Congress is busy putting the final touches on a plan to offer Reserve and National Guard members a choice: to stay under their current retirement plan or accept a reduced defined benefit at age 60 in return for participating immediately in a 401(k)-like Thrift Savings Plan (TSP).
In a detailed account of the controversy, Stars and Stripes reports that for many, “particularly those who are younger and have fewer years of service, are likely next year to face a difficult choice of retirement plans.”
More details of the plan are emerging as its architects answer questions posed by military associations, veterans groups, congressional staffs and individual reservists.
Some reserve component advocacy groups are delighted by the prospect that their members will be given the choice.
“The Thrift Savings Plan would have government matching of contributions up to five percent of basic pay to include monthly drill pay. Also, at the 12-year mark, new plan participants, including Reserve and Guard, would be offered a continuation payment in return for obligating to serve four more years.”
The paper adds that for Reserve and Guard, the minimum one-time continuation payment would be set equal to a half month of active duty pay for their grade and years of service. That’s one-fifth the minimum of two-and-a-half months’ basic pay to be set for their active duty counterparts.
But for critics, it doesn’t go far enough.
“It’s insulting,” retired Army Col. Robert F. Norton told the paper. Norton is deputy director of government relations for Military Officers Association of America (MOAA), who along with 21 other associations and veterans groups have urged Congress not to shift future forces to the proposed “blended” retirement if the cost is a 20 percent cut in annuities called “defined benefit.”
The concern is that Thrift Savings Plan with government matching, and vesting of account balances after only two years, could create a future retention crisis, particularly in periods of sustained operations. The continuation payment, even if enhanced, might be no match for the pull of civilian life when members have portable TSP and face lowered annuities if they stay.
However, other groups, including Reserve Officers Association (ROA) and the Enlisted Association of the National Guard of the United States (EANGUS), support the retirement changes now moving through Congress as more fair and flexible with the potential to benefit even full-term careerists.
See Also:
- TSP Realized Significant Gains in 2023
- Black October a Good Thing for TSP Funds
- Yellen Says Debt Limit Standoff Impacting TSP’s G Fund
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
