The Military Survivor Benefit Plan: A Description of Its Provisions

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The Military Survivor Benefit Plan: A

Description of Its Provisions

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Specialist in Military Manpower Policy

January 12, 2011

Congressional Research Service

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www.crs.gov

RL31664

CRS Report for Congress

Prepared for Members and Committees of Congress

The Military Survivor Benefit Plan: A Description of Its Provisions

Summary

The military Survivor Benefit Plan (SBP) was created in 1972. Since its creation, it has been

subjected to many legislative changes. This report describes the basic provisions of the military

Survivor Benefit Plan and all relevant changes or modifications that have occurred.

Specifically, the military Survivor Benefit Plan is described and explained in terms of its

eligibility provisions, costs, benefits, and its current or former integration with other federal

programs (including Social Security and Department of Veterans Affairs Dependency and

Indemnity Compensation) for members and retirees of active duty military service and the

Reserve Components (both the reserves and National Guard). In addition, tables and work sheets

are provided to assist the reader in computing the costs and benefits available under this program.

Nearly every Congress since 1972 has, in some way, modified the provisions of the military

Survivor Benefit Plan. These modifications have had a significant effect on current and

prospective participants and beneficiaries. In nearly every instance, these changes have made the

SBP more generous. Furthermore, these modifications involve complex issues and processes, and

are, therefore, a source of numerous requests for information from constituents to their

congressional representatives.

Congressional Research Service

The Military Survivor Benefit Plan: A Description of Its Provisions

Contents

Introduction ................................................................................................................................1

Major Provisions of the Survivor Benefit Plan.............................................................................2

Coverage for Military Members Retired from an Active Duty Career ....................................2

Spouse Only Coverage..........................................................................................................3

Computational Formulas .................................................................................................3

Original Computational Formula.....................................................................................3

Flat-Rate Formula ...........................................................................................................4

Remarriage .....................................................................................................................5

“Paid-Up” Provisions ......................................................................................................5

Spouse and Child(ren) Coverage ...........................................................................................6

Child(ren) Only Coverage .....................................................................................................6

Persons with an Insurable Interest .........................................................................................7

Former Spouse Coverage ......................................................................................................8

Former Spouse and Child(ren) Coverage...............................................................................9

Coverage for Military Members Retired from the Reserve Components.................................9

“Forgotten Widow” Coverage ............................................................................................. 11

Coverage for Military Members Serving on Active Duty ..................................................... 11

Survivor Benefit Plan and Social Security ................................................................................. 12

Survivor Benefit Plan and Veterans’ Affairs Dependency and Indemnity Compensation............. 12

“Concurrent Receipt” .......................................................................................................... 13

Special Survivor Indemnity Allowance (SSIA) .................................................................... 15

Retiree and Government Contributions to SBP .......................................................................... 15

Tables

Table 1. Computation of Survivor Benefit Plan Costs to a Hypothetical Retiree for

Spouse Only Coverage.............................................................................................................4

Table 2. Computation of SBP Costs under Persons with an Insurable Interest Coverage...............8

Table 3. Computation of Original Survivor Benefit Plan Cost to the Retiree for Spouse

Only Coverage (Work Sheet).................................................................................................. 18

Table 4. Computation of Flat-Rate Survivor Benefit Plan Cost to the Retiree for Spouse

Only Coverage (Work Sheet).................................................................................................. 18

Table 5. Computation of SBP Costs under Persons with an Insurable Interest Coverage

(Work Sheet).......................................................................................................................... 18

Contacts

Author Contact Information ...................................................................................................... 18

Congressional Research Service

The Military Survivor Benefit Plan: A Description of Its Provisions

Introduction

This report outlines the purpose and legislative background of providing benefits to the surviving

dependents of a deceased member/retiree of the uniformed services. In certain cases, individuals

other than dependents can be designated recipients of survivor benefits. This report describes the

categories of beneficiaries eligible for survivor benefits under the military Survivor Benefit Plan

