When a retirement eligible Guardsman or Reservist dies their retirement pay stops. This means that the surviving spouse will be left without a substantial income source. If you are a retiree you need to give serious thought to how you can protect your spouse from the hardships caused by the loss your retirement pay.
One option available to you is the Survivor Benefit Plan. The SBP is an insurance plan that will pay your surviving spouse a monthly payment (annuity) to help make up for the loss of your retirement income. The plan is designed to protect your survivors against the risks of:
Prior to 1978, there was no provision for Guardmembers to elect coverage in the Survivor Benefit Plan (SBP) until just before their 60th birthday. As a result, many retirement eligible Guardmembers who died before reaching age 60 (the time when they would normally begin to receive retired pay) were unable to provide protection for their survivors based on their military careers and retired pay entitlements.
Members of the Reserve Forces now have the opportunity to make important decisions regarding survivor protection as soon as they are officially notified that they have become retirement eligible. For National Guard members, this notification takes place when they have completed 20 qualifying years of Reserve Component service and are notified they will be entitled to receive retired pay at age 60.
Under RC-SBP, members of the National Guard and Reserve who are notified that they have attained 20 years of satisfactory federal service creditable toward entitlement to retired pay at age 60, have three options for providing financial protection for their survivors. The survivor may be the spouse, former spouse, dependent children, or a person with an insurable interest in the member. Like the active duty version of the SBP, Survivor benefits (annuities) can be as much as 55 percent of the retired pay are receiving (or would have received) at the time of death.
Note: A surviving spouse's SBP annuity is reduced when they reach age 62 and become eligible for Social Security. This is called the Social Security offset. In the past the offset reduced the SBP annuity to 35 percent of the base amount. The offset created a need for members to purchase a Supplemental Survivor Benefit Plan (SSBP) policy. Fortunately the National Defense Authorization Act of 2005 established a phase out of the offset by 2008. Thus eliminating the need for the SSBP.
The phase out will increase the SBP percentage as follows:
A Reserve Component member, upon being notified of eligibility to receive retired pay at age 60, is automatically covered at the maximum level unless the member, with spouse concurrence, if married, elects a lesser amount of coverage or no coverage. Such an election must be made within 90 days of receiving the 20 year letter.
There are several categories of beneficiaries that a member may choose from to provide an annuity under SBP. The categories are:
Eligibility for this category requires that a surviving spouse be a widow or widower who was married to a retiree at the time of his or her enrollment; or, if not married at the time of enrollment, was married to the deceased retiree for at least one year prior to the retireeA?s death; or, if not married at time of enrollment and was not married to the deceased retiree for at least one year prior to death, was the parent of issue by that marriage. Spouse coverage applies not only to the spouse a member has at time of enrollment, but also automatically to any subsequent spouse the member might acquire, unless the member elects to decline coverage for a subsequent spouse within one year of the date of marriage (concurrence of the subsequent spouse is not required, but that spouse will be notified of the memberA?s declination).
SBP protection under this category is expanded to cover an eligible child or children if there is no surviving spouse, or if a surviving spouse subsequently dies or becomes ineligible to receive benefits due to remarriage before the age of 55. Thus, if there is a divorce or if the spouse dies before the retiree, the full SBP annuity will be paid to the eligible surviving child or children in the same manner as if the member had elected A?Child OnlyA? coverage.
This option provides an annuity only for dependent children regardless of whether a member is married or not at time of enrollment (although a married memberA?s spouse must concur with a child only election). Children remain beneficiaries until age 18 or age 22 if a full-time, unmarried student. Children mentally or physically incapable of self-support remain eligible, while unmarried, for as long as the incapacitation exists. A member with no dependent children at time of eligibility to elect coverage may elect coverage for a child subsequently acquired, but the child must be added within one year of being acquired (born, adopted, etc.).
A member who has a former spouse upon becoming eligible to elect a survivor annuity may elect coverage for a former spouse. If the member has more than one former spouse, the member must specify which former spouse is being covered. An election for a former spouse prevents payment of an annuity to a current spouse. A former spouse who was not a memberA?s former spouse on the date a member became eligible to participate in SBP must have been married to the member for at least one year in order to be named as a former spouse beneficiary.
A member who does not have a spouse or dependent child when eligible to make a program election may elect to provide coverage for a person with an insurable interest in the member. The Department of Defense defines an insurable interest as A?a natural person with an insurable interest who has a reasonable and lawful expectation of financial benefit from the continued life of the participating member, or any individual having a reasonable and lawful basis, founded upon the relation of parties to each other, either financial or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the retired memberA?. If the election is for a person who is more nearly related than a cousin, no proof of financial expectation is required.
An election for insurable interest coverage, for other than a dependent (as described in 10 U.S.C. 1072(2)), made by a member retiring on or after November 24, 2003 under a military disability provision, who dies within one year after being retired due to a cause related to the disability for which retired, shall be voided and any premiums paid for that coverage will be paid to the person to whom the annuity would have been paid.
Click below for more SBP information: