More than 740,000 active-duty members and 176,000 drilling Reserve and National Guard personnel are expected to opt in to the new Blended Retirement System when the choice becomes available in 2018.

The opt-in estimates are the product of a “dynamic retention” computer model to predict how personnel will react to a new retirement choice. The BRS was designed by the Military Compensation and Retirement Modernization Commission and approved by Congress last year for military members with fewer than 12 years of service.

The three-member Department of Defense Board of Actuaries is responsible for ensuring the Defense Department’s Military Retirement Fund is properly valued and actuarially sound. It held its annual meeting July 15 and accepted RAND’s estimate that 916,754 active and reserve component members will opt into the BRS in 16 months. That estimate is roughly half of the 1.8 million active-duty, Guard and Reserve members eligible to make the choice.

A transcript of that July meeting, however, shows the board and department actuaries embraced RAND’s numbers only reluctantly, as flawed approximations but also the best available. To understand why the number experts grumbled, we first need to review major features of the BRS.

The new plan is called blended because it combines an immediate but smaller annuity after 20 or more years of service with a Thrift Savings Plan enhanced by government matching of member contributions of up to 4 percent of basic pay plus an automatic 1 percent government contribution for all BRS participants.

This 401(k)-like nest egg is a portable benefit on leaving service. Veterans can roll the account into an employer 401(k) or continue to make contributions whether they served two years or 40 years in the military. Because this feature will benefit the great majority of members who leave service short of retirement eligibility at 20 years, the blended plan is expected to be a popular option, particularly with younger folks on their first or second enlistment and officers completing initial service obligation.

Committed careerists, however, are likely to stick with High-3 retirement, which will pay 20 percent more in lifetime annuities if full careers are a realistic goal. The blended plan has two other features High-3 doesn’t.

By current law, BRS participants are to receive a one-time “continuation payment” at the 12-year mark that, at a minimum, must equal two-and-half months of basic for active-duty members who agree to serve four more years or one-half month of active pay for reserve component personnel who make the same deal.

The last key feature of BRS allows those who reach retirement to receive in a lump sum 25 percent or 50 percent of their pre-old-age retirement annuities. In other words, here would be cash to help buy a home, start a business or pay off debts in return for reducing military annuities by one quarter or one half until age 67.

What bothered the Board of Actuaries about the RAND forecasts is that no one has calculated how attractive the lump sum feature will be. Another term for the missing ingredient is “personal discount rate.” Without that rate, which the board characterizes as a policy decision, RAND was forced to assume that no BRS member would elect the lump-sum distribution.

Because many will, however, the actuaries know the BRS opt-in estimates and, therefore, projected costs to properly fund the new military retirement option, are not precise enough to be acceptable. The board so advised Defense Secretary Ash Carter in a mid-July letter providing the board’s annual status report on the Military Retirement Fund.

“The significant uncertainty surrounding the opt-in process and other aspects of BRS means the opt-in and other assumptions are likely to change as more experience and information about the new system become available,” the board advised.

Members who enter service on or after Jan. 1, 2018, have no choice; BRS will be their retirement plan. Another group with no choice are members with 12 or more years of service by Dec. 31, 2017. They will be grandfathered under current High-3 retirement.

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