A new retirement system for the Uniformed Services known as the Blended Retirement System will go into effect next January and is useful because it would allow service members who previously had not qualified for full retirement to receive benefits.
Figures indicate that about 81 percent of military service members leave without any retirement benefit. The new system would decrease those numbers.
Under the National Defense Authorization Act for fiscal year 2016 (amended FY 2017), service members who joined after 2006 but before Jan. 1, 2018 will have the choice of whether to stay with the existing legacy military retirement system (commonly known as the High-3 system) or opt into the new BRS. Specifically, active-duty service members with fewer than 12 years of service as of Dec. 31, and Reserve component service members with less than 4,320 points will have until Dec. 31, 2018 to decide to remain in the current system or opt into the BRS.
Service members who rejoin active duty and still have less than 12 years of service will have 30 days to choose to remain in the High-3 or to opt-in to the BRS.
Under the High-3, service members needed to serve 20 years to receive pension payments, which made retirement benefits unavailable to everyone. The new BRS allows service members to separate at any time and have an existing portable retirement fund through thrift savings program, government contribution and earnings.
Service members who have already retired or who have transferred to the retired Reserve component are not eligible to opt into the BRS.
Similarities under both systems include each provide an automatic government TSP contribution of one percent of a service member’s basic pay, as well as service members are eligible for government matching TSP contributions.
The High-3 requires 20 years of service and sets a defined annuity benefit at 2.5 percent times years served times retired pay base.
The BRS retains the traditional defined benefit annuity, but adjusts the years of service multiplier from 2.5 percent to 2.0 percent for calculating monthly retirement pay. The Department of Defense will contribute 1 percent of a service member’s basic pay to their TSP after 60 days of entering service and will match the service member’s contributions (up to an additional 4 percent when he or she contributes at least 5 percent) at the start of the third year of service.
According to a March article published in the “Military Times,” under the current retirement plan, an E-7 who retires after 20 years in 2017 would receive $26,842.80 annually, along with cost-of-living allowances. Under BRS, because of the percentage drop from 2.5 to 2 percent, that same E-7 who retires after 20 years would receive $21,474.24 annually.
But, BRS encourages retirement savings and includes a continuation pay provision to encourage service members to continue military service at the mid-point of their career. For instance, an active-duty service member who reaches 12 years of service and commits for an additional four years will be eligible for a cash incentive. The payment will be two-and-a-half months of basic pay for the active-duty member and half a month’s basic pay for the Reservist.
BRS would allow a service member to get full retirement when eligible or opt to get a lump-sum benefit at retirement. If the lump-sum option is chosen, the service member will get a reduced monthly retirement check until age 67.
This new system increases the likelihood of a service member obtaining retirement benefits. Currently, under High-3, only 19 percent of active-duty and 14 percent of Reserve components qualify for benefits. With BRS, an estimated 85 percent of all service members will get retirement benefits.
Those who leave after only two years will keep TSP savings, DoD contributions and any earnings.
Service members who opt into the BRS will begin receiving automatic matching contributions effective the first pay period after opting in. The BRS Opt-in Course is mandatory by Dec. 31 and is available on the Joint Knowledge Online at http://jko.jten.mil. Soldiers, Airmen and Sailors will use MyPay, Coast Guardsmen will use Direct Access and Marines will use Marine Online.
Those who joined before 2006 will remain in the current retirement system.
The only service members who will be automatically enrolled in BRS are those who enter the military on or after Jan. 1, 2018.
For others, the opt-in period for BRS begins on that date and concludes Dec. 31, 2018.
Information about BRS is available at http://militarypay.defense.gov/BlendedRetirement/.
The DoD’s military pay website offers a comparison calculator between the two retirement plans at http://militarypay.defense.gov/Calculators/BRS/.
Once a decision has been made about which retirement system to select, the decision is irrevocable.
The DoD has no preference about which system a service member selects, but wants each to receive the right compensation and benefits.
(Editor’s note: Information for this article was obtained from Department of Defense sources including military pay, Blended Retirement System and Military OneSource websites, as well as from “Military Times”).