A new Center for Naval Analyses study commissioned by the Marine Corps concludes the new Blended Retirement System (BRS) won’t endanger force retention, retirees or the force.
The CNA study also suggests that young career-minded service members who opt into the BRS, to get government-matching of their Thrift Savings Plan contributions, will still have potential career retirement benefits that most civilian peers would envy, according to the Stars and Stripes.
The Department of Defense is also launching educational programs aimed at educating service members on how the plan affects the lifetime take-home income of career personnel. The mandatory opt-in training is available on the common-access-card-enabled Joi
“This is a good news story,” said retired Marine Col. Jeffery Peterson, CNA’s research team leader for fleet manpower operations.
He told Stars and Stripes he had concerns when the CNA study began that the Military Compensation and Retirement Modernization Commission, which designed the BRS, might have used some unrealistic projections of member behavior or growth of TSP savings overtime.
“I was a little skeptical when we started varying a lot of assumptions. I thought we might find some very different things could play out” on changing personal discount rates, opt-in rates, contribution rates or return on investments.
“What we found was, under a wide range of assumptions, their results appear to be pretty stable [and will] keep force profiles looking like they are,” said Peterson. So “if that was the goal, then they found a formula that accomplished it.”
The Fiscal Year 2016 Nation Defense Authorization Act created the new military retirement system blending the traditional legacy retirement pension with a defined contribution to service members’ Thrift Savings Plan account.
The new Blended Retirement System goes into effect on Jan. 1, 2018.
According to military pay talking paper, all members serving as of Dec. 31, 2017, are grandfathered under the legacy retirement system. No one currently-serving will be automatically switched to the Blended Retirement System.
Though they are grandfathered under the legacy retirement system, Active Component Service members with fewer than 12 years since their Pay Entry Base Date, and Reserve Component Service members who have accrued fewer than 4,320 retirement points as of Dec. 31, 2017, will have the option to opt into the Blended Retirement System. The opt-in/election period for the Blended Retirement System begins Jan. 1, 2018, and concludes on Dec. 31, 2018.
All Service members who enter the military on or after Jan. 1, 2018, will automatically be enrolled in BRS, the talking paper reports.
The Blended Retirement System allows members to earn government retirement benefits early in their career and members can take those benefits with them even if they don’t end up retiring from the military … unlike the legacy system.
The study also found that, when fully implemented, the BRS will save the Marine Corps annually $122 million on active-duty enlisted retirement, $22 million on active-duty officer retirement, $1.5 million on reserve enlisted retirement and $400,000 on reserve officer retirement. That’s total annual savings of $143 million off a manpower budget of $14.5 billion.
Service members who leave short of 20 years would be better off under the BRS because the legacy plan provides no retirement benefit, only access to TSP with no government matching. So perhaps the most interesting part of the CNA study for members is a comparison of “cumulative lifetime take-home income” under BRS versus legacy retirement, after 20 years, for enlisted (E-7s) and officers (O-5s).
The new military retirement system is “one of the most significant changes to military pay and benefits that we’ve had over the past 70 years,” said Anthony Kurta, who is performing the duties of undersecretary of defense for personnel and readiness.
It is important for eligible service members to know their options under the legacy and new systems and choose the retirement plan that works best for them and their families, Kurta told Pentagon reporters.
“We’ll now be able to offer to 85 percent of our force a portable government retirement savings while still maintaining a traditional pension for those that serve at least 20 years,” he said in a Department of Defense story.
Still, Peterson told the Stars and Stripes, the success of the BRS will depend heavily on service programs to raise the financial literacy of members so they understand the importance of steady TSP contributions, investing to achieve higher returns and avoiding the temptation to stop TSP contributions or to make early withdrawals.
“If the services do that well, and people are making smart choices, you are going to hear a lot fewer complaints” about the BRS “than if we do it poorly and [career] people default to saying, ‘This new system screws you over.’”
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