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Other benefits: Survivor benefits

To enable retirees to provide for their families after their deaths, the government offers an annuity program called the Survivor Benefit Plan.

SBP coverage also is given to all active-duty members at no cost as long as they remain in uniform.

Active-duty and reserve retirees, however, must pay monthly premiums. The SBP provides up to 55 percent of a member’s monthly retired pay to his survivors.

To participate in the SBP or the Reserve Component SBP, or to decline participation, both the retiring service member and spouse must agree to the option in writing.

Monthly premiums are deducted from retired pay. Retirees who elect SBP coverage when they leave active duty must remain covered for two years, after which they have a one-time, one-year window of opportunity to withdraw from the program.

When retirees elect to participate in SBP, they select a dollar amount of their retirement pay, called the base amount, as the foundation of the SBP benefit. The base amount must be between $300 and the full amount of monthly retirement pay. The cost of SBP generally is 6.5 percent of the amount of coverage a retiree selects. Surviving spouses then receive 55 percent of the base as their SBP payment.

Surviving spouses of military retirees have SBP annuities suspended if they remarry before age 55. If the marriage ends for any reason, the SBP will be reinstated when requested and when appropriate documentation is provided. However, the dependent ID card and its associated entitlements are not reinstated.

Cost-of-living adjustments. SBP premiums and annuities to survivors increase yearly, following the same guidelines used for retired pay COLAs.

DIC offset. Survivors of service members who die on active duty, and survivors of retirees who die of service-connected causes, are eligible for Dependency and Indemnity Compensation from the Department of Veterans Affairs. However, if survivors also receive SBP payments, those payments are reduced dollar-for-dollar by the amount paid in DIC. A pro-rated share of SBP premiums is refunded to the surviving spouse in a lump sum, but with no interest.

A change in law under the 2008 Defense Authorization Act creates a special payment to partially offset the reduction in SBP benefits required for those who also receive DIC. The special payments are scheduled to begin Oct. 1, 2008, the start of fiscal 2009. In that fiscal year, the monthly payment will be $50, and will increase by $10 each year to $100 per month in fiscal 2013. It will stay at $100 through February 2016, when the special payment will end.

SBP offset. A longstanding feature of the SBP program was an offset that kicked in when survivors reached age 62. At that time, the value of the annuity paid to survivors dropped from 55 percent of the level of retired pay selected by the retiree to 35 percent. The rationale was that a survivor’s Social Security payments would make up the difference and allow them to maintain their standard of living.

In 2004, Congress approved a revision that is phasing out the offset in increments over several years. As of April 2008, the offset for SBP annuitants age 62 and older is eliminated and payments equal 55 percent of the retirees’ chosen coverage for all annuitants, regardless of age.

Disability. Veterans with service-related disabilities that have been rated by the VA as totally disabling for 10 or more years, or those with a total disability rating that has been held for not less than five years from the last date of active duty, may withdraw from SBP participation.

There are two reasons for this: Disabled retirees may no longer be able to afford SBP premiums, and spouses automatically qualify for VA dependency and indemnity compensation when these veterans die, regardless of cause of death.

Divorce. If a service member’s marriage ends, SBP deductions stop when the retiree notifies the finance center or service. No further deductions are made unless the retiree remarries. The retiree then has a year to opt out of the benefit for the new spouse.

Retirees who do not notify the Defense Finance and Accounting Service of their remarriage, and therefore fail to decline coverage with approval of the new spouse, will owe any premiums not deducted from their retirement pay.

SBP benefits also can be provided for ex-spouses, and courts can order coverage for them. They are eligible for benefits at the same cost as spouses. Divorce decrees from state courts can allow service members to name ex-spouses as SBP beneficiaries.

Contact: http://www.dod.mil/military pay/survivor/sbp/01_overview.html