Almost a million servicemembers expected to opt for ‘blended’ retirement

U.S. Army SSG Chad M. Theriault USA Provost Sergeant Senior Enlisted Advisor, HHC USAG Italy, left, gives a gift to U.S Army Master Sergeant Robert Y. Halstead, HHC USAG Italy, during his retirement ceremony at the Darby Community Club, Leghorn Camp Darby, Italy, May 13, 2016. (Photo by Elena Baladelli/released)

In 2018, service members with fewer than 12 years’ service will have the option to opt in to the new BRS, or Blended Retirement System.

More than 740,000 currently serving active duty members and 176,000 Reserve and National Guard personnel are expected to opt in, according to a a “dynamic retention” computer model developed by RAND Corporation.

The new system has three elements: a 401(k)-style component with Defense Department matching funds for entry-level and other service members, a mid-career continuity bonus, and a retirement annuity similar to the one now in place for service members that complete twenty or more years of eligible service.

Those who have served in uniform for fewer than 12 years as of December 31, 2017, will have a choice to stay in the current system or to opt into the new retirement plan, Army Sgt. Maj. Mike Schultz said, and those who enter service after the blended retirement rolls out will automatically be covered by the new modernized retirement system.

The aspects that make the plan “blended” are automatic and matching government contributions in the Thrift Savings Plan, similar to a 401(k) and transferable on leaving service, for service members in the new retirement plan, and retaining lifetime monthly retired pay for those who serve at least 20 years.

The government will automatically contribute 1 percent of a member’s basic pay into the member’s TSP account even if the member contributes nothing. After 24 months of service, the government will match member contributions, dollar-for-dollar, up to the first 3 percent the member contributes and fifty cents per dollar for the next 2 percent the member contributes.

Thus, if a member contributes 5 percent into the member’s TSP account, the government will contribute an additional 5 percent (1 percent automatic plus 4 percent matching), Schultz said. Members who serve at least 24 months and then separate will be able to keep the government contributions and transfer them to a new employer’s retirement plan. For service members that stay in the military for a full career of 20 years or more, the new plan continues to offer monthly retired pay similar to today’s system, although it will be computed based on a length-of-service factor of 2 percent per year, instead of the 2.5 percent per year used in the current system.

“A midcareer bonus is in addition to the TSP account and the 20-year annuity modeled on the current plan,” Schultz said. The DoD will pay a bonus of at least two and a half months’ basic pay (one-half month for reserve and National Guard members not serving in a full-time capacity) to those service members who have served 12 years and who agree to remain in uniform for four more years.

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