Legal Assistance for Military Personnel

Legal Eagle

Back

THE LEGAL EAGLE

THE SURVIVOR BENEFIT PLAN

INTRODUCTION: As a service to our legal assistance clients, we have prepared this handout with frequently asked questions on issues involving the Survivor Benefit Plan. It is, of course, very general in nature since no handout can answer your specific questions. We do ask, however, that you read over these questions and answers carefully in connection with your visit to our legal assistance attorneys so that you may have the fullest information available to help you with your family law problem. Comments, corrections and suggestions regarding this pamphlet should be sent to the address at the end of the last page.

1. Q. WHAT IS THE SURVIVOR BENEFIT PLAN, AND HOW DOES IT WORK?

A. The Survivor Benefit Plan (SBP) is an annuity paid to the surviving spouse or family member of a deceased servicemember. It's similar to insurance in that it enables retired military personnel to provide monthly income to beneficiaries after the retiree's death. The beneficiary of your SBP can be your spouse, former spouse, dependent children, or any other person with an insurable interest in your life.

2. Q. HOW DO YOU DECIDE HOW MUCH YOUR BENEFICIARY WILL RECEIVE?

A. To determine how much the beneficiary will receive, you must designate a "base amount," and this is based on your retired pay. The minimum base is $300 per month, but you can select any greater amount, in $100 increments, up to the full monthly amount of your retired pay.

The annuity for your spouse or former spouse is 55% of the base amount. Until 2004, the law stated that this would decreases to 35% of the base amount when the beneficiary reached age 62, unless you were eligible to retire on or before October 2, 1985, in which case there is a complex set of rules which establishes the annuity amount.

In the fall of 2004 this changed.; under current law this Social Security Offset will be phased-out over 3 ½ years so that it is eliminated in 2008. From October 1, 2005 until March 31, 2006, the applicable percent will be 40%. From April 1, 2006 until March 31, 2007, the percent will be 45%. From April 1, 2007 until March 31, 2008, it will be 50%. After April 1, 2008 the applicable percent will be 55%, which will eliminate the previous “offset” entirely.

Your cost will depend on who your beneficiary is and what base amount you select. Former spouse coverage, for example, costs 6.5% of the selected base amount, deducted from the retiree's gross retired pay.

3. Q. DO I HAVE TO SIGN UP? OR DO I HAVE A CHOICE?

A. SBP participation is optional, but if you are on active duty and married, you will not be able to reject SBP coverage without your spouse's consent. There is also a Guard/Reserve SBP program; once enrolled, a member of the Guard/Reserve must elect the maximum coverage unless the spouse consents to a lesser amount.

4. Q. WHEN DO I HAVE TO DECIDE?

A. There are three points to remember:

•  If you are married and on active duty, you must make your SBP election before you retire. If you elect to participate, you cannot cancel the SBP coverage later, except under very limited circumstances.

•  If you are a Reservist, you have two chances to select SBP coverage -- first when you complete 20 years of service and again when you turn 60. However if you elect to participate at the 20-year point, you cannot un-enroll at age 60.

•  You are only allowed one adult SBP beneficiary. You can't reserve part for a present or future spouse and part for a former spouse. Multiple beneficiaries are only permitted if you choose “child coverage” and there is more than one child, or “spouse and child coverage.”

5. Q. IS THIS REALLY A GOOD DEAL?

A. SBP is generally a good plan, but there are some situations in which it may not be the most economical plan. For example, the minimum SBP plan premium for $300 per month as the base amount is cheaper than almost every private insurance program. But at larger amounts, SBP coverage may be more expensive than commercial insurance. Also, if you're going through a divorce and the SBP has not been designated for your soon-to-be-ex, consider “saving” the SBP for a future spouse if your soon-to-be former spouse is likely to remarry before 55, thus losing eligibility for coverage.

Commercial life insurance or a private annuity may also provide better or cheaper protection for a younger surviving spouse. But SBP is a lifetime annuity and it'll never become “too expensive,” as might be the case with life insurance. For better comparison information on life insurance, check with an insurance agent who is familiar with the costs and benefits of SBP, such as a military retiree or an agent who is in the Reserves or the National Guard. The bottom line here is, "Shop around!"

SBP CHECKLIST

This attorney checklist will help to explain the SBP and coverage for the non-military spouse.


 

 

Action or issue

 

Comments

 

 

 

SBP is a unitary benefit, cannot be divided between current spouse and former spouse

 

 

 

 

 

Election: Servicemember on active duty is automatically covered; at retirement an election must be made, and spouse concurrence is necessary if member chooses no SBP, child only coverage or coverage at base amount less than his/her full retired pay

 

 

 

 

 

Election - Guard/Reserve: There is one opportunity to make election at the 20-year mark (after 20 years of creditable Guard/Reserve service). At time of application for retired pay (about a year before member turns 60), he/she is given another opportunity. Spouse concurrence as above.

 

 

 

 

 

If representing the nonmilitary spouse, be sure to mandate former spouse coverage with member selecting full retired pay as base amount

 

SBP benefit payments equal 55% of the selected base amount, which can be $300 or above. Until 2004, the percentage was reduced when the beneficiary turned age 62 to 35%. This is being phased out; the phase-out will be complete by April 1, 2008.

