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Blended Retirement System Problem - You Could Lose Matching Contributions

By Capt. Matthew

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If you're in the blended retirement system and max out, or nearly max out, your yearly contribution to your thrift savings plan, listen up!  The matching contributions are not as straightforward as they seem.

 

The yearly maximum in 2018 you can contribute to your TSP is $18,500.  Also, BRS will match contributions up to 4 percent of your base pay...EACH PAY PERIOD.

 

So, the problem is that if you reach the $18,500 limit prior to December, you will miss at least one 4 percent matching contribution.  For example, if you reach the limit in September, you will not receive matching contributions for October, November, or December.  Again, BRS matches contributions each pay period (each month), not your overall contribution. 

 

So, if you can't contribute in a pay period because you've reached the limit, then there is nothing for BRS to match (though it will still provide the automatic 1 percent contribution). 

 

This has been confirmed when I called the Thrift Savings Plan agency, as well as by Air Force Personnel Center. In fact, AFPC is creating a training video to cover this very topic.

 

While I'm not any sort of financial adviser, I will share what I have been advised:  be careful with how you contribute if you want to receive all your BRS matches.  Do this by pacing your contributions throughout the year in order to arrive in December with at least 4 percent of your base pay left in the

$18,500 limit. 

 

Unfortunately, this is not as simple as it seems.  Remember promotion (or demotion) changes your base pay.  As does time in service, which will probably change your base pay at least every other year.  You'll have to factor those in.

 

Also, if you've already contributed money this year, the math gets even more complicated.  And even if you nail down those factors for this year, the maximum limit for 2019 might change as it did between 2017 and 2018, and next year you'll have to start over.

 

Some may not consider this a "problem" because BRS is functioning as intended with this respect.  But in my humble opinion this is a problem for several reasons.  No warnings in either myPay or a person's TSP account alert a member that they are on pace to miss matching contributions. 

 

Also, it was not in any BRS training, and although that is being rectified for future BRS enrollees, currently enrolled members may not see it.

 

Furthermore, as stated before, members are going to have to do this funny math pretty much every year, and may have to make changes mid-year if/when their base pay changes.

 

Even further, by requiring members to hold off on making contributions in the beginning of the year and instead invest the money later in the year, members will be missing out on the opportunity for growth.  After all, a dollar invested in January will be worth more than a dollar invested in December if the market goes up.

 

All these issues could be fixed if the BRS were tweaked to where if a person reached the maximum limit early, the same matching contributions would still be given each pay period.  This wouldn't cost the government anything extra because it's still paying the same amount and at the same times, and it would mean less effort spent doing the ever-changing math, and more money in members' savings due to growth.

 

Hopefully, this message reaches everyone with the "good" problem of reaching the TSP contribution limit.  Unfortunately, if it doesn't, then it is likely there are going to be people in BRS who miss out on money they have earned for their retirement.  For some people, it could already be too late.

 

For more information, please contact an Airman & Family Readiness Center.