Now that you are retired, you’re either in the “gray” area or receiving your monthly annuitant pay. Let’s address the often confusing Survivor Benefit Plan (SBP). We’ll try to cover the most important areas of the Survivor Benefit Plan and Reserve Component Survivor Benefit Plan.
The Survivor Benefit Plan (SBP) was created by Congress in 1972 to put an end to the category of destitute survivors. SBP is the sole means by which survivors can receive a portion of military retired pay. Military members are automatically enrolled at no cost while they serve on active duty. Should they die on active duty with an eligible beneficiary, SBP is payable. In conjunction with their retirement, military members must elect to receive reduced retired pay for their lifetime, so as to continue 55 percent of their retired pay to their survivors following their death. To help military members and spouses make informed decisions on SBP participation, in-depth SBP counseling is provided by installation Retirement Services or Activities Officers (RSO/RAO). A NOSC may not have a full-time individual assigned this task, but information is available at Association Headquarters by calling CAPT McAtee at (703) 548-5800.
SBP’s #1 advantage is the fact that it is COLA-adjusted. This feature helps keep SBP’s purchasing power in step with tomorrow’s dollar value. It is a permanently increasing duct; all features of SBP are increased by the same percentage as the retiree COLA. The ratio of cost to benefit is constant.
There are six categories of beneficiaries for SBP; they are:
Spouse. An eligible spouse is the spouse you’re married to when you die. If you marry after retirement, the marriage must last at least one year; or you must have had children born of that spouse. Benefits are paid until the spouse dies, but stop upon remarriage before age 55 (and can be resumed if the remarriage ends).
Spouse & Child(ren). The spouse is the primary beneficiary, with eligible children (to age 18, or under 22 if full-time, unmarried college students) receiving the annuity only if the spouse dies or remarries before age 55. The 55% annuity is divided equally among the eligible children.
Child(ren) Only. Eligible children are the primary beneficiaries. If the retiree dies while a child is eligible, the 55% annuity continues until the child exceeds the age of eligibility or is married. “Eligible children” are defined as adopted children, stepchildren, foster children, and recognized natural children who live with the retiree in a regular parent-child relationship. Children of all marriages are eligible beneficiaries under this election. Child coverage offers excellent protection for incapacitated children, since the 55% annuity is payable to them for life. The mental or physical incapacity must have been incurred while in the age eligibility range. By receiving this annuity, certain Social Security benefits are lost. Check with your local Social Security office for details.
Former Spouse. This option can be elected voluntarily or be required by a state court. Former spouse costs and benefits are identical to those for spouses. The same remarriage limitations apply.
Former Spouse & Child(ren). This is identical to the “spouse & children” option in costs and benefits, except that only children of the marriage to the former spouse are eligible beneficiaries.
Insurable Interest. If a retiree is unmarried with no children or one dependent child, this option may be selected. The “natural person” must be someone with a financial interest in your life. Examples are a close relative or a business partner. The base amount is the dollar amount of retired pay you select on which to base participation. It can be any amount between $300 per month and full retired pay. Payments to the beneficiary are then computed on 55% of this base amount.
Costs and benefits for the beneficiary are as follows:
Spouse (or Former Spouse): The cost is 6.5% of the base amount. For example, with a base amount of $1,000 per month, the cost
for spouse coverage is $65. The annuity is 55% of $1,000 (or $550).
Spouse (or Former Spouse) & Child: The spouse portion of this election costs 6.5% of the base amount. The child cost portion is
based on the ages of the military member, the spouse, and the youngest child. This cost is very low, given typical ages.
Child Only: The cost is based on the ages of the retiree and youngest child. Using a $1,000 base amount as an example, with the
member aged 42 and the youngest child 10, the child cost is $3.80. Children are primary beneficiaries in this option. Eligible children
equally divide the 55% benefit.
Insurable Interest: The base amount must be full retired pay in this option. Costs are 10% of retired pay, plus 5% for each full five
years younger the beneficiary is than the retiree, and cannot exceed 40% of retired pay. The annuity is 55% of the remainder of
retired pay minus the SBP premium and continues for life.
Note: This option may be cancelled at any time. Should you gain a spouse or child in the future, the insurable interest coverage may be changed to spouse or child or both, within one year of acquisition.
Contact information for the Defense Finance and Accounting Service (DFAS) can be found at http://www.dfas.mil/retiredpay/contactus.html.
Next month, we’ll finish SBP and address some of the differences (inequities!) with which Reserve Component (RC) members must deal.
