One of the greatest aspects of the Blended Retirement System (BRS) is the government match in the individual’s Thrift Savings Plan (TSP) account. The government contribution comes in two parts to the servicemember.
The first part is an automatic “Service Automatic Contribution” in the form of 1%. This means that no matter if a servicemember wants to or not, the government will automatically contribute the value of 1% of your basic pay (at the time) to the servicemembers TSP.
The second part is the matching of government contributions of an additional 4% of the value of the servicemembers pay, so long as the service member contributes an equal amount to the TSP. This is where the “match” aspect of the BRS comes into play. So while the government may in total contribute 5% of basic pay to TSP, only 4% of is a “match” to servicemember contributions.
Here you can see the detailed explanation from the official TSP Booklet TSPFS1 (6/2017) :
Your service will begin contributing an amount equal to 1% of your basic pay into your TSP account each pay period. This does not come out of your pay. It’s called a Service Automatic (1%) Contribution. In addition, if you elect to contribute a portion of your own pay into your TSP account, your service will match a portion of it. This is called a Service Matching Contribution. For every dollar you contribute up to 3% of your basic pay, your service will also contribute a dollar. For every dollar you contribute beyond that up to 5% of your pay, your service will contribute 50 cents. So if you contribute 5% of your basic pay in a pay period, your service will contribute an amount equal to 4% of your basic pay (1 for 1 on the first 3% and .50 to 1 on the next 2%). Because you get the Service Automatic (1%) Contribution2 no matter how much you contribute of your own pay, you can receive a maximum contribution from your service of an amount equal to 5% of your basic pay
Another website, the “Military Money Manual” offers a different perspective on this contribution and how servicemembers can maximize this. You can find it here: https://militarymoneymanual.com/brs-tsp-match-contribution-value/
What does this all mean for the individual servicemember?
Some fundamentals:
- The government is going to automatically open a TSP account for servicemembers automatically after joining the service. This is generally within 60-90 days of joining. Find more about opening the basics here.
- The government is going to automatically put money into the TSP regardless of if the servicemember wants to utilize it or not.
- The government will only match a certain percentage that servicemember contributes, not 100% of the contributions.
From the Office of the Financial Readiness:
What servicemembers should think about:
- How much they should contribute to their TSP via the Blended Retirement System? The argument for contributing just enough to get the match from the government is a viable one.
More to follow from the team at BlendedRetirementSystem.com – Dec 2019
