Blended Retirement System on the plate

Published April 26, 2017
By Shellie-Anne Espinosa
21st Space Wing Public Affairs

PETERSON AIR FORCE BASE, Colo. -- At the first of a series of professional development luncheons to discuss today’s Air Force policies and issues, Master Sgt. Gerald Morey, 21st Wing Staff Agencies First Sergeant, had a guest speaker discuss the new Blended Retirement System April 21, 2017, at the golf course on Peterson Air Force Base, Colorado.

“I want to get Airmen together monthly to talk about things that are very concerning and talk about topics that are near and dear to all Airmen,” said Morey. “It comes to money, it comes to new policies that are coming out, new procedures that not only affect just a certain Air Force Specialty Code but everybody in the Air Force. As you know, things are being changed constantly.”

At the luncheon, Patricia Maxwell, Peterson AFB personal financial counselor, explained the new BRS scheduled to go into effect Jan. 1, 2018. She quickly answered the question of whether or not Airmen should opt into the new retirement system.

“Just like with everything in finances, the answer is-it depends,” Maxwell said. “Everybody’s situation is completely unique. Just because something works for him, it may not work for her. You’re going to need to come in and talk with us about what it is you are trying to accomplish for your future and then we’ll help guide you along the path of which retirement system is going to be better for you.”

Anyone serving before Dec. 31, 2017, will be grandfathered under the legacy retirement system. In order to be moved to the BRS, members must opt into the program between the dates of Jan. 1, 2018, and Dec. 31, 2018. They also must be active duty with fewer than 12 years or a reservist with fewer than 5,320 points as of Dec. 31, 2017. Anyone who enters the military on or after Jan. 1, 2018, will be automatically enrolled in the BRS.

The Fiscal Year 2017 National Defense Authorization Act created the new retirement system by blending the legacy retirement pension with the Thrift Savings Plan.

“The Blended Retirement System is taking the old pension program, and blending it with the new, which is making contributions and having the employer give matching contribution to your Thrift Savings Plan,” said Maxwell. “This is the same as the General Schedule retirement program.”

According to the Department of Defense Personnel and Readiness section, 85 percent of the force can benefit from the BRS. Under this system, members will keep their TSP savings, DOD contributions and any earnings they received during their time served regardless of reaching retirement. Members only have to serve for a minimum of two years to receive these benefits. Only 19 percent of active duty members will qualify for the legacy retirement system, requiring at least 20 years of service.

“The government needed to try to do something that brings our system up to the modern era but also helps with all the costs of retirement,” Maxwell said. “People are living longer so the retirement system is having to pay out longer. The thing, I think, that helped the government make this decision is that only 19% of the people who come into the military retire.”

Monthly retiree payments are computed by taking a percentage and multiplying it by years served and a retired base pay. The legacy system uses 2.5 percent while the BRS uses 2.0 percent to calculate monthly annuities. While the BRS annuities may be lower, it still covers 66 percent more personnel than the legacy system. The BRS, however, also includes automatic and DOD matching TSP contributions as part of a member’s retirement.

As an incentive to keep members in longer, the new BRS will allow for continuation pay. This is similar to the Selective Reenlistment Bonus, however, there is a major difference.

“Everyone will get continuation pay, regardless of their AFSC,” Maxwell said. “They will be replacing the reenlistment bonuses with continuation pay. The continuation pay is a minimum of 2.5 times your base pay, up to 13 times your base pay. Continuation pay is supposed to be paid between eight and 12 years. Congress is still working out the details on continuation pay, but this system guarantees everyone gets something, when under the current system, a lot of Airmen get nothing.”

Another change under the BRS is the option to take a lump sum at retirement. Three months before retiring, the member may choose to take a reduced pension at 25 or 50 percent, to receive a lump sum shortly after retiring. Once the member reaches age 67, pensions will return to full value. This lump sum is taxable, however, and members should be aware of their options on lump sum payouts to reduce this burden.

“Congress is trying to work on a deal to give the lump sum to DOD members at a personal discount rate to reduce the tax,” Maxwell said. “That rate hasn’t been established yet, though, but we have another eight years before the first members retire under this new system.”

The BRS is a change and may seem intimidating at first, but simply said, while the multiplier for the monthly pensions is reduced, it will give benefits to more people and encourages earlier savings for retirement. It has an option for a lump sum payout at retirement, and it has continuation pay as an incentive to stay for a full career. The DOD is allowing an entire year for members to decide whether or not opting into the program will benefit their futures.

For more information to help Airmen decide on which retirement system they prefer, visit http://militarypay.defense.gov/BlendedRetirement/. Airmen are also encouraged to contact the Airman and Family Readiness center at (719) 556-6141 to personally sit down with a finance counselor and determine if the new system will be beneficial to their retirement goals.

For future professional development lunches for WSA Airmen, emails will be sent out to RSVP each month as topic, speakers and locations are finalized.