(SBP), the formulas used in computing the income level (including the integration of SBP

benefits with other federal benefits), and the costs of SBP participation incurred by the retiree

and/or the beneficiary.1

Under the SBP, a military retiree can have a portion of his or her monthly retired pay withheld in

order to provide, after his or her death, a monthly survivor benefit (55% of base2 amount of

military retired pay at the time of the retiree’s death) to a surviving spouse or other eligible

recipient(s). The cost of this protection is shared by the retiree (in the form of reductions from

monthly military retired pay after retirement), the government, and possibly the beneficiary

(under certain types of coverage). The original intended purpose of the SBP (and its antecedents)

is to “insure that the surviving dependents of military personnel who die in retirement or after

becoming eligible for retirement will continue to have a reasonable level of income.”3 Coverage

was later expanded to active duty personnel as well.

The Survivor Benefit Plan was created by legislation enacted on September 21, 1972,4 and has

been modified by later legislation. The SBP replaced the Retired Serviceman’s Family Protection

Plan (RSFPP).5 The RSFPP was replaced because it had a number of unpopular features that

made it unattractive. The RSFPP could be expensive for the retiree; the cost was approximately

$0.23 of deducted retired pay per dollar of survivor benefits for a retired member age 45 who

elected to provide coverage for a spouse who was 5 full years younger. The RSFPP was intended

to be actuarially neutral in terms of costs—in other words, the cost of this program was fully paid

for by its participants. The decision to elect RSFPP coverage had to be made by the prospective

military retiree before his or her 18th year of military service. Furthermore, the methods used in

computing the RSFPP’s cost and benefit could change between the time at which the

servicemember elected to provide coverage and the time at which the member actually retired.

Thus, the costs and benefits remained an unknown quantity, limiting the ability of the retiree to

make future financial plans. During its 19-year history, participation in the RSFPP never

exceeded more than 15% of eligible military retirees. It was expected—and has largely been

proven—that the SBP would be a significant improvement over the RSFPP, in terms of

Retirees of the uniformed services (Army, Navy, Marine Corps, Air Force and Coast Guard), as well as retirees of the

Public Health Service (PHS) and the National Oceanic and Atmospheric Administration (NOAA) are eligible to

participate in the Survivor Benefit Plan. This report emphasizes the provisions of the SBP as they relate to members or

retirees of the Armed Forces.

Base retired pay is that amount of retired pay that the retiree selects to be used in determining the SBP benefit and

cost. This amount may not be greater than total monthly retired pay and may not be less than (1) $635 monthly as of

January 1, 2006, or (2) total retired pay, if smaller than $635 monthly. This 55% maximum may include amounts

received from other federal sources.

U.S. Department of Defense, Office of the Secretary of Defense, Military Compensation Background Papers,

Compensation Elements and Related Manpower Cost Items: Their Purposes and Legislative Backgrounds, 6th Ed.,

April 2005: 902.

P.L. 92-425, 10 U.S.C. 1447 et seq.

Originally known as the Uniformed Services Contingency Option Plan of 1953, P.L. 83-239, 67 Stat. 501, 1953; name

changed by P.L. 87-381, 75 Stat. 810, 1961.

Congressional Research Service

The Military Survivor Benefit Plan: A Description of Its Provisions

participation rates, costs to the retiree, and benefits for the survivors. It also entails higher costs to

taxpayers because the SBP costs are shared with the government in most cases.

Major Provisions of the Survivor Benefit Plan

Coverage for Military Members Retired from an Active Duty

Career

Six separate types of coverage are available under the SBP for military members retired from an

active duty military career, characterized according to the relationship of the beneficiary or

beneficiaries to the military retiree:6

•

Spouse Only;

•

Spouse and Child(ren);

•

Child(ren) Only;

•

Persons with an Insurable Interest;

•

Former Spouse;

•

Former Spouse and Child(ren).

The type of coverage and the amount of coverage provided are factors used in determining the

cost to the military retiree. Generally, a retiree is automatically enrolled in the SBP upon

retirement at the maximum level of coverage to his or her respective surviving spouse and

surviving dependent children, unless the retiree elects not to participate, to participate at a lesser

level of coverage, elects other than spouse coverage, or is ordered by a court to provide such

benefits to a former spouse. To participate at a reduced level of coverage, the retiree elects to have

his or her base amount of retired pay—that amount of monthly retired pay the retiree selects to be

used in determining the SBP benefit and cost—be less than his or her total retired pay subject to a

$300 minimum. The maximum SBP benefit is 55% of base amount of military retired pay, when

the base amount and total retired pay are the same. Reduced coverage consists of 55% of the base

amount of retired pay when the retiree elects a base amount that is less than total retired pay.

If a retiree elects not to participate, or to participate at a reduced level of coverage, the retiree’s

spouse must be notified, and in the case of such an election made on or after March 1, 1986, the

spouse must concur with the election for it to be effective. 7 Any decision not to participate or to

participate at a reduced level is usually irrevocable. However, under certain circumstances, a

retiree who is unmarried at the time of his or her retirement and who elects not to participate in

the SBP, but who marries after his or her retirement, may elect within one year of marriage to

provide SBP benefits for the new spouse. This election takes effect only after a one-year waiting

period. With the enactment of P.L. 99-145 (November 8, 1985, effective March 1, 1986), the

In certain instances, the annuity may be paid to the representative of a legally incompetent survivor (P.L. 102-190;

105 Stat. 1389; December 5, 1991).

P.L. 99-145; Nov. 8, 1985; 99 Stat. 676, 677.

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The Military Survivor Benefit Plan: A Description of Its Provisions

spouse of a post-military-retirement marriage must be notified if the retiree does not elect to

provide an SBP benefit, or elects to provide an SBP benefit at a reduced level.

Spouse Only Coverage

In order to be eligible for Spouse Only coverage, the intended SBP beneficiary must be a widow

or widower who was (1) married to the retiree at the time of retirement, (2) married to the

deceased retiree for at least one year prior to the retiree’s death, or (3) the parent of a child born

of a post-retirement marriage. The benefit (considering income from all federal sources—

including Social Security and veterans’ benefits—attributable to military service) was intended to

be at least 55% of the base amount of retired pay the retiree was receiving at the time of death—

which, for maximum coverage, is the same as total retired pay.

Computational Formulas

The computational formula for determining the amount of retired pay withheld is based on the

date the member entered the service and/or the type of retirement the service member is entitled

to receive. The formulas are discussed below as the “Original Computational Formula” and the

“Flat-Rate Formula.” Military personnel who entered the service on or after March 1, 1990, and

who are not entitled to retired pay under either Chapter 61 of title 10 U.S. Code (Retirement or

Separation for Physical Disability), or Chapter 67 (Retired Pay for Non-Regular Service), that is,

“Disability Retired Pay” or “Reserve Retired Pay,” will have their withholdings computed under

the “Flat-Rate” method. Those military personnel who first became a member before March 1,

1990, or those who have their retired pay computed under either Chapter 61 or 67 (regardless of

the date of retirement) will have their SBP withholdings computed under whichever alternative

(Original or Flat-Rate) is more financially advantageous.8 The reduction in retired pay does not

apply during any month in which there is no eligible spouse (or former spouse) beneficiary.

(Reductions to retired pay are not considered taxable income.)

Original Computational Formula

Under this method, the retiree’s contribution to the total cost of providing the SBP benefit is

computed as 2.5% of the first $735 of the base amount of retired pay plus 10% of the remaining

base amount of retired pay. This contribution is withheld from the retiree’s total monthly retired

pay.9 For example, a hypothetical retiree (E-5, with 20 years of service in 2011) receives a

monthly base amount of military retired pay of $1,388 (see Table 1). The cost of providing

survivor protection for this retiree is $83. In other words, $83 is deducted from this hypothetical

retiree’s base amount of monthly retired pay of $1,388 to insure that upon the retiree’s death, his

or her surviving spouse will receive a monthly survivor benefit of 55% of his or her base amount

Members with base amounts of $1,275 or more who retire on or after January 1, 2004, will have their contributions

determined using the “Flat-Rate” method. This amount has been indexed and is currently $1,554.