 

 

 

If representing the member/retiree, make sure that the base amount selected yields an SBP payment not to exceed the amount of retired pay awarded to the former spouse, so that spouse doesn't profit by retiree's death

 

Selection of a base amount lower than full retired pay means that the death benefit payments from SBP are about the same as the lifetime spousal payment. This “mirror benefit” approach may be very difficult to calculate, depending on what the rules of pension division are in the state involved.

 

 

 

If representing the member/retiree, try to negotiate a reduction of the spouse's share of the military pension to reflect the additional cost of the SBP premium, which is taken out of the retired pay

 

SBP premium is 6.5% of selected base amount, payable out of retired pay, and it is “taken off the top” and deducted before division of disposable retired pay, so both parties pay in same shares as their shares of the retired pay

 

 

If member/retiree is to submit SBP election to DFAS, make sure this is done within one year of divorce; enclose divorce decree and SBP application form titled Survivor Benefit Plan (SBP) Election Statement for Former Spouse Coverage (DD Form 2656-1)

 

 

 

 

 

If spouse/former spouse applies, be sure to enclose copy of divorce decree, order for SBP coverage and “deemed election letter” within one year of order granting SBP coverage [different deadline from one year after divorce, in some cases]

 

There is no specific form for the letter - it just needs to explain that what is enclosed and that, since the member did not elect coverage, the enclosed order mandates SBP “former spouse” coverage

 

 

 

If above deadlines are exceeded, apply to the appropriate Board for the Correction of Military Records for relief (may be available if retiree has not remarried)

 

 

 

 

 

Send SBP documents to: Defense Finance and Accounting Service, U.S. Military Retirement Pay, P.O. Box 7130 , London , KY 40742-7130 .

 

It is recommended to send by certified mail, return receipt requested.

 

 

 

SBP is reduced by Dependency and Indemnity Compensation in certain circumstances.

 

For information, go to www.vba.va.gov/bln/21/Milsvc/Docs/DICDec2002Eng.doc. Or call toll-free 1-800-827-1000.

 

6. Q. I'M GOING THROUGH A DIVORCE FROM MY HUSBAND. IS THERE ANYTHING I SHOULD KNOW ABOUT HIS SBP COVERAGE FOR ME?

A. Yes. Here are the most important points:

•  First of all, it's not automatic. You must ask for it, and the two of you must agree on this coverage (or the judge must order it) for SBP to be effective.

•  Secondly, it must be included in a court order and sent to DFAS (Defense Finance and Accounting Service) if you want to be sure that this option will be honored. And the order must be sent to DFAS within one year of the divorce .(if by the retiree or servicemember) or within a year of the SBP order (if by the spouse).

•  Finally, if retirement is approaching soon, see an SBP counselor or a legal assistance attorney now, so you can make an informed decision.

7. Q. WON'T THIS BE TAKEN CARE OF WHEN MY DIVORCE GOES THROUGH?

A. Not necessarily. If your divorce is in an overseas court – Germany , Japan , etc. – then the court cannot do anything about military retirement benefits, including retired pay and Survivor Benefit Plan. No order from an overseas court will be obeyed by DFAS regarding SBP. You'll have to ask a court in the U.S. to make provisions for SBP if you want to be covered.

On the other hand, you may be proceeding with a divorce in an American court. In this case, you should ask your civilian attorney to be sure to include a request for property division in the divorce papers you file with the court. Your papers should specifically ask for division of any military pension rights and coverage under the Survivor Benefit Plan in case your husband dies. If DFAS is served with the SBP order by the spouse or former spouse within a year of the entry of that U.S. court order, then it will honor that “deemed election” request, even if your husband refuses to sign an application to that effect.

8. Q. IF I HAVE OTHER QUESTIONS, WHAT SHOULD I DO?

A. See a legal assistance attorney or private attorney as soon as possible. Your lawyer can answer many questions and help you to make a fair and intelligent decision about your choices, options and alternatives. Our legal assistance office stands ready, willing and able to help you in these matters. Be sure to bring along with you to the interview a copy of any documents or court papers that might be helpful to your attorney.

Location and hours of your Legal Assistance Office: ___________________

Information on local agencies, offices and resources: __________________

[rev. 1/08]

* * *

THE LEGAL EAGLE SERIES OF CLIENT HANDOUTS IS PREPARED BY MARK E. SULLIVAN, CHAIR OF THE MILITARY COMMITTEE, ABA FAMILY LAW SECTION AND AUTHOR OF THE MILITARY DIVORCE HANDBOOK (AM. BAR ASSN. 2006). COMMENTS AND SUGGESTIONS SHOULD BE SENT TO HIM AT: 2626 GLENWOOD AVENUE , STE. 195, RALEIGH , N.C. 27608 [919-832-8507]; E-MAIL— MARK.SULLIVAN@NCFAMILYLAW.COM.

THE NORTH CAROLINA STATE BAR
217 E. Edenton Street • PO Box 25908 • Raleigh, NC 27611-5908 • 919.828.4620
Copyrightę North Carolina State Bar. All rights reserved. • Website design provided by Sageisland.com

>