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SBP: The facts

Posted 9/15/2010   Updated 9/15/2010 Email story   Print story


by Tech. Sgt. Tammie Moore
4th Fighter Wing Public Affairs

9/15/2010 - SEYMOUR JOHNSON AIR FORCE BASE, N.C.  -- Throughout their career servicemembers make several important decisions that impact their finances and family - one of those final decisions revolves around the survivor benefit plan.

The SBP was enacted in 1972 as a program to ensure military widows would continue to receive an income after the retired member's death. In the past, several spouses were left with no source of income and destitute when the retiree passed away because the program did not exist.

"The Survivor Benefit Program is the only program that allows retirees the opportunity to insure part of their retirement check is left to someone when they die," said Andrew Colville, 4th Force Support Squadron causality assistance representative. "Some retirees are aware that when they die their retirement pay stops; many spouses are not aware of that."

In fact, there are quite a few SBP myths that Mr. Colville works to set straight during the mandatory counseling sessions he conducts with each servicemember on base preparing for retirement.

"There is this misconception among military families that length of marriage while in service dictated that a spouse would be allowed to continue to receive retirement pay once that military member dies," Mr. Colville said. "That is not the case -- anytime a retiree dies everything stops."

Another misunderstanding people have about SBP that Mr. Colville is working to set straight is the notion SBP is an insurance plan.

"It is not," he said. "It's an annuity; it is a program that will keep money coming in where as life insurance is normally a lump sum payment. Survivor's Benefit is continually paid every month to a spouse for the remainder of that spouse's lifetime, unless remarried prior to age 55. The average age of a military widow is between 55 and 56 years old, that still puts (them) years before Social Security. They need income and that is where SBP comes in."

There is not a standard rate that servicemembers pay for SBP, as each retiree tailors their plan to meet their individual needs.

There are different mathematics used to determine what the premium is, Mr. Colville said. "The premium is tax free and deducted directly from the retirement pay; however, the benefit paid to an annuitant is taxable just like the retirement pay is taxed. Normally it takes a spouse 31 months or less to take out of SBP what a retiree contributed."

Unlike many financial decisions servicemembers make, their decision not to enroll in SBP require their spouse's consent.

"The spouse's attendance at that mandatory SBP briefing is not required but they must still received SBP the information. The spouse must have an understanding of the program because a retiree cannot decline or reduce the benefit without a spouse's permission," Mr. Colville said.

The only way a retiree who declines SBP can later enroll in the program is through a Congress mandated open season. Enrollment during an open season typically will require the retiree to pay catch-up premiums back to their date of retirement.

"What I tell my clientele is that if you don't take SBP in any way shape or form; don't ever plan on being offered the opportunity later because you may not be able to afford it later," Mr. Colville said. "We have no forewarning when there is going to be an open season. Each open season has had different perimeters and they have run about five and eight years apart and may have a longevity clause (stating) a retiree who joins during an open season may have to live for a specified length of time or SBP will not pay out.."

If a retiree's marriage is later desolved, the retiree can stop their SBP if they are not mandated to continue it by the terms of the divorce. Should that retiree remarry, they have a year to disenroll their new spouse as the new spouse is automatically covered on the first anniversary of the remarriage.

"Anytime a retiree's spouse dies the will suspend the program," Mr. Colville said.

Like most military programs SBP rules and regulations have changed throughout the years.

"Older retirees were told they would have to pay for the rest of their life (if they chose to take SBP)," Mr. Colville said. "Now they have to pay into SBP until they reach two requirements, reach the age of 70 or and have paid in for 30 years. If a retiree dies before reaching the requirements the spouse is not responsible for the remaining years. Also, there is no longer a Social Security off set."

For more information about SBP or to schedule an appointment with Mr. Colville to discuss the program, call 722-7192.

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