If total retired pay is less than $735 per month—i.e., $8,820 per year—the base amount must be equal to total retired

pay. Sec. 714 of P.L. 99-145, the FY1986 DOD Authorization Act, provided that the then-$300 base shall be increased

by the same percentage amount and at the same time as across-the-board increases in military basic pay after October 1,

1985. The basic pay index will apply only to retirees whose retired pay is computed on the basis of basic pay rates in

effect on or after the date of the basic pay increase. As of January 1, 2011, the base amount had been indexed to $735.

Amounts are rounded to the lower dollar.

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The Military Survivor Benefit Plan: A Description of Its Provisions

of retired pay, or $764 per month, if the retiree dies while receiving the $1,388 amount. If the

retiree received more than $1,388 per month in total military retired pay—say as an E-8 with 20

years of service, or $2,101—but elected to provide less than the maximum coverage (by using

$1,388, rather than total retired pay, as the base amount), the computation of costs and benefits

would remain the same. If an individual’s retired pay increases as the result of cost-of-living

adjustments (COLAs), the amount deducted from his or her retired pay, and the potential SBP

benefit to his or her designated survivor (in this case, his or her spouse), usually will increase

proportionately as well. The costs of SBP protection and benefits are computed on the basis of

retired pay rates at the time of retirement [including any adjustments made to the base ($735)

amount]. All subsequent post-retirement changes are a result of cost-of-living adjustments to

retired pay.10

Table 1. Computation of Survivor Benefit Plan Costs to a Hypothetical Retiree for

Spouse Only Coverage

Enter base amount of retired pay.

$1,388.00

Enter $735, or total retired pay if less than $735 (see footnote 9).

$735.00

Multiply the figure in line two by 2.5%.

$18.00

Subtract $735 from line one.

If line one is less than $735 enter zero.

$653.00

Multiply line four by 10%.

$65.00

Add lines three and five.

$83.00

Line six is the cost of survivor protection under the Spouse Only coverage. The payment to the

beneficiary is 55% of base amount military retired pay, or $763. The base $735 is indexed for

inflation. Worksheets are at the end of this report.

Flat-Rate Formula

P.L. 101-189 (November 29, 1989, 103 Stat. 1577 et seq.) revised and simplified the

computational formula for determining SBP withholdings.11 Under this new formula, SBP

withholdings are computed to be 6.5% of the base amount of retired pay. A retiree who used

$1,388 (E-5, 20 years of service) as the amount of the base amount of retired pay would have

$90.00 ($1,388 x 0.065) withheld in order to provide the same level of protection under the FlatRate method.

The Omnibus Budget Reconciliation Act (OBRA) of 1993 delayed nondisability retirees’ COLA until April 1, 1994.

The OBRA did not delay the increase in SBP costs to each nondisability retiree enrolled in the SBP. Therefore, SBP

premiums were increased for the three months of retired pay payable on January 1, February 1, and March 1, 1994.

Because DOD could not reprogram its retired pay computers to accommodate the new law by January 1, 1994, the

three months’ of increased SBP premiums were taken out of the retired pay received on April 1, 1994.

This legislation also provided for the recomputation of survivor annuities in the case of a member who dies on active

duty while qualified to apply for retired pay, or who serves at least 20 years, but is not eligible to receive retired pay as

a commissioned officer because he/she has not served at least 10 years as a commissioned officer. Under this language,

effective March 1, 1990, the survivor annuity would be computed based on the grade in which the member was serving

at the time of death, unless he/she would have been entitled to be retired in a higher grade.

