SURVIVOR BENEFIT PLAN (SBP)

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SURVIVOR BENEFIT PLAN (SBP)Presented byDan
McCulloughUSAF AcademySurvivor Benefit Plan
Counselor333-2129
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AVERAGE LIFE EXPECTANCY

• Life expectancy in the USA
• Average is 78.0 years
• Males 75.15 years
• Females 80.97 years
• Average number of years female spouses outlive
  male military retirees
• 30 of female spouses - 15 years
• 20 of female spouses - 29 years
• 10 of female spouses - 34 years
• Life expectancy averages taken from U.S.
  Census Bureau, International Data Base as of
  7/16/2007

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PURPOSE OF SBP

• Retired pay stops the date of the retirees
  death!
• Even if theres a surviving spouse/children
• SBP is the only way survivors can receive a
  portion of deceased members retired pay
• SBP provides surviving spouses with a continuing,
  inflation-protected, lifetime income

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AUTOMATIC COVERAGE PROVISION

• All retirees must complete a DD Form 2656 before
  retirement date
• Provides DFAS-CL data required to properly
  establish your retired pay account
• Federal and state income tax
• Arrears of retired pay beneficiary(ies)
• Properly establishes SBP coverage

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AUTOMATIC COVERAGE PROVISION

• Spouse concurrence required on the DD Form 2656
  when married member does not elect full spouse
  coverage
• DD Form 2656 must be completed, dated, and
  properly witnessed by SBP counselor
• If DFAS-CL does not receive the DD Form 2656 with
  a valid SBP election (and spouse concurrence, if
  required) before retirement date, the law
  requires maximum SBP coverage be established
  (even for a single person!)

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SBP BENEFICIARY CATEGORY OPTIONS

• Each retiring member must elect a category of SBP
  beneficiary
• Spouse
• Child(ren)
• Spouse and Child(ren)
• Former Spouse
• Former Spouse and Child(ren)
• Insurable Interest
• Decline

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LEVEL OF COVERAGE AVAILABLE

• Each retiring member must elect a level of
  coverage
• By selecting a base amount
• Base amount determines the cost
• Cost also determined by category of beneficiary
  elected
• Base amount determines the annuity payable
• Base amount can be any figure between 300 and
  the members full (gross) retired pay
• Cost-of-living adjustments (COLAs) are applied to
  the base amount at the same time and rate as
  retired pay increases

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SPOUSE ONLY OPTION

• A spouse, married to member on date of
  retirement, is immediately eligible
• No length of marriage requirement
• A member, who is not married on the date of
  retirement, may cover a future spouse
• Member must send written request to DFAS prior to
  1st anniversary of first marriage after retiring
  and include a copy of the marriage
  certificate/license

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SPOUSE ONLY OPTION

• New spouse becomes an eligible beneficiary the
  earlier of
• 1st anniversary of marriage
• Upon birth of a child if before the 1st
  anniversary of marriage
• Exception Immediately if retired member
  remarries the spouse covered at retirement and
  member elects to resume spouse coverage

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SPOUSE ONLY OPTION

• SBP coverage and premiums are suspended if spouse
  loses eligibility
• Death
• Divorce (may change election to Former Spouse
  coverage following divorce)

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SPOUSE ONLY OPTION

• Remarriage options for members with suspended
  spouse SBP coverage
• Member must send written request to DFAS prior to
  first anniversary of marriage to
• Resume prior level of coverage for new spouse, OR
• Increase prior level of coverage for new spouse,
• Member must repay difference with interest before
  1st anniversary of marriage
• OR
• Decline coverage for new spouse

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SPOUSE ONLY OPTION

• If a member with suspended spouse coverage does
  NOTHING prior to the 1st anniversary of marriage
• Coverage is automatically established by
  operation of law for new spouse on 1st
  anniversary of marriage
• For the same level of coverage previously in
  effect
• If DFAS is not promptly notified of marriage,
  debt of premiums will accrue

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SPOUSE ONLY OPTION

• Provides spouse an annuity of 55 of the elected
  base amount for life
• Remarriage before age 55 suspends annuity
• Annuity can be reinstated if remarriage ends
• Due to death or divorce
• Annuity continues if remarriage occurs at age 55
  or older
• Annuity increases with retiree COLAs
• Annuity is taxable

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CHILD ONLY OPTION

• Children are eligible until age 18 (22 if
  unmarried full-time students)
• Children disabled and incapable of self-support
  remain eligible for life or as long as disability
  causes them to be incapable of self-support
• Be cautious if Social Security Disability
  benefits are involved
• However, childs marriage at any age terminates
  childs eligibility

