recruiting and retention needs because these special pays and 
bonuses can be turned on and off as necessary, making them useful in 
addressing short-term shortfalls. 

Concluding Observations: 

Comparisons between military and civilian compensation are important 
management tools--or measures--for the department to assess the 
adequacy and appropriateness of its compensation. However, such 
comparisons, as we have previously noted, present both limitations and 
challenges. Specifically, data limitations prevent exact comparisons 
of military and civilian personnel. Moreover, these comparisons 
represent points in time and are affected by factors, such as the 
health of the economy. To illustrate, it is not clear the degree to 
which changes in civilian health care availability or retirement 
benefits affect the outcome of comparing military and civilian 
compensation. In addition, valuing military service is complicated. 
While serving in the military offers personal and professional 
rewards, such service also requires many sacrifices--frequent moves 
and jobs that are arduous and sometimes dangerous. As a result, 
ultimately the department's ability to recruit and retain personnel is 
an important indicator of the adequacy--or effectiveness--of its 
compensation. 

Agency Comments and Our Evaluation: 

The Deputy Under Secretary of Defense for Military Personnel Policy 
provided oral comments on a draft of this report. The senior official 
noted that the department appreciated our review and generally agreed 
with the contents of our draft report. The official stated that 
numerous public and private sector studies have attempted to estimate 
the value military members place on noncash and deferred benefits and 
that each study has found that identifying relevant assumptions, 
valuing these benefits, and finding appropriate benchmarks and 
comparisons are significant challenges. The official further agreed 
with our evaluation that in conducting a comparison of military and 
civilian compensation, different assumptions can generate 
significantly different results. 

However, because of the variation in the results of these studies, the 
Deputy Under Secretary stated that further study is necessary before 
the department is willing to consider measuring and benchmarking 
military compensation using a measurement that incorporates benefits. 
Specifically, the official stated that DOD believes regular military 
compensation is the appropriate metric to use in comparing both the 
competitiveness and comparability of military compensation with 
private sector compensation. The official further said that the 
department believes regular military compensation is a well known and 
respected metric and noted that it allows for a relatively homogeneous 
comparison of military and civilian compensation. Moreover, the 
official stated that DOD remains concerned with using any metric that 
includes noncash or deferred benefits because of the difficulty in 
making a direct comparison between military benefits and corresponding 
private sector benefits. Nevertheless, we continue to believe that 
when making broad-based comparisons of military and civilian 
compensation, it is important to look at the total compensation 
package--to include both cash compensation and benefits. As we noted 
in the report, this does not, however, eliminate or minimize the need 
to understand cash compensation and how it compares with civilian cash 
compensation. In fact, we believe it is also important for DOD to 
continue to compare its regular military compensation with civilian 
pay because, as we reported in 2005, cash compensation tends to spur 
actions--such as enlisting or reenlisting. 

The Deputy Under Secretary further noted that DOD agrees that our 
examples of compensation for selected military and civilian 
occupations can be informative but have limited utility and are 
unsuitable for making compensation policy decisions. The official 
further stated that seemingly similar occupations differ considerably 
when one considers the additional impact on the military member due to 
working conditions, risk of death or injury, frequent deployments, 
separation from family members, and frequent relocations. 

The official also noted that, unlike the private sector which can 
laterally hire an employee from another organization, the military 
must grow its leaders internally because there is no private sector 
labor market from which the military can hire for certain unique 
occupations--such as an infantry battalion commander. Thus, according 
the Deputy Under Secretary, an evaluation of the comparability of 
military and private sector compensation must also consider the cost 
to the military of growing a replacement member lost to the private 
sector or the additional cost to retain a member through a bonus or 
other retention payment. We agree and acknowledge these points in our 
report. In addition, officials from the Directorate of Compensation 
provided us with technical comments, which have been incorporated into 
our report, where appropriate. 

We are sending copies of this report to the Secretary of Defense and 
appropriate congressional committees. In addition, the report will be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions on the matters discussed in 
this report, please contact me at (202) 512-3604 or farrellb@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made key contributions are listed in appendix VIII. 

Signed by: 

Brenda S. Farrell:
Director, Defense Capabilities and Management: 

List of Congressional Committees: 

The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate: 

The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable Norm Dicks:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

In conducting this review, we limited our scope to active duty 
officers and enlisted servicemembers. In addition, we focused on cash 
compensation and the value of some benefits to the servicemembers 
versus the cost to the government of providing such compensation to 
the servicemember. 

To address our objectives, we identified and reviewed studies on 
compensation, comparisons of military and civilian compensation, human 
capital, and military benefits and personnel issues--including those 
conducted by CNA Corporation (CNA), the Congressional Budget Office 
(CBO), the Congressional Research Service (CRS), the Department of 
Defense (DOD), GAO, and RAND Corporation. We interviewed or obtained 
information from DOD officials in Washington, D.C., from the Office of 
the Under Secretary of Defense for Personnel and Readiness: (1) the 
Deputy Under Secretary of Defense for Military Personnel Policy, (2) 
Directorate of Compensation, (3) Directorate of Officer and Enlisted 
Personnel Management, and (4) Directorate of Accession Policy. In 
addition, we interviewed officials from DOD's Defense Manpower Data 
Center, the Department of Labor's Bureau of Labor Statistics (BLS), 
CNA, CBO, the Military Officers Association of America (MOAA). During 
the interviews with DOD and others, we obtained and subsequently 
reviewed supporting documentation on, for example, historical and 
current compensation policy, prior reports, and trends in compensation. 

With regard to the 2008 CNA report,[Footnote 50] we conducted a 
methodological review of the study. We analyzed the report and its 
appendices. We also interviewed the author of the report about the 
methodology and the reasoning behind it. We also examined the datasets 
used by CNA for appropriateness, along with the sources of the data 
and looked for information on survey design, collection mode, and 
content. Additionally, we reviewed other select research on the topic 
of comparing military and civilian compensation. We found that the 
methodology and data used by CNA, such as the Current Population 
Survey and personnel data from the Defense Manpower Data Center, were 
appropriate for CNA's estimates--with the exception of the limitations 
and areas of comment noted in this report. As is the case with any 
research of this nature, it is possible that errors exist in CNA's 
estimates or that improvements could be made in these calculations. 
Furthermore, we note that other reasonable modeling assumptions could 
have been made and other alternative sources of data could have been 
used, potentially generating different results. 

For our first objective, to assess total military compensation, 
including pay and benefits, for officers and enlisted personnel, in 
addition to the methods listed above, we reviewed CNA's 2008 report 
entitled Comparing Military and Civilian Compensation Packages and 
identified estimated values for the elements of military compensation--
regular military compensation, health care, retirement, and additional 
tax advantages. To provide examples of military compensation for a 
hypothetical individual servicemember, we used data from the 2010 
Selected Military Compensation Tables to identify a "typical"--meaning 
existing in a relatively high proportion among the population--
enlisted and officer pay grade and the associated family size for the 
pay grade. We then used DOD's regular military compensation calculator 
to estimate compensation levels for an individual with the identified 
characteristics. We analyzed data on the utilization of benefits 
provided to servicemembers from DOD's Status of Forces Survey of 
Active Duty Members. We also identified the employee benefits 
available to active duty servicemembers, by leveraging our prior work 
on military compensation, reviewing DOD financial management 
regulations, service budget documents, military compensation 
background papers, DOD and service Web sites, and other department 
documents. 

For our second objective, comparing military compensation and private- 
sector pay and benefits for civilians of similar age, education, and 
experience with similar job responsibilities and working conditions of 
officers and enlisted personnel, in addition to the methods mentioned 
above, we reviewed CNA's report to identify estimated values for 
private-sector compensation, including cash pay and benefits. We also 
reviewed the methods that CNA used to estimate values for several 
benefits--retirement, health care, and the additional tax advantages 
received by military servicemembers--which were then used to compare 
the pay and benefits received by military servicemembers with that of 
comparable civilians. Through these reviews, the methods used by CNA 
were deemed acceptable for our purpose of reporting the estimated 
values for these benefits. Additionally, we assessed the reliability 
of the Employment Cost Index (ECI) by reviewing BLS documentation and 
interviewing BLS staff. Based upon these checks, we determined that 
the ECI was sufficiently reliable for the purposes of our work. 

For our third objective, to assess the 10th Quadrennial Review of 
Military Compensation (QRMC) recommendation to include regular 
military compensation and select benefits when comparing military and 
civilian compensation and determine if it is adequate and appropriate, 
in addition to the methods mentioned above, we conducted a literature 
review of previously published reports on compensation policy and 
management. In addition, we interviewed DOD officials from the 
aforementioned offices to determine the department's position on the 
9th and 10th QRMC's recommendations related to percentile comparisons, 
the adequacy of current military compensation, and percentile 
comparisons, in general. Finally, we analyzed the information we 
obtained to ascertain if including benefits is appropriate when 
comparing military and civilian compensation. 

We conducted this performance audit from November 2009 through March 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Selected Active Duty Military Compensation and Benefits: 

This appendix summarizes compensation and benefits that relate to 
direct cash compensation, indirect cash compensation, and indirect 
deferred compensation, which the federal government provides to active 
duty servicemembers and their dependents. This appendix is not 
intended to be an exhaustive list of all available compensation and 
benefits. To compile this list, we drew from several sources, 
including Department of Defense (DOD) informational materials, 
directives, instructions, and regulations; studies on military 
compensation; prior GAO reports; and relevant sections of the U.S. 
Code. 

Direct Cash Compensation: 

Regular Military Compensation: 

Basic Pay: 
The largest component of regular military compensation. Basic pay 
rates are based on rank and years of service with pay increasing as 
servicemembers are promoted to higher grades or accumulate additional 
years of service. 

Basic Allowance for Housing: 
An allowance designed to provide military personnel in nongovernment 
housing with the resources necessary to live in housing comparable to 
their civilian counterparts. A servicemember's allowance is calculated 
by their location, pay grade and family status. The Secretary of 
Defense may prescribe an overseas basic allowance for housing for a 
member of a uniformed service who is on duty outside of the United 
States. 

Basic Allowance for Subsistence: 
A cash payment designed to defray the costs of a servicemember's 
meals. There are different monthly rates for enlisted personnel and 
officers. Both rates are required to be adjusted annually based on the 
increase in food costs determined by the Secretary of Agriculture each 
year. 

Tax Advantage: Servicemembers receive an income tax advantage due to 
the fact that the basic housing allowance and basic allowance for 
subsistence are not subject to federal income tax. 

Allowances: 

Clothing Allowances: 
There are many different types of clothing allowances available to 
assist eligible servicemembers in covering the cost of obtaining and 
replacing prescribed uniforms. These include but aren't limited to the 
initial clothing allowance, the cash replacement clothing allowance 
and the extra clothing allowance. 

Continental United States Cost of Living Allowance: 
Servicemembers assigned to high-cost locations in the continental U.S. 
and certain servicemembers who have dependents that reside in high-
cost locations in the continental U.S. are paid a Cost of Living 
Allowance. The Cost of Living Allowance compensates for a portion of 
costs for non-housing expenses incurred in areas that exceed costs in 
an average U.S. military location by more than 8 percent. Allowance 
rates are based on a number of factors including the servicemember's 
rank, duty location, and dependent status. The Continental United 
States Cost of Living Allowance is a taxable allowance, and an amount 
is added to offset average income tax. 

Family Separation Allowance: 
Eligible servicemembers may be entitled to a monthly allowance of $250 
during qualifying periods of separation from the servicemember's 
dependents. 

Family Subsistence Supplemental Allowance: 
This allowance is intended to supplement an individual's basic 
allowance for subsistence to raise it to a level sufficient to remove 
that member's household from, or obviate the need for, benefits under 
the food stamp program. 

Outside the Continental United States Cost of Living Allowance: 
A Cost of Living Allowance is authorized to assist a member in 
maintaining the purchasing power of the discretionary portion of 
spendable income while assigned to a location outside the continental 
United States. The allowance is derived by comparing the cost-of-
living in the assigned location with the cost-of-living in the 
Continental United States, and varies based on several factors 
including the member's rank, duty location, and dependent status. 