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The Military Survivor Benefit Plan: A Description of Its Provisions

The basic benefit is not affected by the type of computational formula used. (See “Computational

Formulas” section for an explanation of who is eligible to use the Flat-Rate method.)12

Remarriage

Regardless of which formula is used, a surviving spouse (or eligible former spouse) may become

ineligible to receive SBP benefits if he or she remarries. Eligibility for SBP benefits when

remarriage occurs is dependent upon the age at remarriage and the date that such a remarriage

occurs. A surviving spouse (or eligible former spouse) becomes ineligible to receive SBP benefits

if he or she remarries prior to reaching age 60, if such a remarriage took place prior to November

14, 1986 (remarriage after age 60 does not affect receipt of an SBP benefit). A surviving spouse

(or eligible former spouse) becomes ineligible to receive SBP benefits if he or she remarries prior

to reaching age 55 if such a remarriage took place on or after November 14, 1986 (remarriage

after age 55 for these beneficiaries does not affect receipt of SBP payments). If the second

marriage is terminated (by death, annulment, or divorce), the original SBP benefit can be

reinstated (subject to certain restrictions). The surviving spouse of two or more deceased military

retirees (each a participant in the SBP) may select and receive the more financially advantageous

benefit. (Effective January 1, 2004, SBP-DIC offset surviving spouses who remarry after

attaining the age of 57 are eligible to receive both the full SBP and DIC.13 This concurrent receipt

benefit for those remarrying after attaining age 57 is called the “Special Rule Concerning DIC

Offset.”)

“Paid-Up” Provisions

In 1999, Congress further expanded the generosity of the SBP by enacting the so-called “paid-up”

provision. Under this language, reductions in retired pay made to cover the retiree’s share cease

when two conditions are met: (1) the retiree reaches age 70, and (2) the retiree has participated in

the SBP for 360 months. As enacted, these provisions became effective October 1, 2008.14

For those individuals retiring on or after January 1, 2004 with base amounts of $1,275 or greater, their premiums are

computed using the more generous 6.5% method, regardless of when they entered the service.

As part of the Veterans Benefits Act of 2003, (P.L. 108-183, 117 Stat. 2651, December 16, 2003), effective January

1, 2004, Congress enacted language that allows a DIC recipient to continue to receive DIC if remarried after age 57

without being subjected to the SBP-DIC offset. In other words, a surviving spouse who is eligible to receive both SBP

and DIC and who remarries after attaining age 57 is eligible, after January 1, 2004 (whichever came later) to receive

both the full amounts of SBP and DIC. Remarriage prior to age 55 or after attaining age 57 can have a substantial effect

on the income of a surviving spouse. This change did not automatically occur following enactment, but rather some

years later after the issue was raised in court leading some to speculate as to the true intention of Congress in passing

this language.

P.L. 105-261, 112 Stat. 2045 Oct. 17, 1998. P.L. 106-65; 113 Stat. 667; Oct. 5, 1999; This law extended this

provision to participants in the RSFPP. Furthermore, P.L. 105-261; 112 Stat. 2045, Oct. 17, 1998, created an open

enrollment that allowed persons not currently participating in the SBP to enroll subject to certain restrictions. P.L. 10665 extended the paid-up provision to these “late” enrollees, provided they paid the total premiums that would have been

withheld from their retired pay, had they been participating since they first became eligible. In addition, from April 1,

1992 through March 31, 1993, retirees who initially rejected coverage were afforded a one-year opportunity to enroll.

This late enrollment required greater withholdings on retired pay. (See P.L. 102-190; 105 Stat.1388; Dec. 5, 1991)

Lastly, P.L. 105-85; 111 Stat. 1797; Nov. 18, 1997, created a one-year opportunity for participants to discontinue SBP

coverage, subject to certain restrictions.