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CHILD ONLY OPTION

• Covers all members children while they are
  eligible
• Cannot designate a particular child(ren) to
  receive the annuity
• Child cost based on ages of member and youngest
  child
• Child coverage and cost suspended when last child
  loses eligibility

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CHILD ONLY OPTION

• Future child(ren) (natural, adopted, step, grand)
  are automatically covered if child coverage
  elected
• Future child(ren) covered on date of acquisition
• No change in cost if member is currently paying
  premiums for child coverage
• If premiums had been suspended because last child
  lost eligibility, new child costs recomputed
  based upon current ages of member and new
  youngest child
• Member must notify DFAS-CL in writing with a copy
  of the new childs birth certificate

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CHILD ONLY OPTION

• Member who has no eligible children at retirement
  may cover a future child
• Member must send written request to DFAS within
  one year of acquiring the first eligible child
  and include copy of childs birth certificate
• Child becomes covered on date of receipt of the
  election request by DFAS-CL
• Costs begin 1st day of the following month

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CHILD ONLY OPTION

• Provides eligible child(ren) an annuity of 55 of
  the elected base amount
• Only one annuity is payable
• All eligible children receive equal shares of the
  annuity (when over age 18)
• Annuity paid to adult guardian on behalf of a
  minor child
• Dont consider electing child only coverage as
  replacement income for spouse because it cant be
  changed to spouse coverage when last child loses
  eligibility

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SPOUSE CHILD OPTION

• Spouse is the primary beneficiary
• Spouse receives annuity until death or remarriage
  prior to age 55
• Annuity reinstated if remarriage terminates
• Eligible children are contingent beneficiaries
• Receive equal shares of the annuity if spouse
  dies or remarries prior to age 55
• Provides maximum family coverage

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FORMER SPOUSE OPTION

• Only one former spouse may be covered
• Excludes current spouse (cant split the annuity)
• Can suspend premiums if former spouse remarries
  prior to age 55
• Must furnish copy of former spouses remarriage
  certificate
• Does not terminate former spouses eligibility
• Just suspends former spouses eligibility to
  receive the annuity while remarried
• Premiums reinstated if remarriage ends

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FORMER SPOUSE OPTION

• Both DD Form 2656 and DD Form 2656-1 must be
  completed prior to retiring
• Copy of complete divorce decree (including
  property settlement, if applicable) must be
  attached

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FORMER SPOUSE CHILD OPTION

• Former Spouse is the primary beneficiary
• Former Spouse receives annuity until death or
  remarriage prior to age 55
• Annuity reinstated if remarriage terminates
• Eligible children are contingent beneficiaries
• Only children from marriage to this former spouse
  are eligible
• Excludes children of any other marriage
• Receive equal shares of the annuity if former
  spouse dies or remarries prior to age 55

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INSURABLE INTEREST OPTION

• Unmarried members with no or only one dependent
  child may elect this option
• If one dependent child, cannot bypass the
  dependent child and elect insurable interest
  coverage for someone else
• Can elect for one dependent child in lieu of
  child only coverage, allowing child to receive
  life-long payment regardless of age, martial or
  student status
• Cost much more expensive than child only coverage

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INSURABLE INTEREST OPTION

• Can elect coverage for a person with a financial
  interest in the continued life of the member
• Can be a relative or non-relative
• If related closer than cousin, no proof of
  financial interest needed
• Others must prove financial interest connection
• Examples Beneficiary of life insurance policy,
  business partner, joint property owner, etc.

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INSURABLE INTEREST OPTION

• Lifetime coverage for beneficiary
• Not terminated by marriage, student status, or
  age
• Beneficiary receives 55 of retired pay after
  SBP costs are deducted
• Member may terminate coverage at any time
• Cant name another insurable interest beneficiary
  
• Member may change to coverage for new spouse
  and/or child
• Must submit election change request to DFAS-CL
  within one year of acquiring new spouse and/or
  child

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BRIEF THE FOLLOWING SLIDE IF MEMBER IS RETIRING
FOR DISABILITY
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INSURABLE INTEREST OPTION

• Insurable Interest election will be vitiated
  (voided) if
• Member retires for disability, and
• Member dies within one year of retiring, and
• Cause of death is related to the disability for
  which the member is retired
• If election is voided, premiums paid will be
  refunded to the SBP beneficiary
• Exception An annuity is payable if the SBP
  beneficiary is a dependent holding a valid
  military dependent ID card with the member as the
  sponsor on the members date of death

