Updated 4 Feb 2017 with more information and links.
The Department of Defense (DoD) is rolling out a new Blended Retirement System (BRS) on January 1, 2018. At the base, the BRS is similar to how the current (or its new name, the legacy system) works. There’s a group of military Service members these changes do not affect. But for the rest, a decision will need to be made. Will you stay in the legacy system or go into the BRS? There’ll be differences in how the legacy retirement works compared to the BRS. Because of this, I’ve put together an overview of the present system compared to the Blended Retirement System to help you navigate the changes.
The Blended Retirement System
If you joined the service before January 1, 2006, or have more than 12 years of service, the BRS doesn’t apply to you. There’s no decision you’ll need to make—you’re grandfathered into the current/old system. However, if you’re in a leadership position, you need to be spun up on the BRS regardless, to help those you supervise.
If you join the service after December 31, 2018, the BRS will be your retirement. There’s no decision you’ll need to make—you will be enrolled automatically into the new system/BRS.
If you joined military service after Dec 31, 2005, but before January 1, 2018, you will be required to decide to remain in the old/legacy system or to enroll into the BRS.
Today’s military retirement system is a defined benefit plan. The benefit is a monthly annuity, better known as a pension. After serving 20 years, active duty members receive monthly payments based on a formula. This calculation comes from multiplying 2.5% times the average of your highest three years of base pay. And then multiply by the number of years served. (NOTE: For reserve, divide your number of points by 360 to get your years served.) Also, there’s the option to sign up for the Thrift Savings Plan (TSP), the government’s version of a 401k. The TSP allows you to save money in a tax-advantaged account for your retirement. In the old system, the Service members are responsible for signing up for the TSP on their own with no contributions or match from the government.
New Blended Retirement System
The BRS is made up of three components. The first part is a combination of an automatic 1% contribution and matching contributions to a Service members TSP. The second is continuation pay, a cash payment if the member commits to at least three more years of service. The pay is meant to encourage Servicemembers in critical jobs to stay in longer. The third part is still a pension after 20 years of service. With the new annuity, it will be the same formula as the old system but instead of 2.5% multiplier use 2%. In the BRS, sign-up for the TSP will be automatic for those joining the military after January 1, 2018.
If you have less than 12 years of service on December 31, 2017, and want to sign up for the BRS, the earliest you can do so is January 1, 2018. But, once you’ve made the decision to opt into the new retirement system— it’s a done deal. Opting in can’t be changed later, it’s irrevocable. Once an opt-in to the BRS is selected, the Servicemember will start to receive automatic the contribution and match they qualify for, starting the first pay period after opt-in.
For those making a choose between the new and old retirement system, have no fear, the Department of Defense knows members need to know all the facts before making an educated decision. Because of that, they’re rolling out educational courses and financial calculators, at the beginning of 2017.
Blended Retirement System Resources
From the DoD.
Frequently Asked Questions here.
Here’s a visual breakdown for active duty.
And a visual for Reserve component
DoD News breakdown