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Understanding the Survivor Benefit Plan


The Survivor Benefit Plan allows retired service members to allocate a portion of their retired pay to a spouse or other eligible beneficiary categories after their death. Like your retirement pay, SBP benefits are inflation protected, making the coverage a good investment for many retirees. However, since SBP elections are generally irrevocable, it’s important to understand the SBP election categories in order to make the best decision before you retire.

Enrollment

Your SBP enrollment election must be made before you retire, or the election will be made for you. Here are some basics about enrollment:

Automatic coverage - Every retiring service member with an eligible spouse or child is automatically enrolled in SBP at the maximum level unless another election is made. If you don't want the maximum level, you must make the election before you begin receiving retirement pay. If you are married, an election of anything less than the maximum level of SBP coverage for your spouse must be endorsed by your spouse in writing.

Enrollment eligibility. The following people are eligible for coverage under SBP:

  • Spouse only
  • Spouse and children - The spouse is the primary beneficiary, and the children only receive the SBP if the spouse loses eligibility for SBP. For spouse and children, all eligible children are SBP beneficiaries under this election.
  • Children only - Children are eligible up to age 18, or 22 if full-time, unmarried students. The 55 percent annuity is divided equally among eligible children. Child coverage offers excellent protection for totally incapacitated children, since the 55 percent annuity is payable to them for life.  However, the SBP for a totally incapacitated child may have an adverse affect on other benefits the child receives due to disability.
  • Former spouse or former spouse and children - For former spouse and children, only the children of the marriage to the member are eligible.
  • Person with insurable interest - This election can be made by a retiring, unmarried member with one or no eligible children. A retiring unmarried member with only one eligible child may elect insurable interest for that child. If insurable interest is for a relative with a closer relationship than a cousin, no proof of financial interest is required. All other insurable interest beneficiaries must show a financial interest in the retiring member.

You may choose coverage for a spouse or a former spouse, but not both.  A former spouse is not automatically enrolled. If former spouse is elected, the spouse's concurrence is not required.

Enrollment period - Consider making your SBP election 60 to 90 days before you retire. Elections not made by date placed on the retired list result in automatic SBP coverage.

Monthly premium and benefit amounts

The premiums and the benefit amounts are calculated as a percentage of the base amount you choose. Your chosen base amount can be between $300 and your full retirement pay (maximum coverage) with the exception of members retired under REDUX retirement. Members retired under the REDUX may elect as a maximum base amount, the retired pay they would have received under the high three year retired pay calculation. Both the premiums and the benefit annuity payments will be adjusted annually by the same percentage as military retired pay. Although this will increase your premium costs, your beneficiary will receive annual increases in the benefit amount, protecting the payments against inflation.

Monthly Costs. Costs are calculated based on the beneficiaries and the base amount you choose.

  • Cost for spouse or former spouse - Premium percentages are determined by the date you entered active service and your retirement date. Generally the monthly premium is about 6.5 percent of your base amount.
  • Cost for children - The benefit amounts are determined by the age difference between the retiree and the youngest child at the time of enrollment. Premiums will automatically stop when the youngest child beneficiary loses eligibility (at age 18, or 22 for full-time students).
  • Cost for spouse (or former spouse) and children - The premium amount for spouse coverage is calculated at the same rate as spouse-only coverage. A small amount is added for children coverage, which is determined by the retiree's age, the spouse's (or former spouse's) age and the youngest child's age.
  • Cost for an insurable interest - The premium amount for an insurable interest is considerably more - 10 percent of gross retired pay plus 5 percent for every five years the beneficiary is younger than the retiree (to a maximum of 40 percent).

Benefit amounts for spouse, former spouse or an insurable interest - The SBP annuity pays 55 percent of your chosen base amount.

Benefits for children - The annuity pays 55 percent of your base amount to your enrolled children as well. If more than one child is enrolled, the benefit amount is divided equally among the children. The payments are made until the child reaches age 18, or 22 if a full-time student. If children are enrolled with a spouse or former spouse, only the spouse or former spouse receives payments. In the event the spouse dies or remarries before age 55, the eligible children equally share the SBP annuity.

Benefits for insurable interest - The annuity is calculated as 55 percent of the base amount minus the SBP premium.

Changes to SBP

Because changes to SBP are difficult to make, it is important to make a decision on your SBP election before you retire. Coverage can be terminated under certain circumstances, but the base amounts are more difficult to change.

Terminating SBP coverage - As an SBP participant you have a one-year window to terminate SBP coverage between the second and third year following the date you began to receive retired pay. However, once you terminate SBP coverage, it cannot be reinstated. Coverage for an insurable interest may be terminated at any time.

Divorce, death and remarriage - If you get a divorce or your spouse dies, the spouse SBP coverage and premiums are suspended. Coverage for your children will continue, but will be recalculated as children-only coverage. Upon remarriage, you have three options you may make within one year of the marriage:

  • You may resume SBP coverage for your new spouse at the prior level.
  • You may elect not to renew coverage.
  • You may increase coverage for your new spouse, if the prior coverage was less than the maximum level.

If you do not select one of the new options within one year of remarriage, your new spouse will be automatically covered at the same level as your previous spouse.

If you declined coverage for an eligible spouse when you retired, you will not be able to add coverage for a new spouse if you remarry after retiring.

Open enrollments - On rare occasions, open enrollment periods are offered to eligible retirees. During this time, retirees who are not participating in SBP may elect coverage for eligible beneficiaries, but they must pay applicable premiums retroactive to when they were first eligible to enroll (usually their retirement date). Retirees who are currently participating may add an eligible beneficiary or increase the amount of coverage. Open enrollment periods are not offered on a regular basis, and it may be years, or never, before the next SBP open enrollment. Since SBP was enacted on Sept. 21, 1972, there have only been five SBP open enrollment periods.

Resources

Military Officers Association of America - Call 800-245-8762, or download their booklet entitled "SBP Road Map" to answer your questions.

Your installation's support services - Your Fleet and Family Support Center, Marine Corps Community Services, Airman and Family Readiness Center or Army Community Service Center can provide you with information and support.

Military OneSource - This free 24-hour service is available to all active duty, Guard, and Reserve members and their families. Call 800-342-9647.

The Office of the Secretary of Defense - This site provides information on all aspects of the SBP, including instructions on calculating your benefit costs.


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