For a specific selection of active-duty troops (those with fewer than 12 years of service and reserve component members with fewer than 4,320 retirement points) the deadline to choose between the old military retirement system and the new Blended Retirement System is December, 31st. There are substantial differences between the two systems and the decision is an important one.
These changes come as part of the National Defense Authorization Act, legislation passed in December of 2016. Below we've focused on three points that are especially important: changes to pension and changes to the Thrift Savings Plan (TSP), and continuation pay.
- Pension: Retirement pay will be 2% times the number of years of service. So, for example, if a person retires after 20 years of service, then their retirement pay will be 40% of their final base pay. A service member can choose one of two options when it comes to taking retirement pay - either full pension or one of two options for a lump-sum disbursement upon retirement. The differences between these two options for lump-sum payments lie in how the monthly annuities are dispersed.
- Thrift Savings Plan: The Thrift Savings Plan is a defined contribution plan for federal employees. The military will contribute 1% of the service member’s base pay commencing 60 days their date of service. Service members are automatically enrolled with a 3% contribution which can be raised, lowered, or terminated thereafter. In addition, the military would match up to 5% of individual contributions after two years of service and the service member would be vested after two years of service.
For a more detailed summary of these changes along with some additional information, click here. If you have any questions about these changes, or military family law in general, please contact us and feel free to ask any questions you have. We are always happy to help!