Blended Retirement Overview Overview Slide, more detail on following slides… Current Retirement Blended Retirement Proposal 2.5% per year = 50% of base pay at 20 years (20+ = $) TSP Available (no matching) Roth & Regular No automatic enrollment Cliff vesting (20 years), 15% Enlisted & 46% of officers reach retirement No market risk REDUX has not been embraced (30k at 15 years) VA repay later assuming disability payments No specific changes to non-regular retirement at this point. (Retired Pay Base X Multiplier %) 2.0% per year = 40% of base pay at 20 years (20+ = $) Introduces Cost Sharing for Retirement (Blended…) TSP matching (automatic 1%) NDAA: Matching Same as FED CIVs Matching stops at 26 years 1% after 60 days, match starts at 2+ years Market Risk on TSP portion Career Bonus, 12 years all Soldiers Soldier Choice: 12 years or more – 31DEC17 Current plan Less than 12 years - 31DEC17 Choose plan After 1JAN18 Blended Retirement Lump Sum Buyout option I Program Summary

Blended Retirement Proposal BRS Bottom-Line Current Retirement Blended Retirement Proposal If you are staying for a career, in most cases Soldiers are better off sticking with current plan No market risk TSP is still suggested even if you don’t get matching If the Soldier is not planning on making the Army a career, they may benefit by keeping some TSP matching money Don’t recommend BRS unless Soldier intends to contribute MAX TSP. If they don’t they lose 20% from old plan I Website: http://militarypay.defense.gov/BlendedRetirement/

Blended Retirement Proposal Retirement Annuity Current Retirement Blended Retirement Proposal Retired Pay 2.5% per year = 50% of base pay starting at 20 years (20+ = $) The Soldier receives this money as they earn their regular pay, no contribution required Amount of actual retirement pay is based upon rank and years of service Funding comes from top of the system set aside (federal money), your State does not lose money from POM budgets to pay for retirement Cliff vesting (20 years), DoD wide 15% Enlisted & 46% of officers reach retirement Example: AD E7 with 20 years this pay equals $ 201,282 Retired pay 2.0% per year = 40% of base pay starting at 20 years (20+ = $) The Soldier receives this money as they earn their regular pay, no contribution required Amount of actual retirement pay is based upon rank and years of service BRS 20% REDUCTION Funding comes from top of the system set aside (federal money), your State does not lose money from POM budgets to pay for retirement Cliff vesting (20 years), DoD wide 15% Enlisted & 46% of officers reach retirement? Example: AD E7 with 20 years this pay equals $ 161,025

Thrift Savings Program Current Retirement Blended Retirement Proposal TSP (Market Risk) Available (No matching) Roth TSP- The Soldier can select the ROTH option which means that their contribution is Taxed along with their regular pay, but it is not taxed when they reach retirement age (59+) and begin withdrawing funds Traditional TSP- The Soldier can make contributions tax exempt but the funds are then taxed as they are withdrawn No automatic enrollment No automatic 1% Federal contribution Soldier has to enroll in TSP TSP (Market Risk) 1% federal contribution after 60 days) see chart Matching of up to 5% base pay (chart) Soldier automatically enrolled in TSP Roth TSP- The Soldier can select the ROTH option which means that their contribution is Taxes along with their regular pay, but it is not taxed when they reach retirement age (59+) and begin withdrawing funds Traditional TSP- The Soldier can make contributions tax exempt but the funds are then taxed as they are withdrawn Soldier is vested upon 2 years of service, the Soldier can leave with this money, possible impact to retention? Matching ends after 26 years of service (reverts to current rules?)

Blended Retirement Proposal Career Bonus Current Retirement Blended Retirement Proposal No Career Bonus: Career Status Bonus / REDUX (30k at 15 years) has not been embraced by Soldiers. Under REDUX if the Soldier is granted VA compensation they will have to repay the 30K Career Bonus: after 12 years of service, members will receive a cash payment if they sign up to a commitment of 4 more years (Commander decision) The payment will be 2.5 months of basic pay for the AD member and .5 month’s basic pay for the RC member (AGRs are RC, SECDEF should fix with Service policy) DoD assumes that the Soldier will reinvest the money, but sometimes Soldiers spend money they should save Money is categorized like a bonus, so it is not subject o VA Offset How this money is POMed TBD May dilute impact of other bonuses, service is concurrent with other programs

