Would you like to have government money in your Thrift Savings Plan (TSP) accounts?
You may, if you are in the group who is eligible to opt-in to the military's new Blended Retirement System (BRS.) While the BRS has several parts, the biggest change is government contributions to service member's TSP. This means that military members who do not remain on active duty until retirement will have government-funded retirement contributions when they leave the military.
With over 80 percent of military service members leaving the military prior to earning retirement pay, this is a big benefit.
This also brings the military TSP system closer to equivalent federal and civilian programs. TSP is similar to a civilian 401(k) tax-advantaged retirement savings account.
In the civilian world, it is not uncommon for employers to contribute to 401(k) accounts, or match a portion of employee contributions to 401(k) accounts. And federal civilians who are under the Federal Employees Retirement System (FERS) receive both employer (government) contributions and employer (government) matching contributions. The new government contributions to military members' TSP accounts will mirror the government contributions to federal civilian employees' TSP accounts.
Note: For service members serving on 31 December 2017, who opt-in to the BRS, there will be slight difference in the vesting and matching dates listed below. See the notes.
Military members will receive an automatic government TSP contribution equal to 1% of their base pay, beginning after 60 days of service and continuing until 26 years of service. The service member will be vested in (take ownership of) the automatic government contributions after twenty-four months of service. If the service member leaves the military before reaching 24 months of service, they will forfeit the government contributions to their TSP account.
For service members serving on 31 December 2017, who elect to opt-in to the BRS, automatic contributions will begin as soon as they opt-in to the BRS.
After two years of service, service members will be eligible for a government match of their TSP contributions. There is one aspect to this that is a little challenging: the match amount changes as the contributions change. As a result, you'll hear different numbers and it will seem like someone is confused. It's easiest to understand in chart form:
For service members serving on 31 December 2017, matching contributions will begin as soon as they opt-in to the BRS. For this reason, experts are recommending that you opt-in early in the year, to take full advantage of the government matching funds for 2018.
Service members are vested in government matching contributions immediately.
That's the short, clean, and simplified version of the government contributions to TSP that will be available for those who fall under the military's new Blended Retirement System.
The rest of the changes to the BRS include changes to the way retirement pay is calculated, continuation pay, and the option to receive a portion of your retirement pay in a lump sum. In order to keep this from being overwhelming, we're hitting each individual topic separately.
Other posts on this topic include: