Military Retirement - Military Times

Survivor Benefits

To enable retirees to provide for their families after their deaths, the government offers an annuity program, the Survivor Benefit Plan, available to all active-duty and reserve retirees. For a monthly premium, the SBP provides up to 55 percent of a member’s monthly retired pay to his or her 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 costs 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.

SBP offset

A long-standing 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 2007, SBP annuitants age 62 and older receive 50 percent of the retirees’ chosen level of coverage. In April 2008, the offset will be eliminated for older annuitants and they will receive 55 percent of the retirees’ chosen coverage, just as SBP annuitants under age 62 receive.

Disability

Veterans with service-related disabilities that have been rated by 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/militarypay/survivor/sbp/01_overview.html.