Soldiers have a Choice (OPT IN) Current Retirement Blended Retirement Proposal Soldier OPT IN: Soldiers under current retirement plan are in the program they are in based upon the date they entered military service (High Three) The Career Status Bonus / REDUX was a choice for Soldiers Starting on 31JUL86 (Details in Notes section) Soldier OPT IN: Certain Soldiers can choose: 12 years or more on 31DEC17 Current plan (4321 or more points) Less than 12 years on 31DEC17 Choose plan (4320 or less) After 1JAN18 Blended Retirement DoD is basing the time of service on points for ARNG Soldiers (4320 pts), ~315K traditional Soldiers will be in a choice group because this point value represents 12 of active service time Soldier decision will be selected online using MYPAY (Audit Standards?) DoD wants a legally binding decision, but has not provided a legal review of their proposed process DoD wants this to be a “one-time” decision, not revocable Assumption: DFAS will have to get HR Data to record the decision to HR Systems? CSB/REDUX Members who entered the service after July 31, 1986 are given a choice of two retirement plans when they reach their 15th year of active service: High-3 Year Average Career Status Bonus (CSB)/REDUX Military members who elect CSB/REDUX are eligible to receive a $30,000 bonus when they reach their 15th year of active service, but will also have their retired pay calculated at a reduced rate. CSB/REDUX is a two-part deal. It includes the $30,000 bonus, but also results in a reduced retired pay. While the $30,000 Career Status Bonus may seem like an incentive now, it is important to be aware of the effects electing to retire under CSB/REDUX will have on your retired pay. CSB REDUX Retired Pay Calculation Retirement Calculator Your monthly pay may differ from the calculator’s estimate. The formulas used to calculate retired pay are complex and differ depending on individual circumstances. CSB/REDUX Retirement Calculator Non-Disability retirees will have their percent multiplier reduced by: 1 percent for each full year of creditable service less than 30, and 1/12th of 1 percent for each full month of creditable service less than a full year. This will also affect your retired pay by reducing the cost of living adjustments (COLA) by one percent. This reduction remains in effect up to the age of 62. Once you reach age 62, your retired pay will be restored to the same amount paid under the High-3 System. Full COLA rates will be applied to your new computation, but the COLA will continue to be applied at the reduced rate each year following. Disability Retirees and Reserve/Guard members retiring at age 60 (or younger in some cases) are exempt from all provisions of the CSB/REDUX provisions except the 1 percent COLA reduction.

Blended Retirement Proposal Lump Sum Current Retirement Blended Retirement Proposal No Soldier Lump Sum: To receive retired pay, 20 plus years Payments of annuity monthly for life Lump Sum Available: Soldier can elect to receive lump sum payment upon retirement Lump Sum choice reduces retired pay between retirement date and age 67 50% or 25% of retirement annuity payable when the Soldier is eligible for retired pay (Age 60 for traditional) SUBJECT TO FULL VA OFFSET, over 50% VA may be concurrent? Proposed Discount Rate 7.3% Unknown Components: The impact on Survivor Benefit plan TBD Nothing about rights of spouse in legislation DFAS’s system to push data back to Services TBD

Blended Retirement Proposal Soldier Training Current Retirement Blended Retirement Proposal Soldier Training: NDAA requires Financial Literacy training, this is beyond Blended Retirement 10USC992 Soldiers can access Personal Financial Counselors (OSD Contract) for financial questions PFCs mostly support Active Duty installations. There are 140 ARNG and and 77 ANG PRCs The PFC is a DoD asset, so we are sharing with the Navy, etc. Concern over local leaders becoming liable if Soldier makes wrong BRS decision and regrets it PFCs will have 4 year degree and be certified as financial counselors If Soldier does nothing, they stay is current retirement plan Soldier Training: ARNG approach to link BRS and Financial Literacy Training BRS implementation guidance will call for ATMS to track training completion by loading certificate All OPT IN group will require JKO based BRS Training Before 1JAN18 JKO (CAC) and Army One Source (non-CAC) will both provide the training, it will be a challenge to record the training was completed Army Directive 2016-05 creates added training challenge 4 DoD online Classes (JKO) Leader’s Course (intro) OPT IN Group (<12 years on 31DEC17) New Soldier Group (After 1JAN18) Counselor Course

Backup

MCRMC Assumes 100% investment by Soldier, this may not be the case Soldier’s Money Note Difference GOV 1% TSP Money TSP Concern: The OPM Federal Employee TSP Participation Patterns Report 2008-12 on page 26 stated that, “By the end of 2012, close to half of FERS participants deferred less than 5 percent of their salary. Those participants are not receiving the full agency matching contribution.”