Funding the Military Retirement System: A Private Sector Investment Approach to Accrual Accounting

摘要

The military retirement system is frequently a candidate for budget cuts. Most cost-cutting proposals and legislative actions have been aimed at the benefit structure of the retirement system. However, Public Law 98-94, enacted on October 1, 1984, addresses the funding aspect of the military retirement system. The law, which established accrual accounting and a military retirement fund, ensures immediate recognition of the future costs of the retirement system when considering any force size changes and pay changes for DOD. To pay for these future costs, the retirement system partially relies on the investment of excess retirement funds in special interest Treasury securities. This research concerns the investment aspect of accrual accounting, in particular, the possibility of investing the military retirement fund in the private sector instead of the within the government. To accomplish this macro-level research, it is necessary to determine representative private investment plans. The real interest returns of the plans, as determined by several factors such the management of the fund, inflation, and debt implications, are compared to the real return currently assumed by the DOD office of the Actuary for the special issue securities.