The passage of the 2016 National Defense Authorization Act was a milestone for the military when it comes to retirement planning, thanks to the creation of the Blended Retirement System (BRS) as part of that legislation. This new retirement system (effective as of 1 January 2018) does not change the “basic qualifications” for military retirement, and according to the Department of Defense, the military pension remains “the primary component” of military retirement under BRS.
No Automatic Transfer Into BRS
The Blended Retirement System has a one-year opt-in timeline, the entire calendar year of 2018 was left open for those who served prior to January 1, 2018 to decide whether to stay in the “legacy” retirement system or switch to BRS by formally opting in.
The Department of Defense is adamant about this key issue, stating in no uncertain terms that no service member will be “automatically moved” to the Blended Retirement System. If you served time in uniform under the legacy retirement system, you are free to continue under that retirement plan. However, all “new accessions” as of January 1, 2018, automatically begin serving in uniform under BRS. New recruits after January 1, 2018 will not have access to the legacy system.
Furthermore, according to the Department of Defense, those in uniform “serving as of Dec. 31, 2017, active-duty members with fewer than 12 years or National Guard and reserve members with fewer than 4,320 retirement points may opt into the BRS”.
The Blended Retirement System includes matching contributions from the government. The DoD automatically contributes one percent of a military member’s basic pay after 60 days of service, and additional matching contributions are possible at the start of year three up to year 26 of active service.
At the midpoint of your military career, under BRS “continuation pay” is an option. Those serving and paying into BRS “may be eligible” for a cash payout in exchange for continued service according to the Department of Defense.
Full Retirement Pay Calculations Under BRS
BRS full retirement pay for those serving on active duty for 20 years or more is calculated using a “retired pay base” (an average of the highest 36 months of basic pay) which is multiplied by two percent and the number of years served. The number you get from that calculation is your Full Retirement Pay Annuity. Guard and Reserve retirements are based on a retirement points system and are calculated differently.
Those serving on active duty prior to December 31, 2005 do not have the option to switch to BRS, and those who go into active service after 1 January 2018 will be automatically enrolled in BRS and have no options under the legacy system.
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