January 1, 2018 was monumental for many reasons. For many a bleary-eyed party-goer, the day started late and held such auspicious news as a new world darts champion and California’s move to legalize recreational cannabis. And, of course, the United States military inaugurated its Blended Retirement System. Happy New Year!
BRS – The Blended Retirement System
It’s our beloved military, so of course there’s an abbreviation for the Blended Retirement System, or BRS. Now before you say that BRS is more like BS, consider two advantages added to military retirement: TSP and continuation pay.
The “blend” of BRS comes from two major sources of retirement income:
- The annuity provision for those service members who retire after 20 or more years of service
- The TSP or Thrift Savings Plan, the government-run 401(k) retirement account allowing members to invest their own money in either stocks or government securities and also get a contribution to that account from their employer
Military Retirement Formula
It’s our beloved government, so of course there’s a formula for calculating everything coming to retiring military members. The new, blended system uses the same retirement annuity formula that has been around for many years, which was almost comprehensible:
- You took the average of your highest 36 months of basic pay and multiplied it times 2.5 percent of your years of service
But under BRS, that 2.5 percent multiplier is shaved down to 2 percent. Hold on, hold on — sure, it sounds unfair. So to compensate for that downward adjustment, the United States government will contribute to a service member’s Thrift Savings Plan (TSP).
After the first 60 days in the service, all members are automatically enrolled in TSP and receive a monthly, automatic government contribution of 1 percent of basic pay. This 1 percent contribution comes to you whether you put in any of your own money or not.
However, you are also automatically enrolled to contribute 3 percent of your out-of-pocket base pay to the TSP each month. You can increase, decrease, or stop that 3 percent contribution at any time.
After two years of service, the U.S. government matches your contributions, up to a total of 5 percent. That 5 percent government contribution is on top of whatever you put in on your own. So, if you contribute 5 percent of your basic pay, the government will match it, making a total contribution to the TSP of 10 percent of basic pay.
Of course, if you only contribute 3 percent to your TSP, the government matching contribution will be only 3 percent. The cap for the government’s contribution is 5 percent, but you could squirrel away more as your own contribution.
As an example, say you are an E-4 and have four years of service. If you contribute 5 percent of your basic pay, you will save over $3,000 each year. Compound that with interest over 20 years with your military career and you will have hundreds of thousands of dollars tucked away, money you barely missed.
Do You Need 20 Years of Service?
Most service members — 83 percent — do not remain in the military for a full 20 years. Before BRS, anything short of 20 years got you zilch, nada, nothing in retirement benefits. The BRS fixed that, providing the public service equivalent of a 401(k) account, the TSP.
Still, the TSP and BRS did not automatically cure the 10-year problem. Members serving to 10 years were suddenly faced with the decision: leave or go. Officers tended to stick around longer, since their 20-year pension benefits were more generous than those for enlisted personnel. So, to sweeten the pot, the government added an 8- to 12-year “continuation pay” to provide incentive for enlisted personnel and officers to stay with the service.
To get the continuation pay, you must commit to another three years of service, but the perk is very nice, as outlined at Military.com:
- “For active duty members, it will be at least 2.5 times monthly base pay and no more than 13 times monthly base pay. For reserve members, it will be at least 0.5 times monthly base pay, based on active duty pay charts, and no more than 6 times monthly base pay.”
Though rates for continuation pay can fluctuate based on service member numbers, the 2021 rates, as described in DCMilitary.com, reflected the original figures.
The impact the BRS could have on your family law matter (separation, support, divorce, property division) is best judged by a family law attorney familiar with military matters. Like anything of cash value, your military retirement (pension and TSP) is subject to equitable (not equal) division between you and your spouse.
The Firm For Men has a deep bench of experienced family law attorneys ready to help you with every aspect of separation, divorce, custody, and support. Contact us today to learn more about family law and your military career.