SOM (Blended Retirement System) review

.pdf
School
University of Alabama **We aren't endorsed by this school
Course
EDUCATION K12
Subject
Finance
Date
Nov 7, 2023
Pages
6
Uploaded by juliusmuchiri on coursehero.com
SOM (Blended Retirement System) review What is the Blended Retirement System and how is it different from the previous retirement system? It's the new retirement system and the difference is that BRS adjusts the years of service multiplier from 2.5 percent to 2.0 percent for calculating monthly retired pay. In addition, the BRS includes automatic government contributions of 1 percent of basic pay and government matching contributions of up to an additional 4 percent of basic pay to a service member's TSP account. Why was the BRS made? Previously, fewer than 20 percent of service members who joined the military received a government retirement benefit after they left service. Under BRS about 85 percent of service members will receive a government retirement benefit if they serve at least two years, even if they don't qualify for a full retirement. This expansion of government retirement benefits ensures a greater number of service members receive government-provided retirement benefits, previously only available to the 19 percent of active component and 14 percent
of National Guard and Reserve members who served 20 or more years. When did the BRS take effect? January 1, 2018. Who is affected by the BRS? Soldiers who joined after January 1, 2018. And soldiers who opted into the BRS before Dec 31 2018. When were soldiers able to opt into the BRS? Between 1 January 2018 and 31 Dec 2018. Is the legacy (high-3) retirement system available for soldiers that joined after 31 Dec 2017? No. What is TSP? Thrift savings plan. The TSP is a defined contribution retirement savings and investment plan that offers the same types of savings and tax benefits many private corporations offer their employees under 401(k) or similar plans. Please see the following section for more information. When are you enrolled into the TSP? When you enroll in BRS.
What is the difference between a Traditional TSP and a Roth TSP? The decision whether to invest in a traditional TSP or a Roth TSP boils down to whether you believe you will be in a higher or lower tax bracket when you take your distributions. With the traditional TSP, contributions are made with pre-tax money (income which has not been taxed it comes directly out of your pay check). With the traditional TSP, you defer paying taxes on your contributions and their earnings until you withdraw them. If you are making contributions to a traditional TSP while your pay is subject to combat-zone tax exclusion, your contributions will also be tax-free at withdrawal, but your earnings will be subject to tax. With a Roth TSP, you pay taxes on your contributions as you make them (unless you are in a combat zone or designated support area making tax-exempt contributions), and your earnings are tax-free at withdrawal as long as you meet certain IRS requirements. For more information visit TSP.gov for more information. Can I contribute other forms of pay to my TSP? You can also contribute from 1 percent to 100 percent of any incentive pay, special pay, or bonus pay to your TSP as long as you also elect to contribute from your basic pay - up to the established Internal Revenue Code (IRC) limits. You can elect to contribute from incentive pay, special pay, or bonus pay, even if
Page1of 6
Uploaded by juliusmuchiri on coursehero.com