Defense Secretary Chuck Hagel is set Monday to recommend a limit on military pay raises, higher fees for health-care benefits and less generous housing allowances to prune billions of dollars in benefits from the defense budget, setting up an election-year confrontation with veterans groups and lawmakers.

Faced with steadily increasing military personnel costs that threaten to overwhelm an ever-tighter budget, Mr. Hagel is also expected to include a one-year freeze on raises for top military brass—a gesture meant to show that the best-compensated leaders also will make sacrifices.

Pentagon officials describe the package of cuts, which will be part of the military's coming budget, as a modest and realistic attempt to save billions of dollars needed to protect other critical portions of U.S. defense spending.

But the approach—which would also place limits on things like support for grocery stores offering discounts to military families—is certain to face fierce resistance from veterans groups that recently defeated a far more modest congressional effort to curb military pay.

"This is a real uphill battle with Congress," said Mieke Eoyang, a former Democratic congressional aide and director of the National Security Program at Third Way, a centrist think tank in Washington.

"God bless [Mr. Hagel] for trying to get a handle on these costs," she said. "But in this political environment, in an election year, it's going to be hard for members of Congress to accept anything that's viewed as taking benefits away from troops."

Pentagon officials say that they recognize the political realities, but emphasize that declining military spending makes trimming costs even more important this year.

"Personnel costs reflect some 50% of the Pentagon budget and cannot be exempted in the context of the significant cuts the department is facing," said Adm. John Kirby, the Defense Department's top spokesman. "Secretary Hagel has been clear that, while we do not want to, we ultimately must slow the growth of military pay and compensation."

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