The United States can’t sustain the pay, allowances, retirement and health benefits that the all-volunteer military force and their families enjoy, according to a study by the Defense Department’s Reserve Forces Policy Board.

“The all-in cost of the all-volunteer force is one of the time-ticking bombs that could explode our defense capabilities if not dealt with responsibly,” said Arnold Punaro, chairman of the board, a former top staffer on the Senate Armed Services Committee and retired Marine Corps major general.

Punaro said one reason that it’s difficult to reform the system is because “the Pentagon does not know what the all-volunteer force really costs.” His board study says the Defense Department has not included in its calculations all ancillary, life-cycle costs such as family housing, education, day care, commissaries and health care.

They are the equivalent of what industry would consider deferred compensation, Punaro said.

Under today’s system, military personnel who retire after 20 years of service receive at least 50 percent of their salaries for the rest of their lives, indexed for inflation. Another 2 percent is added for every service year over 20. They also get lifetime health insurance under TRICARE, the military’s HMO-style plan whose current annual fee for families is $520.

“The military (active duty) retirement system is arguably the best retirement deal around. Unlike most retirement plans, the Armed Forces offer a pension (technically a “reduced compensation for reduced services) with benefits that start the day you retire, no matter how old you are,” according to Military.com.

Punaro adds these facts:

“First of all, 80 percent of those who join the military and serve honorably never get one nickel in retirement benefits or health care after they leave active duty. For the 17 percent that make it to a non-disability retirement, 75 percent of them retire at career 1/8year 3/8 23 or less (why wouldn’t they).”

One result, he adds, is “we now have 2.4 million retirees and only 1.4 million active duty.” Adding to the cost, he says, “We have 9 million beneficiaries of the $52 billion-a-year health-care bill of which 5.5 million are retirees and their dependents.”

The 1970 Nixon-appointed commission that recommended moving from the draft to an all-volunteer force said the program “would be unsustainable over time if it did not end the 20-year cliff vesting retirement, the up and out promotion system and change the pay and compensation from time in grade to skills and performance.” The all-volunteer program started in 1973, and 40 years later none of those changes has occurred.

Change will depend on the Military Compensation and Retirement Modernization Commission, which Defense Secretary Leon Panetta called for last year and Congress established in the fiscal 2013 Defense Authorization Bill. President Barack Obama signed the bill on Dec. 31.

Its task is “to make recommendations to modernize such systems in order to ensure the long-term viability of the All-Volunteer Force.”

There will be nine members, one appointed by Obama and two each by the Senate majority and minority leaders and House speaker and minority leader. A four-month deadline was set to appoint the members. The law prohibits any member from being “employed by a veterans service organization or military-related advocacy group or association,” a move meant to prevent conflict of interest.

Panel recommendations are supposed to come within two years. Five months after the commission is established, the president is to give it a set of principles for modernization. Four months later, the defense secretary is supposed to provide specific recommendations. Six months after that, the commission is to report its findings and recommendations to the president and to Congress.

To protect current members of the armed forces and retirees, the commission cannot change the monthly amount of retirement pay to less than what they would have received under current programs, nor their eligibility date.

Here’s a tough issue for the commission: relating retirement compensation to combat or non-combat service.

On Friday I discussed budget problems before a group of Marine Corps majors and lieutenant colonels at the Command and Staff College at Quantico, Va. Many of them had seen – or would see – service in Iraq and/or Afghanistan.

I noted that, historically, probably fewer than 20 percent of them would spend 20 years in the service and qualify for retirement pay and benefits. I then asked how they felt about those who don’t see combat but serve 20 or more years in office jobs. There was a nervous rustle when I mentioned the Marine Corps Band, “The President’s Own,” most members of which never went to boot camp and who can serve their entire military career in Washington.

According to the band’s website, 40 of its musicians have 19 or more years of service, almost all with the band. That’s nearly double the potential retirement rate for combat and other units. The director, Col. Michael Colburn, and his executive and operations officers have each been with the band for more than 24 years.

Shouldn’t a retirement plan have a pay differential between combat and non-combat service since today most enlisted personnel who fight almost never stay in for 20 years? Should there be a totally different retirement system?

It remains to be seen whether Congress will have the nerve to significantly revise a system that the country can no longer afford.

Walter Pincus covers defense and foreign policy for The Washingon Post and writes the Fine Print column.

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