Members of Congress and the President are working together to finalize the federal budget and approve a pay raise for service members and federal employees. Within the budget, pay increases for military personnel, in particular, were recently discussed and a substantial increase was approved.

The proposed increase can significantly change the federal budget as well as the finances of most military personnel. Here’s what this proposal means for Congress and service members, and how you can make the most of the increase to your paycheck.  

What Does the Pay Raise Entail?

In early November, members of the House and Senate reached an agreement on a $700 billion defense bill which would provide a 2.4% pay raise for service members as part of the 2018 budget. On average, this proposed military raise will equate to a $575 annual increase for soldiers and a $900 – $1,700 increase for officers.  

The raises are part of the National Defense Authorization Act (NDAA), which is typically proposed and updated by Congress each year. This was a bipartisan agreement proposed by Senate Armed Services Committee Chairman and Senator John McCain (R-AZ) and ranking member Senator Jack Reed (D-RI).

This pay raise for service members comes as a surprise after President Trump approved a 2% 2018 COLA raise for service members earlier this year. It’s important to note that the 2.4% pay raise for service members will replace the initial 2% proposed, not add to it.

What Are the Next Steps to Approve the Pay Raise for Service Members?

While the House and Senate both approve of the pay increase, there are additional approval processes ahead of the proposal before it can go into effect. According to the Military Benefits website, there are two steps that must be completed before the pay raises are finalized:

  • President Trump must sign the NDAA into effect, which is expected to be approved in mid-to-late December. For context, the 2017 military pay raises were approved on Dec. 23, 2016.  
  • Congress must find funding for the raises because they exceed the budget cap.

While the time spent finding funding for the bill and getting it signed might slow down the overall approval process, it is unlikely that the budget will be rejected. However, it is still in the President’s power to limit the pay raises to 2% instead of the more generous offer created by Congress.  

This proposed pay increase is one of the highest since 2010, as most employees receive an average 1% increase annually to account for the average cost of living increase. These pay increases are based on growth in the private sector along with the Bureau of Labor Statistics’ Employment Cost Index.

Pay Disparity Between Military and Civilian Employees Increases

While the pay raise for service members is certainly good news for military personnel, some question whether the increase will create a rift within the federal workforce. The civilian workforce is set to receive a 1.9% federal employee raise in 2018, meaning the average salary growth between the two categories of worker will differ significantly.

Pay changes have been a part of the annual budget review for the past several years, with military members typically receiving a higher pay raise than civilian federal employees. For example, President Obama approved a 2% pay increase for civilian employees in 2009 compared to the 3.4% military pay increase approved by the House and Senate Armed Services Committees that year.

According to FedSmith, military personnel have received higher raises than civilian employees in five of the past ten years between 2007-2017. Civilian members have never received a higher raise than military members. This is because military personnel are perceived as having a more dangerous occupation than civilian workers, especially in times of war or years with multiple active conflicts across the world.

Advocates for pay parity believe civilian federal employees work hard and deal with many of the same living expenses as military personnel. There are multiple proposals and bills in Congress advocating equal pay raises for service members and civilian employees who dedicate their careers to the government.

Both Republican and Democratic officials have proposed different raise levels for military and civilian employees, making this an individual vote, not a party-based decision.

Pay Raises Mean It’s Time to Review Your Finances

If you’re a member of the military who is expected to receive a pay raise in 2018 or a civilian federal worker who is also seeing a change in your financial situation, consider calling setting up time with a MyFEDBenefits specialist to discuss your financial situation.

We can review your options and look for ways to make the most of your pay raise so you’re invested and properly saving for retirement.

Any time you get a pay raise, it’s important to review your savings and retirement plans. Contact us today to set yourself up for a comfortable future.  Contact us now. 

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