Survivors Benefit Plan

Under federal law, military retirement pay terminates with the death of the military servicemember.  In other words, a military retiree could devote his or her entire career to the military and the family would be left without support if the servicember dies prematurely.  Due to the potential for hardship, the government created a special annuity that servicemembers can purchase to provide for their spouse or minor children and insure against this scenario.

The Survivor Benefit Plan (“SBP”) provides a defined benefit to certain eligible beneficiaries upon the service member’s death.  The benefit is a percentage of the service member’s retirement pay on a monthly basis for the lifetime of the beneficiary.  This coverage can provide an eligible beneficiary with up to 55% of the service member’s monthly military retirement pay.

All active duty servicemembers receives SBP at no cost.  For retirees, however, SBP coverage can cost as much as 6.5% of the service member’s gross retired pay.  This is a significant expense to a retiree.  In a divorce case, the SBP premium is deducted from retired pay prior to division of the retired pay.  As a result, absent some other agreement, the servicemember and spouse necessarily share the expense of the SBP premium.  And, they do so on the same pro-rata basis that the military retired pay is divided.  In other words, if the servicemember receives 60% of the retired pay, he or she will implicitly pay 60% of the SBP premium.  Once a beneficiary starts receiving SBP payments, the payments are subject to a cost of living adjustment or “COLA” each year.

In cases where a former spouse receives a relatively small percentage of the military retirement, he or she may receive a windfall if the servicemember elects maximum SBP coverage.  For example, if a former spouse receives 25% of the military retired pay, with a maximum SBP election, he or she could receive up to 55% of the retired pay upon the servicemember’s death.  An experienced military divorce attorney representing the servicemember will be sure to avoid this result.

Former spouses frequently demand SBP coverage, even when that may or may not be the best means of insuring their interest in the military retired pay.  For example, a former spouse who remarries before age 55 is no longer eligible to receive the annuity.  In this case, the former spouse still implicitly pays the cost for the annuity, and the benefit of this expensive insurance would go to the service member’s new spouse.  If you are a former spouse with plans to remarry, then a life insurance policy is probably a much better option than SBP coverage.

If you are facing a military divorce, it is critical to hire an attorney who understands how SBP coverage works and, for the former spouse, the steps necessary to procure the coverage.  A former spouse also has to be certain to file the appropriate forms with DFAS to make a deemed SBP election.  If the former spouse does not make this election within one year of the date of the court order dividing the military retirement, the right to SBP coverage may be lost entirely.

Please contact us if you need legal representation concerning retirement division, SBP coverage, or any of the other issues presented by a military divorce.

Related Military Divorce Information: Military Disability Pay

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