Survivor Benefit Plan (SBP): Protecting Your Family After Service

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Military retired pay stops when a retiree dies. This can create a significant financial gap for surviving spouses and children. The Survivor Benefit Plan (SBP) addresses this risk by providing a continuous monthly income to eligible survivors.

SBP offers distinct advantages over standard insurance options:

• Protection against inflation through Cost-of-Living Adjustments
• Cost structure partially subsidized by the government
• Reliable income for the lifetime of eligible beneficiaries

Understanding the Basics

What SBP Is

The Survivor Benefit Plan is a DoD-sponsored program that provides up to 55 percent of a service member’s retired pay as a monthly annuity to eligible beneficiaries. Enacted by Congress in 1972, SBP replaced the earlier Retired Serviceman’s Family Protection Plan.

SBP coverage was initially focused on retirees but was later expanded to include members who die while on active service.

Who Administers SBP

The Defense Finance and Accounting Service (DFAS) administers the Survivor Benefit Plan. DFAS handles:

• Processing enrollments
• Collecting premiums
• Disbursing monthly annuity payments

DFAS provides SBP annuities to approximately a quarter of a million survivors of military service members and retirees. DFAS serves as the primary source for essential SBP resources, including forms, online account management through myPay, and customer support.

Eligibility to Provide Coverage

Active Duty Service Members

Service members on active duty receive SBP protection automatically at no cost. If an active duty member dies in the line of duty, their eligible survivors are generally covered.

For active duty deaths, the SBP annuity is typically calculated based on what the member’s retired pay would have been if they had retired with a 100% disability rating on the date of death. This often results in a higher base amount for the 55% annuity compared to a standard retirement calculation.

Reserve and National Guard Members

Reserve and National Guard members have a different pathway to SBP coverage, known as the Reserve Component Survivor Benefit Plan (RC-SBP). Eligibility typically arises when a member receives their “20-year letter.”

RC-SBP provides survivor coverage during the “gray area” between qualifying for retirement and actually receiving retirement pay. Members must make an election when they receive their 20-year letter, choosing from three options that determine when coverage begins.

If a member elects RC-SBP coverage, premiums are deferred until they start receiving retired pay, usually at age 60. At that point, the RC-SBP coverage automatically converts to standard SBP.

Military Retirees

For most service members, retirement is the primary decision point for SBP coverage. When a member retires from active duty or begins receiving Reserve Component retired pay, they must make an SBP election.

Full SBP coverage for a spouse and/or eligible children is the default election if the retiree does not make a different valid election. This “default to full coverage” ensures dependents are protected unless the retiree takes specific action to reduce or decline participation.

The SBP election made at retirement is, with very limited exceptions, irrevocable. Once the decision is made and retirement processing is complete, it generally cannot be changed.

Who Can Receive SBP Payments?

Spouse Coverage

Spouse coverage is the most common SBP election. To be eligible, the member must be married on the date of retirement. If a member enrolls in spouse coverage, it applies not only to their current spouse but also to any spouse acquired later through remarriage.

The SBP annuity is generally payable to the surviving spouse for their lifetime. However, eligibility stops if the surviving spouse remarries before reaching age 55. If that subsequent marriage later ends, their eligibility can be reinstated. Remarriage at or after age 55 does not affect continued eligibility.

Members can also elect “Spouse and Child(ren)” coverage. Under this option, the spouse is the primary beneficiary. The annuity passes to eligible children only if the surviving spouse dies or becomes ineligible.

Former Spouse Coverage

Coverage for a former spouse requires a specific election by the retiring member. This election can be made voluntarily or as required by a court order or divorce decree.

If divorce occurs after retirement, the member must make the former spouse election within one year of the divorce decree. If the member fails to make the required election, the former spouse can submit a “Request for Deemed Election” directly to DFAS within one year of the court order.

Court-ordered former spouse coverage generally takes priority over coverage for a current spouse. A member typically cannot cover both a former spouse and a current spouse simultaneously.

Child(ren) Coverage

SBP can provide an annuity for dependent children, including natural children, adopted children, stepchildren, and, in some cases, foster children. To be eligible, a child must be unmarried.

The annuity is payable until the child reaches age 18. Eligibility can extend until age 22 if the child remains unmarried and is a full-time student. To continue receiving payments between ages 18 and 22, students must annually certify their full-time status to DFAS.

Children who are incapable of self-support due to a physical or mental disability that existed before age 18 (or before age 22 while a full-time student) can receive SBP benefits for their lifetime, as long as they remain unmarried.

Special Needs Trusts for Disabled Dependents

For members with dependent children eligible for lifetime SBP benefits due to a qualifying disability, there is an option to direct the SBP annuity payments to a Special Needs Trust (SNT).

The primary advantage is allowing the disabled child to receive SBP income without jeopardizing eligibility for essential means-tested government benefits like Supplemental Security Income and Medicaid.