Bonus, Incentive and Special Pays: 
These are additional forms of cash compensation used to attract and 
retain personnel into hard-to-fill occupations or specialties, or to 
provide extra compensation for hazardous or special duty. The National 
Defense Authorization Act for Fiscal Year 2008[Footnote 51] provided 
authority to consolidate existing bonus, incentive and special pay 
authorities into eight broad categories: general bonuses for enlisted 
members; general bonuses for officers; special bonus and incentive pay 
authorities for nuclear officers; special aviation incentive pay and 
bonus authorities for officers; hazardous duty pay; assignment pay or 
special duty pay; skill incentive pay or proficiency bonus; and bonus 
and incentive pays for officers in health professions. In addition, 
the consolidation includes the 15 year career status bonus and 
retention incentives for members qualified in critical military skills 
or assigned to high priority units. The Act provided DOD with ten 
years to implement the consolidation and transition of all special and 
incentive pay programs to the new authorities. The following are among 
the more than 60 existing bonus, incentive and special pay authorities: 
* Enlistment Bonus; 
* Selected Reserve Reenlistment Bonus; 
* Accession Bonus for new officers in Critical Skills; 
* 15 year Career Status Bonus; 
* Critical Military Skills or High Priority Unit Retention Bonus; 
* Health Professional Bonuses; 
* Nuclear Career Accession Bonus; 
* Nuclear Career Annual Incentive Bonus; 
* Skill incentive pay or proficiency Bonus; 
* Conversion to Military Occupational Specialty Bonus; 
* Transfer Between Armed Forces Bonus; 
* Volunteer Incentive Bonus for Retired or Reserve Members; 
* Acceleration or Deceleration Experimental Subject Pay; 
* Air Weapons Controller Flight Pay (AWACS); 
* Career Sea Pay; 
* Chemicals Munitions Handling Pay; 
* Dangerous Organisms or Toxic Pesticides Exposure Pay; 
* Demolition Duty Pay; Dental Officers Special Pays; 
* Diving Duty Pay; 
* Engineering and Scientific Career Continuation Pay; 
* Firefighting Crew Member Duty Pay; 
* Flight Deck Duty Pay; 
* Flying Duty Pays; 
* Foreign Language Proficiency Bonus; 
* Hardship Duty Pay; 
* Hazardous Duty Incentive Pay; 
* High or Low Pressure Chamber Duty Pay; 
* Hostile Fire/Imminent Danger Pay; 
* Judge Advocate Continuation Pay; 
* Medical Officer Special Pays; 
* Nuclear Qualified Officers Continuation Pay; 
* Officers Holding Positions of Unusual Responsibility and of Critical 
Nature; 
* Parachute Duty Pay; 
* Separation Pay (Non-disability); 
* Special Duty Assignment Pay; 
* Special Pay for Members of Weapons of Mass Destruction Civil Support 
Teams; 
* Special Warfare Officer Continuation Pay; 
* Surface Warfare Officer Continuation Pay; 
* Submarine Duty Pay; 
* Thermal Stress Experimental Subject Pay; 
* Service or Testing of Aircraft or Missiles with Toxic 
Fuels/Propellants Pay; 
* Veterinarians Special Pay. 

Other: 

Additional Tax Advantage: 
Servicemembers do not pay state, local and Federal Insurance 
Contributions Act (FICA) taxes on their housing and subsistence 
allowances and can often avoid paying any state taxes depending on 
their state home-of-record. 

Combat Zone Tax Advantage: 
The combat zone tax exclusion allows servicemembers to exclude 
compensation received for active service--including basic pay, 
bonuses, special pays, and allowances but excluding pensions and 
retirement pay--from their gross income for each month during which 
any portion is spent serving in a designated combat zone or 
hospitalized as a result of wounds, disease or injury incurred while 
serving in a designated combat zone. Servicemembers who serve in a 
combat zone or have a related hospitalization for a minimum of 1 day 
are eligible to receive the combat zone exclusion for the respective 
month. Enlisted members' exclusions are not limited. Officers can 
exclude up to the maximum enlisted amount received. 

Savings Deposit Program: 
This program provides the opportunity for eligible members of the 
uniformed services to make deposits in special savings accounts, 
during qualifying tours of duty, and to earn an annual interest rate 
of 10 percent on those funds. 

Indirect Noncash Compensation: 

Death and Burial: 

Burial Benefits: 
Among other benefits, the Department of Veterans Affairs or DOD may 
provide a casket, a government headstone or marker, or a burial flag 
at no cost to a deceased servicemember or veteran. In addition, 
servicemembers and veterans who have completed service requirements 
are eligible for burial in a Department of Veterans Affairs national 
cemetery. Secretaries of the military departments may provide a travel 
allowance for eligible family members to attend burial ceremonies for 
deceased members who die while on duty. 

Burial Costs: 
DOD may reimburse up to $8,800 for a member's burial expenses, 
depending on the type of arrangements. DOD may provide travel 
allowances for eligible next of kin. The Department of Veterans 
Affairs will pay a burial allowance of up to $2,000 if the veteran's 
death is a result of a service-connected disability, upon the request 
of a survivor. In some cases, it may also pay the cost of transporting 
the remains of a service-disabled veteran to the national cemetery 
with available gravesites that is nearest the last residence of the 
deceased. 

Continued Health Benefits for Surviving Family Members: 
According to TRICARE, surviving family members of a deceased active 
duty servicemember remain eligible for health care benefits under 
TRICARE at active duty family member rates for a 3-year period 
following the servicemember's death, in the case of surviving spouses, 
or until eligibility ends, in the case of children. 

Continued Military Privileges for Surviving Family Members: 
The unremarried surviving spouse and qualified dependents of a 
deceased member are eligible for unlimited shopping privileges at 
military commissaries and exchanges. Dependents of a servicemember who 
dies while on active duty may be eligible for continued housing 
benefits. 

Death Gratuity Payments: 
Eligible survivors of a servicemember who dies while on active duty or 
in certain other circumstances receive an immediate cash payment of 
$100,000. 

Dependency and Indemnity Compensation: 
The Department of Veterans Affairs provides a nontaxable payment to 
eligible surviving spouses, eligible unmarried children, and eligible 
parents of servicemembers who die from a service-connected or 
compensable disability. 

Survivor and Dependent Education: 
Surviving spouses and children are eligible for up to 45 months of 
education benefits. 

Tax Benefit: 
When a member of the Armed Forces dies while in a combat zone in 
active service, or as a result of wounds, disease, or injury while so 
serving, tax forgiveness rules for federal income taxes apply. 
Additionally, favorable tax rules apply when an individual dies as a 
result of wounds or injury that was incurred outside the United States 
in a terrorist or military action. Generally, benefits received from 
the Department of Veterans Affairs by a beneficiary of a deceased 
member are exempt from taxation. 

Unused Leave: 
Survivors of a deceased member may be entitled to payment for the 
deceased's unused accrued leave, if any. The amount of the payment is 
based on the member's basic pay at the time of death. 

Dental and Medical Care: 

Continued Health Care Benefit Program: 
Members leaving the military before retirement can purchase health 
care benefits to cover medical bills incurred by them and their 
families while between jobs. 

Dental: 
Active duty servicemembers are entitled to dental care in more than 
400 military dental treatment facilities on a space available basis. 
Eligible family members may enroll in the TRICARE Dental Program, 
which requires monthly premiums and copayments. The dental program 
covers a wide range of diagnostic, preventive, and restorative 
services. 

TRICARE: 
DOD provides health care to active duty members and their dependents 
through TRICARE, a managed care program. Care is provided in more than 
500 military treatment facilities worldwide, supplemented by civilian 
providers. TRICARE offers beneficiaries three health care options: 
Prime, Standard, and Extra. Active duty personnel are required to 
enroll in TRICARE Prime when it is offered. This program offers care 
in military treatment facilities and does not require copayments from 
active duty members for care obtained from military treatment 
facilities. Dependents may choose to enroll in TRICARE Prime where 
available or may elect to receive care under TRICARE Extra, a 
preferred provider option, or under TRICARE Standard, a fee-for-
service option. Beneficiaries obtaining care may be subject to 
deductibles and a cost share. 

Education Assistance: 

Educational Benefits: 
The Services offer an array of educational benefits that support 
members' continuing education while they are in the military and after 
they return to civilian life. Examples include the Montgomery GI Bill, 
the Post 9-11 GI Bill, federal student loan repayment programs, and 
voluntary education programs. 

Insurance: 

Servicemembers Group Life Insurance: 
A government-sponsored program that provides insurance coverage to 
members of the Armed Forces and certain dependants of members. Under 
the program, active duty members, certain reserve members and eligible 
dependants are insured to certain dollar thresholds[Footnote 52] by 
default. Members may elect less coverage or no coverage. 

Traumatic Injury Protection Program: 
This program is a rider to Servicemembers Group Life Insurance that 
provides for payment to servicemembers who are severely injured (on or 
off duty) as the result of a traumatic event and suffer a loss that 
qualifies for payment. Every member who has SGLI also has TSGLI 
effective December 1, 2005. This benefit is also provided 
retroactively for members who incurred severe losses as a result of a 
traumatic injury between October 7, 2001 and December 1, 2005, if the 
loss was the direct result of injuries incurred in Operations Enduring 
Freedom or Iraqi Freedom. This program will pay a benefit of between 
$25,000 and $100,000 depending on the nature of the loss resulting 
from the traumatic injury. 

Installation-based: 

Child and Youth Programs: 

Child Development Programs: 
This system provides child care services for children aged birth 
through 12 years, of DOD personnel provided in child development 
facilities, to include contract locations, family child care homes, 
and alternative locations. Care may be provided on a full-day, part-
day, or hourly basis. Care is designed to protect the health and 
safety of children and to promote their physical, social, emotional, 
and cognitive development and to enhance children's readiness for 
later school experience. The goals of the child development system 
include assisting DOD military and civilian personnel who are parents 
of children under the age of 6, or who are full-time students, in 
locating at least one affordable option for quality child care; 
assisting DOD personnel who are parents of school-aged children in 
locating child care; expanding availability of care through use of 
resource and referral programs to quality affordable options both on 
and off DOD installations; and, whenever possible, supporting the 
needs of their personnel for hourly care and preschool programs by 
expanding the use of facilities and programs other than the Child 
Development Centers. 

Exceptional Family Member Program: 
The Exceptional Family Member Program (EFMP) is a mandatory program 
for all active duty servicemembers with eligible family members. The 
program identifies family members with special medical and/or 
educational needs, documents the services they require, and takes 
those needs into consideration during the personnel assignment process 
Additionally, DOD policy allows (but does not require) the military 
services to provide family support services specifically for 
exceptional family members at family centers on military installations 
with an EFMP.When the family centers provide support services for 
exceptional family members, the assistance generally includes 
providing information about and referrals to programs and services 
that can accommodate an exceptional family member. 

Youth Programs: 
Youth programs are a comprehensive series of planned and self-directed 
activities and events responding to the recreational, developmental, 
social, physiological, psychological, cultural, and educational needs 
of eligible youth. Youth programs are intended to focus on five core 
areas: character development and leadership development; education 
support and career development; health and life skills; the arts; and 
sports, fitness, and recreation. 

Discount Shopping: 

Commissaries: 
Active duty servicemembers, their dependents, and retirees can 
purchase discounted grocery items at more than 280 commissaries 
worldwide. Because commissaries sell food and household items free of 
local sales tax and at cost, plus a 5-percent surcharge to help defray 
operational expenses, customers can save more than 30 percent on their 
purchases compared to commercial supermarkets. 

Exchanges: 
Active duty servicemembers, their dependents, and retirees may 
purchase a variety of goods and services at 1,522 military exchanges 
worldwide. Exchanges are similar to department stores, selling 
apparel, footwear, household appliances, jewelry, cosmetics, food, and 
other merchandise. Some exchanges offer gas stations, florist shops, 
optical shops, fast food restaurants, and liquor stores. 

Family Support Services: 

Deployment and Mobilization Support: 
Deployment and mobilization support programs help servicemembers and 
their families prepare for and cope with the challenges associated 
with mobilization, remote assignments, and deployments. Programs 
address a range of issues that may arise prior to, during, and upon 
return from deployments. Programs may include briefings on available 
support services; free telephone, video electronic mail, and 
teleconferencing calls; and benefits such as a free oil change for the 
family's personal vehicle. Upon return from deployment, workshops may 
be held to help members and their families readjust to life together. 

Family Advocacy Programs: 
Family Advocacy Programs (FAPs) are designed to address prevention, 
identification, evaluation, treatment, rehabilitation, follow-up, and 
reporting of family violence. FAPs consist of coordinated efforts 
designed to prevent and intervene in cases of family distress, and to 
promote healthy family life. 

New Parent Support Program: 
The New Parent Support Program is a standardized prevention program 
using an intensive, voluntary, home visitation model developed 
specifically for expectant parents and parents of children from birth 
to 3 years of age to reduce the risk of child abuse. The Healthy 
Parenting Initiative is a part of the New Parent Support Program that 
is described as a user-friendly, diverse set of materials to help 
military parents with young children increase their parenting 
effectiveness, and to inform parents about topics related to parenting 
in the context of deployment, relocation, and dangerous work, as well 
as general parenting information. 