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The Military Survivor Benefit Plan: A Description of Its Provisions

Spouse and Child(ren) Coverage15

Under Spouse and Child(ren) coverage, upon the retiree’s death, SBP benefits are first paid to the

surviving spouse. If the surviving spouse predeceases the retiree, dies after becoming eligible to

receive SBP benefits, or becomes ineligible to receive SBP benefits (through remarriage, for

example), the SBP benefits will then be paid directly to the designated child or children. If there

is more than one child, the SBP benefits are paid in equal shares to each child for as long as he or

she remains eligible.

The cost of this coverage is additive to that of Spouse Only coverage, and is determined on an

actuarial16 basis, taking into account the age of the retiree, the spouse, and the youngest child. For

example, a retiree who is 45 years old, with a spouse who is 40 years old (i.e., 5 full years

younger than the retiree) and a child age 10, would have to pay a small additional amount of the

base amount of retired pay in order to cover a child or children in addition to the amount paid for

Spouse Only coverage. Since the cost of coverage is computed on an actuarial basis, it is subject

to change.

A child becomes ineligible for an SBP benefit upon reaching age 18 (or 22, if a full-time

student).17 A child who marries becomes ineligible to receive SBP benefits regardless of age.18 An

eligible child who is or becomes incapacitated (either physically or mentally) may continue to

receive SBP benefits for the duration of the incapacitation if the condition existed prior to the

child’s 18th birthday.

Child(ren) Only Coverage

Under Child(ren) Only coverage, SBP benefits are paid directly to the surviving child(ren) of a

deceased military retiree regardless of whether or not there is a surviving spouse. Eligibility under

this coverage is subject to the same restrictions as a child is, or children are, under Spouse and

Child(ren) coverage. (Under certain circumstances, spouse coverage can be restored if a spouse

later becomes eligible.) The cost of this coverage is also computed on an actuarial basis (and

therefore subject to modification). For example, a military retiree who is 45 years old, has a child

age 10, and elects maximum coverage, would have approximately 2.5% of his or her base amount

of retired pay withheld in order to provide, at the time of his or her death, an SBP survivor benefit

for the surviving child. In other words, in the example mentioned above under Spouse Only

coverage, $34.00 ($1,388 x 2.5%) would be withheld from a retiree’s retired pay in order to

provide his or her surviving child(ren) with a benefit of $763 per month. (Child Only coverage is

less expensive due to the limitation on the number of years—until age 18 or 22, under most

circumstances—a beneficiary remains eligible to receive SBP benefits.)

The term “child” includes an adopted child, a stepchild, foster child, or recognized natural child who lived with the

participant in a regular parent-child relationship. It may be necessary for the child to prove dependency in order to be

eligible to receive an SBP annuity.

Costs that are actuarially determined are based on probabilities of known life expectancy rates, as well as interest and

inflation assumptions.

A child who becomes ineligible because he or she reaches age 18 and then later becomes a full-time student prior to

reaching age 22 may become eligible to receive SBP benefits while a full-time student.

A married child who, prior to being married, was eligible to receive SBP benefits will not become eligible to receive

these benefits anew if the marriage ends by divorce. If, however, the marriage is terminated as the result of an

annulment, SBP eligibility may be reinstated.

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The Military Survivor Benefit Plan: A Description of Its Provisions

Persons with an Insurable Interest

Insurable Interest coverage may be selected only if there is neither a spouse nor a dependent child

at the time of retirement. Under this coverage a beneficiary is defined as “a natural person with an

insurable interest”19 in the retiree. Included in this category are relatives of the retiree, such as a

parent, sibling, or a child who may not qualify for SBP beneficiary status under Spouse Only,

Spouse and Child(ren), or Child(ren) Only provisions. Non-relatives, such as a business partner,

may also be covered. Unlike other SBP options, Insurable Interest must be elected at the

maximum level.

The cost of Insurable Interest coverage is (1) 10% of the base amount of military retired pay plus

(2) 5% of total base amount of retired pay for each full 5 years that the named beneficiary is

younger than the retiree. Insurable Interest coverage is thus more expensive than other types of

coverage. However, the total cost to the retiree of this coverage cannot exceed 40% of total

military retired pay. In other words, a retiree who wishes to provide Insurable Interest coverage to

a person 30 or more years younger would have the maximum of 40% of the base amount of

military retired pay withheld.

