Some soldiers may be sorry down the road for not signing up for the Blended Retirement System during the “opt in” period that concluded on 31 December 2018. The results of the opt-in, a complex decision with difficult choices, will have researchers examining why more troops did not choose the new system. The answers will certainly impact retention and readiness. One question we might ask based on the early data available is whether soldiers missed out on a good deal.
BRS replaces the present High Three system in which individuals must serve twenty years active or equivalent reserve service to qualify for retirement benefits. BRS offers service members a reduced annuity combined with automatic and government matched deposits to the Thrift Savings Plan (TSP) which individuals can invest in a range of low cost investment funds. In addition, soldiers may take a lump sum distribution on retirement of up to 50% of the discounted value of their retirement in exchange for reduced annuity payments until full retirement age. While not part of BRS, the authorizing legislation also created a mid-career Continuation Pay for service members in which they may receive a minimum of 2.5 times monthly pay as a one-time bonus at mid – career (8 – 12 years of service) up to a maximum of 13 months’ pay, with the specific rate set by the needs of the service. BRS clearly offers soldiers more choice.
So did service members miss a good deal if they did not opt for BRS? The answer is dependent on individual circumstances, as is often the case for financial decisions. But a few broad conclusions can focus our thinking and make sure this new system helps retention over time. For service members who know that life will call them out of the military altogether before the twenty year mark, opt in was clearly the better path. Under BRS, The government contributes 1% of the soldier’s basic pay to an individual TSP account and matches individual contributions up to five percent of basic pay. This translates to an immediate 100% return on service member contributions, with the added benefit that those contributions will grow at compounded rates within a chosen TSP fund. Matching contributions vest immediately, and the 1% automatic contribution vests in as little as two years.