Now that you are retired, you’re either in the “gray” area or receiving your monthly annuitant pay. Let’s address the often confusing Survivor Benefit Plan (SBP). We’ll try to cover the most important areas of the Survivor Benefit Plan and Reserve Component Survivor Benefit Plan.
The Survivor Benefit Plan (SBP) was created by Congress in 1972 to put an end to the category of destitute survivors. SBP is the sole means by which survivors can receive a portion of military retired pay. Military members are automatically enrolled at no cost while they serve on active duty. Should they die on active duty with an eligible beneficiary, SBP is payable. In conjunction with their retirement, military members must elect to receive reduced retired pay for their lifetime, so as to continue 55 percent of their retired pay to their survivors following their death. To help military members and spouses make informed decisions on SBP participation, in-depth SBP counseling is provided by installation Retirement Services or Activities Officers (RSO/RAO). A NOSC may not have a full-time individual assigned this task, but information is available at Association Headquarters by calling CAPT McAtee at (703) 548-5800.
SBP’s #1 advantage is the fact that it is COLA-adjusted. This feature helps keep SBP’s purchasing power in step with tomorrow’s dollar value. It is a permanently increasing duct; all features of SBP are increased by the same percentage as the retiree COLA. The ratio of cost to benefit is constant.
There are six categories of beneficiaries for SBP; they are:
Spouse. An eligible spouse is the spouse you’re married to when you die. If you marry after retirement, the marriage must last at least one year; or you must have had children born of that spouse. Benefits are paid until the spouse dies, but stop upon remarriage before age 55 (and can be resumed if the remarriage ends).
Spouse & Child(ren). The spouse is the primary beneficiary, with eligible children (to age 18, or under 22 if full-time, unmarried college students) receiving the annuity only if the spouse dies or remarries before age 55. The 55% annuity is divided equally among the eligible children.
Child(ren) Only. Eligible children are the primary beneficiaries. If the retiree dies while a child is eligible, the 55% annuity continues until the child exceeds the age of eligibility or is married. “Eligible children” are defined as adopted children, stepchildren, foster children, and recognized natural children who live with the retiree in a regular parent-child relationship. Children of all marriages are eligible beneficiaries under this election. Child coverage offers excellent protection for incapacitated children, since the 55% annuity is payable to them for life. The mental or physical incapacity must have been incurred while in the age eligibility range. By receiving this annuity, certain Social Security benefits are lost. Check with your local Social Security office for details.
Former Spouse. This option can be elected voluntarily or be required by a state court. Former spouse costs and benefits are identical to those for spouses. The same remarriage limitations apply.
Former Spouse & Child(ren). This is identical to the “spouse & children” option in costs and benefits, except that only children of the marriage to the former spouse are eligible beneficiaries.
Insurable Interest. If a retiree is unmarried with no children or one dependent child, this option may be selected. The “natural person” must be someone with a financial interest in your life. Examples are a close relative or a business partner. The base amount is the dollar amount of retired pay you select on which to base participation. It can be any amount between $300 per month and full retired pay. Payments to the beneficiary are then computed on 55% of this base amount.
Costs and benefits for the beneficiary are as follows:
Spouse (or Former Spouse): The cost is 6.5% of the base amount. For example, with a base amount of $1,000 per month, the cost
for spouse coverage is $65. The annuity is 55% of $1,000 (or $550).
Spouse (or Former Spouse) & Child: The spouse portion of this election costs 6.5% of the base amount. The child cost portion is
based on the ages of the military member, the spouse, and the youngest child. This cost is very low, given typical ages.
Child Only: The cost is based on the ages of the retiree and youngest child. Using a $1,000 base amount as an example, with the
member aged 42 and the youngest child 10, the child cost is $3.80. Children are primary beneficiaries in this option. Eligible children
equally divide the 55% benefit.
Insurable Interest: The base amount must be full retired pay in this option. Costs are 10% of retired pay, plus 5% for each full five
years younger the beneficiary is than the retiree, and cannot exceed 40% of retired pay. The annuity is 55% of the remainder of
retired pay minus the SBP premium and continues for life.
Note: This option may be cancelled at any time. Should you gain a spouse or child in the future, the insurable interest coverage may be changed to spouse or child or both, within one year of acquisition.
Contact information for the Defense Finance and Accounting Service (DFAS) can be found at http://www.dfas.mil/retiredpay/contactus.html.
Next month, we’ll finish SBP and address some of the differences (inequities!) with which Reserve Component (RC) members must deal.