A very critical report by the State Comptroller reveals alarming findings about increases in pensions for soldiers retiring from the career army. In a long chapter in the report dealing with pension arrangements in Israel, State Comptroller Judge (ret.) Yosef Shapira relates how IDF chiefs of staff have distributed benefits to permanent army soldiers being released, increasing their pension payments by up to 20%. These benefits, which are costing billions of shekels a year without no transparency or supervision, are being granted behind the Ministry of Finance's back, with no consideration of the benefits' cumulative effect on the state budget and its actuarial liabilities.
For years, the IDF has been fighting the negative public image of its career personnel, which is primarily a result of the irregular pensions and the young age of the retirees. The State Comptroller's report published today and the main points detailed here will almost certainly force army chiefs and senior Ministry of Defense officials to explain a thing or two to the public under the headings of transparency, sound management, and especially economizing.
The report reveals that in 2013-2015, the Chief of Staff increased pension allowances for army retirees by an average of 8.5% for most retirees from the permanent army, beyond the pension allowance to which they are legally entitled when becoming civilians, based on rates of pension deductions from their salaries during their years of service. According to the State Comptroller's report, over the past three years, this gesture has increased the state's actuarial liability by almost NIS 3 billion. Benny Gantz was Chief of Staff until February 2015, when he was replaced by Gadi Eizenkot.
Shapira found that the Chief of Staff's additions to the pensions for permanent army retirees averaged no less than 8.8% in 2015, and that 64% of IDF retirees received increases of 7% or more from the Chief of Staff - a higher estimate than the one known until now to the Ministry of Finance Accountant General Department and the committee headed by Gen. (res.) Yohanan Locker, which examined the structure of the military budget and wrote a controversial report with recommendations for changing this structure and introducing fundamental reforms in salary structure for the career army by the end of 2017. The findings of this report were not adopted because of the protests it aroused in the army and the Ministry of Defense.
"Hundreds of millions a shekels a year"
The State Comptroller's report now reveals that 46.7% of retirees from the career army in 2015 received pension increases of 8% or more from the Chief of Staff, 29.3% of them received increases of over 10%, 14.9% received increases of over 14%, and 1.4% received increases of over 19%. The State Comptroller stated that 86.3% of permanent army retirees had received some pension increase from the Chief of Staff.
The number of Chief of Staff-granted pension increases began to rise in 2015, compared with 2013, especially those receiving increases of more than 11%. "Only"17.6% of those retiring from the permanent army in 2013 received increases of more than 11%, compared with 23.7% in 2015. "The cumulative budget cost of the increases amounts to hundreds of millions of shekels a year," the State Comptroller wrote. "The additional actuarial liability according to calculations by the Ministry of Finance Accountant General is NIS 2.9 billion. Despite this, we did not find that the IDF personnel department and the Ministry of Finance had taken the defense budget constraints into account in increasing the percentage of pensions."
The State Comptroller added, "We found no calculations of the effect of the percentage increase on the actuarial liability and the cumulative cost in the state budget, which is substantially greater than the annual cost of those retiring that year as calculated by the IDF and the Ministry of Defense. The personnel department had no complete and detailed list of these increases."
Figures reported in the State Comptroller's report show that, as in preceding years, the average retirement age in the IDF in 2015 was 44. The average monthly allowance received by a permanent army soldier who retired at that time was NIS 13,081. At the end of 2015, according to data processed by the State Comptroller's Office, the average age of retirement from the IDF was 47, and the average monthly pension for permanent army retirees rose to NIS 15,025. The defense establishment's proportion of the state's unfunded pension liability climbed to 24% in 2015, compared with 17.8% in 2003.
Even the Chief of Staff did not know
The Locker committee received data from the Accountant General's Department showing that even though the Chief of Staff had the authority to increase the pension percentage for permanent army retirees by up to 19%, most of them received a 6% increase. In the summer of 2014, the report indicates, Accountant General Michal Abadi-Boiangiu told the Locker committee, "The Chief of Staff's increases were given to all the retirees, without exception." In another case, she sent the committee members a document composed jointly by her and the deputy budget director complaining that the Ministry of Finance only had data on pension accumulation percentages for IDF retirees, not the scope of the increases, and that the increases averaged 6%.
Following these findings, the State Comptroller's Office demanded from IDF Personnel Directorate head Brigadier General Hagi Topolanski and Ministry of Defense budget director and IDF chief of staff financial advisor Brigadier General Sasson Hadad the annual cost of the unfunded pensions for all IDF retirees, including data on the amount of the increases granted to retirees by the Chief of Staff. According to the report, the IDF was unable to provide the figures. Last summer, the person responsible for pension payments in the IDF personnel directorate told the State Comptroller's Office staff, "We are unable to produce an exact figure for the budget cost, and we lack precise information on our percentage increases. Clarifying the precise information will require the opening of thousands of retirees' files over the years."
Even Eizenkot was unable to answer the State Comptroller's questions about the extent of the percentage increases for IDF retirees. In his attempt to explain the difficulty in obtaining data, the report quoted him as saying in a discussion with representatives from the State Comptroller's Office, "It was hard to get the data. It wasn't as if I asked for the figures and got them immediately."
The reported included quotations from statements made by Eizenkot last June referring to the State Comptroller's findings revealed to him by the State Comptroller's Office. "The discrepancies you pointed out are correct. There are people responsible in the Personnel Directorate, and they do the calculations. It does not receive the Chief of Staff's stamp, and most of them get 6-9%."
Concerning the finding that a group of permanent army retirees received a 19% increase from the Chief of Staff, the Chief Staff said, "This is a very small proportion, and when they told me about it, I said that it appeared to be unacceptable. I think a 19% supplement is illogical and unacceptable. I regard it as a problem."
Eizenkot also told the State Comptroller's Office that in view of the findings, he was ordering various people in the IDF to bring every case of an increase of over 8% in the unfunded pension of a permanent army retiree to him for individual approval. "In every such case, let them explain to me exactly why more than 8% should be given. I understand that when they did a comparison with civilian concerns, there are other ways of granting ranks and doing things to improve (the amount of pension allowance, Y.A.) in cases in which the expected pension allowance is small."
In addition, the State Comptroller found that the IDF and its Personnel Directory had no list itemizing the percentage increases granted by the Chief of Staff to permanent army retirees. The IDF also does not explain to the retirees themselves the composition of the pension percentage that they will receive; all they give is the final pension rate.
Published by Globes [online], Israel business news - www.globes-online.com - on October 27, 2016
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