Personal Financial Management Programs: 
Personal Financial Management Programs are conducted by trained 
counselors who provide personal and family financial planning 
education, information services, and assistance, including but not 
limited to, consumer education, advice and assistance on budgeting and 
debt liquidation, retirement planning, and savings investment 
counseling. 

Relocation Assistance Programs: 
The Relocation Assistance Programs provide the information and 
services necessary to support DOD personnel and their families who are 
undergoing a permanent change of station. The programs provide pre-
move destination information, relocation counseling, and settling-in 
services. Typical programs address information on the shipment and 
storage of household goods, financial planning, permanent change of 
station entitlements, and child care. A special Web site provides 
information about more than 300 military installations. The services 
may offer additional seminars and programs tailored to members' needs. 
Such programs include information seminars for spouses and new 
military families and the loan of household items for use prior to the 
arrival of personal household goods. 

Employment Assistance Program: 
The Employment Assistance Program provides career related services 
such as assessments, career counseling, resume preparation services, 
job guidance services, seminars, and personalized career assistance on 
career research, and is available to military spouses. 

Transition Assistance Program: 
The Transition Assistance Program provides services to departing 
military members to help them adjust to civilian life and obtain jobs. 
Services include pre-separation counseling, individual transition 
planning, employment assistance, excess leave and permissive temporary 
duty, and relocation assistance for personnel overseas. In 2001, DOD 
launched a Web site that offers courses on conducting job searches, 
writing resumes, and using the Internet to find jobs. 

Leave: 

Annual Leave: 
Members accrue leave at the rate of 2-1/2 days per month of active 
service, excluding certain specified periods. Leave accumulated in 
excess of 60 days is lost at the end of a fiscal year, although 
current law permits members to keep up to 75 days (until September 30, 
2013). Other exceptions authorize a member to maintain more than 60 
days of leave as of the end of a fiscal year, several of which involve 
circumstances during which it is unlikely that leave will be used. 

Other Leave: 
Members may be eligible for other forms of leave, including: 
Convalescent Leave; Education Leave of Absence; Graduation Leave; 
Public Holidays. 

Other: 

Adoption Expenses: 
Federal law authorizes reimbursement for qualifying adoption expenses 
for eligible members. Members may be eligible for a maximum of $2,000 
per child, not to exceed $5,000 per calendar year. 

Legal Assistance: 
Eligible servicemembers and their families can receive free legal 
advice and assistance from judge advocates or civilian attorneys for 
many personal, civil legal matters. 

Privileges at Military Facilities (Morale, Welfare, and Recreation): 
Servicemembers and their families have access at installations to 
morale, welfare, and recreation programs. These programs include 
fitness centers, golf courses, movie theaters or free movies, 
automotive skills development, crafts and hobby programs, guest 
quarters, swimming pools, enlisted clubs, game rooms and arcades, 
coffeehouses, intramural sports, bowling centers, libraries, rifle and 
pistol ranges, and outdoor recreation. 

Space Available Travel: 
Space Available Travel permits military members and their families to 
travel free,[Footnote 53] under certain conditions, on military 
transportation, space permitting. For example, family members may use 
this benefit to accompany an active duty servicemember on immediate 
family emergencies and on house-hunting trips related to a pending 
permanent change of station move. 

Mass Transportation Benefit Program: 
Active duty servicemembers may be eligible to receive benefits to 
offset commuting costs associated with using public transportation. 

Veterans Affairs - Home Loan: 
Members may obtain guaranteed home loans from the Department of 
Veterans Affairs in order to purchase homes, make home improvements, 
and refinance home loans. 

Indirect Deferred Compensation: 

Retirement: 
Military members presently are covered by one of three separate 
retirement systems, depending on when they joined the military. All 
three systems require no contribution from the servicemember, and 
ordinarily allow retirement after 20 years of service.[Footnote 54] 
Benefits received are based on years of service and salary. 

Retiree Dental and Health Care: 
Members retiring from active duty are eligible to reenroll in TRICARE 
and pay an annual enrollment fee to maintain continued health 
coverage. In addition, DOD offers other benefits including a voluntary 
Retiree Dental program and a pharmacy program. 

Survivor Benefit Plan: 
The Survivor Benefit Plan provides members who reach retirement 
eligibility an opportunity to leave a portion of their retired pay to 
their survivors. 

Thrift Savings Plan (Uniformed Services Plan): 
Servicemembers may contribute a percent of their basic pay into this 
government retirement savings and investment program that offers 
participants the same type of savings and tax benefits that many 
private corporations offer their employees under "401(k)" plans. The 
retirement income that servicemembers receive from their accounts 
depends on the amount contributed during working years and the 
earnings on these contributions. 

Veterans Affairs - Health Care: 
Eligible retirees may enroll in the Veterans Affairs health care 
system. 

[End of table] 

[End of section] 

Appendix III: Sample of a Personal Statement of Military Compensation: 

Personal Statement Of Military Compensation: 

This statement outlines the total value of your military pay, 
allowances and benefits. By making your compensation more "visible," 
this statement could be useful when applying for credit or loans 
(including home loans) from businesses or lending institutions. 
Another way this summary could be used is to help determine whether 
specific civilian employment offers would let you maintain the same 
standard of living you had while serving in the military. Start with 
the Total Direct Compensation on page 1, add the Federal Tax advantage 
from page 2, and then add any additional expense a civilian employer 
would expect you to pay for health and life insurance, retirement 
contributions, etc. This will tell you approximately what level of 
civilian salary you must earn in order to maintain a similar standard 
of living as that provided by your military take home pay. Each 
section of this statement contains an explanation. However, if you 
have any questions, please contact your local pay office. 

Summary: 
A. Basic Military Compensation as of March 2009: $V.00; 
B. Special Pay and Bonuses: $AA.00; 
C. Expense allowances:	$AF.00; 

Total Direct Compensation: $AM.00. 

Added value of Service-estimated indirect compensation: $AO.00; 

Added considerations/programs (Your estimate): 
	
Total Compensation: 

The following information provides more details on the value of your 
personal compensation. Adding the indirect compensation and additional 
considerations to your direct compensation should provide a clearer 
picture of your total military compensation package. 

Direct Compensation As Of March 2009 (Note 1): 

A. Basic Compensation. Describes the basic elements of compensation 
paid to all military members. This includes Basic Pay, the value of 
living in government quarters or receiving Basic Allowance for Housing 
(BAH), and the value of meals furnished or received Basic Allowance 
for Subsistence (BAS). Your basic compensation is: 

Basic Pay: 
Monthly: $.00 J; 
Annual: $.00 K. 

BAH or quarters valued at actual BAH for your location, rank and 
dependency status (see Note 2): 
Monthly: $.00 L; 
Annual: $.00 M. 

BAS	
Monthly: $.00 N; 
Annual: $.00 0. 

Total Basic Compensation: 
Monthly: $.00 U; 
Annual: $.00 V. 

B. Special Pay And Bonuses. Describes pay in addition to Basic 
Compensation for people in certain skills and assignments. As an 
example, Special Duty Assignment Pay is a monetary allowance to 
compensate personnel who serve in designated duties involving the 
performance of extremely difficult duties or duties demanding an 
unusual degree of responsibility. Another example is Foreign Language 
Proficiency Bonus (FLPB); it is a monetary incentive paid to eligible 
and qualified military personnel possessing foreign language 
proficiency. The objective of FLPB is to encourage the acquisition, 
maintenance, and enhancement of foreign language skills vital to 
national defense. 

Special and Incentive Pays: 
Monthly: $.00 W; 
Annual: $.00 X. 

Bonuses: 
Monthly: $.00; 
Annual: $.00 Y. 

Total Special Pay And Bonuses: 
Monthly: $.00 Z; 
Annual: $.00 AA. 

C. Expense Allowance. Some individuals receive allowances to help 
compensate for extra expenses they incur based on the location of 
their duty assignment These include overseas housing allowance (OHA), 
cost of living allowance (COLA) (Note 1) only payable in certain 
areas, family separation allowance (FSA), and clothing replacement 
allowance (CRA). Your total expense allowances are: 

Total Expense Allowances: 
Monthly: $.00 AE; 
Annual: $.00 AF. 

Note 1: Pay items on your March 2009 LES, marital status and 
dependents taken from your personnel records. Annual rates for COLA 
are for 365 days, not 12 times the March rate. 

Note 2: If BAH was not in effect in March 2009, we assumed you 
received quarter's worth about as much as BAH. If you received partial 
BAH, we assumed that the partial BAH and value of quarters together 
roughly equal full BAH. 

Service-Estimated Indirect Compensation: 

Other programs supplement your direct compensation. These have a cash 
value to you in terms of spendable income. They are an important part 
of your compensation and should be considered in adding up your real 
pay value. 

A. Medical Care. As an active duty member, the military provides you 
and your family with comprehensive medical care. TRICARE is the name 
of the Defense Department's regional health care program. TRICARE has 
three health plan options: TRICARE Prime (all active duty are 
automatically in Prime, but family members may also choose to enroll 
in this HMO-type plan); TRICARE Standard (an indemnity plan, formerly 
called CHAMPUS); TRICARE Extra (a Preferred Provider Organization 
plan). Under TRICARE Prime, you will have an assigned military or 
civilian primary care manager who will manage all aspects of your 
care, including referrals to specialists. Prime has no deductibles, 
cost-shares, or co-payments (unless the Point of Service option is 
used) except a nominal co-payment for prescriptions filled at a retail 
pharmacy or through the National Mail Order Pharmacy program. TRICARE 
Standard offers more choice of providers, but requires an annual $150 
deductible/person or $300/family (E-1 to E-4: $50/person, $100/family) 
plus a 20% cost-share for outpatient care and a $15.65/day ($25.00 
minimum) charge for inpatient care. TRICARE Extra offers the same 
benefit as Standard, but when you elect to use a network provider, the 
outpatient visit cost-share is only 15%. Please contact the 
Beneficiary Counseling and Assistance Coordinator at the nearest 
military treatment facility for additional information. The personal 
costs experienced by you or your family will vary depending on the 
TRICARE option you select For more information, visit www.tricare.mil. 

B. Federal Tax Advantage. This represents the amount of additional 
Federal tax you would have to pay if your quarters (BAH), and meals 
(BAS) allowances were taxed. Your tax advantage is based on SINGLE 0 
DEPN(S). P Q R 

Monthly Rate: $.00 S; 
Annual Rate: $.00 T. 

Service-Estimated Indirect Compensation (A + B): 
Monthly Rate: $.00 AN; 
Annual Rate: $.00 AO. 

Additional Considerations (As You Estimate): 

When adding up the total worth of your compensation package, you 
should also consider the many other programs and privileges you have. 
Their worth will be different for each person depending on use. This 
page is presented for you to determine the yearly value/savings you 
estimate each of these programs has been worth to you. 

A. Your Retirement Benefit is a combination of your military pension 
and the Thrift Savings Plan (TSP). 

1) Military Pension. One of the most attractive incentives of a 
military career is the retirement system that provides a monthly 
retirement income for those who serve a minimum of twenty years. There 
are currently, three retirement plans in effect -- Final Basic Pay, 
High-3, and Choice of High-3 or Redux with $30K Career Status Bonus 
(CSB). A description of each follows. Information on all three plans 
is available at http://www.afoc.randolph.af.mil/. Additional 
information on the new High-3 and Redux/$30K CSB choice is available 
at: http://www.defenselinkmil/home/features/2007/EmpRes/index.html. 

Plan: Final Basic Pay; 
Eligible (as determined by DIEUS) (Note	1): Entered service prior to 8 
Sep 80; 
Retired Pay Formula (Notes 2, 3 & 4): 2.5% times the years of service 
times final basic pay; 
Cost-of-Living Adjustment (COLA) (Note 5): Full inflation protection; 
COLA based on Consumer Price Index (CPI). 

Plan: High-3 (Note 6); 
Eligible (as determined by DIEUS) (Note	1): Entered service on or 
after 8 Sep 80 and before 1 Aug 86; 
Retired Pay Formula (Notes 2, 3 & 4): 2.5% times the years of service 
times the average of the highest 36 months of basic pay; 
Cost-of-Living Adjustment (COLA) (Note 5): Full inflation protection; 
COLA based on Consumer Price Index (CPI). 
			
