FRA NewsBytes April 24 2015

FRA Newsbytes 04/24/2015

FRA Newsbytes 04/24/2015

In this issue:
Defense Authorization Markup Creates New Military Retirement System
Appropriations Subcommittee Approves Military Construction and VA Budget
Veterans Status Bills Introduced
CFPB Takes Action against Military Allotment Processor’s Hidden Fees
Internet Explorer Must Be Updated for DFAS
FRA Appoints National Vice President

Defense Authorization Markup Creates New Military Retirement System
The House Armed Services Committee, Military Personnel Subcommittee marked up and approved its section of the FY 2016 Defense Authorization bill (H.R. 1735), which makes drastic changes to the retirement system for future military retirees. The subcommittee adopted the first recommendation of the Military Compensation and Retirement Modernization Commission (MCRMC) final report that creates a “blended” retirement system. The current defined benefit plan for 20 or more years of service would be replaced by smaller defined benefit plan (from 40 to 50 percent of base pay). It also adds a new mandatory defined contribution plan known as a Thrift Savings Plan (TSP), which provides a one percent employer contribution and an employee contribution unless the service member opts out. Any employee contributions would be matched by the employer up to five percent of pay. The plan would also provide a bonus determined by the military branch at 12 years of service if the service member signs up for four more years. It has been estimated that a future E-7 retiree who serves 20 years and lives until age 85 will lose more than $260,000 in benefits compared to the same E-7 who retires today. These lost benefits would be shifted to pay for benefits for service members who leave the military before completing 20 years of service.

FRA believes that this shift will provide an incentive for service members to leave before they complete 20 years of service. FRA surveyed its membership in February 2015 on this issue and found that 80 percent opposed this recommendation. For more information on this provision, members can read the April 23, 2015 Military Update on the FRA website.

Other provisions in the Subcommittee mark include:

  • Rejecting the administration’s proposed TRICARE fee increases and increases in pharmacy co-pays for retirees under age 65;
  • Creating a unified medical command to provide health care savings by eliminating duplicate efforts by each service branch;
  • Requiring DoD and VA to establish a joint uniform formulary for prescription drugs;
  • Rejecting the administration’s reductions to the active duty annual pay increase (2.3 percent vs. 1.3 percent), Commissary subsidies and BAH;
  • Consolidating the number of Reserve Component status category authorities by which Reservists can be mobilized from 30 to 6;
  • Reviving active duty financial literacy education;
  • Recognizing Reserve Component members as veterans if they are entitled to retirement benefits; and
  • Improving the sexual assault prevention program.

The full House Armed Services Committee (HASC) is scheduled to markup the bill (H.R. 1735) next week. Members are urged to use the Action Center (action.fra.org/action-center) to ask their U.S. Representative not to cut future military retiree benefits to pay for benefits for those who serve fewer than 20 years.
Appropriations Subcommittee Approves Military Construction and VA Budget
A House appropriations subcommittee (MilCon/VA) approved the Military Construction and Department of Veterans Affairs (VA) spending bill that provides $77 billion in spending for military construction and the VA, the first of 12 spending bills. The still unnumbered bill is the first spending bill to be approved by subcommittee, and increases VA spending by six percent over the current budget. The administration’s budget requests a 7.5 percent increase. Most of the variance between the administration’s request and the subcommittee markup comes from the subcommittee’s cuts to the VA’s construction budget. Subcommittee Chairman Congressman Charlie Dent (Penn.) cited the Denver VA hospital construction project, which is far behind schedule and is more than $1 billion over budget. The subcommittee did approve the administration’s request for hiring an additional 770 disability claims processors. The VA asserts that the disability claims backlog has shrunk from more than 600,000 disability claims pending more than 125 days to less than 200,000. The spending bill still has to work its way through the House and Senate in the coming months. Legislators are trying to get back to the “regular order” for approving 12 separate spending bills before the end of the fiscal year (September 30, 2015). The FRA Legislative Team will monitor the legislative process to ensure adequate funding for programs that impact FRA membership.
Veterans Status Bills Introduced
The “Honor America’s Guard-Reserve Retirees Act” has been introduced in both chambers of Congress (H.R. 1384/S. 743), sponsored by Rep. Tim Walz (Minn.) and Sen. John Boozman (Ark.) respectively. These bills grant full veteran status to members of the reserves and the National Guard who have served at least 20 years but have not been called up for active duty. As of now, these brave men and women cannot legally call themselves veterans. FRA supports full veteran status for Reservists with 20 years or more of service, and members are urged to use the Action Center (action.fra.org/action-center) to ask their legislators to support this important legislation.
CFPB Takes Action against Military Allotment Processor’s Hidden Fees
The Consumer Financial Protection Bureau (CFPB) recently announced that it took action against Fort Knox National Company and its subsidiary, Military Assistance Company (MAC), for charging service members millions of dollars in hidden fees. The military allotment processor did not clearly disclose various recurring fees, which could total $100 or more. Under a consent order entered into with the CFPB, Fort Knox National Company and Military Assistance Company will pay about $3.1 million in relief to harmed service members.

The Military Assistance Company (MAC) was one of the nation’s largest third-party processors of military allotments. The military allotment system allows service members to deduct payments directly from their paycheck. The allotment system was created to help deployed service members send money home to their families and pay their creditors at a time when automatic bank payments and electronic transfers were not yet common bank services. Creditors such as auto lenders, installment lenders, and retail merchants have been known in recent years to direct service members to use the system to collect payments straight from service member’s paycheck.

Service members would set up an allotment that transferred a portion of their pay into a pooled bank account controlled by MAC which would then pay MAC a monthly service charge—typically between $3 and $5—to have MAC make monthly payments to a creditor out of the account. On many occasions, however, excess funds amassed in the payment account, often without service members’ knowledge, and MAC charged residual-balance fees against these funds. Service members were unaware of fees because online account information did not include fee charges and, service members received no monthly statements from MAC.

The CFPB alleges that from 2010 to 2014, tens of thousands of service members had their money slowly drained from their accounts. The CFPB has the authority to take action against institutions that violate federal consumer financial laws, including engaging in unfair, deceptive, or abusive practices.

A copy of the administrative consent order is available at http://files.consumerfinance.gov/f/201504_cfpb_regulation-fort-knox-mac-settlement.pdf.
Internet Explorer Must Be Updated for DFAS
The Defense Finance and Accounting Service (DFAS) has announced that effective 21 April 2015, myPay users who access their accounts through the Internet Explorer web browser must have Internet Explorer version 8 or higher in order to access their accounts. Earlier versions do not have the necessary security protocols, and attempts to log on with earlier versions of Internet Explorer will be denied.

For more information go to: http://paycheck-chronicles.military.com/2015/04/16/news-from-dfas/#ixzz3Xsmtdvgr.
FRA Appoints National Vice President
On Friday, April 17, 2015, the FRA Board of Directors appointed Jr. PNP Virgil Courneya to serve for the remainder of the association year as National Vice President (NVP), fulfilling the term of the late Roger Mitchell. He was sworn into office by NP John Ippert on Friday afternoon.