Blended Retirement System (BRS) Comparison Calculator

Technical Reference

A. Data the User Cannot Modify

1. Basic Pay Table and Growth Rates


The BRS Comparison Calculator uses the latest approved and published Military Pay Chart.  Future military pay increases will be adopted from the latest approved DoD five-year plan (‘FYDP’), as provided by the OUSD(Comptroller).  Military pay raises beyond the FYDP will use the economic assumption (‘across-the-board basic pay’) set at the most recent annual meeting of the DoD Board of Actuaries.  This information is published by the DoD Office of the Actuary under the tab “Military Retirement/Valuation of the Military Retirement System,’ Economic Assumptions paragraph, Appendix D, of the annually published report.  The calculator will be updated no later than December 31 each year to reflect the latest approved and published Military Pay Chart for the following year as well as incorporating annual adjustments to both the FYDP and economic assumption of the DoD Board of Actuaries.  As of December 2016, the Board of Actuaries’ annual across-the-board basic pay assumption is 3.25% per year.  [Note: this assumption excludes promotion and longevity increases]  


2.  Cost of Living Adjustments (COLA)

The calculator uses future Military Retirement System COLA rates as projected by the Office of Management and Budget (OMB) for the most immediate five calendar years.  These assumptions will be updated each year no later than December 31 for the following five calendar years.  COLAs beyond the most immediate five years will use the economic assumption (‘inflation’) set at the most recent annual meeting of the DoD Board of Actuaries (same URL as in paragraph 1).  As of December 2016, the Board of Actuaries’ annual inflation assumption is 2.75% per year.  


3.  Government Discount Rate (GDR) for Determining the Lump Sum Calculation

This rate is approved annually by the Deputy Assistant Secretary of Defense (Military Personnel Policy) based on calculations provided by the DoD Office of the Actuary.  The rate is the inflation-adjusted, 7-year average of the Department of Treasury ‘High-Quality Market (HQM) Corporate Bond Yield Curve’ at the 23-year maturity monthly average spot rate, plus an adjustment factor of 4.28 percentage points.  The inflation-adjustment applied is the Department of Treasury ‘Breakeven Inflation (TBI) Curve’ covering the same underlying 7-year averaging period at the same spot rate maturity.  As of January 1, 2018, the GDR for determining lump sum is 6.99% (in real economic terms).  The rate will be published June 1st for the following calendar year.


4.  Present Value

To determine the present value of an annuity stream for comparative financial purposes the future stream of then-year annuity payments is discounted to a current, or "present," value.  Present value, in this context, is used to compare the lifetime streams of payments under both retirement systems (e.g., BRS vs. “legacy” High-3); it is not the same as the present value using the above Lump Sum Formula.   Present values are the summation of all the discounted annuity amounts.  The discounted annuity amounts are calculated by dividing each period-specific retired pay by the projected annualized growth rate (the discount rate in this formula, also called "interest") raised to the number of time periods (e.g., years, months) being valued.  The discount rate used is the economic assumption (‘interest’) set at the most recent annual meeting of the DoD Board of Actuaries (same URL as in paragraph 1).  As of December 2016, the Board of Actuaries’ annual nominal interest assumption is 5.25% per year.  


5.  Thrift Savings Plan (TSP) Elective Deferral

Each year the Internal Revenue Service (IRS) determines the maximum amount an individual can contribute to tax-deferred savings plans like the TSP.  The Internal Revenue Code § 402(g) elective deferral limit for 2017 is $18,000 (excludes catch-up contributions beyond age 50).  The calculator assumes the annual cap is increased, on average, $500 annually to account for anticipated IRS cap increases.  In reality, IRS maximums are not increased at a set rate each year, but have averaged approximately $500 annually since 1996.  The cap will be adjusted accordingly each year, no later than December 31, based on the actual IRS elective deferral set for the following year, resulting in subsequent adjustments to all future years as a consequence.


6.  Continuation Pay Multiplier and Installments

The default Continuation Pay multiplier is 2.5 x monthly Basic Pay for the Active Component (AC) and 0.5 x monthly Basic Pay (as if on active duty) for the Reserve Component (RC).  These minimum multipliers will remain the default setting until further notice.  

B.     Data the User Can Modify


7.  Thrift Savings Plan (TSP) Continuously-Applied Rate of Return 

The default rate of return for the BRS Comparison Calculator is 7% (in nominal economic terms).  This is based on the TSP C-Fund average 10-year annual return, which is currently 7.36% after expenses.  Users can adjust the rate up to 40%, but not less than zero (i.e., 0%).


8.  TSP Individual Contribution Rate

The default individual contribution rate is set to 5% of Basic Pay, the individual contribution required to receive full government matching.  Users can set this rate at any non-negative rate up to 92%.  Contributions are limited to 92% of Basic Pay as FICA, Medicare, and Social Security contributions must still be made from Basic Pay. 


9.  TSP Withdrawal Age

TSP withdrawal age is set to age 67, the federally-defined full Social Security retirement age for the majority of current Service members.  The payments are payable in equal monthly installments until death; the user can set the withdrawal age anywhere from age 59 years, 6 months (the earliest withdrawal age not subject to the IRS 10 percent early withdrawal penalty), to 70 years, 6 months (the age at which Internal Revenue Code mandates a minimum distribution).


10.  Military Promotion Milestones

Predetermined career progression defaults are based on observed average promotion milestones across the DoD based on information drawn from the Selected Military Compensation Tables.  Users can modify promotion estimates, but a reasonable minimum time between promotions is set in the calculator (3 years minimum in grades above E-5 for enlisted, W-2 for warrant officers and O-3 for commissioned officers).


11.  Life Expectancy

The DoD Office of the Actuary estimates the average life expectancy of a currently-serving member (based on mortality assumed for the current retiree population), with the option of electing BRS, is age 85 (including expected future decreases in mortality).  This is the default setting, although information in this block will caution the user that age 85 is an average and they should consider planning for living longer.  


12.  Lump Sum Payments and Installments

The default is set to no lump sum payment and no installments of the lump sum.  Users can select a lump sum of retired pay of either 25 percent or 50 percent of the discounted present value of their future retirement annuity based on the Government Discount Rate.  If a lump sum is selected users have the option of one to four equal annual installment payments of the lump sum; the default is one installment (i.e., a single payment). 


13.  Reserve Component (RC) Retirement Points 

RC users will have previously entered their retirement points earned to date, but the calculator must estimate their future retirement points per year through their projected end of service.  The calculator defaults to the following annual retirement points for future years:

15 points for Reserve component membership

48 points for Inactive Duty Training (IDT/Drill)

14 points for Annual Training (AT days)

 The user can override the defaults and adjust their points in any future year based on expected duty.


14.  Non-Regular Retirement Age

The non-regular retirement default age is 60.  The user can decrease the age in three month increments not to go below age 50 provided it does not overlap a pay period.  For this iteration of the calculator, there must be a minimum of 3 years between the time you receive retired pay and the calculator run date.


15.  Continuation Pay Contribution to Thrift Savings Plan

The default is set to 0%.  Total user contributions, including individual contributions from basic pay combined with the continuation pay, cannot exceed the annual IRS Elective Deferral limit.


16.  Continuation Pay Installment Payments

The default is set for continuation pay to be paid in one installment.  Users can select from one to four equal annual installment payments of continuation pay.