AVERAGE LIFE EXPECTANCY

SURVIVOR BENEFIT SURVIVOR BENEFIT PLAN (SBP)PLAN (SBP)

Presented byPresented by

Dan McCulloughDan McCulloughUSAF AcademyUSAF Academy

Survivor Benefit Plan CounselorSurvivor Benefit Plan Counselor333-2129333-2129

AVERAGE LIFE EXPECTANCYAVERAGE 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

PURPOSE OF SBPPURPOSE OF SBP

• Retired pay stops the date of the retiree’s death!• Even if there’s a surviving spouse/children

• SBP is the only way survivors can receive a portion of deceased member’s retired pay

• SBP provides surviving spouses with a continuing, inflation-protected, lifetime income

AUTOMATIC COVERAGE AUTOMATIC COVERAGE PROVISIONPROVISION

• 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

AUTOMATIC COVERAGE AUTOMATIC COVERAGE PROVISIONPROVISION

• 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!)

SBP BENEFICIARY CATEGORY SBP BENEFICIARY CATEGORY OPTIONSOPTIONS

• 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

LEVEL OF COVERAGE LEVEL OF COVERAGE AVAILABLEAVAILABLE

• 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 member’s 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

SPOUSE ONLY OPTIONSPOUSE 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


• 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


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

coverage following divorce)


• 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


• 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


• 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

CHILD ONLY OPTIONCHILD 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, child’s marriage at any age terminates child’s eligibility

CHILD ONLY OPTIONCHILD ONLY OPTION

• Covers all member’s 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

CHILD ONLY OPTIONCHILD 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 child’s birth certificate

CHILD ONLY OPTIONCHILD 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 child’s birth certificate

• Child becomes covered on date of receipt of the election request by DFAS-CL• Costs begin 1st day of the following month

CHILD ONLY OPTIONCHILD 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

• Don’t consider electing child only coverage as replacement income for spouse because it can’t be changed to spouse coverage when last child loses eligibility

SPOUSE & CHILD OPTIONSPOUSE & 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

FORMER SPOUSE OPTIONFORMER SPOUSE OPTION

• Only one former spouse may be covered

• Excludes current spouse (can’t split the annuity)

• Can suspend premiums if former spouse remarries prior to age 55• Must furnish copy of former spouse’s remarriage

certificate • Does not terminate former spouse’s eligibility

• Just suspends former spouse’s eligibility to receive the annuity while remarried

• Premiums reinstated if remarriage ends

FORMER SPOUSE OPTIONFORMER 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

FORMER SPOUSE & CHILD FORMER SPOUSE & CHILD OPTIONOPTION

• 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

INSURABLE INTEREST INSURABLE INTEREST OPTIONOPTION

• 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


• 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.


• 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• Can’t 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

BRIEF THE FOLLOWING SLIDE IF BRIEF THE FOLLOWING SLIDE IF MEMBER IS RETIRING FOR MEMBER IS RETIRING FOR

DISABILITYDISABILITY


• 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 member’s date of death

DECLINE COVERAGEDECLINE 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

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

SBP Program Cost FactorsSBP Program Cost FactorsThresholds to determine premiumsThresholds to determine premiums

$300$300 $735/736 $735/736 $1,574/1575 $1,574/1575

MinimumMinimumBase AmountBase Amount

MaximumMaximumBase AmountBase Amount

$ 735 Dollar Amount$ 735 Dollar Amount BetweenBetween $300 - 735$300 - 735

X X 2.5 % _ 2.5 % _ Cost Factor Cost Factor

$ 18.37$ 18.37 = Premium= Premium

$1,000 Dollar Amount$1,000 Dollar AmountBetween Between $736 - $1,574 $736 - $1,574

-$735 -$735 From Threshold 1 From Threshold 1

= $265______= $265______ Difference Difference

XX 10 % _ 10 % _ Cost Factor Cost Factor

$26.50$26.50 = Premium= Premium

$1,800 Dollar Amount$1,800 Dollar AmountBetween $1,575 andBetween $1,575 andMaximum Base AmountMaximum Base Amount(Full Retired Pay)(Full Retired Pay)

($1,800 base provides $990 ($1,800 base provides $990 per month annuity) per month annuity)

X X 6.5 % 6.5 % Cost Factor Cost Factor

$117.00$117.00 = Premium= Premium

$44.87$44.87 = Monthly Premium for $1,000.00 Base = Monthly Premium for $1,000.00 Base Amount which provides $550 annuity Amount which provides $550 annuity

SBP Program Cost FactorsSBP Program Cost FactorsThreshold 1Threshold 1

$300$300 $735 $735 $ 725 Dollar

AmountBetween$300 - $735

X 2.5 % _ Cost Factor

$ 18.37 = Premium

Minimum Amount of retired pay which can be used Minimum Amount of retired pay which can be used as a “Base Amount” is $300. Any dollar amount as a “Base Amount” is $300. Any dollar amount between $300 and $735 makes up the 1between $300 and $735 makes up the 1stst threshold. threshold. The cost factor for any base amount in this The cost factor for any base amount in this threshold is 2.5%.threshold is 2.5%.

