SBP Premiums and the RC Difference

This month, we’ll continue with SBP premiums and close the topic. As some of the premium payment rules differ between Active Component (AC) and Reserve Component (RC), we’ll try to highlight those differences. Congress enacted a law which, effective 1 October 2008, ended the payment of SBP premiums when a retiree is age 70 and has paid into SBP for 360 months (30 years). If a retiree with less than maximum coverage increased the level of coverage during an open enrollment period or after remarriage, the premiums will continue for the portion
that represents the increased coverage even after termination of premiums for the original coverage. This change in the law applies to qualified members (generally AC only) who will no longer be required to pay SBP
premiums once they satisfy certain age and premium payment requirements. The Reserve Component Survivor Benefit Plan (RCSBP) permits retiring Reservists to provide a portion of their retired pay to an eligible beneficiary after they die. The maximum annuity payable is 55 percent. When you receive your notice of eligibility (NOE) for retirement, you are eligible to participate in the RCSBP. You may elect RCSBP coverage during the 90-day period
beginning after you receive your NOE. If you die before age 60, but before being notified of eligibility by Navy Personnel Command (NPC), or die after receiving that information but before you make the election, your spouse
or eligible minor children are eligible to receive an immediate RCSBP annuity. You have three RCSBP coverage options:

Option A: Decline coverage until age 60 – There is no coverage for the years between becoming eligible for retirement and reaching age 60. A spouse’s written concurrence to decline participation is required.
Option B: Deferred Coverage – An RCSBP annuity is payable on your 60th birthday or the day after your death,
whichever is later. A spouse’s written concurrence in Option B is required.
Option C: Immediate Coverage – The RCSBP annuity would begin on the day after your death, whether before or
after age 60.

Any retiree who is age 70 or older and whose retired pay has been reduced for SBP premiums for at least 360 months will qualify to have his/her SBP costs terminated. RC members are also eligible but credit for paidup
SBP applies only to months that retired pay is reduced. Since no premiums are deducted until the member is eligible to receive retired pay (usually age 60), there is no credit toward months of paid-up coverage for months covered but for which no premiums are paid. SBP premium reductions begin upon commencement of retired pay and only these months of premium reductions are applied to the 360-month requirement. The earliest effective date that a qualified retiree’s SBP premium could stop was 1 October 2008, and the change should have been reflected in the November 2008 payment. There will be no refund of excess premiums paid prior to the 1 October 2008 effective date of paid-up SBP. Retirees who reach age 70 and have paid 360 months of premiums
after 1 October 2008, will not be charged SBP premiums beginning with the month they reach age 70 and have paid 360 months of premiums. The retiree will receive a one-month credit for each month retired pay was reduced. This will be determined by using both current election records and historical records of the initial SBP
election. A retiree who does not have 360 months of paid-up premiums on 1 October 2008 is not eligible to have the SBP costs stopped. In these cases, the retiree will receive an additional one-month credit for each month retired pay is reduced until 360 months of paid premiums is reached. All retirees who are at least 70 years old and have paid at least 360 months of premiums as of 1 May 2008 received a letter notifying them that their premiums will be terminated beginning 1 October 2008. Beginning October 2008, a paid-up SBP premium counter was added to the Retiree Account Statement (RAS). The counter shows how many months of SBP premium payments DFAS has credited to the individual’s retired pay account and will be updated each month . If you believe that the SBP premium counter is wrong, beginning 1 Jan 2009 and ending 30 June 2009, you will be able to dispute the number of months of your SBP premium counter. To begin the dispute process, you must complete and submit a DD2656-11 form (http://www.dfas.mil/retiredpay.html). Complete all fields on the form that apply to you. Section II should be filled out by each retiree submitting the form. If you DID NOT serve any time on the Temporary Disability Retirement List (TDRL), leave Section II, boxes 9 and 10 blank. If you DID serve any time on the TDRL, please provide information in blocks 9 and 10. Please note that all criteria necessary to meet paid-up status are still applicable and that the DD2656-11 is not a waiver of any criteria to reach eligibility.

You may mail your form to:
DFAS
U.S. Military Retirement Pay
P.O. Box 7190
Attn: 2656-11
London, KY 40742-7190
Or fax it to 1-800-469-6559

More detailed information may be found at the Defense Finance and Accounting System (DFAS) Retired and Annuitant Pay home page at http://www.dfas.mil/retiredpay.html.