The Federal Retirement Thrift Investment Board (FRTIB), the agency that oversees the Thrift Savings Plan, has issued proposed regulations for the rollout of the Blended Retirement System (BRS).
About the Blended Retirement System
The BRS is a new military retirement system that will offer a smaller pension but has added a defined contribution to the TSP. It is mandated by the National Defense Authorization Act of 2016. This new system will go into effect on January 1, 2018.
Military personnel serving as of December 31, 2017, will be “grandfathered” under the current retirement plan. But, while no one currently-serving will be automatically switched to the new system, many will have a choice.
Active service members with fewer than 12 years since their Pay Entry Base Date, and some Reserve Component Service members will have an option to join the new retirement plan. The opt-in period for the BRS begins January 1, 2018. It ends on December 31, 2018.
Those who enter the military on or after January 1, 2018 will be automatically enrolled in the BRS.
Four Key Changes
The proposed rules published by the FRTRIB outline four major changes made to the TSP portion of a military service member’s retirement package by BRS and how they will be implemented. Those are:
Automatic 1% Contributions
Employing services will contribute an amount that equals 1% of each service member’s monthly pay to the service member’s TSP account. These contributions are additional compensation; they are not deducted from service members’ basic pay. They are referred to as ‘‘automatic’’ contributions because the services must make them whether or not the service member also makes contributions from his/her basic pay.
Service members who first enter duty on or after January 1, 2018, cannot receive any Service Automatic (1%) Contributions until the first full pay period following the date that is 60 days after the member’s Pay Entry Base Date (PEBD). For members who elect to transfer to the BRS, Service Automatic (1%) Contributions will begin the first full pay period following their election to transfer.
Participants must also complete 2 years of military service before they are vested in their automatic contributions. FRTIB is therefore proposing to have separate definitions for civilian and military service. For service members who transfer to BRS, all military service completed prior to the election will counts towards the vesting requirement.
Service members will be auto-enrolled to contribute 3% of their basic pay, and re-enrolled again annually if they stop making contributions.
FRTIB is therefore proposing to defer automatic enrollment for BRS participants until the first full pay period following the date that is 60 days after the member’s PEBD because the member would not be eligible for Service Automatic (1%) Contributions until that date.
Employing services will match service members’ TSP contributions dollar for dollar on the first three percent of basic pay and 50 cents on the dollar for the next two percent of basic pay that the member contributes.
Default Investing Fund
Unless the service member elects otherwise, contributions will be invested in an age appropriate lifecycle fund (L Fund) instead of the Government securities fund (G Fund).
Comments on the proposed rules must be submitted on or before November 13, 2017. They can be submitted at regulations.gov for Docket ID number FRTIB–2017–0006.