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The 2018 Blended Military Retirement System Explained
WASHINGTON, February 12, 2016 — Upon taking office almost a year ago, Defense
Secretary Ash Carter promised reforms, saying “that a blended retirement system is a
key step in modernizing the department’s ability to recruit, retain and maintain the
talent we require of our future force.”
An overhaul of the current military retirement system is slated to take effect January 1,
2018. The new system has three elements: a 401(k)-style component with Defense
Department matching funds for entry-level and other service members, a mid-career
continuity bonus, and a retirement annuity similar to the one now in place for service
members that complete twenty or more years of eligible service.
DoD News spoke with Army Sgt. Maj. Mike Schultz while he was the senior enlisted
advisor to the Assistant Secretary of Defense for Manpower and Reserve Affairs
about the details of the new modernized retirement system.
One key point, Schultz said, is that many of those now serving will have the choice to
opt into the new blended retirement plan.
Training the Force on Retirement Options
The first critical step in the change, he said, is educating senior leaders about the
program’s provisions. Those leaders will then ensure training takes place at the
“camps, posts and stations” where service members work.
Training tools now in the works will include online classes and benefits calculators for
troops and their families, as well as classroom and distance learning, Schultz added.
He said the “deliberate approach to educate the force” will be a key effort from now
Grandfathering and Opting In
The sergeant major said the question he hears most often about blended retirement is:
“What will it mean to me?”
First, he said, all troops now serving are grandfathered and will be allowed to remain in
the current system.
Those who have served in uniform for fewer than 12 years as of December 31, 2017,
will have a choice to stay in the current system or to opt into the new retirement plan,
Schultz said, and those who enter service after the blended retirement rolls out will
automatically be covered by the new modernized retirement system.
Incentives, ‘Portability’ Built In
The phase-in will, Schultz noted, both keep faith with those who could retire under the
current system, and offer new options for what he termed a “portable” retirement
benefit plan to those who will serve in the future.
The aspects that make the plan “blended” are automatic and matching government
contributions in the Thrift Savings Plan, similar to a 401(k) and transferable on leaving
service, for service members in the new retirement plan, and retaining lifetime monthly
retired pay for those who serve at least 20 years.
The government will automatically contribute 1 percent of a member’s basic pay into
the member’s TSP account even if the member contributes nothing. After 24 months
of service, the government will match member contributions, dollar-for-dollar, up to the
first 3 percent the member contributes and fifty cents per dollar for the next 2 percent
the member contributes.
Thus, if a member contributes 5 percent into the member’s TSP account, the
government will contribute an additional 5 percent (1 percent automatic plus 4 percent
matching), Schultz said. Members who serve at least 24 months and then separate will
be able to keep the government contributions and transfer them to a new employer’s
retirement plan. For service members that stay in the military for a full career of 20
years or more, the new plan continues to offer monthly retired pay similar to today’s
system, although it will be computed based on a length-of-service factor of 2 percent
per year, instead of the 2.5 percent per year used in the current system.
“A midcareer bonus is in addition to the TSP account and the 20-year annuity modeled
on the current plan,” Schultz said. The DoD will pay a bonus of at least two and a half
months’ basic pay (one-half month for reserve and National Guard members not
serving in a full-time capacity) to those service members who have served 12 years
and who agree to remain in uniform for four more years.
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