9155 / What is the blended retirement system that is available for military servicemembers?

The Department of Defense instituted a new retirement plan that started on January 1, 2018 called the Blended Retirement System (BRS).¹ BRS is a combination of defined benefit and defined contribution pension plans. This new retirement plan is mandatory for active and reserve component servicemembers who entered the military on or after January 1, 2018.² BRS was available to opt into for active duty servicemembers who had less than 12 years of service on December 17, 2017 and for reserve servicemembers who had fewer than 4,324 retirement points as of December 17, 2017.BRS combines familiar aspects of the legacy retirement plans’ defined benefit pension calculation but also provides for defined contributions into the Thrift Savings Plan (TSP). The defined benefit calculation for active and reserve components uses the High-36 calculation for Basic Pay times the 2.0 percent multiplier (rather than the 2.5 percent multiplier) times the creditable years of service. This means that a servicemember who completes 20 years of military service will receive 40 percent of his or her High-36 Basic Pay upon eligibility for retirement benefits.

The defined contribution calculation is based on a combination of guaranteed contributions by the government to the TSP and matching contributions made by the servicemember to the TSP. The government agrees to contribute 1 percent of the servicemember’s base pay upon entry into the military. The servicemember is automatically enrolled to contribute 3 percent of his or her base pay upon entry. Upon completion of two years of service, the government will match up to 4 percent of the servicemember’s contribution and continue to contribute the automatic 1 percent. This means that a servicemember could contribute 5 percent of his or her base pay, receive the obligatory 1 percent and matching 4 percent from the government and put a total of 10 percent of the base pay in the TSP for an annual, tax-deferred retirement contributions.

In addition to the defined benefit pension and contribution plans, the BRS offers retiring servicemembers the option to take a lump sum payment of retirement pay of 25 percent or 50 percent. The lump sum payment is reduced to present value using published DoD annual rates. Selecting the 25 percent or 50 percent lump sum payment reduces the retiree’s monthly pension payment by the lump sum percent selected (i.e. 25 percent or 50 percent) until the veteran reaches 67, the full Social Security retirement age. The monthly pension payment returns to 100 percent after the retiree reaches the Social Security full retirement age, which will presumably still be 67. The payments may be made in up to four consecutive annual installments.