The Survivor Benefit Plan (SBP) is a benefit afforded to military retirees to ensure a continuous lifetime annuity for their dependents after the service member dies. The benefit can also be afforded to a disabled dependent through a Special Needs Trust (SNT) or a person with a natural insurable interest. The last two groups can be more complicated. An SNT allows a disabled dependent to continue receiving federal disability payments. The Department of Defense defines a natural insurable interest as “a natural person with an insurable interest who has a reasonable and lawful expectation of financial benefit from the continued life of the participating member, or any individual having a reasonable and lawful basis, founded upon the relation of parties to each other, either financial or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the retired member.”
SBP is an insurance plan that will pay a surviving spouse and/or others monthly to assist in the loss of income. The premium is paid from the gross retired pay, so it does not count towards income. Enrollment in SBP is automatic, and the service member, spouse or former spouse, and children need to be aware of the program and the election process through the Defense Finance and Accounting Service (DFAS). This includes the spouse, former spouse, and/or children making an SBP-deemed election on their own.
SBP can be elected at the time of the service member’s retirement. Upon the retirement of a married service member, he or she must choose to elect or decline SBP. If the married service member declines not only coverage but the maximum amount of coverage, the spouse will be notified and will have to agree to either not receive the benefit or not receive the maximum amount of coverage. Further, whether married or not, when a service member retires, he or she will have to elect coverage for his or her children or risk losing that coverage forever. Child coverage is relatively inexpensive because children will receive benefits only while they are considered eligible dependents.
If a service member divorces after retirement, a divorce decree may stipulate who will be the beneficiary of the SBP. However, one must not assume that whatever was stipulated by a Court will automatically be executed. The service member and/or former spouse may need to notify DFAS of what the Court decreed. A service member should file a deemed election with DFAS, which must be filed within 1 year of the divorce or order granting the former spouse the SBP. Without the deemed election, if the retiring service member fails to elect anyone or elects a new spouse, the former spouse will not be paid by DFAS as the beneficiary. If the service member and former spouse were married at the time of retirement and the former spouse was named as the SBP beneficiary, DFAS must be notified that there has been a change in the status of the marriage. If an election is not timely submitted and the former spouse was not named (or deliberately changed from spouse to former spouse) by the retiring service member, the only way to correct the election would be to do so during a rare open season or by filing an application with the Board for the Correction of Military Records.
SBP is a complex issue that could cost the service member’s dependents tens of thousands of dollars. Service members and Veterans should be aware of this benefit, the eligibility periods, and the impact of accepting or declining enrollment. SBP can provide financial benefits to the service member’s family after death, so they do not lose the totality of their income upon the service member’s death. SBP offers a different way for service members to provide for their families and survivors. SBP is also like retirement pay that is protected from inflation. When the cost-of-living adjustment (COLA) increases, so does the SBP, including the premium.
Chad Lennon is an attorney in the military law practice at Tully Rinckey PLLC, and a Major in the Marine Corps Reserve. Concurrently, he is the Co-Chair for the New York State Bar Association Committee on Veterans, Co-Chair for the Suffolk County Bar Association Committee on Military and Veterans Affairs and is an Officer for the Suffolk County Bar Association Academy of Law. He can be reached at (888)-529-4543 or at info@tullylegal.com.
