What reservists need to know about blended retirement

KEESLER AIR FORCE BASE, MS, UNITED STATES

11.18.2016

Story by Master Sgt. Jessica Kendziorek 

403rd Wing

KEESLER AIR FORCE BASE, Miss. -- Are you thinking about your retirement? Or are you one of those people who are in the middle or just beginning your military career? For either it is important to know there are changes coming to the military retirement system that will begin Jan. 1, 2018.

A new retirement system, the Blended Retirement System, was created in the Fiscal Year 2016 National Defense Authorization Act to blend the traditional legacy retirement and a defined contribution retirement.

“Eighty percent of our troops leave service before 20 years are up,” Defense Secretary Ash Carter said. “And in the current system, if they leave before 20 years, they leave with nothing. (BRS) creates a choice that opens up opportunity and allows us to be similar to other (civilian) institutions and therefore competitive with them in getting people to join us and stick with us.”

Now you ask, “What does this mean for me?”

Here are the highlights.

The new retirement system is a blend of the old and the new. You will still receive the traditional style of retirement, but you will also be getting a defined contribution retirement plan, or Thrift Savings Plan.

The current plan requires an active component member to complete 20 years of service and a reserve component member to complete 20 “qualifying” years plus attain the age of 60. Then the member will receive an annuity of 2.5 percent times the number of years served times the highest 36 months average of the base pay at retirement.

With the new plan, upon retirement active duty members will receive an annuity of two percent times the number of years served times the highest average of 36 months base pay. Once they reach retirement age they will also receive their TSP funds. Reserve members receive the same benefits but must attain the age of 60 before payment will begin.

Okay, now you are asking, “How does the Thrift Savings Plan work?”

In a nutshell, whatever percentage you contribute, the Department of Defense will make up to 4 percent additional matching contributions, giving you a 10 percent total on your retirement savings.

There is, however, one thing to keep in mind when choosing what to contribute to your TSP.

While the DOD will automatically give you one percent of your basic pay after 60 days of service, the matching contributions will not start until the third year and will continue through 26 years of service. But the good news here is that after completing 2 years of service you are fully vested and it is yours to keep. It will go with you if you leave military service. But remember, for you to receive a higher percentage, you also have to contribute a percentage of your base pay.

So right about now you are asking, “Is this going to affect me?”

For those serving the military, whether active, Guard or Reserve as of Dec. 31, 2017, you are grandfathered into the current retirement system, no one will be automatically moved to the new blended retirement system.

However, there are some military members that have options, those member include the active duty members who entered military service between Jan. 1, 2006 until Dec. 31, 2017 and the reservists and guardsmen with fewer than 4,320 retirement points as of Dec. 31, 2017. They will have the option to stay in the original retirement system or switch to the new blended retirement system. Those who want to switch to the new blended retirement system must make the decision before Dec. 31, 2018.

For those individuals who join a military service branch on Jan. 1, 2018 and after, they will automatically be enrolled in the blended retirement system.

For more information on the blended retirement system you can visit the Department of Defense, military compensation website at http://militarypay.defense.gov/BlendedRetirement/ and check out the links for the introduction to the blended retirement and the infographics for both the active and reserve components.

• Date Taken: 11.18.2016
• Date Posted: 11.18.2016 15:04
• Story ID: 215207
• Location: KEESLER AIR FORCE BASE, MS, US