The new Blended Retirement System (BRS) goes into effect on January 1, 2018. The new system is designed to provide some retirement savings portability for members who choose to separate from the service with less than the years of service required to qualify for a active or reserve retirement. The new BRS combines the existing cliff-vested defined benefit annuity monthly retirement program with a defined contribution plan (Thrift Savings Plan). Hence, the Department of Defense is essentially reducing the benefits of the current retirement system and allocating those savings to a TSP matching program.
The plan is available to members who complete at least 60 days of service to receive automatic contributions and members to complete at least two years of service to receive matching contributions under the BRS.
Blended Retirement System Calculation
The formula to calculate the defined benefit portion of the Blended Retirement System (BRS) is:
2.0% x YOS x High-36 month average (under the exiting system the percent is 2.5% rather than 2.0%).
For reserve members the YOS is determined by dividing the number of points the member has earned by 360.
Members must complete 20 years of service to qualify for a reserve retirement, and may start collecting benefits at approximately age 60.
BRS Continuation Pay
Due to the fact that many members may elect to separate at a higher rate due to the fact that they can take some of their retirement benefits with them, a “continuation pay” component has been added to the BRS. Continuation Pay is provided to those who have 12 years of service. These service members are then eligible for 2.5 months for Active Component and 0.5 months for Reserve members. This continuation pay is intended to encourage members to stay and increase retention. This is handled as a cash payment much like a bonus.
BRS Opt In Decision
Members who have fewer than 12 years of service or 4,320 points for Reservists as of December 31, 2017 will have the option to convert to the new Blended Retirement System as their retirement plan, or stay under the exiting retirement system.
- Members who have more than 12 years in will be grandfathered into the current system.
- Members who have less than 12 years of service will have the option to opt-in to the BRS. The decision to opt-in is irrevocable.
I think the BRS is a good thing all around for service members. The current system is deeply flawed from the standpoint that a member could server 19.9 years, separate and not receive a single penny in retirement benefits. The “cliff-vested” approach is not practical in today’s dynamically changing economic environment. I’m glad that the benefits folks in the DoD have woken up to this and introduced a retirement system that is more fair. In fact, I think this new system may allow members to earn a retirement that could well exceed their benefits under the current system if they invest the money well. In addition, flexibility is a tremendous asset and having the option to leave the service for better opportunities and still retain some of your retirement benefits is extremely valuable.