Plan: High-3 Choice; 
Eligible (as determined by DIEUS) (Note	1): Entered service on or 
after 1 Aug 86; or: 
Redux/CSB Choice: Instead of retiring under High-3, members may choose 
to receive a $30,000 (Note 7) "Career Status Bonus" at 15 years of 
service in exchange for agreeing to serve to at least 20 years of 
service and then retiring under the less generous Redux plan
Retired Pay Formula (Notes 2, 3 & 4): High-3: 2.5% times the years of 
service times the average of the highest 36 months of basic pay; Or: 
Redux/CSB option: 2.5% times the years of service, minus one; 
percentage point from the product for each year less than 30 years, 
times the average of the highest 36 months of basic pay. At age 62, 
retired pay is recalculated without deducting the one percentage point 
for each year less than 30, which allows it to catch up to what it 
would have been without the Redux penalty. 
Cost-of-Living Adjustment (COLA) (Note 5): High-3: Full inflation 
protection; COLA based on Consumer Price Index (CPI); Or: 
Redux/CSB option: Partial inflation protection; COLA based on Consumer 
Price Index (CPI) minus 1 percent. At age 62, retired pay is adjusted 
to reflect full COLA since retirement. Partial COLA then resumes after 
age 62. 

Note 1: Date initially entered uniformed service (DIEUS) refers to the 
fixed date the member was first enlisted, appointed, or inducted. This 
includes cadets at the Service Academies, students enrolled in a 
reserve component as part of the Services' senior ROTC programs or 
ROTC financial assistance programs, students in the Uniformed Services 
University of the Health Sciences, participants in the Armed Forces 
Health Professions Scholarship program, officer candidates attending 
Officer Training School, and members in the Delayed Entry Program. 

Note 2: The maximum multiplier is 75 percent times basic pay. 

Note 3: Members should be aware that the Uniformed Services Former 
Spouses Protection Act allows state courts to consider military 
retired pay as divisible property in divorce settlements. The law does 
not direct state courts to divide retired pay; it simply permits them 
to do so. 

Note 4: Retired pay stops upon the death of the retiree unless he or 
she was enrolled in the Survivor Benefit Plan. See "Survivor Benefit 
Plan (SBP)" on page 3 for additional information on this program. 

Note 5: COLA is applied annually to retired pay. 

Note 6: High-3 is a reference to the average of the high three years 
or, more specifically, the high 36 months of basic pay as used in the 
formula. 

Note 7. Effective 28 Dec 01, members may elect one of 5 options to 
receive the $30K CSB: one lump sum payment of $30IC; two annual 
payments of $15K; three annual payments of $10K; four annual payments 
of $7.5K; or five annual payments of $6K. 

(For Retirement-Eligible Personnel) If you were to retire in your 
present grade, your initial gross monthly retired pay would be $.00 AG 
increased annually for inflation. For each year you continue to stay 
on active duty, you will receive an additional 2.5% of your basic pay 
up to a maximum of 75%. Your retirement represents a considerable 
value over your life expectancy. While retired pay stops upon death, 
you can ensure your survivors receive a portion of it by enrolling in 
the Survivor Benefit Plan when you retire (see below). Retired pay 
calculation is for illustration only. It does not consider any active 
duty service commitment or time-in-grade requirement, which may 
preclude your retiring immediately in your present grade. Further, the 
date used to determine years of service in your actual retired pay 
computation (the "1405" date) will be determined by the MPF from paper 
records and could be different than the total active Federal military 
service used in this example. 

2) Uniformed Services Thrift Savings Plan (TSP): You can gain 
additional tax deferred advantages through participation in the TSP. 
You are authorized to contribute up to 100% of your base pay, special 
and incentive pays, and bonuses, up to the annual contribution limits 
identified below. If you perform duty in a designated combat zone, 
your contributions to TSP may be tax-exempt (versus tax deferred) and 
not count against your tax deferred limits. The combination of your 
tax-exempt and tax deferred contributions is limited by the Internal 
Revenue Service to $55,000 for 2009. More information can be found at 
http://www.tsp.cov/. 

Year: 2009 +; 
% of Base Pay: (unlimited); 
Total Annual Tax Deferred Limits: $16,500. 

B. Death And Survivor Programs. If you die on active duty, your 
survivors are eligible for life insurance and other payments. 

1) Serviceman's Group Life Insurance. You may buy life insurance in 
$50,000 increments up to $400,000 at a very low cost. You are 
currently paying premiums for SGLI coverage of $400,000 AU on yourself 
and $.00 AV on your spouse. 

2) Death Gratuity, Va Dependency And Indemnity Compensation (DIC), 
Housing. In the event of your death, your dependents would receive a 
death gratuity payment of up to $100,000 and monthly non-taxable 
Dependency and Indemnity Compensation (DIC) payments (non-taxable) of 
$1,067 for the surviving spouse and an additional $250 for each 
surviving child. DIC is adjusted annually for inflation. More 
information can be found at http://www.vba.va.gov/. In addition, a 
Basic Allowance for Housing (at the rate that is payable for members 
of the same grade and dependency status as the deceased member for the 
area where the dependents are residing) may be paid to the dependents 
of a member of the uniformed services who dies while on active duty 
and shall terminate 365 days after the date of the member's death. 

3) Survivor Benefit Plan (SBP). All pay stops when a member dies. 
However, if you die on active duty, in the line of duty, your 
surviving spouse and children are automatically protected by the SBP--
at no cost to you. The surviving spouse will get an annuity equal to 
the difference between the dependency and indemnity compensation DIC 
payment, paid by the Department of Veterans Affairs, and the SBP 
payment that would be paid if you had been retired on the date of your 
death. In some cases, if it would be beneficial to the family, the 
Secretary of the Air Force may authorize payment of the SBP to the 
children instead of the surviving spouse. To determine the amount of 
the SBP, the maximum applicable rate of retired pay that would be due 
you will be used. The only way retirees can guarantee their survivors 
receive a share of their retired pay is to enroll in SBP before they 
retire. The maximum annuity is equal to 55% of retired pay until the 
spouse attains age 62. Beginning 1 Apr 2009, there will no longer be a 
reduction to the SBP annuity that was originally required when 
surviving spouses attained age 62. The SBP annuity for your survivor 
is adjusted each year by the same percentage increase given to 
military retired pay. Additional information can be found at 
http://ask.afpc.randolph.af.mil. 

C. Pay Growth. Pay raises each year, longevity increases, and 
competitive promotion opportunities. 

D. State/local Tax Advantage. Besides being exempt from Federal taxes, 
your BAH, BAS, and overseas allowances and in-kind housing may be 
exempt from State and Local taxes, depending upon the state you claim 
as a legal residence. Relative to the tax laws of your legal 
residence, this can save you hundreds of dollars each year. 

E. Discounted Services And Benefits. 

1) Commissary. Studies have found that commissary shoppers save an 
average of 31.1% or more on their grocery purchases, amounting to 
about $3,354.00 annually for a family of four. If you spend the 
following, your savings will be approximately: 

Monthly Grocery Purchases: 

Supermarket: $200.00; 
Commissary: $137.80; 
Savings: $62.20; 
% Savings: 31.1%. 

Supermarket: $300.00; 
Commissary: $206.70; 
Savings: $93.30; 
% Savings: 31.1%. 

Supermarket: $400.00; 
Commissary: $275.60; 
Savings: $124.40; 
% Savings: 31.1%. 

Discover your benefit. Find your nearest commissary through the 
locations link at www.commissaries.com. 

2) Army And Air Force Exchange Service (AAFES). Now in our second 
century of service, the Army and Air Force Exchange Service (AAFES) 
remains committed to serving you, the "best customer in the world". 
Your exchange provides products and services to authorized customers 
worldwide and generates reasonable earnings to supplement appropriated 
funds for Army and Air Force morale, welfare, and recreation (MWR) 
programs. Earnings fund new and improved stores with most of the 
profits going to MWR programs — about $272 million in 2007 and more 
than $2.4 billion over the past 10 years. AAFES' shelf prices provide 
you an average of 20 percent overall savings compared to off post/base 
retail operations. While you and your family can enjoy your exchange 
benefit at your home station, in many ways AAFES' greatest value is 
our pledge to "Go Where You Go." Your Exchange currently operates over 
317 stores and fast food outlets in Iraq, Afghanistan and other 
contingency locations, all run by AAFES Associate volunteers. And 
remember, AAFES offers 24/7 convenience through its website 
'www.aafes.com' where you can "Find, Click, and Save." 

3) Federal Long-Term Care Insurance Program (FLTCIP): The FLTCIP is 
the only long term care insurance program sponsored by the Federal 
Government. It is managed by the Office of Personnel Management and 
offered by two insurance leaders--John Hancock and MetLife. It 
provides comprehensive benefits to included home care, informal care, 
and inflation options at competitive group premiums. The FLTCIP helps 
preserve your retirement savings should a long-term care need arise. 
Those eligible for the FLTCIP include all Federal Employees (Uniformed 
Service members), their spouses, adult children (including natural, 
adopted & step), parents, parents-in-law, and stepparents.
Call 1-800-LTC-FEDS (1-800-582-3337) or visit the web site at: 
http://www.LTCFEDS.com. 

4) Education Programs. Members in accredited schools pursuing degree 
programs receive up to 100 percent of tuition costs, up to a maximum 
of $250.00 per semester hour, $4,500 per fiscal year, paid by the 
Government through the Military Tuition Assistance Program. Search 
tools to find military-friendly colleges are on the Air Force Virtual 
Education Center (AFVEC) through the AF Portal. Members who had 
established an account in the Veterans Educational Assistance Program 
(VEAP) by contributing $25-$100 each month or by lump sum payment (up 
to $2700), have a Government $2 for $1 matching contribution for a 
total of up to $8,100. Members must serve on active duty for at least 
181 continuous days, and enlisted for the first time between 1 Jan 
1977 and 30 Jun 1985 inclusive, and signed up prior to 1 Apr 1987 to 
make contributions. Members who elected to participate in the 
Montgomery GI Bill upon entering active duty (after 30 Jun 1985), and 
agreed to payroll reduction of $100 per month for a total of 12 
months, can receive a benefit of $47,556 with yearly increases as 
determined by the consumer price index. 

5) Services Activities. Provide conveniently located, low-cost, 
professionally managed activities and entertainment. You and your 
family members receive significant savings when you participate in 
Services programs such as fitness, libraries, child development and 
youth programs, arts and crafts, auto skills, outdoor recreation 
activities, golf, bowling, clubs, equipment checkout, aero clubs, etc. 

6) Counseling And Assistance Programs. Military members and their 
family members can receive free personal financial management 
counseling, relocation services assistance, transition counseling, 
spouse employment consultation, and assistance from a wide range of 
other services available from Airman and Family Readiness Centers. Air 
Force Aid Society provides zero interest emergency loans, grants, 
education assistance and community enhancement programs to members who 
qualify (total assistance given in 2007 was $19,300,000 in all 
programs). Below are some estimated costs if services were procured in 
the civilian sector: 

Personal Financial Counseling/Education: $250.00; 
Spouse Employment Counseling: $250.00; 
Transition Assistance Services:	$4,200.00; 
Non-medical Counseling:	$100.00. 

7) Legal Counseling. Military members and dependents estimated costs 
if services were procured in the civilian can get free basic estate 
planning, legal counseling and assistance. Below are some estimated 
costs if services were procured in the civilian sector: 

Consultations with an attorney:	$200.00; 
Wills: $250.00; 
Notaries: $5.00; 
Advance Medical Directives: $75.00; 
Client Correspondence: $50.00; 
Powers of Attorney: $50.00. 

8) Space Available Travel. Space available travel for Uniformed 
Services members can provide substantial savings over commercial 
airline fares. Space available travel is defined by DoD policy as a 
privilege (not an entitlement), which accrues to Uniformed Services 
members as an avenue of respite from the rigors of Uniformed Services 
duty. Under one of the categories of space available travel, members 
on leave can travel with one dependent on permissive TDY house hunting 
trips. For additional information on this special privilege, consult 
the AMC Space Available web page at 
http://www.amc.af.mil/questions/topic.asp?id=380. 

