Military Survivor Benefit Programs (SBP)
The Department of Defense (DoD) offers the Survivor Benefit Plan (SBP) to provide financial protection for military families after a service member’s death. There’s no one-size-fits-all solution, as active duty, Guard/Reserve, and military retirees have different requirements and options, as we’ll explore below.
While all SBP programs aim to provide a continuous, inflation-adjusted monthly income, they differ significantly based on the service member’s duty status and retirement eligibility.
Survivor Benefit Programs: Plans and Eligibility
There are 3 different SBP options, one for each of the following:
- Military retirees (the original program)
- Active duty troops
- Qualifying members of the Guard/Reserve
According to the Defense Department’s official site, an SBP for military retirees allows them ”to ensure, after death, a continuous lifetime annuity for their dependents.” The foundational Survivor Benefit Plan (SBP), enacted in 1972, provides cash benefits as a lifetime annuity. Primarily for military retirees of the uniformed services, its coverage was expanded to include those on active duty.
For those troops, SBP provides “up to 55% of a service member’s retired pay to an eligible beneficiary upon the member’s death. The program provides no-cost automatic coverage to members serving on active duty, and reserve component members who die of a service-connected cause while performing inactive duty training.”
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Did you know active duty members can also purchase coverage upon retirement? Some reserve component members can also get coverage; the Reserve Component Survivor Benefit Plan (RCSBP) is specifically designed for members of the Reserve Components who qualify for non-regular (often referred to as “gray area”) retired pay, typically after completing 20 years of qualifying service.
This plan essentially “bridges the gap” between qualifying for retirement and reaching age 60, which is when reservists typically become eligible to receive retired pay. At age 60, for those who enrolled in RCSBP, their coverage seamlessly transitions into the standard SBP.
Enrollment and Decision Points
The timing and method of enrollment vary between the plans. For retirees, election to participate in the general SBP is typically made at the time of retirement. Once enrolled, there are limits on changing or discontinuing coverage. If a member does not have eligible beneficiaries at retirement but later marries or has children, they may enroll within one year of the qualifying event, such as marriage or the birth or adoption of a child.
For RCSBP, enrollment occurs when a Reserve Component member receives their Notice of Eligibility (NOE) for retired pay, typically before they reach age 60 and begin receiving retired pay.
At this point, members have three distinct options: They can decline coverage until age 60 (Option A), at which point they can enroll in SBP.
They can elect to defer the annuity (Option B), meaning payments to beneficiaries would begin at a later specified time, usually when the member would have begun receiving retired pay; or they can elect an immediate annuity (Option C), where payments to beneficiaries would begin immediately upon the member’s death, regardless of their age or whether they were receiving retired pay.
For SBP for Active Duty, coverage for service members who die on active duty in the line of duty is automatic, and there is no charge to the service member. The benefits are calculated as if the service member had retired with a 100% disability, and beneficiaries are determined by law.
All rules and regulations cited in this article governing these plans are subject to change. Be sure to check the most current options and guidelines before you commit.
SBP Cost and Premiums
The financial contribution of the service member or retiree differs across the plans. For the general SBP, a portion of the retiree’s monthly retired pay is withheld to provide the benefit.
The retiree shares the cost through deductions from retirement pay, the government, and sometimes the beneficiary, depending on the coverage type. These premiums are paid from gross retired pay, resulting in possible tax advantages as they may reduce taxable income.
For RCSBP, members pay the standard SBP cost plus an additional Reserve Component cost. This reflects the time when the reservist is SBP-eligible but not yet receiving retired pay.
The total cost for RCSBP or SBP coverage is capped at a percentage of the gross retired pay (in the past, this was approximately 6%). Premiums for RCSBP, under Options B and C, begin when the member enrolls, even if they are not yet receiving retired pay. As previously noted, coverage for SBP due to Active Duty death in the line of duty is provided at no cost to the service member.
SBP-DIC Offset Elimination
For years, a technicality prevented some surviving military spouses from receiving full benefits from SBP, but a long-sought change for SBP beneficiaries in the Guard/Reserve has fixed this problem.
The correction? Eliminating the SBP-Dependency and Indemnity Compensation (DIC) offset, often referred to by advocates as the “Widow’s Tax.”
Before this change, if a surviving spouse was eligible for both SBP (from the DoD) and Dependency and Indemnity Compensation from the Department of Veterans Affairs, their SBP payment was reduced dollar-for-dollar by the amount of their DIC payment.
This policy was widely criticized as it effectively penalized surviving spouses for being eligible for two separate, earned benefits. Years of advocacy efforts by military survivor organizations and bipartisan support in Congress led to the inclusion of provisions in the National Defense Authorization Act for Fiscal Year 2020 that mandated the elimination of this offset.
Beginning January 1, 2023, surviving spouses eligible for both SBP and VA DIC payments receive both benefits in full, without one reducing the other. It is important to note that the offset never affected the DIC payment itself from the VA; only the SBP payment from the DoD was reduced.
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About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
