TSP

More Marines opted-in to BRS than any other branch. It was the only branch that required personnel to make a choice to either opt in to BRS, or to stay in the legacy system (not just by default).

What if you gave a party and nobody came? That must be how the uniformed services felt when the year-long opt in period for the Blended Retirement System (BRS) ended. Well, it’s not like nobody came, but only about a third of the number of active duty personnel and reservists that were expected to jump to the new system actually did so.

BRS offers a service match (like the one FERS folks get) to TSP participants; at the cost of a military retirement that is 20% less generous than that of what is now called the “legacy retirement system”. Under both systems, military retirement is available after 20 years of active duty service or a certain number of reserve points. Current statistics show that only about 19% of active duty enlistees serve the 20 years necessary for retirement. Only 14% of reservists accumulate enough points to retire.

The legacy system provides 2.5% of salary per year of service and a TSP with no matching contributions. The blended system will provide 2% of salary per year, plus an employer match to the TSP like the one received by FERS civilian employees. It was assumed (you know what they say about that) that the high percentage of uniformed service people who do not stick around long enough to earn military retirement would opt for the Blended Retirement System so that they would have more TSP money to take with them when they left.. After all, who cares what percentage of your salary is used for pension calculation if you’re not going to collect it anyway?

Current enlistees who had fewer than 12 years of service, or any reservist/guard member with fewer than 4,320 points had a one-year long open season (all of 2018) to opt into the new retirement system. Here, in FEDweek’s TSP Investment Report, we ran several articles since the middle of 2017 on the BRS open season. A higher percentage of Marines switched than did members of any other branch. Almost 60% of active duty Marines who were eligible to switch actually did so. When it came to reservists, Marines switched at a rate three times greater than the other services.

Even the Thrift Board, who estimated 500,000 to 750,000 new members, wildly over guessed. The total number of switchers was only slightly over 400,000, and many of those already had TSP accounts.

What did this teach us? It taught us that providing financial education to employees/service members pays dividends. Only the Marines required their members to make a positive choice; they had to either opt into BRS or opt to stay in the legacy system. The other branches allowed members to do nothing; even though doing nothing was, in effect, choosing to remain in the legacy retirement system.