If $300 is used as the base the cost is: If $300 is used as the base the cost is:

2.5% of $300 = $7.50 per month2.5% of $300 = $7.50 per month

Annuity payable is 55% of the base amount Annuity payable is 55% of the base amount

- 55% of $300 = $165- 55% of $300 = $165

If $735 is used as the base the cost is:If $735 is used as the base the cost is:

2.5% of $735 = $18.37 per month2.5% of $735 = $18.37 per month

Annuity payable is 55% of the base amountAnnuity payable is 55% of the base amount

- 55% of $735 = $404- 55% of $735 = $404


$736$736 $1,574 $1,574 $1,000 Dollar

AmountBetween$736 - $1,574

-$735 . From Threshold 1

= $265 . Difference

X 10 % . Cost Factor

$26.50 = Premium

Cost computations for Threshold 2 are Cost computations for Threshold 2 are computed using amounts of retired pay computed using amounts of retired pay between $736 and $1,574. You take your between $736 and $1,574. You take your chosen base amount (i.e. $1,000), subtract $735 chosen base amount (i.e. $1,000), subtract $735 from Threshold 1 ($1,000 - $735 = $265), take from Threshold 1 ($1,000 - $735 = $265), take 10% of the remainder ($26.50) and add the 10% of the remainder ($26.50) and add the result to the cost amount in Threshold 1 result to the cost amount in Threshold 1 ($18.37). ($18.37).

In the example, we used $1,000 of retired pay In the example, we used $1,000 of retired pay as the base amount. The final cost ends up as the base amount. The final cost ends up being $44.87 ($26.50 + $18.37) and the annuity being $44.87 ($26.50 + $18.37) and the annuity payable is 55% of $1,000 ($550 per monthpayable is 55% of $1,000 ($550 per month).).

If $1,574 is used as the base amount, the cost is If $1,574 is used as the base amount, the cost is $102.27 ($83.90 + $18.37) and the annuity is 55% $102.27 ($83.90 + $18.37) and the annuity is 55% of $1,574 ($865 per month).of $1,574 ($865 per month).


$1,575$1,575 Full Retired PayFull Retired Pay

$1,800 Dollar AmountBetween $1,575 andMaximum 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 When you get to $1,575 of retired pay, it becomes cheaper for the retiree to compute the becomes cheaper for the retiree to compute the cost by simply using a flat 6.5% cost factor on cost by simply using a flat 6.5% cost factor on the entire amount. the entire amount.

In this example, we used $1,800 of pay as a In this example, we used $1,800 of pay as a base amount. The cost comes out to $117.00 base amount. The cost comes out to $117.00 per month and the annuity would be 55% of per month and the annuity would be 55% of $1,800 ($990 per month).$1,800 ($990 per month).

DEPENDENCY AND INDEMNITY DEPENDENCY AND INDEMNITY COMPENSATION (DIC)COMPENSATION (DIC)

• DIC is a tax-free monthly payment awarded by the VA • If member’s 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

DEPENDENCY AND INDEMNITY DEPENDENCY AND INDEMNITY COMPENSATION (DIC)COMPENSATION (DIC)

• DIC is paid to:• Unmarried surviving spouse ($1,154 per month)• Eligible children ($286 per month)

• DIC reduces surviving spouse’s 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)

WITHDRAW FROM SBP BECAUSE OF WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATINGVA 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

WITHDRAW FROM SBP BECAUSE OF WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATINGVA 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 member’s death

DISCONTINUE DISCONTINUE PARTICIPATIONPARTICIPATION

• 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 member’s 25th and 36th month of retirement)

• No refund of premiums

DISCONTINUE DISCONTINUE PARTICIPATIONPARTICIPATION

• ALL coverage stops (e.g., can’t keep coverage for a child and stop the spouse’s 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

CHANGE FROM SPOUSE TO CHANGE FROM SPOUSE TO FORMER SPOUSE COVERAGEFORMER SPOUSE COVERAGE

• When a member who has spouse SBP coverage divorces, that spouse’s SBP eligibility is terminated• No longer the member’s “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

DIVORCE DIVORCE AFTER RETIREMENTAFTER 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

MISCELLANEOUS PROVISIONSMISCELLANEOUS 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)


• 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


• 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

UNIQUE FEATURESUNIQUE FEATURES

• Premiums paid with pre-tax dollars:• SBP premiums are deducted from member’s 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!!

• 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

UNIQUE FEATURESUNIQUE FEATURES

MEMBER’S MEMBER’S RESPONSIBILITIESRESPONSIBILITIES

• Member and spouse must attend SBP briefing• Complete a DD Form 2656 • Make SBP election• Obtain spouse’s 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

MEMBER’S MEMBER’S RESPONSIBILITIESRESPONSIBILITIES

• 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

Closing…Closing…

We are here to help you if/when you We are here to help you if/when you need assistance....need assistance....

Congratulations on your retirement!!Congratulations on your retirement!!

AVERAGE LIFE EXPECTANCY

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AVERAGE LIFE EXPECTANCY