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DECLINE COVERAGE

• Retired pay STOPS when retiree dies
• No payments made to anyone unless member is
  enrolled in SBP
• SBP beneficiary excluded at retirement can not
  arbitrarily be covered in the future
• If member has an eligible spouse at retirement
  and declines spouse coverage, cannot cover that
  spouse or a later acquired spouse
• If member has an eligible child at retirement and
  declines child coverage, cannot cover that child
  or a later acquired child

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SPOUSE PREMIUMS

• Cost is 6.5 percent of the base amount you elect
  or
• If base amount is lower than 1,575, cost is 2.5
  percent of the first 735, plus 10 percent of the
  base amount in excess of 735
• If you initially entered active service prior to
  1 Mar 90 or are retiring for disability
• Cost increases with retiree COLAs
• Premiums are not taxable
• Provides a tax savings
• SBP cost lower than it appears

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SBP Program Cost Factors Thresholds to determine
premiums
300 735/736 1,574/1575

Minimum Base Amount
Maximum Base Amount
735 Dollar Amount
Between 300 - 735 X
2.5 _ Cost Factor 18.37
Premium
1,000 Dollar Amount Between 736 -
1,574 -735 From Threshold 1
265______ Difference X 10 _ Cost
Factor 26.50 Premium
1,800 Dollar Amount Between 1,575
and Maximum Base Amount (Full Retired
Pay) (1,800 base provides 990 per month
annuity) X 6.5 Cost Factor 117.00
Premium
44.87 Monthly Premium for 1,000.00 Base
Amount which
provides 550 annuity
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SBP Program Cost Factors Threshold 1
300 735
Minimum Amount of retired pay which can be used
as a Base Amount is 300. Any dollar amount
between 300 and 735 makes up the 1st threshold.
The cost factor for any base amount in this
threshold is 2.5. If 300 is used as the base
the cost is 2.5 of 300 7.50 per
month Annuity payable is 55 of the base amount
- 55 of 300 165 If 735 is used as the
base the cost is 2.5 of 735 18.37 per
month Annuity payable is 55 of the base amount
- 55 of 735 404
725 Dollar Amount Between 300 -
735 X 2.5 _ Cost Factor 18.37
Premium
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SBP Program Cost Factors Threshold 2
736 1,574
1,000 Dollar Amount Between 736 -
1,574 -735 . From Threshold 1
265 . Difference X 10 .
Cost Factor 26.50 Premium
Cost computations for Threshold 2 are computed
using amounts of retired pay between 736 and
1,574. You take your chosen base amount (i.e.
1,000), subtract 735 from Threshold 1 (1,000 -
735 265), take 10 of the remainder (26.50)
and add the result to the cost amount in
Threshold 1 (18.37). In the example, we used
1,000 of retired pay as the base amount. The
final cost ends up being 44.87 (26.50 18.37)
and the annuity payable is 55 of 1,000 (550
per month). If 1,574 is used as the base
amount, the cost is 102.27 (83.90 18.37) and
the annuity is 55 of 1,574 (865 per month).
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SBP Program Cost Factors Threshold 3
1,575 Full Retired Pay
1,800 Dollar Amount Between 1,575
and Maximum Base Amount (Full Retired
Pay) (1,800 base provides 990 per month
annuity) X 6.5 Cost
Factor 117.00 Premium
When you get to 1,575 of retired pay, it becomes
cheaper for the retiree to compute the cost by
simply using a flat 6.5 cost factor on the
entire amount. In this example, we used 1,800
of pay as a base amount. The cost comes out to
117.00 per month and the annuity would be 55 of
1,800 (990 per month).
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DEPENDENCY AND INDEMNITY COMPENSATION (DIC)

• DIC is a tax-free monthly payment awarded by the
  VA
• If members death is ruled service-connected by
  the VA AND
• If member has been rated 100 VA disabled for
• 10 or more years immediately preceding death
• 5 or more years immediately preceding death if
  awarded 100 VA disability rating at retirement
• 1 year immediately preceding death if member was
  a former POW

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DEPENDENCY AND INDEMNITY COMPENSATION (DIC)

• DIC is paid to
• Unmarried surviving spouse (1,154 per month)
• Eligible children (286 per month)
• DIC reduces surviving spouses SBP annuity
  dollar-for-dollar
• SBP premiums refunded for portion of the SBP
  annuity not received
• DIC does NOT reduce the SBP annuity paid to
  child(ren)

