FEDweek

Blended Retirement To Take Effect

On Jan. 1, the military retirement-pay system will undergo its biggest and most significant change in years. The Blended Retirement System (BRS) will take effect, drastically changing the way persons who join the services from that date onward would accrue retirement pay.

Service members who join next year will automatically be enrolled into the Thrift  Savings Plan (TSP)
Persons who joined the service before that date will be grandfathered into the legacy retirement system. However, active-duty service members with fewer of 12 years’ service since their Pay Entry Base Date and reservists and National Guard members with fewer than 43,20 retirement points accrued as of Dec. 31 will have the opportunity to switch to the Blended Retirement System. Persons who want to opt into BRS can do so between Jan. 1 and Dec. 31, 2018.

Under the legacy system, a service member accrues annuity benefits at a rate of 2.5 percent, multiplied by the number of years served. That figure is multiplied again, by the retired pay base amount. Because a person must serve at least 20 years to qualify for retirement pay under the legacy system, only 19 percent of all active-duty and 14-percent of all reserve personnel stay in long enough to collect it.

Under the Blended Retirement System, a service member accrues annuity benefits at a rate of 2 percent, multiplied by years served and multiplied again by retired base pay. While retirement pay is accrued at a lower rate than the legacy system offers, 85 percent of all service members will leave the military with some retirement benefit. For example, those who serve only two years will be able to keep their Thrift Savings Plan savings, plus the matching contributions to their TSPs from the Defense Department, plus any earnings.