The Defense Department on Wednesday laid out the final details for its new blended retirement system for military personnel, which will automatically enroll new service members and give existing troops the option of signing up.
The changes were included in the fiscal 2016 Defense authorization bill as the result of a longstanding effort to reform military service members’ compensation package. Deputy Defense Secretary Robert Work, an Obama appointee who President Trump asked to stay on, officially issued the policy that will take effect in 2018.
Under the system, new troops would automatically be enrolled in the Thrift Savings Plan and receive a matching contribution from the government. The government will contribute between 1 percent and 5 percent of service members’ salaries toward their TSPs, depending on what they elect to contribute themselves, though they will be defaulted into contributing 3 percent of their paychecks. The TSP account will begin 60 days into their service. Those who stay in the military for 20 years, and are thereby entitled to a retirement pension, would receive a less generous calculation for their annuity.
The new system moves away from the 20-year, all-or-nothing pension system currently in place for military members. Only about 17 percent of troops serve for 20 years and become eligible for the benefit.
To encourage members to stay in the military, they would receive “continuation pay” after 12 years of service. That payment will amount to between 2.5 and 13 times service members’ monthly basic pay. The guidance allows members to receive the payment in one lump or in four equal installments spread out over four years. Individuals who accept the bonus must sign on to at least three additional years of service, and may have to repay it if they do not complete the added time.
The new blended retirement system only automatically affects new service members starting Jan. 1, 2018. Current service members are grandfathered into the existing system, but can opt into the new one. They will have all of 2018 to make their decision. The Pentagon is in the process of educating troops about the modified retirement system, and launched its third of four courses this week. Troops electing to enroll in the blended system must complete the training to be eligible. Once enrolled via the “myPay” website, the decision is irrevocable, the guidance stated.