9) Tricare Dental Program (TDP). TDP eligibility includes spouses and 
eligible children of active duty members of the Uniformed Services, 
Selected Reserve and Individual Ready Reserve. Additionally, the 
Selected Reserve and Individual Ready Reserve members themselves are 
eligible for the TDP. Enrollees may be treated in both CONUS and 
OCONUS locations. TDP monthly premiums for Selected Reserve members 
and family members of active duty are cost-shared by the Department of 
Defense (DoD) (i.e., the government pays 60% of the premium, sponsor 
pays 40%). The sponsor's monthly premium payment is $11.58 for a 
single enrolled family member and $28.95 for families with two or more 
members enrolled. Basic preventive, diagnostic and emergency services 
are covered at 100%; the plan pays 50%-80% of the cost for certain 
specialized services such as restorations, orthodontics, and 
prosthodontics. Moreover, DoD cost-shares other specialty care 
(periodontic, endodontic, and oral surgery) at a higher percentage for 
E-1s to E-4s. 
(Add this amount to Summary Total on page 1): 
Total: 

Contents: 

V — Monthly BP X 12. 
AA - Includes all Special "Pays". Annual amount paid for Special Pays 
such as FLPP and SDAP, etc. 
Includes all Bonuses. Annual amount paid for Bonuses such as ACIP, 
Medical, Dental, Re-enlistment, enlistment, etc. 

AF - Includes expense allowances such as OHA, COLA, FSA, Annual 
Clothing/CRA, etc. 

AM - Annual total of the entitlements above. 

AO - These figures are the addition of the Medical Amount and the Tax 
Advantage. The Medical amount is from the figures provided by the 
Service (this year 0). The tax advantage is the computed amount of 
what the member would be taxed if all his pay and allowances were 
taxable, based on his marital status and number of dependents. The 
annual amount is the monthly amount multiplied by 12. 

J - The Monthly amount of Basic Pay. 

K - Amount of J X 12. 

L - The Monthly amount of BAH. 

M - Amount of L X 12. 

N - The Monthly amount of BAS. 

O - Amount of N X 12. 

U - Total Monthly amount of BP, BAH, and BAS. 

V - Total Annual amount of BP, BAH, and BAS. 

W - Monthly amount of Special Pays such as FLPP and SDAP, etc. 

X - Annual amount of Special Pays such as FLPP and SDAP, etc. 

Y - Annual amount of all Bonuses paid such as ACIP, Medical, Dental, 
Re-enlistment, enlistment, etc. 

Z - Monthly total amount of Special Pays. 

AA - Annual amount of Special Pays and Bonuses. 

AE - Monthly amounts paid for OHA, COLA, FSA, Clothing/CRA, etc. 

AF - Annual amounts paid for OHA, COLA, FSA, Clothing/CRA, etc. 

P,Q,R - Your W-4 declared marital status and number of exemptions 

S - The actual monthly tax advantage realized by not taxing BAS and 
BAH. 

T - The actual annual tax advantage realized by not taxing BAS, and 
BAH. 

AN - The actual monthly tax advantage realized by not taxing BAS, BAH 
and Medical care. 

AO - The actual annual tax advantage realized by not taxing BAS, BAH 
and Medical care. 

AG - The monthly amount of the member's estimated retired pay (based 
on grade and number of years service). Amount will only
be present if member is over 20 years. 

AU - Amount of SGLI coverage for member (i. e. $400,000.) 

AV - Amount of SGLI coverage for spouse (i. e. $100,000.) 

[End of section] 

Appendix IV: Overview of Studies Comparing Military and Civilian 
Compensation: 

Over the years, there have been a variety of public and private sector 
studies on the parity of military and civilian compensation and the 
role of compensation in recruiting and retaining military personnel. 
Specifically, organizations such as RAND Corporation (RAND),[Footnote 
55] the Congressional Budget Office (CBO),[Footnote 56] CNA 
Corporation (CNA),[Footnote 57] and the Congressional Research Service 
(CRS)[Footnote 58] have compared military and civilian compensation 
and studied the extent to which a pay gap exists between military and 
civilian pay. Although the methodology and results of these studies 
vary, they similarly recognize the complexities of conducting such a 
comparison. The first of these four studies was conducted by RAND, 
which reported in 2002 on the role played by the different components 
of military pay in total cash compensation and how cash compensation 
varies according to rank, service, occupational group, and years of 
service.[Footnote 59] Specifically, RAND found that considerable 
variation existed among the services in the incidence and average 
amounts of non-regular military compensation pays and allowances; 
however, these differences are overshadowed by the similarity in the 
average amount of regular military compensation. 

In June 2007, CBO issued a report in which it discussed common 
problems with comparing the compensation of active-duty enlisted 
personnel to civilian sector pay and benefits.[Footnote 60] 
Specifically, CBO noted that evaluating the comparability of military 
and civilian jobs can be difficult because the extent to which job 
security, autonomy in performing tasks, group solidarity, and other 
intangible rewards are valued, may differ. Further, CBO noted that the 
inclusion of employment benefits further complicates assessments of 
compensation comparability in that (1) qualitative differences between 
military and civilian benefits may be difficult to measure, (2) 
private employers offer a wide variety of non-cash compensation, thus 
making it difficult to identify the "average" civilian benefit 
package, and (3) the cost of providing these benefits may 
significantly differ from the perceived value placed on those benefits 
by an employee. In addition, CBO identified four ways to assess the 
comparability of military and civilian pay, including (1) comparing 
cumulative increases over time in private-sector wages and salaries 
and in military basic pay, (2) comparing levels of military and 
civilian pay, adjusted for people's years of experience and education, 
(3) comparing total compensation including non-cash and deferred cash 
benefits, and (4) comparing military and civilian trends in cash 
compensation--including special pays and bonuses--for selected 
occupations. CBO reported that estimates made using each of the four 
methods suggest that, as of 2006, DOD has achieved its goal to make 
regular military compensation comparable with the 70th percentile of 
civilian earnings. 

A third study was conducted by CNA, which in March 2008 issued a 
report on the findings from its analysis of the comparability of 
civilian and military pay.[Footnote 61] Specifically, the CNA report 
highlighted the complexity of estimating compensation benefits but 
also noted that without the inclusion of benefits, the value of a pay 
comparability study is limited. For example, CNA suggested that 
servicemembers value each benefit differently, depending on their own 
unique needs, interest, and personal circumstances. Furthermore, CNA 
found that it is difficult to analyze the value of such benefits, due, 
in part, to a lack of consistent data on the extent to which benefits 
are utilized. Based on its analyses, CNA concluded that regular 
military compensation compared quite favorably with cash compensation 
of the 70th percentile of civilians and the 80th percentile when three 
select benefits were included. 

In December 2009, CRS also reported on the challenges of military- 
civilian compensation comparisons, similar to those identified in the 
previously mentioned reports.[Footnote 62] Specifically, CRS noted 
that it is difficult to find a common index or indicator on which to 
base a comparison of the dollar values of military and civilian 
compensation because (1) military compensation applies to multiple 
branches of the Armed Forces, whose receiving population and 
taxability vary widely, (2) the various ranks and pay grades of 
military personnel complicate a comparison of compensation within the 
Armed Forces, much less conducting a comparison with comparable 
civilians, (3) with some exceptions, the conditions of military 
service are frequently more arduous than those of civilian employment, 
even in peacetime, for both military personnel and their families, (4) 
comparisons between and the use of different sets of military pay 
compensation statistics can yield very different results, and (5) the 
level of specificity used in a pay comparison can lead to sharply 
differing results. 

[End of section] 

Appendix V: Benefits and Corresponding Utilization Rates Reported in 
DOD's Status of Forces Surveys: 

Benefits represent a significant portion of The Department of 
Defense's (DOD) overall compensation package for active duty 
servicemembers. Valuing benefits from a servicemember's perspective 
presents a number of challenges because, for example, the military 
compensation system includes a large number of pays and noncash and 
deferred benefits. Specifically, to determine how servicemembers view 
some of the benefits DOD provides, we reviewed the results of DOD's 
Status of Forces Survey for Active Duty Servicemembers. That is, we 
looked at self-reported utilization rates of various benefits. Table 6 
provides a list of benefits we reviewed and corresponding utilization 
rates. 

Table 5: Self-Reported Utilization Rates of Various Components of 
Military Compensation: 

Compensation component: Commissary; 
Utilization rate: 90%. 

Compensation component: Exchange; 
Utilization rate: 90%. 

Compensation component: Child care (on-base); 
Utilization rate: 37%. 

Compensation component: Tuition assistance programs for college/higher 
education; 
Utilization rate: 34%. 

Compensation component: Adult continuing education/counseling; 
Utilization rate: 19%. 

Compensation component: Basic skills education; 
Utilization rate: 10%. 

Compensation component: Technical/Vocational programs; 
Utilization rate: 6%. 

Compensation component: DOD-run School; 
Utilization rate: 18%. 

Compensation component: Thrift Savings Plan; 
Utilization rate: 44%. 

Compensation component: Personally visited military health care 
provider; 
Utilization rate: 85%. 

Compensation component: Family member used military health care 
provider; 
Utilization rate: 86%. 

Compensation component: Personally Visited On-Base Military Dentist; 
Utilization rate: 82%. 

Compensation component: Family member used military dental care; 
Utilization rate: 46%. 

Compensation component: Bowling center; 
Utilization rate: 56%. 

Compensation component: Outdoor recreation programs or facilities; 
Utilization rate: 53%. 

Compensation component: Libraries; 
Utilization rate: 46%. 

Compensation component: Community center programs or facilities; 
Utilization rate: 45%. 

Compensation component: Information ticket and tours services; 
Utilization rate: 39%. 

Compensation component: Military lodging program; 
Utilization rate: 38%. 

Compensation component: Do-it-yourself Automotive Facility; 
Utilization rate: 27%. 

Compensation component: Golf course; 
Utilization rate: 26%. 

Compensation component: Recreation programs for deployed 
servicemembers; 
Utilization rate: 18%. 

Compensation component: Arts and crafts skill development programs or 
facilities; 
Utilization rate: 14%. 

Source: DOD's Status of Forces Survey for Active Duty Members. 

Note: These results are from the 2007-2009 Status of Forces Surveys. 
The margin of error ranged from +/-1 to +/-3 percent. 

[End of table] 

[End of section] 

Appendix VI: Examples Comparing Select Military Occupations to 
Comparable Occupations and Limitations of Such Comparisons: 

Comparisons of compensation of select enlisted and officer occupations 
to comparable civilian occupations face many limitations. For example, 
if an occupational comparison approach is to be used to generalize to 
the entire military population, a very detailed, exhaustive, and time- 
consuming comparison of occupations would be needed. However, such 
comparisons of military and civilian occupations are still lacking 
because many military occupations do not have an exact civilian 
counterpart and other characteristics and attributes may not be 
adequately reflected or recognized in this type of comparison because 
of data limitations, as discussed below. Since these, and other 
limitations, would exist, a comprehensive occupational comparison 
would still not answer the question, "Is military pay adequate 
compared to civilian pay or which sector receives more compensation?" 

Furthermore, for the occupations that are being compared, a number of 
assumptions must be made to assign monetary values, for example the 
discount rate used to calculate retirement values. These assumptions, 
while they may be reasonable, produce approximations of values for 
each side of the comparison and these values could significantly 
change if other reasonable assumptions were made. As we discussed in 
other sections of the report, the examples comparing compensation of 
select enlisted and officer occupations do not present the value of 
all components of the compensation system--only those for which we 
were able to assign value during the course of this engagement. 

In addition to the numerous assumptions being made (see table below 
for the specific assumptions we made), there are data limitations that 
cannot be overcome. These limitations prevent one from controlling the 
characteristics of the civilian selected for each comparison. For 
example, we could not identify existing data of civilian earnings by 
the selected occupations that contained a representative sample 
population with demographic information on the sample population. 
Thus, we could not provide earnings data for a civilian within the 
selected occupations that exactly matched the characteristics of 
military personnel to include years of experience, family size, and 
tax filing status. 

Further, it is worth noting that many question whether a military job 
is comparable to a civilian job since the working conditions of 
military personnel may require different risks and levels of 
responsibility, among other differences. From this perspective, 
examples showing occupational comparisons of civilian and military 
compensation, such as that presented in table 7, is somewhat limited 
in its usefulness. As a result, these examples are presented solely 
for illustrative purposes. 

Table 7: Examples Comparing Select Military Occupations to Comparable 
Civilian Occupations (For Illustrative Purposes Only): 

Occupation: Truck driver[G]: Civilian; 
Earnings[A]: $37,270; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $37,270; 
Health care[D]: -$3,692; 
Retirement[E]: $766; 
Commissary[F]: n/a; 
Total benefits: -$2,926; 
Total compensation: $34,344. 

Occupation: Truck driver[G]: E-4, with 4 years, married, filing 
jointly, no other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $24,574; 
Regular military compensation[B]: Housing allowance: $13,524; 
Regular military compensation[B]: Subsistence allowance: $3,533; 
Regular military compensation[B]: Federal tax advantage: $2,459; 
Regular military compensation[B]: Tax advantage: $1,413; 
Total cash: $45,502; 
Health care[D]: $0; 
Retirement[E]: $309; 
Commissary[F]: $2,075; 
Total benefits: $2,384; 
Total compensation: $47,886. 

