thedrifter
02-13-07, 07:50 AM
U.S. Military (Ret.)
Take care of your survivors
By Alex Keenan - Special to the Times
Posted : February 19, 2007
I get a lot of inquiries about benefits offered to survivors upon the death of a retiree. One of the biggest benefits is the Survivor Benefit Plan, created by Congress to take care of surviving spouses and children when retired pay stops upon a retiree’s death. The plan has undergone some fairly significant changes.
Launched in 1972, the goal of SBP was to ensure survivors of military retirees would have reasonable and continuous income replacement, which Social Security alone does not provide.
Congress intended that the value of Social Security and other entitlements would be considered when determining whether reasonable income replacement was achieved.
When a military retiree dies, military pay stops on the date of death. Today, more than 250,000 survivors of military retirees continue to receive payments because their sponsor participated in SBP. The program has a cost-of-living adjustment, is government-subsidized, and offers tax-free features.
Recently, Congress allowed an open enrollment season for SBP under a provision of the 2005 Defense Authorization Act. Basically, it was an opportunity for military retirees to enroll in SBP who had not done so when they first were eligible.
This was only the fourth time that an open season was held in which retirees could get into the SBP after the fact. Each time, the open season coincided with major changes to the program.
The latest enrollment season began Oct. 1, 2005, and ended Sept. 30. The reason the program was opened up again to those who did not get in when they were first eligible is that Congress ordered a phasing out of the Social Security “offset” that reduced benefits for survivors at age 62, when they became eligible for Social Security.
Instead of the 55 percent of a member’s retirement pay, SBP payments were reduced to 35 percent of retired pay, on the theory that Social Security would substitute for the other 20 percentage points.
The offset began to be phased out in October 2005, when the percentage of retired pay for survivors age 62 and older increased to 40 percent. Then in April, it increased again to 45 percent. This April, it is due to go to 50 percent, and in April 2008, the last phase kicks in when the percentage is restored to 55 percent for all SBP beneficiaries age 62 and older.
There was a substantial catch, however — retirees who wanted to join SBP during the open enrollment window not only had to begin paying their monthly premiums as of the date of their election into the program, they also had to pay a lump-sum buy-in premium equal to the amount of all back premiums from the date of original eligibility, plus interest.
The lump-sum premium was allowed to be paid over a period of two years, and premiums will be refunded to survivors if a retiree dies during those two years.
Under the law, a retiree cannot reduce or decline spouse coverage without the spouse’s written consent.
The cost of SBP is 6.5 percent of the base amount of coverage. You can choose as your base amount anything from your maximum monthly retirement pay to as little as $300 per month.
For example, with a base amount of $1,000 per month, the monthly cost for spouse coverage is $65. Upon the retiree’s death, the annuity would be 55 percent of $1,000, or $550, until age 62, and currently 45 percent, or $450, after age 62 under the schedule for phasing out the Social Security offset.
SBP elections are made by category, so the choices you make for your eligible beneficiaries at retirement are critical. You may voluntarily elect to discontinue participation in the SBP only during the 25th through the 36th month after you begin drawing retired pay. If you qualify to discontinue participation in the plan, you must complete DD Form 2656-2. Again, spousal concurrence is required, except in limited circumstances when your spouse is unavailable.
The SBP comes with costs — considerable costs for those who chose to get into the latest open enrollment season and had to pay those lump-sum back premiums. But it is one way to gain peace of mind that your loved ones will continue to have a steady source of income after you’re gone.
Complete information on the SBP is available online at www.dod.mil/militarypay/survivor/sbp/01_overview.html.
Alex Keenan is a retired command master chief petty officer who served 28 years in the Coast Guard. E-mail him at retired@atpco.com.
Ellie
Take care of your survivors
By Alex Keenan - Special to the Times
Posted : February 19, 2007
I get a lot of inquiries about benefits offered to survivors upon the death of a retiree. One of the biggest benefits is the Survivor Benefit Plan, created by Congress to take care of surviving spouses and children when retired pay stops upon a retiree’s death. The plan has undergone some fairly significant changes.
Launched in 1972, the goal of SBP was to ensure survivors of military retirees would have reasonable and continuous income replacement, which Social Security alone does not provide.
Congress intended that the value of Social Security and other entitlements would be considered when determining whether reasonable income replacement was achieved.
When a military retiree dies, military pay stops on the date of death. Today, more than 250,000 survivors of military retirees continue to receive payments because their sponsor participated in SBP. The program has a cost-of-living adjustment, is government-subsidized, and offers tax-free features.
Recently, Congress allowed an open enrollment season for SBP under a provision of the 2005 Defense Authorization Act. Basically, it was an opportunity for military retirees to enroll in SBP who had not done so when they first were eligible.
This was only the fourth time that an open season was held in which retirees could get into the SBP after the fact. Each time, the open season coincided with major changes to the program.
The latest enrollment season began Oct. 1, 2005, and ended Sept. 30. The reason the program was opened up again to those who did not get in when they were first eligible is that Congress ordered a phasing out of the Social Security “offset” that reduced benefits for survivors at age 62, when they became eligible for Social Security.
Instead of the 55 percent of a member’s retirement pay, SBP payments were reduced to 35 percent of retired pay, on the theory that Social Security would substitute for the other 20 percentage points.
The offset began to be phased out in October 2005, when the percentage of retired pay for survivors age 62 and older increased to 40 percent. Then in April, it increased again to 45 percent. This April, it is due to go to 50 percent, and in April 2008, the last phase kicks in when the percentage is restored to 55 percent for all SBP beneficiaries age 62 and older.
There was a substantial catch, however — retirees who wanted to join SBP during the open enrollment window not only had to begin paying their monthly premiums as of the date of their election into the program, they also had to pay a lump-sum buy-in premium equal to the amount of all back premiums from the date of original eligibility, plus interest.
The lump-sum premium was allowed to be paid over a period of two years, and premiums will be refunded to survivors if a retiree dies during those two years.
Under the law, a retiree cannot reduce or decline spouse coverage without the spouse’s written consent.
The cost of SBP is 6.5 percent of the base amount of coverage. You can choose as your base amount anything from your maximum monthly retirement pay to as little as $300 per month.
For example, with a base amount of $1,000 per month, the monthly cost for spouse coverage is $65. Upon the retiree’s death, the annuity would be 55 percent of $1,000, or $550, until age 62, and currently 45 percent, or $450, after age 62 under the schedule for phasing out the Social Security offset.
SBP elections are made by category, so the choices you make for your eligible beneficiaries at retirement are critical. You may voluntarily elect to discontinue participation in the SBP only during the 25th through the 36th month after you begin drawing retired pay. If you qualify to discontinue participation in the plan, you must complete DD Form 2656-2. Again, spousal concurrence is required, except in limited circumstances when your spouse is unavailable.
The SBP comes with costs — considerable costs for those who chose to get into the latest open enrollment season and had to pay those lump-sum back premiums. But it is one way to gain peace of mind that your loved ones will continue to have a steady source of income after you’re gone.
Complete information on the SBP is available online at www.dod.mil/militarypay/survivor/sbp/01_overview.html.
Alex Keenan is a retired command master chief petty officer who served 28 years in the Coast Guard. E-mail him at retired@atpco.com.
Ellie