To utilize this option, the member must have already elected either “Child Only” or “Spouse and Child(ren)” coverage that includes the disabled child. Establishing an SNT involves legal complexities and requires consultation with an attorney specializing in estate planning and special needs law.

Insurable Interest Option

For members who are unmarried and have no eligible dependent children at retirement, SBP offers an “Insurable Interest” coverage option. This allows the member to designate coverage for a person who has a legitimate financial interest in the member’s continued life, typically a close relative.

Premiums for insurable interest coverage are often significantly higher than for spouse or child coverage. The cost depends on the age difference between the retiree and the beneficiary, potentially ranging from 10% to 40% of the retired pay base amount.

Beneficiary Eligibility at a Glance

The Cost of Protection: SBP Premiums

How Premiums Are Calculated

SBP premiums are determined based on the “base amount” of retired pay that the member chooses to cover. This base amount can range from a minimum threshold (around $300 per month) up to the member’s full gross retired pay.

For standard Spouse Only coverage based on the full retired pay, the premium is generally 6.5% of the chosen base amount. If Child(ren) coverage is elected, an additional premium is added based on the age difference between the retiree, spouse (if covered), and the youngest child.

Reserve Component members who elected RC-SBP begin paying premiums only when they start receiving retired pay, typically at age 60.

Paying for SBP

The most common method for paying SBP premiums is through automatic deduction from the retiree’s monthly military retired pay. These premiums are deducted before federal income taxes are calculated, effectively lowering the retiree’s taxable income.

In situations where retired pay might be insufficient to cover the premium (often due to VA disability compensation), DFAS has alternative deduction methods. Since April 2018, DFAS can deduct SBP premiums from Combat-Related Special Compensation pay if retired pay is not enough.

Retirees can also authorize DFAS to deduct premiums directly from VA disability compensation payments. In rare cases where these deductions aren’t feasible, retirees may make direct payments, preferably through the Pay.gov online portal.

The Government’s Share

A key feature of SBP is the significant government subsidy. The premiums paid by retirees do not cover the full actuarial cost of providing the lifetime, inflation-protected annuity benefit.

This government contribution, combined with the fact that the government also absorbs administrative costs, results in premiums that are generally well below the cost for conventional insurance policies offering comparable benefits.

SBP Annuity Payments

Calculating the Monthly Annuity

The standard SBP annuity amount is 55% of the elected base amount of the member’s retired pay. If the retiree elected to cover their full retired pay, the annuity will be 55% of that full amount. If they elected a lower base amount, the annuity would be 55% of that lower amount.

The calculation differs slightly for certain situations:

• Active Duty Line-of-Duty Death: The base amount is often calculated as if the member retired with a 100% disability
• Insurable Interest Coverage: The 55% annuity is calculated after the higher premium has been subtracted

When Payments Begin and How Long They Last

Eligibility for SBP annuity payments begins on the day after the member’s death. However, the beneficiary must first report the death to DFAS and complete the necessary claim paperwork. Once DFAS processes the claim and verifies eligibility, payments will commence, including any retroactive amounts.

The duration of payments depends on the type of beneficiary and their continued eligibility:

• Spouse: Lifetime, unless remarriage before age 55
• Former Spouse: Typically lifetime, subject to remarriage rules
• Children: Until age 18, or age 22 if a full-time student
• Disabled Children: Potentially lifetime
• Insurable Interest: Beneficiary’s lifetime

Protection Against Inflation

SBP annuity payments are automatically increased each year by a Cost-of-Living Adjustment. This COLA is typically the same percentage increase applied to military retired pay.

This automatic annual increase ensures that the purchasing power of the SBP annuity is preserved over time. This feature provides significant long-term financial security compared to many private insurance policies or annuities with fixed payouts.

Tax Considerations

SBP annuity income received by a survivor is generally considered taxable income at the federal level. State income tax rules vary by state.

While the annuity is taxable, it’s taxed based on the survivor’s overall income and tax bracket, which may be lower than the tax rate the military member was paying while receiving retired pay.

Each January, DFAS issues IRS Form 1099-R to SBP annuitants. This form reports the total annuity payments received during the previous tax year. Annuitants can manage federal income tax withholding through their myPay account or by submitting IRS Form W-4P to DFAS.

Enrolling in SBP

The Enrollment Process

The SBP election must be made before the effective date of retirement. It’s recommended that service members finalize their SBP decision 60-90 days before their retirement date.

The official SBP election is documented on DD Form 2656, “Data for Payment of Retired Personnel.” This form captures essential information for initiating retired pay, including the member’s SBP election – specifying the type of coverage, the base amount elected, and information about eligible beneficiaries.

The Importance of Spouse Concurrence

If a retiring member is married and chooses any option other than full SBP coverage for their current spouse, the law requires the spouse’s written, notarized signature concurring with that election on DD Form 2656.

This spousal concurrence requirement ensures the non-military spouse is fully aware of and formally agrees to any decision that reduces or eliminates their potential benefits. An SBP election that requires spousal consent but lacks a valid signature is generally considered invalid, and the system will typically default to establishing full spouse coverage.

