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SURVIVOR BENEFIT PLAN (SBP) Presented by Dan McCullough USAF Academy Survivor Benefit Plan Counselor 333-2129 PowerPoint Presentation
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SURVIVOR BENEFIT PLAN (SBP) Presented by Dan McCullough USAF Academy Survivor Benefit Plan Counselor 333-2129 - PowerPoint PPT Presentation


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SURVIVOR BENEFIT PLAN (SBP) Presented by Dan McCullough USAF Academy Survivor Benefit Plan Counselor 333-2129. AVERAGE LIFE EXPECTANCY. Life expectancy in the USA Average is 78.0 years Males – 75.15 years Females – 80.97 years

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SURVIVOR BENEFIT PLAN (SBP)Presented byDan McCulloughUSAF AcademySurvivor Benefit Plan Counselor333-2129

slide2

AVERAGE LIFE EXPECTANCY

  • Life expectancy in the USA
    • Average is 78.0 years
      • Males – 75.15 years
      • Females – 80.97 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

slide3

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
slide4

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
slide5

AUTOMATIC COVERAGE PROVISION

  • Spouse concurrence required on the DD Form 2656 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 2656 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!)
slide6

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
slide7

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
slide8

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
slide9

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
slide10

SPOUSE ONLY OPTION

  • SBP coverage and premiums are suspended if spouse loses eligibility:
    • Death
    • Divorce (may change election to Former Spouse coverage following divorce)
slide11

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
slide12

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
slide13

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
slide14

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
slide15

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
slide16

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
slide17

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
slide18

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
slide19

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
slide20

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
slide21

FORMER SPOUSE OPTION

  • Both DD Form 2656 and DD Form 2656-1 must be completed prior to retiring
    • Copy of complete divorce decree (including property settlement, if applicable) must be attached
slide22

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
slide23

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
slide24

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.
slide25

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
slide26

BRIEF THE FOLLOWING SLIDE IF

MEMBER IS RETIRING FOR

DISABILITY

slide27

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
slide28

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
slide29

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
slide30

SBP Program Cost Factors

Thresholds to determine premiums

$300 $735/736 $1,574/1575

Minimum

Base Amount

Maximum

Base Amount

$ 735 Dollar Amount

Between

$300 - 735

X 2.5 % _ Cost Factor

$ 18.37= Premium

$1,000 Dollar Amount

Between

$736 - $1,574

-$735 From Threshold 1

= $265______ Difference

X 10 % _ Cost Factor

$26.50= Premium

$1,800 Dollar Amount

Between $1,575 and

Maximum Base Amount

(Full Retired Pay)

($1,800 base provides $990 per month annuity)

X 6.5 % Cost Factor

$117.00= Premium

$44.87 = Monthly Premium for $1,000.00 Base Amount which provides $550 annuity

slide31

SBP Program Cost Factors

Threshold 1

$300 $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

Annuity payable is 55% of the base amount

- 55% of $735 = $404

$ 725 Dollar

Amount

Between

$300 - $735

X 2.5 % _ Cost Factor

$ 18.37= Premium

slide32

SBP Program Cost Factors

Threshold 2

$736 $1,574

$1,000 Dollar

Amount

Between

$736 - $1,574

-$735 . From Threshold 1

= $265 . Difference

X 10 % . Cost Factor

$26.50 = 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 ($26.50 + $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 $102.27 ($83.90 + $18.37) and the annuity is 55% of $1,574 ($865 per month).

slide33

SBP Program Cost Factors

Threshold 3

$1,575Full Retired Pay

$1,800 Dollar Amount

Between $1,575 and

Maximum Base Amount

(Full Retired Pay)

($1,800 base provides $990 per month annuity)

X 6.5 % Cost Factor

$117.00= 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 $117.00 per month and the annuity would be 55% of $1,800 ($990 per month).

slide34

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
slide35

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)
slide36

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
slide37

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
slide38

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
slide39

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
slide40

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 2656-1 to DFAS with a copy of the divorce decree
    • Former spouse may request ‘deemed’ election (if court ordered or in written agreement)
    • Either mustbe submitted within the first year of divorce
slide41

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
slide42

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)
slide43

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
slide44

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
slide45

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!!
slide46

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
slide47

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
slide48

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
slide49

Closing…

We are here to help you if/when you need assistance....

Congratulations on your retirement!!