Thrift Savings Plan Board Approves Five-Year Lifecycle Fund Increments by Erich Wagner (govexec.com)

The panel that oversees the retirement savings plan for federal employees on Wednesday unanimously approved offering lifecycle funds targeted to within five years of participants’ expected retirement date rather than the current 10-year increments.

A report on the TSP’s investment options by consultants at Aon Hewitt recommended following a trend in private 401(k) providers to offer lifecycle funds – which move investors to a more conservative portfolio as they near their anticipated retirement date — on a five-year basis.

“Most have been moving to five-year increments,” Bill Ryan, a partner at the firm, told the Federal Retirement Thrift Investment Board. “It helps bridge the gap for participants, and it’s easier to figure out where to place someone based on their age.”

The TSP will implement the new L Fund increments in 2020.

Aon Hewitt also recommended that the TSP’s I Fund, which is made up of international stocks and bonds, be diversified to include stocks in Canada, emerging markets, and international small-cap markets.

“These are large markets to which we have no exposure,” Ryan said. “By adding these, we would improve the risk portfolio for participants, as well as improve outcomes on a forward-looking basis.”

The board during its monthly meeting approved further examination of expanding the I Fund’s portfolio, which Sean McCaffrey, deputy chief investment officer for the FRTIB, said could be done by this fall.

“We want everyone to be fully comfortable with what we’re getting into,” he said. “We’ve got a little more studying to do just to be prudent.”

“We must be thoughtful about this because of the different risks associated with various markets,” said board chairman Michael Kennedy.

Elsewhere on the agenda, TSP officials briefed the board on their progress with preparing for the onset of the blended retirement system for the military, which is scheduled to come online in January. Under the system, new troops would automatically be enrolled in the TSP 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 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. The online opt-in website for service members launched in April, and more than 163,000 people have already signed up online. Tom Emswiler, a senior adviser for uniformed services at TSP, said more have signed up through offline training events.

Emswiler said testing of the TSP and military services’ payroll systems will commence next month, and beginning June 6 the Defense Department website will offer an online calculator for service members to determine whether to opt in to the blended system or stay with their current pension plan. They will have all of 2018 to make that decision.

TSP project manager Tanner Nohe said the agency is working to increase its IT and call center capacity to deal with the influx of new enrollees in time for the automatic enrollment system to come online.


May 31, 2017

http://www.govexec.com/pay-benefits/pay-benefits-watch/2017/05/thrift-savings-plan-board-approves-five-year-lifecycle-fund-increments/138303/


Agencies Reveal More Info on Military Blended Retirement Plan – by Erich Wagner (govexec.com)

Federal agencies released new information this week to help current military service members decide whether to opt into the new blended retirement program, which is slated to come online next year.

Service members with fewer than 12 years in the military by the end of this year must choose by the end of 2018 whether to stay with the current military retirement system, or move into the blended system. Officials with the Thrift Savings Plan, the government’s 401(k)-style retirement plan for federal employees, posted a fact sheet and video explaining the new system.

Under the new system, new troops would automatically be enrolled in the TSP and receive a matching contribution from the government—between 1 and 5 percent of their salaries, depending on what they choose to contribute themselves. The default is 3 percent of their paychecks, and the TSP account will begin 60 days into their service.

Those who stay in the military for 20 years, entitling them to a retirement pension, would receive a less generous calculation for their annuity.

TSP’s fact sheet spells out how the current military retirement system works, as well as how changing to the blended system would affect one’s defined benefit payments after 20 years of service. The two biggest factors in deciding between the systems, officials said, are whether a service member plans to stay a full 20 years to qualify for the defined benefit portion of the blended option, and how long one would be able to contribute through the TSP.

“How many years of making contributions and receiving service contributions will I have before retirement?” TSP officials wrote. “Is it likely that these contributions and their earnings—along with any benefit I might get from continuation pay or the lump sum option—will ultimately outweigh the amount I’d be giving up as a result of the reduced monthly annuity?”

To help answer to those questions, the Defense Department has launched an online calculator where service members can learn whether the current retirement system or the blended system is the better option financially.

Troops can plug in their age; when they began their military service and at what pay-grade; and when they plan to retire, as well as how much they would hypothetically contribute to the TSP, and the website will lay out how much they would earn under each retirement program option for easy comparison.

“We have designed an all-in-one calculator that is intuitive to use and takes into account the unique financial situations of our active duty, National Guard and Reserve service members,” said Tony Kurta, acting undersecretary of Defense for personnel and readiness. “The calculator presents to service members the information needed to make an effective comparison. The calculator will provide service members the ability to compare estimated benefits between their current retirement plan and BRS prior to making this important decision.”

