A newly released Defense Department policy allows military retirees with special needs children to take advantage of a law changing the way their Survivor Benefit Plan can be paid after their death.
The Survivor Benefit Plan allows military retirees to provide to a designee a monthly payout after their death of up to 55 percent of their retirement pay, depending on the plan the choose. Users pay a monthly premium. If the retiree outlives the person for whom he has designated the payout, the premiums are lost.
In the past, retirees have been hesitant to select a disabled adult child as their beneficiary because they feared any extra income would disqualify the child from receiving other government subsidies for disabled adults, such as housing assistance and Medicaid.
The new law, however, passed as part of the 2015 National Defense Authorization Act, allows the retiree to instead designate certain types of Special Needs Trusts as the recipient of their SBP payout instead of the disabled child. Doing so fixes the issue and should allow the disabled child to receive both government benefits and SBP support after the retiree's death.
The policy guidance, published Dec. 31, more than a year after the law was passed, allows retirees to make the changes.
To take advantage of the new rules, retirees currently paying into an SBP assigned to a disabled child can make a one-time decision to switch the designated payout to a special needs trust, according to the new policy. If a retiree has already died, his surviving spouse or the child's guardian can elect to the change, the policy says.
--Amy Bushatz can be reached at email@example.com. Follow her on Twitter at @amybushatz.