The only major exception is when the member elects former spouse coverage as required by a court order. In that specific situation, the current spouse’s consent is not needed.

What Happens if You Decline Coverage?

Declining SBP coverage at retirement is a significant decision with lasting consequences. This choice is generally permanent and irrevocable.

By declining coverage, the retiree accepts the full financial risk associated with the cessation of their military retired pay upon death. Their surviving dependents will not receive any SBP annuity income to replace that lost financial support.

Late Enrollment Options

A limited opportunity exists for members who retire without eligible dependents. If such a retiree later acquires an eligible dependent, they can elect SBP coverage within one year of the qualifying event:

• First marriage after retirement
• Birth or adoption of the first child after retirement

Failure to make the election within this one-year window means permanently forfeiting the opportunity to provide coverage for that newly acquired dependent.

SBP and VA DIC: How They Work Together

Understanding VA Dependency and Indemnity Compensation (DIC)

DIC is a tax-free monthly benefit paid by the VA to eligible survivors of service members who die from service-related causes. This includes members who die on active duty due to service-related injury or disease, as well as veterans who die from a service-connected condition.

Eligibility for DIC is generally stricter than for SBP because it depends on the cause of death being service-connected, as determined by the VA. DIC is administered entirely by the VA, separate from DoD/DFAS administration of SBP.

The SBP-DIC Offset: Now Fully Eliminated

For many years, federal law prohibited a surviving spouse from receiving the full amount of both SBP and DIC benefits concurrently. Under this offset, the SBP payment was reduced by the amount of the DIC payment.

The crucial update is that the SBP-DIC offset was completely eliminated effective January 1, 2023. Eligible surviving spouses now receive their full SBP payment from DFAS and their full DIC payment from the VA, with no reduction.

This elimination represents a major positive change, significantly increasing the total monthly income for thousands of surviving spouses who qualify for both benefits.

What Happened to the Special Survivor Indemnity Allowance (SSIA)?

The Special Survivor Indemnity Allowance was paid to surviving spouses whose SBP payments were being reduced due to the DIC offset. Because SSIA was directly linked to the existence of the offset, the elimination of the offset also meant the cessation of SSIA payments.

The final SSIA payments were made around January 3, 2023. While the disappearance of SSIA might initially seem like a loss of income, affected survivors should see that the increase in their SBP payment significantly outweighs the discontinued SSIA payment.

SBP vs. DIC Key Differences

Managing Your SBP

Choosing Your Coverage Level

Retirees don’t have to elect their full retired pay as the SBP base amount. They can choose a lower base amount, down to a minimum threshold (around $300).

Electing a lower base amount results in lower monthly premiums but also means a proportionally lower annuity payment for survivors. Choosing less than full coverage for a spouse requires that spouse’s written, notarized consent.

Making Changes After Enrollment

SBP elections made at retirement are generally irrevocable. However, certain life events can lead to changes:

• Loss of Beneficiary: If a covered beneficiary becomes ineligible, SBP coverage for that beneficiary stops
• Remarriage After Retirement: If a retiree elected spouse coverage, lost that spouse, and later remarries, the new spouse becomes eligible after one year
• Special Needs Trust Designation: A member or survivor can elect to direct payments for an already-covered disabled child to an SNT

Terminating SBP Coverage

Despite the general irrevocability, there is one limited opportunity to voluntarily terminate SBP coverage: between the 25th and 36th month after the retiree begins receiving retired pay.

Termination requires the written consent of the covered beneficiary. This termination is permanent and irreversible; once coverage is terminated, it cannot be reinstated. Any premiums paid up to termination are generally not refunded.

Essential SBP Resources

Key Government Websites

Defense Finance and Accounting Service (DFAS)

• Retired & Annuitant Pay Portal
• SBP Overview for Retirees
• Manage Your SBP Annuity
• Applying for SBP Annuity
• SBP Cost & Payment Information
• myPay Account Access

Department of Defense (DoD) Military Compensation

• SBP Program Overview
• SBP Main Benefits Page

Military OneSource

• SBP Benefit Page
• SBP and DIC Information

Department of Veterans Affairs (VA)

• Dependency and Indemnity Compensation (DIC)
• DIC Benefit Rates

Important SBP-Related Forms

Many SBP actions require specific forms, available via the DFAS Forms Library or the DoD Forms website. Key forms include:

• DD Form 2656: Data for Payment of Retired Personnel (for SBP election at retirement)
• DD Form 2656-7: Verification for Survivor Annuity (for starting SBP payments after death)
• DD Form 2656-10: Request for Deemed Election (for court-ordered former spouse coverage)
• DD Form 2788: Child Annuitant’s School Certification (annual certification for students)
• DD Form 2828: Physician Certificate for Child Annuitant (for disabled children)

Contact Information for Assistance

• DFAS Customer Care Center: 1-800-321-1080
• Military OneSource: 1-800-342-9647
• VA Benefits Hotline: 1-800-827-1000

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.