TSP officials reported last week that more than 163,000 people have already signed up online for the blended retirement system.


June 7, 2017

http://www.govexec.com/pay-benefits/2017/06/agencies-reveal-more-info-military-blended-retirement-plan/138494/

 


The Thrift Savings Plan Under the Blended Retirement System

How will the Thrift Savings Plan change under the Blended Retirement System?  In my article, “An Introduction to the Thrift Savings Plan,” I described the basics of how TSP works.  There is a significant difference between the plan under BRS and how it works for service members right now.

 

As you have already learned, there are no matching funds for contributions you make to the plan.  Under the Blended Retirement System, this will change and a total of up to 5% of base pay will be added to the contributions you make.

 

How does this work?  Well, if you are already a serving member and have at least two years of service, you will begin receiving an automatic 1% contribution to your TSP account if you switch to BRS.  The first 3% of base pay you contribute will be matched dollar for dollar.  After that, the next 2% of money you contribute will be matched at 50¢ per dollar.  The 1% automatic contribution plus the 100% match on the first 3% of your money plus the 50% match on the next 2% of your money equals a 5% total match.

 

These matching funds have a nice effect on your total investment.  That effect is an automatic 100% return on your investment.

 

For a visual representation of what I just described, see the BRS infographic I have posted in the description below.  There is an active and reserve component version of this graphic.

 

The 1% contribution will begin immediately for service members who switch to BRS.  It will begin after sixty days for new members.  The matching funds will begin once a member reaches two years of service.

 

I mentioned in my previous article that there are two version of the TSP, traditional and Roth.  Traditional contributions are not taxed now but are taxed when you withdraw the funds and their earnings at age fifty-nine and a half.  Roth contributions are taxed now but are not taxed when you withdraw the funds and their earnings at age fifty-nine and a half.  All matching funds go into a traditional account.  Your contributions can go to either or both of the two.

 

There will be a vesting requirement in order to keep the matching funds.  Vesting simply means your ability to keep that money (by that I mean the matching funds only, not your money).  If you have at least two years of service, you will be fully vested as soon as you switch to BRS.  If you have less than two years, you will be vested once you hit the two-year mark.

 

D.J, are the matching funds based on the active duty pay scale or my drill pay?

The matching funds are based on whatever amount of money you have earned for a particular month.  If you’re on a short tour of active duty, are drilling, or on annual training, your matching funds will be based on that amount of money.  The match will not be based a full month of base pay unless you have earned that much for the month.

 

Are matching funds also added if I contribute bonuses or incentive pay to the TSP?

No, the matching funds are based on your base pay only.  Don’t let this fact prevent you from contributing those funds to the plan if that is what you wish to do.

 

If I receive the career continuation bonus, can I contribute that to the TSP?

Yes, you can contribute all or a portion of that payment to the TSP.  It is also possible to receive career pay in four annual installments.  This means if you want to contribute as much of the continuation pay as possible and you are receiving more than the $18,000 per year limit then you can break up the payments and either pay less in taxes or be able to contribute more to the TSP.

 

You can set your preferences for what percentage of base pay, bonuses, and incentive pay you would like to go to the TSP through the MyPay website or through the Coast Guard Pay Portal. You can then manage how the money is spread across the various funds within TSP at the TSP website.  There are links to all of these sites in the description below.

 

Last month, I posted an announcement for a webinar which would describe some of the workings of TSP under the BRS.  I have not found the recording of that webinar on MilitaryOneSource.  I do however have a copy of the slides they used.  I have posted them to my website and include a link in the references below.  It is called “TSP Under the Blended Retirement System.”

 

Next week, I will talk about some of the other effects of the Blended Retirement System.

 

Thanks for joining me today and, of course, thank you for your service.

 

D.J.

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan


Podcast Episode 0018 – The Thrift Savings Plan Under the Blended Retirement System

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2


YouTube Episode 0020 – The Thrift Savings Plan Under the Blended Retirement System

https://youtu.be/aIfkfxk_C9E

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan


Podcast Episode 0015 – Myths About the Blended Retirement System


Let’s bust some myths about the Blended Retirement System.

References:
Myths About the New Military Retirement Plan

Related YouTube Episodes:
Episode 0014 – What is the Blended Retirement System?
Episode 0015 – Calculating Retired Pay Under the Blended Retirement Plan

Related Podcast Episodes:
Podcast Episode 0012 – What is the Blended Retirement System?
Podcast Episode 0013 – Calculating Retired Pay Under the Blended Retirement Plan