The Survivor Benefit Plan (SBP) is an inflation-protected annuity feature of retired military pay that continues to pay a monthly benefit to your dependents after your death.
Unlike some other annuities, payments can never run out. If you die before your spouse, they will continue to get monthly checks until they pass away.
Payments keep increasing by Cost-of-Living Adjustments (COLA), thereby keeping future payments to survivors protected from inflation.
SPB Spouse Coverage
SBP spouse coverage costs 6.5% of the desired coverage. You can elect full or partial SBP coverage.
DFAS will withhold 6.5% of your retirement pay for surviving spouse coverage. That means for every $1,000 you get in retirement pay DFAS will withhold $65 monthly for SBP. If you die before your spouse they will get $550 in SBP payment for every $1,000 in retirement pay you recieve.
You can also elect a lower level of SBP coverage. For example, if you receive $1,000 of retired pay each month, you can elect to have your coverage based only on $700 of your pay. In this case, DFAS would collect $45.50 each month from your retired pay, and if you die before your spouse they would get $385 each month. There is, however, a minimum level of coverage required that varies by individual.
SBP Benefit Payments
The SBP annuity is determined by the base amount you elect. The base amount may range from a minimum of $300 up to a maximum of full retired pay. The annuity is 55% of the base. Also, the base amount and the payments to the surviving spouse will generally increase at the same time and by the same percentage that cost-of-living adjustments (COLAs) are made to retired pay.
Your surviving spouse may remarry after age 55 and continue to receive SBP payments for life. If remarried before age 55, SBP payments will stop, but may be resumed if the marriage later ends due to death or divorce.
SBP Costs (Premiums)
The SBP premiums for spouse coverage are 6.5% of your chosen base amount.
Like your retirement pay the SBP annuity is protected from inflation. Each year when retired pay gets a Cost-of-Living Adjustment - adjustments for inflation, known as 'COLA' -, so does the base amount, and as a result, so do premiums and annuity payments. Meaning that your premiums and annuity payments will increase with the COLA. These increases are determined by the previous year's Consumer Price Index and averages approximately 2.5 percent.
Monthly SBP costs are not included in your taxable federal income. The true cost for SBP is thus less than the amount deducted from retired pay because less Federal tax will be paid. This also applies to most state income taxes. SBP payments to survivors are taxable, but spouses usually receive benefits when their total income is less and the extra tax exemption for being over age 65 is applicable. The surviving spouse's tax rate should be lower and a long-run significant tax savings should result.
Loss of Spouse
If your spouse dies first or you get divorced, SBP costs will stop (once you notify the pay center). In divorce cases, spouse coverage may be converted to former spouse coverage.
In some instances of divorce, conversion of the coverage to provide for the former spouse may be required by court order.
Public Law provides that a participant is considered "paid-up" after completing 30 years (360 payments) in the plan. This applies to a specific category of beneficiary (i.e., spouse), at a specific base amount (i.e., full retired pay).
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