What is the Survivor Benefit Plan (SBP)? A Guide for Military Retirees
Learn about the Survivor Benefit Plan (SBP), an inflation-protected annuity feature of retired military pay designed to continue providing monthly income to your eligible dependents after your death.
Transitioning to retired life brings many exciting changes, but it also requires careful planning, especially when securing your family's future. For military retirees, one of the most vital decisions regarding financial security is the Survivor Benefit Plan (SBP). The SBP acts as an inflation-protected annuity feature of retired military pay designed to continue providing a monthly income to your eligible dependents after your death.
Here is what you need to know about the SBP as a retired veteran.
The SBP is a government-underwritten program that ensures your spouse or other designated beneficiary continues to receive a portion of your military retirement pay for the rest of their life, provided they remain eligible.
Key Features of the Benefit
- Benefit Amount: Upon the death of the retired Service member, the surviving spouse and/or children receive 55% of the base amount of coverage that you selected.
- Coverage Range: You can select the base amount of coverage anywhere from $300 up to your full retirement pay.
- Inflation Protection: The coverage amount increases according to the Cost-of-Living Adjustment (COLA) rate, which helps protect future payments from inflation. Unlike some other annuities, SBP payments can never run out; if you pass away before your spouse, they continue receiving monthly checks until they pass away.
The SBP typically provides a continuation of income for your spouse and/or children. Children are generally covered until they reach age 18, or age 22 if they are enrolled in college. Eligible children split the annuity equally. You may also elect coverage for other eligible beneficiaries, such as a former spouse or a natural interest person.
Child-Only Option
If you have children, consider the SBP child-only option, which may cost only a few dollars a month.
The SBP is not free; it requires you to pay a premium while you are living. This cost is taken in the form of a monthly deduction from your pre-tax retirement pay.
Cost Calculation for Spouse Coverage
The cost is calculated as the lesser of:
- 6.5% of the base amount, or
- 2.5% of the first $725 plus 10% of the remainder of the base amount.
You continue paying premiums until two conditions are satisfied: you have paid for 30 years and the service member reaches age 70.
Important Tax Consideration
While the SBP premium is deducted pre-tax (meaning it is not taxable income for the retiree), the SBP income received by the survivor is taxable.
When you retire, you must make a decision about the SBP. If you fail to make an election, you will be automatically enrolled for the full amount of coverage.
Spousal Agreement Requirement
If you are married and decide to decline SBP coverage entirely or choose coverage for less than your full retirement pay, federal regulations require your spouse to show agreement with this decision. This spousal agreement often requires notarization on DD Form 2656, Data for Payment of Retired Personnel. This form must be completed to receive your retirement pay.
The law generally restricts changes to SBP coverage after retirement, but there is one major exception:
- One-Time Discontinuation: Public Law 105-85, Section 641 allows for a one-time option to discontinue participation during the third year of retirement (specifically, between the 25th and 36th months).
- Spousal Consent to Cancel: If you are married and covering a spouse (or child), your spouse must agree with your decision to discontinue participation during this period.
- VA Disability Withdrawal: You may also be able to withdraw from SBP due to a qualifying VA disability.
Because the SBP is a highly personal and complex financial decision based on your unique circumstances, educating yourself and your spouse is crucial.
Resources for Detailed Information
- Your Military Installation: Make an appointment with a Personal Financial Manager (PFM) or determine if your installation offers an SBP class. You can also contact an SBP counselor at the nearest military installation for a cost computation for child-only coverage.
- Defense Finance and Accounting Services (DFAS): DFAS manages SBP enrollment and provides information.
- Military Compensation Website: The Military Compensation website also provides detailed information on the SBP.
- VA Benefits and Services: SBP is an important benefit detailed during the VA Benefits and Services course, which also covers topics like disability compensation, health care, and life insurance.
By proactively researching and making an informed SBP decision, you can ensure that your loved ones are financially protected well into the future.
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