1. SURVIVOR BENEFIT PLAN (SBP) Presented by Dan McCullough USAF Academy Survivor Benefit Plan Counselor 1

2. AVERAGE LIFE EXPECTANCY
Life expectancy in the USA
Average is 78.0 years
Males – years
Females – years
Average number of years female spouses outlive male military retirees
30% of female spouses - 15 years
20% of female spouses - 29 years
10% of female spouses - 34 years
** Life expectancy averages taken from U.S. Census Bureau, International Data Base as of 7/16/2007

3. PURPOSE OF SBP Retired pay stops the date of the retiree’s death!
Even if there’s a surviving spouse/children
SBP is the only way survivors can receive a portion of deceased member’s retired pay
SBP provides surviving spouses with a continuing, inflation-protected, lifetime income 3

4. AUTOMATIC COVERAGE PROVISION
All retirees must complete a DD Form 2656 before retirement date
Provides DFAS-CL data required to properly establish your retired pay account
Federal and state income tax
Arrears of retired pay beneficiary(ies)
Properly establishes SBP coverage 4

5. AUTOMATIC COVERAGE PROVISION
Spouse concurrence required on the DD Form when married member does not elect full spouse coverage
DD Form 2656 must be completed, dated, and properly witnessed by SBP counselor
If DFAS-CL does not receive the DD Form with a valid SBP election (and spouse concurrence, if required) before retirement date, the law requires maximum SBP coverage be established (even for a single person!) 5

6. SBP BENEFICIARY CATEGORY OPTIONS
Each retiring member must elect a category of SBP beneficiary:
Spouse
Child(ren)
Spouse and Child(ren)
Former Spouse
Former Spouse and Child(ren)
Insurable Interest
Decline

7. LEVEL OF COVERAGE AVAILABLE
Each retiring member must elect a level of coverage:
By selecting a “base amount”
Base amount determines the cost
Cost also determined by category of beneficiary elected
Base amount determines the annuity payable
Base amount can be any $$ figure between $300 and the member’s full (gross) retired pay
Cost-of-living adjustments (COLAs) are applied to the base amount at the same time and rate as retired pay increases 7

8. SPOUSE ONLY OPTION
A spouse, married to member on date of retirement, is immediately eligible
No length of marriage requirement
A member, who is not married on the date of retirement, may cover a future spouse
Member must send written request to DFAS prior to 1st anniversary of first marriage after retiring and include a copy of the marriage certificate/license 8

9. SPOUSE ONLY OPTION
New spouse becomes an eligible beneficiary the earlier of:
1st anniversary of marriage
Upon birth of a child if before the 1st anniversary of marriage
Exception: Immediately if retired member remarries the spouse covered at retirement and member elects to resume spouse coverage 9

10. SPOUSE ONLY OPTION
SBP coverage and premiums are suspended if spouse loses eligibility:
Death
Divorce (may change election to Former Spouse coverage following divorce) 10

11. SPOUSE ONLY OPTION
Remarriage options for members with suspended spouse SBP coverage
Member must send written request to DFAS prior to first anniversary of marriage to:
Resume prior level of coverage for new spouse, OR
Increase prior level of coverage for new spouse,
Member must repay difference with interest before 1st anniversary of marriage OR
Decline coverage for new spouse 11

12. SPOUSE ONLY OPTION
If a member with suspended spouse coverage does NOTHING prior to the 1st anniversary of marriage:
Coverage is automatically established by operation of law for new spouse on 1st anniversary of marriage
For the same level of coverage previously in effect
If DFAS is not promptly notified of marriage, debt of premiums will accrue 12

13. SPOUSE ONLY OPTION
Provides spouse an annuity of 55% of the elected base amount for life
Remarriage before age 55 suspends annuity
Annuity can be reinstated if remarriage ends
Due to death or divorce
Annuity continues if remarriage occurs at age 55 or older
Annuity increases with retiree COLAs
Annuity is taxable 13

14. CHILD ONLY OPTION
Children are eligible until age 18 (22 if unmarried full-time students)
Children disabled and incapable of self-support remain eligible for life or as long as disability causes them to be incapable of self-support
Be cautious if Social Security Disability benefits are involved
However, child’s marriage at any age terminates child’s eligibility 14

