Make an informed decision on SBP

  • Published
  • By Judy Trabucco
  • Airman and Family Readiness Center
HANSCOM AIR FORCE BASE, Mass. --  Throughout their career servicemembers make several important decisions that impact their finances and family. One of those final decisions is the survivor benefit plan.

The Survivor Benefit Program was enacted in 1972 as a program to ensure military widows would continue to receive an income after the retired member's death. Before that, spouses risked being left with no source of income and could become destitute when the retiree passed away. The SBP is the only program that allows retirees the opportunity to insure part of their retirement check is left to someone when they die.

One misconception among military families is that length of marriage while in service determines what a spouse would be allowed to receive in retirement pay once the military member dies. That is not the case. Anytime a retiree dies, the retired pay stops.

Another misunderstanding is the notion that SBP is an insurance plan. It is not; it's an annuity. It is a program that will keep money coming in, whereas life insurance is normally a lump sum payment. A survivor's benefit is continually paid every month to a spouse for the remainder of that spouse's lifetime, unless remarried prior to age 55. The average age of a military widow is between 55 and 56 years old--years before Social Security kicks in.

There is not a standard rate that service members pay for SBP, as each retiree tailors their plan to meet their individual needs. The premium is tax free and deducted directly from the retirement pay. However, the benefit paid to an annuitant is taxable, just like the retirement pay is taxed. Normally it takes a spouse 31 months or less to take out of SBP what a retiree contributed.

A service member's decision not to enroll in SBP requires their spouse's consent. The spouse's attendance at the mandatory SBP briefing is not required, but they must still receive the SBP information. The spouse must have an understanding of the program because a retiree cannot decline or reduce the benefit without a spouse's permission.

The only way a retiree who declines SBP can later enroll in the program is through a congressionally mandated open season. Enrollment during an open season typically will require the retiree to pay catch-up premiums back to their date of retirement. If a retiree's marriage is later dissolved, the retiree can stop their SBP if they are not mandated to continue it by the terms of the divorce. Should that retiree remarry, they have one year to enroll their new spouse.

For more information about SBP or to schedule an appointment, call Judy Trabucco at 781-225-2755.