TSP Preps For Influx of Service Members in 2018

The Federal Retirement Thrift Investment Board should have a good idea by Nov. 1 of how well its information technology and business systems can handle an influx of service members into the government’s 401(k)-style retirement benefit, which is a key component of the law mandating military retirement reform.

“This is a massive project,” said Tom Emswiler, senior adviser for the uniformed services in the agency’s Office of the Chief Operating Officer, during the board’s monthly meeting on Monday. “It might be the largest we’ve ever had before.” 

The agency has roughly fifteen months to implement a provision in the fiscal 2016 National Defense Authorization Act, which mandates the auto-enrollment of new troops into the TSP. The FRTIB manages a program that has approximately 4.9 million participants, 730,000 of whom are service members, so it’s already big. Auto-enrolling service members could add between 260,000 and 270,000 new participants each year starting in 2018.

“We have to be ready by January 2018 no matter what,” said Greg Long, the board’s executive director. This is not entirely new territory for the FRTIB. In 2010, the agency launched a program that automatically signs up all new civilian hires to allocate 3 percent of their basic pay to the G (government securities) fund, unless they choose to end their contributions or change the amount. 

So far, the blended retirement project is on track, said Emswiler during a presentation at the monthly meeting. The agency has issued a task order for a “capacity study” of its systems and business units to ensure they can absorb the additional participants and increased transactions without disruption. The board expects preliminary results from that study Nov. 1, and will perform whatever upgrades are necessary for a successful implementation based on that assessment.

Additionally, training for leaders on implementing the new blended retirement system for the military started June 1, with approximately 70,000 uniformed service members already trained, Emswiler said. Current service members who can opt into the system are scheduled to receive information and training in January 2017.

The changes to the military’s retirement system – which has not seen significant reform since the World War II era – are based on 2015 recommendations from the Military Compensation and Retirement Modernization Commission. The new blended retirement system, which will take effect in 2018, will automatically enroll new troops into the TSP at 3 percent of their pay with a 1 percent government deposit. After two years of service, the government would be able to match up to 5 percent of any extra contributions service members make.

The main purpose of the retirement reform is to allow non-career military members to boost their retirement nest eggs. Those who serve less than 20 years in the military – 83 percent of troops – do not receive a pension. To encourage members to stay in the military, the new law also includes a measure providing continuation or retention pay after 12 years of service. Service members who stay in the military for 20 years, and are thereby entitled to a retirement pension, would receive a less generous calculation for their annuity under the reforms. Current service members can opt into the new system, or stay in the current one.

TSP board members on Monday also approved the agency’s fiscal 2017 budget proposal of $257 million, a 17 percent increase from fiscal 2016, in part to help the agency implement the blended retirement program.