Occupation: Police: Civilian: 
Earnings[A]: $51,410; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $51,410; 
Health care[D]: -$3,692; 
Retirement[E]: $766; 
Commissary[F]: n/a; 
Total benefits: -$2,926; 
Total compensation: $48,484. 

Occupation: Police: E-4, with 4 years, filing single, no dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $24,574; 
Regular military compensation[B]: Housing allowance: $11,172; 
Regular military compensation[B]: Subsistence allowance: $3,533; 
Regular military compensation[B]: Federal tax advantage: $2,595; 
Regular military compensation[B]: Tax advantage: $1,218; 
Total cash: $43,092; 
Health care[D]: $0; 
Retirement[E]: $309; 
Commissary[F]: $1,131; 
Total benefits: $1,440; 
Total compensation: $44,532. 

Occupation: Automotive service technician/mechanic: Civilian; 
Earnings[A]: $35,100; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $35,100; 
Health care[D]: -$3,692; 
Retirement[E]: $766; 
Commissary[F]: n/a; 
Total benefits: -$2,926; 
Total compensation: $32,174. 

Occupation: Automotive service technician/mechanic: E-4, with 4 years, 
married, filing jointly, no other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $24,574; 
Regular military compensation[B]: Housing allowance: $13,524; 
Regular military compensation[B]: Subsistence allowance: $3,533; 
Regular military compensation[B]: Federal tax advantage: $2,459; 
Regular military compensation[B]: Tax advantage: $1,413; 
Total cash: $45,502; 
Health care[D]: $0; 
Retirement[E]: $309; 
Commissary[F]: $2,075; 
Total benefits: $2,384; 
Total compensation: $47,886. 

Occupation: Fire fighter: Civilian; 
Earnings[A]: $44,260; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $44,260; 
Health care[D]: -$3,692; 
Retirement[E]: $766; 
Commissary[F]: n/a; 
Total benefits: -$2,926; 
Total compensation: $41,334. 

Occupation: Fire fighter: E-4, with 4 years, filing single, no 
dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $24,574; 
Regular military compensation[B]: Housing allowance: $11,172; 
Regular military compensation[B]: Subsistence allowance: $3,533; 
Regular military compensation[B]: Federal tax advantage: $2,595; 
Regular military compensation[B]: Tax advantage: $1,218; 
Total cash: $43,092; 
Health care[D]: $0; 
Retirement[E]: $309; 
Commissary[F]: $1,131; 
Total benefits: $1,440; 
Total compensation: $44,532. 

Occupation: Registered nurse: Civilian; 
Earnings[A]: $62,450; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $62,450; 
Health care[D]: -$3,648; 
Retirement[E]: $1,776; 
Commissary[F]: n/a; 
Total benefits: -$1,872; 
Total compensation: $60,578. 

Occupation: Registered nurse: O-3, with 10 years, married, filing 
jointly, two other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $61,884; 
Regular military compensation[B]: Housing allowance: $19,656; 
Regular military compensation[B]: Subsistence allowance: $2,433; 
Regular military compensation[B]: Federal tax advantage: $3,898; 
Regular military compensation[B]: Tax advantage: $1,830; 
Total cash: $89,701; 
Health care[D]: $0; 
Retirement[E]: $4,679; 
Commissary[F]: $3,280; 
Total benefits: $7,959; 
Total compensation: $97,660. 

Occupation: Civil engineer: Civilian; 
Earnings[A]: $74,600; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $74,600; 
Health care[D]: -$3,481; 
Retirement[E]: $1,602; 
Commissary[F]: n/a; 
Total benefits: -$1,878; 
Total compensation: $72,722. 

Occupation: Civil engineer: O-3, with 8 years, married, filing 
jointly, no other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $60,026; 
Regular military compensation[B]: Housing allowance: $19,656; 
Regular military compensation[B]: Subsistence allowance: $2,433; 
Regular military compensation[B]: Federal tax advantage: $3,898; 
Regular military compensation[B]: Tax advantage: $1,830; 
Total cash: $87,843; 
Health care[D]: $0; 
Retirement[E]: $2,978; 
Commissary[F]: $2,075; 
Total benefits: $5,053; 
Total compensation: $92,896. 

Occupation: Electrical engineer: Civilian; 
Earnings[A]: $82,160; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $82,160; 
Health care[D]: -$2,705; 
Retirement[E]: $1,439; 
Commissary[F]: n/a; 
Total benefits: -$1,266; 
Total compensation: $80,894. 

Occupation: Electrical engineer: O-3, with 6 years, married, filing 
jointly, no other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $57,157; 
Regular military compensation[B]: Housing allowance: $19,656; 
Regular military compensation[B]: Subsistence allowance: $2,433; 
Regular military compensation[B]: Federal tax advantage: $3,898; 
Regular military compensation[B]: Tax advantage: $1,830; 
Total cash: $84,974; 
Health care[D]: $0; 
Retirement[E]: $1,894; 
Commissary[F]: $2,075; 
Total benefits: $3,969; 
Total compensation: $88,943. 

Occupation: Computer and information systems manager: Civilian; 
Earnings[A]: $112,210; 
Regular military compensation[B]: Basic pay: n/a; 
Regular military compensation[B]: Housing allowance: n/a; 
Regular military compensation[B]: Subsistence allowance: n/a; 
Regular military compensation[B]: Federal tax advantage: n/a; 
Regular military compensation[B]: Tax advantage: n/a; 
Total cash: $112,210; 
Health care[D]: -$2,705; 
Retirement[E]: $1,439; 
Commissary[F]: n/a; 
Total benefits: -$1,266; 
Total compensation: $110,944. 

Occupation: Computer and information systems manager: O-3, with 6 
years, married, filing jointly, no other dependents; 
Earnings[A]: n/a; 
Regular military compensation[B]: Basic pay: $57,157; 
Regular military compensation[B]: Housing allowance: $19,656; 
Regular military compensation[B]: Subsistence allowance: $2,433; 
Regular military compensation[B]: Federal tax advantage: $3,898; 
Regular military compensation[B]: Tax advantage: $1,830; 
Total cash: $84,974; 
Health care[D]: $0; 
Retirement[E]: $1,894; 
Commissary[F]: $2,075; 
Total benefits: $3,969; 
Total compensation: $88,943. 

Source: GAO analysis of Bureau of Labor Statistics (BLS), Department 
of Defense (DOD), and CNA data. 

Note: Compensation is presented in 2008 constant dollars. Some totals 
may not add due to rounding. 

[A] Earnings include pays and production bonuses. These data are the 
median earnings figure for the occupation from the BLS Occupational 
Employment Statistics. The experience level of the civilian worker is 
not known; therefore, it is unknown if the median earnings correspond 
to the years of service of the selected military scenario. 

[B] For each of the components of regular military compensation, the 
value is calculated by using the demographics of the military 
personnel selected for comparison. While location is a factor that 
determines the value of the basic housing allowance, the scenario was 
calculated using the average basic allowance for housing for 
continental U.S. locations. In addition, special and incentive pays 
are not included in the analysis due to the difficulty of determining 
whether or not all service military specialties within a select 
occupation group were entitled to a special or incentive pay. 

[C] The Federal Insurance Contributions Act (FICA) tax advantage is 
not defined as being a part of regular military compensation. FICA is 
included under tax advantage for the purpose of visual presentation. 

[D] The health care value is based on CNA's differential analysis of 
what it would cost for a civilian to obtain similar health care as 
what is offered by DOD. These numbers are calculated based on years of 
experience for the civilian equivalent of an enlisted and officer. We 
note that this number is based on an aggregate assumption about 
employer-sponsored health care. However, a more accurate estimation of 
the value of health care would have taken into account that employer- 
sponsored health care most likely varies by occupation. 

[E] The retirement value is based on CNA's analysis of retirement for 
years of experience for enlisted and officer and their civilian 
counterparts. 

[F] The value of the commissary benefit is based on a DOD analysis of 
savings by family size. According to DOD, the estimates provided may 
underestimate the value of commissary savings because non-food items 
were not included in the Defense Commissary Agency's original 
calculations. 

[G] The full standard occupational classification for truck driver, 
according to BLS, is "Truck Driver, Heavy or Tractor Trailer." 

[End of table] 

In order to compare pay and benefits for civilians with pay and 
benefits of enlisted and officers in comparable occupations, we 
identified criteria for selection of occupations based on factors such 
as ability to crosswalk a military occupation to a civilian 
occupation, military occupations with a large population based on 
percentage of force, and inclusion of some military critical 
specialties. We selected four enlisted occupations and four officer 
occupations. We reviewed existing data on the active duty force by 
primary military occupation to confirm the size of these populations. 

Using a crosswalk of military occupations--prepared by DOD's Defense 
Manpower Data Center (DMDC)--to the standard occupational 
classification system used by the Bureau of Labor Statistics (BLS), we 
identified the various service-specific occupations codes that 
crosswalked to the select occupations. Next, we identified large 
groups of personnel by rank and years of service within these 
occupational groups, through queries provided by DMDC of the Active 
Duty Strength file. We selected the personnel defined by rank and 
years of service with the largest distribution to calculate the 
military scenario compensation. In addition, the DMDC queries included 
information on the number of dependents of these personnel. We made 
assumptions that married personnel would file taxes jointly. Using 
this information, we calculated basic pay, basic housing allowance, 
and basic allowance for subsistence using information contained in the 
2008 Selected Military Compensation tables prepared by DOD's 
Directorate of Compensation. DOD provided the values for the federal 
income tax advantage[Footnote 63] (i.e., the value of allowances for 
housing and subsistence not being subject to income tax) and 
additional FICA tax advantage for each of the military personnel 
scenarios. Although special and incentive pays are part of cash 
compensation, we did not make assumptions about entitlement that could 
be generalized to all service military specialties within a select 
occupation. 

For civilian cash compensation within a select occupation group, we 
used BLS's Occupational Employment Statistics to obtain median 
earnings. These figures include pay and production bonuses. However, 
the Occupational Employment Statistics does not contain demographic 
information on civilian employees. For this reason, we were unable to 
include salary information that matched the age, education, and 
experience of the military personnel included in the study. For other 
data on civilian compensation included in the comparison, we included 
information that matched the years of service of the military 
personnel. 

In order to include values for health care and retirement for 
civilians and military with similar years of experience, we included 
values calculated by CNA from a 2008 commissioned study to compare 
military and civilian compensation packages. We converted the 2006 CNA 
values into 2008 dollars. For military retirement, we inflated using 
the percentage increases to basic pay in 2007 and 2008. For civilian 
retirement, we adjusted by increases in the 2007 and 2008 ECI for 
salaries. Finally, civilian health care expenditures were adjusted 
using the percentage increase in 2007 and 2008 in the medical care 
expenditure category of the Consumer Price Index for All Urban 
Consumers. We note that we reviewed CNA's methodology and found it to 
be reasonable. However, we did not verify the calculations underlying 
CNA's estimates of value. Finally, to include the value of the benefit 
to servicemembers for the commissary, we used DOD calculations of 
savings based on family size. We reviewed DOD's methodology and found 
it to be reasonable. However, we did not verify the calculations 
underlying DOD's estimates of value. 

[End of section] 

Appendix VII: Reasonableness of Using the Employment Cost Index to 
Adjust Basic Pay Annually and Use of Employment Cost Index as an 
Approach to Compare Military and Civilian Compensation and Its 
Shortcomings: 

The Employment Cost Index (ECI), a nationally representative measure 
of labor costs for the civilian economy, is used by businesses and 
other organizations to, among other things, adjust wage rates to keep 
pace with competitors; and while it has it strengths and weaknesses, 
it is generally reasonable to use the measure to adjust basic pay. 
However, comparing changes over time in the ECI with changes over time 
in the rates of basic pay does not show whether there is a difference 
or "pay gap" in military and civilian compensation, because among 
other things, the analysis assumes that basic pay is the only 
component of compensation that should be compared to changes in 
civilian pay. 

