The Military Retirement Fund (MRF) was established in 1984 and accrual accounting procedures were adopted to manage it. Prior to 1984, military retirement was funded on a 'pay-as-you-go' basis, meaning that annual appropriations from general revenues or borrowing were used to cover retirees' pensions. This thesis reviews the developments which led to the establishment of the MRF, the mechanics of the accrual accounting procedures, the procedures followed by Congress in budgeting for the MRF, and the investment plan and the securities chosen for investment of MRF funds. While the Military Retirement Fund and its accrual accounting system are not highly visible components of the DoD budgetary and funding process, their impact on retired military personnel, the DoD budget and the national debt is significant. In addition, the Military Retirement Fund and accrual accounting were instrumental in paving the way for the reform of military retirement benefits in FY 1986. An understanding of this system and the unique problems that it presents provides a valuable contribution to further understanding of the defense budget and its treatment within the congressional budget process

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http://archive.org/details/budgetingndinves1094526401

Lieutenant Commander, United States Navy