The Pentagon moves to set troops straight on its new military retirement plan

The Defense Department has begun to educate military leaders, rank-and-file service members and their families about the coming changes to its retirement plan, a months-long effort to provide personnel with enough financial literacy to confidently, competently navigate this new "blended" system.

The first of four programs, unveiled Wednesday at the Pentagon, is called the “Leader Course.” It’s available to anyone and doesn’t require access with a Common Access Card. It provides an introduction to and an overview of the new blended retirement system, with information about who is affected, and the options available to them. A link to the information is on the Joint Knowledge Online site; it can also be found through MilitaryOneSource.mil.

Deployed service members’ commands will receive CD-ROM courses.
The training program will begin in earnest this summer. The Army, for example, has a public relations campaign to inform soldiers and family members what will happen, said Lt. Col. Steve Hanson, allowances branch chief for the Army G1, and the Army’s representative for implementation of blended retirement system education. “It’s our responsibility to arm them with information so they can make the proper decision for themselves,” Hanson said.

“Today, with the release of the Blended Retirement System leader course, we have the opportunity to put the facts out there in an environment where leaders can have the information to make sure they are prepared to answer any questions they might have from their troops,” said Wayne Boswell, the Defense Department’s director of financial readinesss. Since the enactment of the law last year that changed the retirement system, he said, “there has been speculation, rumors, information out there about the blended retirement system’s potential impact.”

“It’s probably a major understatement to say it’s a big change for our service members,” said Andrew R. Corso, assistant director of DoD’s office of military compensation.
The new retirement system will mean smaller pension checks but will includes matching cash contributions to service members’ Thrift Savings Plan accounts — much like a 401(k) plans offered in the private sector. This means that for the first time, troops who leave the military before 20 years of service will have some limited retirement benefits to take with them.

The critical, more detailed course for those who are most affected by the change — those with fewer than 12 years of service by Dec. 31, 2017 — will be rolled out in January. They have the option of switching to the new retirement system or staying with the old. The course is still in development, but will include a tool that lets troops plug in their own data to help them make their decision. Troops will be able to enter numbers such as varying retirement dates and Thrift Savings Plan rates of contribution to determine which choice would be better for them in the long term.

“The calculator will be the heartbeat of the course, to personalize the information and enable them to make decisions,” Boswell said.
No one has to make a decision about this in 2016 or 2017. But in 2018, service members in the active and reserve components who entered the military after Jan. 1, 2006 — about 1.6 million people — will have to decide whether to stay with the current retirement system or move to the new retirement system signed into law in November. Troops can make the choice beginning Jan. 1, 2018; the deadline for making the decision is Dec. 31, 2018. It’s an “opt-in” situation for the troops in this category. If they don’t opt in to the new situation, they will automatically stay in the old retirement system. Those with more than 12 years of service by the beginning of 2018 will automatically remain in the current retirement system.

The courses provide education materials, and no one in the military community — not supervisors, not personal financial managers — is going to tell a service member which choice they should make, Boswell said.

"We don’t want them to be in an advisory role, where they advise whether to or not to opt in,” he said, but to provide facts about the changes, lifelong financial preparedness, lifelong financial readiness, investing, compound interest and other information that service members and families need to understand the decision's impact.

The leader course describes various service members' circumstances and offers questions they should consider. In one scenario, the Marine corporal who joined the Corps in 2010 should ask himself how long he intends to stay in the military; whether he would join the Reserve and stay until completing 20 years; how much will his Thrift Savings Plan contributions grow until retirement; how long he will have to continue investing and receive the benefit of government contributions; and how a possible future spouse and children would factor in to his retirement plans.

DoD and the services are also providing the leader course information to others on installations, such as bank and credit union staffs, professional financial managers and professional financial counselors, Boswell said.

A “train the trainer” course is coming in September for personal financial managers to help them provide additional facts to service members and family members who need more information to make their decision.

DoD officials do not recommend one option over the other, Corso and Boswell said. “We want to make sure service members and families have the information, and it’s up to them to make the determination what’s in their best interest. Everybody’s lifelong career plans, and financial plans are different. This is a very personal decision folks are going to have to make in terms of where they see themselves going in the future. Forcing a younger population to take a look at that and make some of those decisions is a good thing.”

Although Congress is considering come changes to the new retirement benefit this year, the messages in course won't be significantly affected, Corso said. “We were conscious of some of the areas where there may still be some discussion and the training talks about this, with the caveat for potential future modifications if necessary.”