15. CHILD ONLY OPTION Covers all member’s children while they are eligible
Cannot designate a particular child(ren) to receive the annuity
Child cost based on ages of member and youngest child
Child coverage and cost suspended when last child loses eligibility 15

16. CHILD ONLY OPTION
Future child(ren) (natural, adopted, step, grand) are automatically covered if child coverage elected
Future child(ren) covered on date of acquisition
No change in cost if member is currently paying premiums for child coverage
If premiums had been suspended because last child lost eligibility, new child costs recomputed based upon current ages of member and new youngest child
Member must notify DFAS-CL in writing with a copy of the new child’s birth certificate 16

17. CHILD ONLY OPTION
Member who has no eligible children at retirement may cover a future child
Member must send written request to DFAS within one year of acquiring the first eligible child and include copy of child’s birth certificate
Child becomes covered on date of receipt of the election request by DFAS-CL
Costs begin 1st day of the following month 17

18. CHILD ONLY OPTION
Provides eligible child(ren) an annuity of 55% of the elected base amount
Only one annuity is payable
All eligible children receive equal shares of the annuity (when over age 18)
Annuity paid to adult guardian on behalf of a minor child
Don’t consider electing child only coverage as replacement income for spouse because it can’t be changed to spouse coverage when last child loses eligibility 18

19. SPOUSE & CHILD OPTION Spouse is the primary beneficiary
Spouse receives annuity until death or remarriage prior to age 55
Annuity reinstated if remarriage terminates
Eligible children are contingent beneficiaries
Receive equal shares of the annuity if spouse dies or remarries prior to age 55
Provides maximum family coverage 19

20. FORMER SPOUSE OPTION Only one former spouse may be covered
Excludes current spouse (can’t split the annuity)
Can suspend premiums if former spouse remarries prior to age 55
Must furnish copy of former spouse’s remarriage certificate
Does not terminate former spouse’s eligibility
Just suspends former spouse’s eligibility to receive the annuity while remarried
Premiums reinstated if remarriage ends 20

21. FORMER SPOUSE OPTION
Both DD Form 2656 and DD Form must be completed prior to retiring
Copy of complete divorce decree (including property settlement, if applicable) must be attached 21

22. FORMER SPOUSE & CHILD OPTION
Former Spouse is the primary beneficiary
Former Spouse receives annuity until death or remarriage prior to age 55
Annuity reinstated if remarriage terminates
Eligible children are contingent beneficiaries
Only children from marriage to this former spouse are eligible
Excludes children of any other marriage
Receive equal shares of the annuity if former spouse dies or remarries prior to age 55 22

23. INSURABLE INTEREST OPTION
Unmarried members with no or only one dependent child may elect this option
If one dependent child, cannot bypass the dependent child and elect insurable interest coverage for someone else
Can elect for one dependent child in lieu of child only coverage, allowing child to receive life-long payment regardless of age, martial or student status
Cost much more expensive than child only coverage 23

24. INSURABLE INTEREST OPTION
Can elect coverage for a person with a financial interest in the continued life of the member
Can be a relative or non-relative
If related closer than cousin, no proof of financial interest needed
Others must prove financial interest connection
Examples: Beneficiary of life insurance policy, business partner, joint property owner, etc. 24

25. INSURABLE INTEREST OPTION
Lifetime coverage for beneficiary
Not terminated by marriage, student status, or age
Beneficiary receives 55 % of retired pay after SBP costs are deducted
Member may terminate coverage at any time
Can’t name another insurable interest beneficiary
Member may change to coverage for new spouse and/or child
Must submit election change request to DFAS-CL within one year of acquiring new spouse and/or child 25

26. BRIEF THE FOLLOWING SLIDE IF
MEMBER IS RETIRING FOR
DISABILITY

27. INSURABLE INTEREST OPTION
Insurable Interest election will be vitiated (voided) if:
Member retires for disability, and
Member dies within one year of retiring, and
Cause of death is related to the disability for which the member is retired
If election is voided, premiums paid will be refunded to the SBP beneficiary
Exception: An annuity is payable if the SBP beneficiary is a dependent holding a valid military dependent ID card with the member as the sponsor on the member’s date of death 27