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WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATING

• Retirees may withdraw from SBP because of VA
  disability rating
• If member has been rated 100 disabled by the VA
  for
• 5 consecutive years immediately following
  retirement
• 10 consecutive years if 100 disability rating
  was not received immediately following retirement

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WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATING

• Retiree sends signed letter of request to DFAS
• DFAS processes written request and
• Sends member a fact sheet with pros and cons of
  withdrawing
• Verifies rating with the VA
• Sends concurrence statement for spouse to sign
• All premiums terminated
• Premiums refunded to widow(er) following the
  members death

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DISCONTINUE PARTICIPATION

• Member can discontinue ALL participation in the
  SBP during a one-year period
• One-year period begins on 2nd anniversary of
  retirement, ends on 3rd anniversary of retirement
  (between members 25th and 36th month of
  retirement)
• No refund of premiums

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DISCONTINUE PARTICIPATION

• ALL coverage stops (e.g., cant keep coverage for
  a child and stop the spouses portion if election
  is for spouse and child coverage)
• Spouse concurrence required
• On 3rd anniversary of retirement, election
  becomes irrevocable as long as beneficiary
  remains eligible

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CHANGE FROM SPOUSE TO FORMER SPOUSE COVERAGE

• When a member who has spouse SBP coverage
  divorces, that spouses SBP eligibility is
  terminated
• No longer the members spouse
• Spouse coverage must be changed to former spouse
  coverage in order to keep formerly covered spouse
  covered as a former spouse
• Retiree may submit a DD Form 2656-1 to DFAS with
  a copy of the divorce decree
• Former spouse may request deemed election (if
  court ordered or in written agreement)
• Either must be submitted within the first year of
  divorce

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DIVORCE AFTER RETIREMENT

• Court CANNOT
• order retired member to elect former spouse SBP
  coverage if the member does not already have
  spouse coverage
• change the level of coverage (base amount)
  because of the divorce
• If former spouse coverage is elected, member
  cannot arbitrarily stop the coverage

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MISCELLANEOUS PROVISIONS

• Future Civil Service (CS) retirement
• If retiree waives AF retired pay and combines AF
  and CS time, retiree may retain only one survivor
  annuity plan (either AF or CS, not both)
• If military retiree does not combine AF and CS
  time, retiree may participate in both AF and CS
  survivor annuities plans (survivor can receive
  both annuities)

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MISCELLANEOUS PROVISIONS

• Non-resident alien annuitant tax liability
• Flat 30 income tax reduction
• Status of forces agreement (SOFA) may affect tax
  liability
• Only applies to non-U.S. citizen spouses who
  return to their home country

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MISCELLANEOUS PROVISIONS

• Paid-up premiums
• Member must be at least age 70 AND must have made
  360 premium payments
• No further premium payments required
• Annuity remains payable to eligible beneficiary
• Continues to receive COLAs

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UNIQUE FEATURES

• Premiums paid with pre-tax dollars
• SBP premiums are deducted from members retired
  pay before tax liability is assessed
• SBP cost is lower than it appears!!
• Reduces federal and state tax
• SBP is government subsidized
• COLAs are applied to the annuity even after
  member is deceased
• Provides inflation protection for the future!!

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UNIQUE FEATURES

• Premiums suspended if there is no eligible
  beneficiary
• Premiums are paid-up after member reaches age 70
  and has made 360 premium payments
• Age, health, sex, lifestyle not factors in cost
  or eligibility to be in program
• Surviving spouse cannot outlive annuity
• SBP provides peace of mind
• SBP makes other investments and assets more
  valuable

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MEMBERS RESPONSIBILITIES

• Member and spouse must attend SBP briefing
• Complete a DD Form 2656
• Make SBP election
• Obtain spouses concurrence (if required) prior
  to retirement
• As a reminder, the law requires DFAS establish
  maximum SBP coverage if valid election/spouse
  concurrence is not received before date of
  retirement

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MEMBERS RESPONSIBILITIES

• After retirement, promptly notify DFAS of changes
  that affect SBP or your pay
• Change in marital status
• Loss or addition of family member(s)
• Change of direct deposit financial institution
• Change in correspondence (residential) mailing
  address
• Many can be done using myPay

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Closing
We are here to help you if/when you need
assistance.... Congratulations on your
retirement!!