Understanding the Survivor Benefit Plan

  • Published
  • By Judith Trabucco
  • Airman and Family Readiness Center
HANSCOM AIR FORCE BASE, Mass. --  The Survivor Benefit Plan enables military retirees to financially protect a spouse or other survivors by insuring that a portion of retired pay continues after the retiree's death, providing a guaranteed income to the survivors.

The decision to enroll in this program is made prior to retirement and is irrevocable. The retiring servicemember's spouse must consent to any protection level that is less than 100 percent. If no reduction is elected, the cost for spouse-only coverage is 6.5 percent of gross military retired pay.

Everyone's situation is different. When considering the SBP and alternatives, here are some things to keep in mind:

Potential advantages

· No evidence of insurability is required

· No suicide or incontestability clauses

· Benefits are tied to retired pay increases

· SBP costs are not subject to federal income tax or state income tax in most states

· Survivor's benefits are subject to federal estate taxes, but in most cases are eligible for the unlimited marital deduction

· Benefits are not subject to garnishment, lien, or other legal processes

· Benefits may be payable for the lifetime of beneficiary

Potential disadvantages

· No residual estate remains after death or marriage of designated beneficiary

· Monthly benefit is subject to federal income tax as ordinary income

· Monthly benefit is subject to state income tax in some states

· Preferred risks subsidize uninsurable risks

Additionally, SBP costs, benefits and provisions are continuously subject to revision by legislative and administrative action.

The Survivor Benefit Plan may contribute significantly to loved ones' financial well-being and should be considered part of an overall retirement income strategy to address needs and goals. A qualified financial advisor can help develop such a strategy and plan.

For further information regarding the Survivor Benefit Plan, contact Judy Trabucco at 781-225-2765 781-225-2755 or email judy.trabucco@hanscom.af.mil.