28. DECLINE COVERAGE Retired pay STOPS when retiree dies
No payments made to anyone unless member is enrolled in SBP
SBP beneficiary excluded at retirement can not arbitrarily be covered in the future
If member has an eligible spouse at retirement and declines spouse coverage, cannot cover that spouse or a later acquired spouse
If member has an eligible child at retirement and declines child coverage, cannot cover that child or a later acquired child 28

29. SPOUSE PREMIUMS Cost is 6.5 percent of the base amount you elect; or
If base amount is lower than $1,575, cost is 2.5 percent of the first $735, plus 10 percent of the base amount in excess of $735
If you initially entered active service prior to 1 Mar 90 or are retiring for disability
Cost increases with retiree COLAs
Premiums are not taxable
Provides a tax savings
SBP cost lower than it appears

30. SBP Program Cost Factors Thresholds to determine premiums
$ $735/ $1,574/1575
Minimum
Base Amount
Maximum
Base Amount
$ Dollar Amount
Between $
X % _ Cost Factor
$ = Premium
$1, Dollar Amount
Between
$736 - $1,574
-$ From Threshold 1
= $265______ Difference
X % _ Cost Factor
$ = Premium
$1, Dollar Amount
Between $1,575 and
Maximum Base Amount
(Full Retired Pay)
($1,800 base provides $ per month annuity)
X % Cost Factor
$ = Premium
$44.87 = Monthly Premium for $1, Base Amount which provides $550 annuity

31. SBP Program Cost Factors
Threshold 1
$ $735
Minimum Amount of retired pay which can be used as a “Base Amount” is $300. Any dollar amount between $300 and $735 makes up the 1st threshold. The cost factor for any base amount in this threshold is 2.5%.
If $300 is used as the base the cost is:
2.5% of $300 = $7.50 per month
Annuity payable is 55% of the base amount
- 55% of $300 = $165
If $735 is used as the base the cost is:
2.5% of $735 = $18.37 per month
- 55% of $735 = $404
$ Dollar
Amount
Between
$300 - $735
X % _ Cost Factor
$ = Premium

32. SBP Program Cost Factors
Threshold 2
$ $1,574
$1, Dollar
Amount
Between
$736 - $1,574
-$ From Threshold 1
= $ Difference
X % Cost Factor
$ = Premium
Cost computations for Threshold 2 are computed using amounts of retired pay between $736 and $1,574. You take your chosen base amount (i.e. $1,000), subtract $735 from Threshold 1 ($1,000 - $735 = $265), take 10% of the remainder ($26.50) and add the result to the cost amount in Threshold 1 ($18.37).
In the example, we used $1,000 of retired pay as the base amount. The final cost ends up being $44.87 ($ $18.37) and the annuity payable is 55% of $1,000 ($550 per month).
If $1,574 is used as the base amount, the cost is $ ($ $18.37) and the annuity is 55% of $1,574 ($865 per month).

33. SBP Program Cost Factors
Threshold 3
$1, Full Retired Pay
$1, Dollar Amount
Between $1,575 and
Maximum Base Amount
(Full Retired Pay)
($1,800 base provides $990 per month annuity)
X % Cost Factor
$ = Premium
When you get to $1,575 of retired pay, it becomes cheaper for the retiree to compute the cost by simply using a flat 6.5% cost factor on the entire amount.
In this example, we used $1,800 of pay as a base amount. The cost comes out to $ per month and the annuity would be 55% of $1,800 ($990 per month).

34. DEPENDENCY AND INDEMNITY COMPENSATION (DIC)
DIC is a tax-free monthly payment awarded by the VA
If member’s death is ruled service-connected by the VA AND
If member has been rated 100% VA disabled for:
10 or more years immediately preceding death
5 or more years immediately preceding death if awarded 100% VA disability rating at retirement
1 year immediately preceding death if member was a former POW 34

35. DEPENDENCY AND INDEMNITY COMPENSATION (DIC)
DIC is paid to:
Unmarried surviving spouse ($1,154 per month)
Eligible children ($286 per month)
DIC reduces surviving spouse’s SBP annuity dollar-for-dollar
SBP premiums refunded for portion of the SBP annuity not received
DIC does NOT reduce the SBP annuity paid to child(ren) 35

36. WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATING
Retirees may withdraw from SBP because of VA disability rating
If member has been rated 100% disabled by the VA for:
5 consecutive years immediately following retirement
10 consecutive years if 100% disability rating was not received immediately following retirement

37. WITHDRAW FROM SBP BECAUSE OF VA DISABILITY RATING
Retiree sends signed letter of request to DFAS
DFAS processes written request and:
Sends member a fact sheet with pros and cons of withdrawing
Verifies rating with the VA
Sends concurrence statement for spouse to sign
All premiums terminated
Premiums refunded to widow(er) following the member’s death

38. DISCONTINUE PARTICIPATION
Member can discontinue ALL participation in the SBP during a one-year period
One-year period begins on 2nd anniversary of retirement, ends on 3rd anniversary of retirement (between member’s 25th and 36th month of retirement)
No refund of premiums 38

39. DISCONTINUE PARTICIPATION
ALL coverage stops (e.g., can’t keep coverage for a child and stop the spouse’s portion if election is for spouse and child coverage)
Spouse concurrence required
On 3rd anniversary of retirement, election becomes irrevocable as long as beneficiary remains eligible 39

40. CHANGE FROM SPOUSE TO FORMER SPOUSE COVERAGE
When a member who has spouse SBP coverage divorces, that spouse’s SBP eligibility is terminated
No longer the member’s “spouse”
Spouse coverage must be changed to former spouse coverage in order to keep formerly covered spouse covered as a former spouse
Retiree may submit a DD Form to DFAS with a copy of the divorce decree
Former spouse may request ‘deemed’ election (if court ordered or in written agreement)
Either must be submitted within the first year of divorce 40

41. DIVORCE AFTER RETIREMENT
Court CANNOT:
order retired member to elect former spouse SBP coverage if the member does not already have spouse coverage
change the level of coverage (base amount) because of the divorce
If former spouse coverage is elected, member cannot arbitrarily stop the coverage 41

42. MISCELLANEOUS PROVISIONS
Future Civil Service (CS) retirement
If retiree waives AF retired pay and combines AF and CS time, retiree may retain only one survivor annuity plan (either AF or CS, not both)
If military retiree does not combine AF and CS time, retiree may participate in both AF and CS survivor annuities plans (survivor can receive both annuities) 42

43. MISCELLANEOUS PROVISIONS
Non-resident alien annuitant tax liability
Flat 30 % income tax reduction
Status of forces agreement (SOFA) may affect tax liability
Only applies to non-U.S. citizen spouses who return to their home country 43

44. MISCELLANEOUS PROVISIONS
Paid-up premiums
Member must be at least age 70 AND must have made 360 premium payments
No further premium payments required
Annuity remains payable to eligible beneficiary
Continues to receive COLAs 44

45. UNIQUE FEATURES Premiums paid with pre-tax dollars:
SBP premiums are deducted from member’s retired pay before tax liability is assessed
SBP cost is lower than it appears!!
Reduces federal and state tax
SBP is government subsidized
COLAs are applied to the annuity even after member is deceased
Provides inflation protection for the future!! 45

46. UNIQUE FEATURES Premiums suspended if there is no eligible beneficiary
Premiums are paid-up after member reaches age 70 and has made 360 premium payments
Age, health, sex, lifestyle – not factors in cost or eligibility to be in program
Surviving spouse cannot outlive annuity
SBP provides peace of mind
SBP makes other investments and assets more valuable 46

47. MEMBER’S RESPONSIBILITIES
Member and spouse must attend SBP briefing
Complete a DD Form 2656
Make SBP election
Obtain spouse’s concurrence (if required) prior to retirement
As a reminder, the law requires DFAS establish maximum SBP coverage if valid election/spouse concurrence is not received before date of retirement 47

48. MEMBER’S RESPONSIBILITIES
After retirement, promptly notify DFAS of changes that affect SBP or your pay:
Change in marital status
Loss or addition of family member(s)
Change of direct deposit financial institution
Change in correspondence (residential) mailing address
Many can be done using myPay 48

49. Closing… We are here to help you if/when you need assistance....
Congratulations on your retirement!!