The new retirement plan, called the Blended Retirement System (BRS), blends these two options for new servicemembers and for servicemembers with less than 12 years of service who opt in to the new plan. The BRS maintains the annuity based on years of service, but now the Department of Defense (DoD) will also automatically contribute 1% to the servicemembers TSP account each month during active duty, regardless of whether the member contributes to their TSP. After two years of service, the DoD will also match the servicemember’s contributions up to an additional 4%. Meaning that, after two years of service, a member who contributes 5% will see the DoD match that with an additional 5%, for 10% total. Servicemembers who have already served for two years and who opt in to the new plan can begin to receive matching contributions from DoD right away.
The most important difference between the legacy and BRS plans is that the BRS plan offers a benefit for servicemembers who separate after serving less than 20 years. Under the BRS, a servicemember is vested in the DoD contributions to their TSP after two years of service.
The following additional changes to the military retirement system also went into effect on January 1, 2019:
Lump Sum Distribution option. Under the new system, retiring servicemembers may now choose to receive a lump sum distribution of 25% or 50% of their estimated retirement pay in exchange for reduced monthly payments until full Social Security retirement age, which for most is age 67. These members will receive the full amount of their retired pay each month once they reach full Social Security retirement age.
Continuation Bonus. Servicemembers who have served between 8 and 12 years are eligible for a cash bonus for committing to four additional years of military service.
Combined Annuity and TSP. Under the old system, the annuity provision was 2.5% for every year of service. The new annuity benefit is 2% per year of service. The DoD contributions to the servicemember’s TSP account are likely to compensate for the reduction in the annuity benefit.
There are currently 1.6 million active duty, Reserve, and National Guard members who have to make the decision to remain in the legacy plan or opt in to the new system.
It is important for divorcing servicemembers and their spouses to consult with an attorney who is well-versed in these changes to the military retirement system, and to understand the impact on the division of marital assets of the member’s choosing the legacy plan vs. the BRS plan.
The military divorce lawyers at Livesay & Myers, P.C. have extensive experience with the division of military retired pay in divorce. From offices in Fairfax, Arlington, Manassas, Ashburn and Fredericksburg, we represent clients across Northern Virginia. Contact us to schedule a consultation with one of our attorneys today.
[* The legacy system has three retirement plan options, depending upon when the member entered service: The Final Pay retirement system, the High 36 retirement system, and the REDUX retirement system. Most active duty servicemembers fall under the High 36 or REDUX/High 36 plans, which cover members entering service between September 8, 1980 and December 31, 2018.]