ECI Is Generally Reasonable to Adjust Basic Pay Annually but 
Shortcomings Exist When Comparing Increases in Basic Pay and Changes 
in the Employment Cost Index for Civilian Compensation: 

Using the ECI for the purpose of determining the amount of the annual 
basic pay raise has both strengths and weaknesses but is generally 
reasonable to use to adjust basic pay annually. On the one hand, the 
ECI is a nationally representative measure of labor costs for the 
civilian economy. The ECI is also produced in a consistent fashion, 
using a transparent methodology.[Footnote 64] In addition, the ECI 
provides separate data series for different occupational groups, 
industries, and geographic areas.[Footnote 65] On the other hand, the 
ECI is not tailored to the specific segments of the civilian economy 
most relevant to DOD--for example, those occupations and industries 
that the military services primarily compete with for workers. 
[Footnote 66] Also, because the ECI is constructed from data collected 
from surveys of employers, it does not provide data about the 
demographics of the civilian workforce--such as workers' education and 
experience--both of which are important factors that are often taken 
into account when setting employee pay. Nevertheless, we have 
previously reported that creating more tailored indices would be 
challenging.[Footnote 67] Further, none of the experts whom we 
consulted, nor any reports published by other organizations that we 
reviewed during the course of our review, suggested that any other 
existing indices or data series would provide more useful data than 
what are already provided by the ECI.[Footnote 68] 

The ECI is a measure of changes in wages and employer costs for 
employee benefits.[Footnote 69] Created in the mid-1970's, the ECI is 
published quarterly by the Bureau of Labor Statistics and is part of 
the Bureau's National Compensation Survey program, which provides 
measures of occupational wages, employment cost trends, and benefit 
incidence and detailed plan provisions. Closely watched by economists, 
the ECI is one indicator of cost pressures that could lead to price 
inflation for finished goods and services. Organizations use the ECI 
to inform their decision making in a variety of ways--for example, to 
adjust their wage rates to keep pace with what their competitors pay 
or to adjust wage rates in collective bargaining agreements. The 
federal government also uses the ECI to inform its decision making. 
For example, Congress included a provision in the National Defense 
Authorization Act for Fiscal Year 2004 tying the annual basic pay 
raise to the ECI.[Footnote 70] That law contains a provision allowing 
the President to propose alternative pay adjustments to Congress, in 
certain circumstances, if the President deems the standard increase 
required by the law to be inappropriate. 

Shortcomings of Comparing Annual Increases in Basic Pay and the 
Employment Cost Index: 

While the ECI helps inform a variety of decision making with regard to 
setting compensation, comparing changes in the ECI with changes in the 
rates of basic pay does not show whether there is a difference, or 
"pay gap," in compensation between the two, nor does it facilitate 
assessing how military pay rates compare with what civilian employers 
provide. For example, one approach that is sometimes taken to 
illustrate a "pay gap" between basic pay and civilian pay is to 
compare the annual increase in basic pay with the corresponding 
increase in the ECI. Using this approach, the reported "pay gap" for 
each year is the cumulative difference between the two increases, 
expressed as a percentage of the cumulative increases in basic pay. 
However, conducting this type of analysis does not reveal a "pay gap" 
because it assumes that basic pay, which servicemembers receive on a 
regular basis,[Footnote 71] is the only component of compensation that 
should be compared to changes in civilian pay. While basic pay 
represents the largest portion of compensation, servicemembers may 
also receive basic allowance for housing and basic allowance for 
subsistence.[Footnote 72] By excluding such elements, such an analysis 
simply illustrates how a portion of military compensation--basic pay--
and civilian compensation has changed over time. Because the ECI is a 
measure of the change in the cost of labor, a more appropriate and 
analogous comparison of changes in military compensation to the ECI 
uses regular military compensation-
-which includes basic pay, the allowances for housing and subsistence, 
and the federal tax advantage. 

The Congressional Budget Office, in a 1999 report[Footnote 73] 
discussing what the "pay gap" between military and civilian 
compensation means, described three other shortcomings of conducting 
such an analysis. Specifically, the Congressional Budget Office noted 
that such an analysis (1) selects a starting point for the comparison 
without a sound analytic basis, yet the results of the pay-gap 
calculation are very sensitive to changes in that starting point, (2) 
does not take into account differences in the demographic composition 
of the civilian and military labor forces, and (3) compares military 
pay growth over one time period with a measure of civilian pay growth 
over a somewhat different period. 

In undertaking a similar analysis as described above, but comparing 
the total average change in military compensation--a weighted average 
of basic pay and the housing and subsistence allowances--to the ECI, 
different results may be obtained. However, the shortcomings discussed 
above also apply to such an analysis. The key difference is that 
comparing the total average change in military compensation to the ECI 
includes the three major components of military cash compensation, all 
of which have changed over time. 

[End of section] 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov: 

Acknowledgments: 

In addition to the individual named above, Ronald S. Fecso, Chief 
Statistician; Joseph Applebaum, Chief Actuary; Marion A. Gatling, 
Assistant Director; Lori A. Atkinson; Stacy M. Bennett; Margaret 
Braley; Timothy J. Carr; Patrina Clark; Grace A. Coleman; Patrick M. 
Dudley; K. Nicole Harms; Wesley A. Johnson; Susan C. Langley; Kimberly 
Mayo; Tom McCool; Charles W. Perdue; Jennifer L. Weber; and John Van 
Schaik made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, Military Compensation: Comparisons with Civilian Compensation 
and Related Issues, [hyperlink, http://www.gao.gov/products/NSIAD-86-
131BR] (Washington, D.C.: June 5, 1986). 

[2] Regular military compensation is the sum of basic pay, allowances 
for housing and subsistence, and the federal income tax advantage-- 
which is the value a servicemember receives from not paying federal 
income tax on allowances for housing and subsistence. It was initially 
constructed by the Gorham Commission in 1962 as a rough yardstick to 
be used to compare military and civilian-sector pay. 

[3] 37 U.S.C. §1008. 

[4] Pub. L. No. 111-84, §606 (2009). 

[5] CNA was commissioned by the 10th QRMC to conduct a study comparing 
military and civilian compensation. The results of the study were used 
by the QRMC. Typically, discussions of the military tax advantage 
focus on the savings that arise because the allowances for housing and 
subsistence are not subject to federal income tax. However, CNA's 
study also included an estimation of the expected annual tax advantage 
that servicemembers receive because they do not pay state and FICA 
taxes on their housing and subsistence allowances and can often avoid 
paying any state income taxes depending on their state home-of-record. 

[6] We did not verify the calculations underlying CNA's reported 
estimates of the value of these select benefits. 

[7] For example, when applying discount rates to value retirement 
benefits, the rate assumed affects the value of the retirement. To 
illustrate, if a person is to receive $100 in 20 years, the present 
value of that money is: $3.65 using 18 percent, $10.37 using 12 
percent, or $31.18 using 6 percent. 

[8] CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007). 

[9] According to senior officials in the Office of the Under Secretary 
of Defense for Personnel and Readiness' Directorate of Compensation, 
DOD has not yet adopted the 10th QRMC's recommendation of including 
benefits in comparing military and civilian compensation; thus, 
setting the department's overall compensation goal at the 80th 
percentile of comparable civilian employees. 

[10] 38 U.S.C. §§ 3301-3324. 

[11] GAO, Military Personnel: Reserve Compensation Has Increased 
Significantly and Is Likely to Rise Further as DOD and VA Prepare for 
the Implementation of Enhanced Educational Benefits, [hyperlink, 
http://www.gao.gov/products/GAO-09-726R] (Washington: D.C.: July 6, 
2009). 

[12] GAO, Military Personnel: DOD Needs to Improve the Transparency 
and Reassess the Reasonableness, Appropriateness, Affordability, and 
Sustainability of Its Military Compensation System, [hyperlink, 
http://www.gao.gov/products/GAO-05-798] (Washington, D.C.: July 19, 
2005). 

[13] GAO, Military Personnel: DOD Needs to Establish a Strategy and 
Improve Transparency over Reserve and National Guard Compensation to 
Manage Significant Growth in Cost, [hyperlink, 
http://www.gao.gov/products/GAO-07-828] (Washington, D.C.: June 20, 
2007). 

[14] Employer-sponsored benefits are benefits provided to employees 
that are provided by the employer. Examples include pension plans, 
health insurance, and paid leave. 

[15] In general, a person is considered an employee if he or she is 
subject to another's right to control the manner and means of 
performing the work, while independent contractors are individuals who 
obtain customers on their own to provide services (and who may have 
other employees working for them) and who are not subject to control 
over the manner by which they perform their services. Unlike 
employees, independent contractors are generally responsible for 
paying their own Social Security and Medicare tax liabilities and do 
not pay unemployment taxes because they are not eligible to receive 
unemployment insurance benefits. 

[16] For example, while workers' wages are taxed immediately, employer 
contributions to a qualified retirement plan and investment earnings 
on their contributions are typically not included when determining the 
employee's income tax liability until benefits are received. The 
employer is also entitled to a current deduction (within certain 
limits) for contributions to a tax-qualified plan even though 
contributions are not currently included in an employee's income. As 
another example, federal tax policies contain significant tax benefits 
for employer-sponsored health insurance and medical care. 

[17] GAO, Employee Compensation: Employer Spending on Benefits Has 
Grown Faster Than Wages, Due Largely to Rising Costs for Health 
Insurance and Retirement Benefits, [hyperlink, 
http://www.gao.gov/products/GAO-06-285] (Washington, D.C.: Feb. 24, 
2006). 

[18] Defined benefit pension plans typically offer periodic payments 
over a specified period beginning at retirement age. 

[19] Benchmark jobs are standard jobs used for making pay comparisons. 
Pay data for benchmark jobs are generally readily available from the 
surveys firms such as the consulting firm cited above. 

[20] Unlike an average, or the mean, having data on the median level 
of pay--that is the middle item in a group of data, in this case pay, 
when the data are ranked in order of magnitude (from smallest to 
largest)--prevents data from being skewed by a small number of 
employers paying extremely high or extremely low salaries. 

[21] In the case of the active component, "accessions" are individuals 
who have actually begun their military service, as distinguished from 
those who have signed a contract to serve but who have not yet begun 
their service. Accession for active component personnel usually occurs 
when an individual is "shipped" to basic training. 

[22] The obligated term of service for enlisted personnel is 
determined by their initial enlistment contract. The normal service 
obligation incurred is 8 years, which may be service in the active 
component, reserve component, or some combination of both. 

[23] According to an official in the Office of the Under Secretary of 
Defense for Personnel and Readiness' Directorate of Accession Policy, 
enlistment bonuses range from a total amount of $1,000 to $40,000 and 
can be divided up over several years with a maximum of up to $10,000 a 
year, which means that a servicemember receiving a $40,000 bonus would 
receive $10,000 over a 4 year period. In addition, the military 
services vary in the amounts they award. For example, the Navy bonuses 
range $4,000 to $40,000, the Marine Corps ranges from $5,000 to 
$25,000, the Army from $1,000 to $40,000, and the Air Force gives 
$13,000 for a 6 year enlistment in a select skill. 

[24] These estimates come from DOD's regular military compensation 
calculator, available at [hyperlink, 
http://militarypay.defense.gov/mpcalcs/Calculators/RMC.aspx]. 

[25] DOD has more than 60 different special and incentive pays 
including reenlistment bonuses and hazardous duty pay, as well as 
other pays for specific duties like aviation and medical, and 
incentives for servicemembers to take certain assignments among 
others. Because most compensation is determined by factors such as 
tenure, rank, location, and dependent status, these special pays and 
allowances are the primary monetary incentives DOD has for 
servicemembers other than promotions and are used to influence certain 
behaviors such as extending a service contract or filling critical 
shortage occupations. 

[26] The combat zone tax exclusion allows servicemembers to exclude 
compensation received for active service--including basic pay, 
bonuses, special pays, and allowances but excluding pensions and 
retirement pay--for each month during which any portion is spent 
serving in a designated combat zone or hospitalized as a result of 
wounds, disease, or injury incurred while serving in a designated 
combat zone. Servicemembers who serve in a combat zone or have a 
related hospitalization for a minimum of 1 day are eligible to receive 
the combat zone exclusion for the respective month. Enlisted members' 
exclusions are not limited. Officers can exclude up to the maximum 
enlisted amount received. 

[27] Additionally, DOD has estimated that a single servicemember saves 
about $1,131 annually, while a couple with no dependents saves about 
$2,075 annually. 

[28] The Thrift Savings Plan (TSP) is a federal-government-sponsored 
retirement savings and investment plan. The Floyd D. Spence National 
Defense Authorization Act for Fiscal Year 2001 extended participation 
in the TSP, which was originally only for federal civilian employees, 
to members of the uniformed services. The TSP offers the same type of 
savings and tax benefits that many private corporations offer their 
employees under so-called "401(k)" plans. The retirement income 
received from an employee's TSP account will depend on how much money 
is contributed to the account during working years and the earnings on 
those contributions. 

