When it appears that Congress may not pass the National Defense Authorization Act of a continuing resolution, military retirees sometimes ask, “will we receive our retired pay if the government shuts down?”
The short answer is, yes. Military retired pay and the Department of Defense (DoD) survivor benefit plan will continue to be paid if the government shuts down due to a lapse in appropriated funding. This is because payments from the Military Retirement Fund (MRF) are considered mandatory and are not included in the defense budget.
What is the MRF and how does it assure military retirees that they’ll receive their pay each month?
The MRF is funded through “accrual accounting” in which DoD contributes the cost of being earned by members to the MRF and Treasury contributes the cost of the past service and unfunded liabilities. Under this system, payments to retirees and survivors from the MRF, as well as the Treasury payments in the MRF, are considered mandatory and, as such, are not affected by government shutdowns. However, DoD’s funding contributions to the MRF would be delayed by a shutdown but would be paid once the government is reopened.
The MRF is invested in U.S. Treasury securities that are all backed by the full faith and credit of the U.S. government. They are redeemed to the MRF with interest upon maturity. There is no reason to think that this will not be the case in the future. The assets are part of the U.S. debt. The monies are just as safe as U.S. Savings Bonds or other financial instruments of the Federal government. The monies are required by law to be invested in non-marketable, market-based Treasury securities.
For more detailed explanation of the Military Retirement Fund, read the 2021 military retirement valuation report on the website of the DoD Actuary at actuary.defense.gov.
MARK E. OVERBERG, DIRECTOR, ARMY RETIREMENT SERVICES