Marine Corps Base Quantico -- Marines aboard Marine Corps Base Quantico attended an information session Feb. 24 on the Department of Defense (DoD)’s new “blended retirement” system.

Feb. 22-26 was “Military Saves Week,” an annual DoD event established to bring awareness to the importance of making smart financial decisions. The Wednesday information session was part of a Military Saves event held at The Clubs at Quantico.

“This is the first time anyone currently on active duty has seen a change to the retirement system,” said presenter Jessica Perdew, program manager for Headquarters Marine Corps’ Personal Financial Management Program. The new system will go into effect on Jan. 1, 2018.

“What keeps happening to our military budgets — are they expanding or shrinking?” Perdew asked the audience.

The response was almost unanimous: “Shrinking!”

“That’s right,” Perdew said. “So keep in mind that this is intended to be a cost-saving measure.”

The DoD started exploring a blended retirement concept in 2011, Perdew said. In 2013, Congress established the Military Compensation and Retirement Modernization Commission (MCRMC), to review military compensation and retirement systems and make recommendations to modernize the current system.

Marines who start active duty after Jan. 1, 2018 will be enrolled in the new blended retirement system. Those currently on active duty or in the reserves will be grandfathered into the current system. Those who joined after 2006 will have the opportunity to decide whether to stay in the current system or opt into the new system.

“I’ll call you my ‘choosers,’ because you have a choice to make,” Perdew said.

The current system is a defined benefit plan in which a Marine who retires after 20 years receives a monthly annuity until death. The amount is calculated by multiplying years of service (YOS) by 2.5 percent and the average of the highest 36 months of active duty base pay received (High 36).

There is still a defined benefit plan under the new system, but it will use 2 percent as the multiplier instead of 2.5. For example, a person with a High 36 of $1,800 would receive a monthly annuity of $720 instead of the $900 he or she would receive now.

The second part of the blended plan involves the Thrift Savings Program (TSP). Under blended retirement all Marines who join after Jan. 1, 2018 will be automatically enrolled in TSP with one percent of their base pay going into the account after 60 days. At the start of the third year of service, the DoD will begin matching that one percent or up to an additional 4 percent when the member contributes at least 5 percent.

“There is a legislative request in to match up to 6 percent one-to-one,” Perdew said.

These matching contributions will continue through the 26th year of service. Once Marines have been in the service for three years, they are vested in the funds and can take them when they leave the Corps.

According to a fact sheet published by the DoD, under the current system, 81 percent of members who join the military leave with no retirement benefits. Through automatic enrolment in TSP, 85 percent will now receive a retirement benefit, even if they don’t qualify for full retirement.

“You have the benefit whether you serve one tour or 40 years,” Perdew said.

The third part of the plan is a “continuation pay,” a one-time payment given after 12 years of service if the Marine agrees to stay in for another four years.

“Studies have shown that 12 years is the crucial time when Marines decide whether they’re going to make a career of this,” said Perdew.

Perdew said that by April, online training on the new system will be available for leaders.

“And I don’t just mean the people with stars on their lapels — this will be for anyone who talks to Marines on a daily basis,” she explained.

By January 2017, there will be a course available for the “choosers” who have to decide whether to stay in the old system or opt-in to the new.

“It will have calculators and real numbers to help you make that choice,” Perdew said.

Individual units will also receive hands-on training from Personal Financial Management Consultants.

“We have time to get you the information you need and to do this right,” Perdew said.

— Writer: auphausconner@quanticosentryonline.com