[29] See CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007); RAND Corporation, A Look At Cash Compensation for Active-Duty 
Military Personnel (Arlington, VA: 2002); and James E. Grefer, CNA, 
Comparing Military and Civilian Compensation Packages (Alexandria, VA: 
March 2008). 

[30] In general, defined benefit plans promise a specified benefit 
based on years of service, annual earnings, and a payment formula 
chosen by the firm. Under defined contribution plans, employers and 
employees or both make periodic contributions into individual accounts 
for each worker and benefits are based on the size of these accounts 
at retirement. 

[31] The Employee Retirement Income Security Act of 1974, commonly 
known as ERISA, protects the interest of employees in private sector 
employee plans. It requires employers who offer retirement benefits to 
vest their employees under one of two vesting schedules. Under the 
first schedule, the employee's benefits are fully vested after five 
years of service. Alternatively, an employee's benefits may vest under 
a graded vesting schedule--for example, employees under this schedule 
vest to 20 percent after 3 years and an additional 20 percent every 
year thereafter until, at seven years of service, the employee is 
fully vested at 100 percent. These two private sector vesting 
schedules are unlike the military retirement system which requires 20 
years of service to vest. 

[32] A discount rate is based on the economic assumption that a dollar 
today is more valuable than a dollar received in the future. When 
calculating the value today, or the present value, a future dollar 
amount is "discounted" or its value is reduced by a discount rate, 
which is an interest rate. 

[33] CNA used discount rates of 10.5 percent for officers and 12.5 
percent for enlisted. While the study acknowledges there is much 
uncertainty surrounding the estimation of personal discount rates, it 
justifies using lower rates for several reasons, including that its 
review of the literature suggested that people apply lower discount 
rates to retirement savings than they do for high-risk decisions 
inherent in experimental games, which some studies used to estimate 
discount rates, or for severance packages, which some of the studies 
used to estimate discount rates. For example, John T. Warner and Saul 
Pleeter, "The Personal Discount Rate: Evidence From Military 
Downsizing Programs," American Economic Review (March 2001) also 
estimated discount rates for servicemembers and found them to range 
from 10.4 to 18.7 percent for officers and 35.5 to 53.6 percent for 
enlisted. 

[34] These assumed personal discount rates should not be confused with 
the interest rate projections that DOD uses to calculate how much it 
costs to set aside for future retirement benefits. These rates are 
based on the cost of borrowing to the government, and tend to be lower 
than the personal discount rates used by CNA and other researchers who 
have studied how future compensation is valued by servicemembers. If 
these rates were used, the value of retirement would be much higher 
than CNA's estimate. 

[35] While DOD's retirement plan represents a significant cost to the 
department, according to the department's Office of the Actuary, only 
15 percent of enlisted and 47 percent of officers become eligible to 
receive retirement. 

[36] While CNA did not attempt to value retiree health care as it did 
retiree pension, DOD's Office of the Actuary is required by statute to 
review valuations of the fund and to report periodically at least once 
every four years, to the President and Congress on the status of the 
fund. The board is required to include recommendations for changes 
that, in the Board's judgment, are necessary to protect the public 
interest and maintain the Fund on a sound actuarial basis. For 
example, the board estimates that about $5,700 should be set aside to 
fund retiree health care for each servicemember in fiscal year 2011. 
This amount is based on a number of assumptions including but not 
limited to the cost of health care for current retirees, health care 
cost trends and interest rate projections that DOD uses to calculate 
how much it costs to set aside for future benefits. 

[37] [hyperlink, http://www.gao.gov/products/GAO-05-798]. 

[38] CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007). 

[39] There are various data sets available that present information on 
the civilian labor force. For example, the Current Population Survey 
and American Community Survey are surveys of households that contain 
information on respondents' labor market activities. These surveys 
provide data on the demographic characteristics (e.g., age, sex, race, 
and educational attainment) of individuals who are surveyed. However, 
because survey respondents who are employed are classified into 
hundreds of occupations, the number of respondents will be large 
enough to permit a statistically meaningful analysis only for selected 
occupations. As another example, the BLS Occupational Employment 
Statistics program is a survey of employers that collects information 
on a larger number of employees, permitting meaningful analysis of 
wages and benefits for particular occupations. However, it does not 
provide any demographic data on the individuals in these occupations. 

[40] The ECI is a nationally representative measure of labor cost for 
the civilian economy and measures changes in wages and employers' 
costs for employee benefits. 

[41] According to senior officials in the Office of the Under 
Secretary of Defense for Personnel and Readiness' Directorate of 
Compensation, the department has not yet adopted the 10th QRMC's 
recommendation of including benefits in comparing military and 
civilian compensation; thus setting the departments overall 
compensation goal at the 80th percentile of comparable civilian 
employees. 

[42] According to 2005 and 2007 GAO reports, about half of active duty 
compensation costs are comprised of benefits compared to about 18 
percent in the private sector and about 33 percent for federal 
civilian employees (see [hyperlink, http://www.gao.gov/products/GAO-05-
798] and [hyperlink, http://www.gao.gov/products/GAO-07-828]). 
Similarly, in 2004 CBO estimated the cost of active duty compensation 
and also found that benefits comprise over half of the costs of 
compensation. 

[43] Noncash and deferred benefits include such things as health care 
for the servicemember and dependents, Veteran Affairs health care and 
compensation and pensions for veteran members after leaving the 
service, retirement payments and health care for military retirees or 
those who become disabled. In addition, military members and their 
families can receive subsidized child care, they can use fitness 
center and recreational facilities, and they can use the commissaries 
and exchanges. 

[44] If the various military benefits are valued at zero by 
servicemembers, this raises the question of why the government is 
spending money on benefits that are valued at zero by servicemembers. 
Further, only considering cash in comparisons of military and civilian 
compensation suggests that other benefits--those other than cash--have 
a zero value. 

[45] CBO, Statement of Matthew S. Goldberg: Long-Term Implications of 
the Department of Defense's Fiscal Year 2010 Budget Submission 
(Washington, D.C.: Nov. 18, 2009). 

[46] A sum of money received in the future is worth less than the same 
sum received today. To estimate the value of a future sum in terms of 
today's money, analysts use discounting. Specifically, in discussing 
discount rates for the military a 2001 study by John T. Warner and 
Saul Pleeter, The Personal Discount Rate: Evidence from Military 
Downsizing Programs, found that servicemembers in general had a high 
discount rate, which would imply a lower value for deferred benefits. 

[47] GAO, Human Capital: Effective Use of Flexibilities Can Assist 
Agencies in Managing Their Workforces, [hyperlink, 
http://www.gao.gov/products/GAO-03-2] (Washington, D.C.: Dec. 6, 
2002); Military Personnel: Observations Related to Reserve 
Compensation, Selective Reenlistment Bonuses, and Mail Delivery to 
Deployed Troops, [hyperlink, http://www.gao.gov/products/GAO-04-582T] 
(Washington, D.C.: March 24, 2004); Military Personnel, DOD Needs More 
Effective Controls to Better Assess the Progress of the Selective 
Reelinstment Bonus Program, [hyperlink, 
http://www.gao.gov/products/GAO-04-86] (Washington, D.C.: Nov. 13, 
2003); and Military Personnel: DOD Needs More Data to Address 
Financial and Health Care Issues Affecting Reservists, [hyperlink, 
http://www.gao.gov/products/GAO-03-1004] (Washington, D.C.: Sept. 10, 
2003). 

[48] According to DOD, it has relied on the practice of using certain 
pay flexibilities to target and fill critical specialties since 1973. 

[49] Strategic Analysis, Recruiting an All Volunteer Force: The Need 
for Sustained Investment in Recruiting Resources--An Update 
(Arlington, VA: December 2009). 

[50] James E. Grefer, CNA, Comparing Military and Civilian 
Compensation Packages (Alexandria, VA: March 2008). 

[51] Pub. L. No. 110-181, § 661, 662 (2007). 

[52] CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007). 

[52] $400,000 in the case of a member, $100,000 in the case of a 
member’s spouse, and $10,000 in the case of a member’s child. 

[53] Under certain circumstances, a fee is sometimes assessed for 
space available travel. For example, baggage over a certain size, 
weight, or quantity will result in an additional fee. 

[54] Enlisted personnel in the Navy and Marine Corps with more than 20 
and less than 30 years of creditable service, are not eligible for 
voluntary retirement. Instead, at 20 years of service they may request 
a transfer to the Fleet Reserve or Fleet Marine Corps Reserve, and 
draw “retainer pay” which is computed on the same formula as 
retirement pay. When a Fleet Reserve or Fleet Marine Corps Reserve 
member completes 30 years of service they are then transferred to the 
“retired list” and receive retirement pay. 

[55] RAND Corporation, A Look at Cash Compensation for Active-Duty 
Military Personnel (Arlington, VA: 2002). 

[56] CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007). 

[57] James E. Grefer, CNA, Comparing Military and Civilian 
Compensation Packages (Alexandria, VA: March 2008). 

[58] CRS, Military Pay and Benefits: Key Questions and Answers 
(Washington, D.C.: Dec. 29, 2009). 

[59] RAND Corporation, A Look at Cash Compensation for Active-Duty 
Military Personnel (Arlington, VA: 2002). 

[60] CBO, Evaluating Military Compensation (Washington, D.C.: June 
2007). 

[61] James E. Grefer, CNA, Comparing Military and Civilian 
Compensation Packages (Alexandria, VA: March 2008). 

[62] CRS, Military Pay and Benefits: Key Questions and Answers 
(Washington, D.C.: Dec. 29, 2009). 

[63] The tax advantage calculation includes adding the amount of 
earnings that would have to be added to the member's net pay if the 
basic allowance for housing and basic allowance for subsistence were 
taxable in order to equal the same net pay. 

[64] There are adjustments in the methodology from time to time. For 
example, in 2006 the Bureau of Labor Statistics changed the way the 
ECI classified industries and occupations to reflect new industry and 
occupational classification systems and rebased the index, among other 
changes. 

[65] To be included in the ECI, employees in occupations must receive 
cash payments from their employer for services performed and the 
employer must pay the employer's portion of Medicare taxes on that 
individual's wages. Agricultural workers, federal employees, the 
military, the self-employed, and individuals who set their own pay 
(for example, owners, major stockholders, and partners in 
unincorporated firms), among others, are excluded. 

[66] In 2007, Congressional Budget Office pointed out that the sample 
of civilian worker included in the ECI survey is older than military 
personnel, on average, and more likely to have a college degree. 

[67] See GAO, Poverty Measurement: Adjusting for Geographic Cost-of- 
Living Difference, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-95-64] (Washington, D.C.: March 9, 
1995) and Developing a Consumer Price Index for the Elderly, 
[hyperlink, http://www.gao.gov/products/GAO/T-GGD-87-22] (Washington, 
D.C.: June 29, 1987). In the 1990s, researchers at RAND Corporation 
developed a more tailored index called the defense employment cost 
index; however, the index did not gain the acceptance of the Office of 
Management and Budget or Congress and was never adopted by DOD. 

[68] The Congressional Budge Office pointed out that Bureau of Labor 
Statistics publishes a variant of the ECI called the employer costs 
for employee compensation (ECEC) index, which is based on the same 
underlying surveys of employers as ECI, but also reflects changes in 
the occupational mix in the civilian economy more frequently. However, 
it is not clear whether ECEC would represent an improvement over ECI 
for the purpose of setting military pay, because it shares the same 
limitations as ECI discussed here. 

[69] Specifically, the ECI is an employment-weighted measure of change 
in the cost of employing a fixed set of labor inputs. Labor inputs 
measured by the ECI include wages, salaries, and employer costs of 
employee benefits. The ECI relates to payroll periods, including the 
12th of March, June, September, and December, and the data are 
presented as index levels as well as 3-month and 12-month changes. 

[70] Pub. L. No. 108-136, § 602 (2003), codified at 37 U.S.C. § 1009. 
The law requires that all eligible servicemembers' monthly basic pay 
be increased annually by the annual percentage increase in ECI, except 
for fiscal years 2004, 2005, and 2006 when the law required that 
servicemembers' basic pay increase be equal to the annual percentage 
increase in the ECI, plus an additional one half percentage point. 

[71] The amount of basic pay that a servicemember receives depends on 
the member's pay grade and length of service. 

[72] The housing and subsistence allowances are paid to all 
servicemembers not living in military housing or eating in military 
dining facilities or using field rations. 

[73] CBO, What Does the Military "Pay Gap" Mean? (Washington, D.C.: 
June 1999). 

[End of section] 

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