For example, a retiree who is 50 years old and receives $1,388 per month as the base amount of

military retired pay, elects to provide protection to a person 10 full years younger. This retiree

would have the cost of this protection computed as follows: 10% of the base amount of retired

pay (or $138) plus 5% for each full 5 years the beneficiary is younger (in this case the beneficiary

is age 40) than the retiree. The SBP costs would thus be $277 (see Table 2).

According to language contained in the National Defense Authorization Act for FY1995,

Insurable Interest coverage could be voluntarily discontinued (except in those cases where a

former spouse is being covered). Retirees discontinuing this coverage, who later remarry or

acquire dependents, may again participate in the SBP under another allowable beneficiary

category.20

10 U.S.C. 1448(b)(1).

U.S. Congress, House Conference Committee, National Defense Authorization Act for Fiscal Year 1995, H.Rept.

103-701, 103rd Cong.2nd Sess., S. 2182, Aug. 12, 1994: 132-133. (P.L. 103-337) It is expected that this change will

affect approximately 3,000 of the more that SBP 900,000 participants. Rick Maze,”Survivor Benefit Plan ...,” Air Force

Times, Sept. 12, 1994: 20.

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The Military Survivor Benefit Plan: A Description of Its Provisions

Table 2. Computation of SBP Costs under Persons with an Insurable Interest

Coverage

The amount of base military retired pay.

$1,388.00

Multiply line one by 10%.

$138.00

Age of the retiree at his/her last birthday.

Age of prospective beneficiary as of the date of the retiree’s last birthday.

Subtract line three from line four. (If line three is less than line four, enter 0.)

Divide the sum in line five by the number 5 and round the quotient to the lower whole number.

Multiply 5% by line six.

Multiply line one by line seven.

$138.00

Add line two and line eight.

$276.00

10.

Multiply line one by 40%.

$555.00

11.

Compare lines nine and ten: enter the lesser.

$276.00

10%

Line 11 is the cost of survivor protection under the Persons with an Insurable Interest category of

coverage. The payment to the beneficiary is 55% of the base amount of military retired pay less

the premium, or ($1,388-276) x 55%=$611. Worksheets are at the end of this report.

Former Spouse Coverage21

A military member may choose, or may be required by a court order, to provide SBP coverage for

a former spouse, depending on when the divorce occurred. This election can occur as part of or

incident to a divorce-related property settlement. For divorces occurring before November 14,

1986, federal law explicitly states that no court was authorized to order a member or retiree to

provide SBP protection to a former spouse. If a retiree voluntarily decides, in writing, to provide

benefits to a former spouse, this decision must be honored by the retiree. The retiree who elected

Spouse Only or Spouse and Child(ren) coverage, and was subsequently divorced before

November 14, 1986, may switch to Former Spouse coverage for the (now) ex-spouse. This latter

change in coverage must be elected within one year of the date the divorce decree becomes final.

If a divorce occurs on or after November 14, 1986, however, a court may order a member or

retiree to provide SBP protection as part of or incident to a divorce. According to changes in law

implemented by the FY1987 DOD Authorization Act (P.L. 99-661, November 14, 1986), “A court

order may require a person to elect (or to enter into an agreement to elect) ... to provide an

annuity to a former spouse (or to both a former spouse and child).”22 This language does not

require courts to make such an order but gives them the freedom to do so.

The FY1986 DOD Authorization Act (P.L. 99-145, November 8, 1985) included a change in

Former Spouse coverage which provided that military retirees and “former spouses ... covered

under the insurable interest category (could) ... elect jointly to switch to spouse coverage at the

maximum level within one year (and it provided) current participants who had the option of

For more information on issues affecting former spouses, see CRS Report RL31663, Military Benefits for Former

Spouses: Legislation and Policy Issues, by (name redacted).

10 U.S.C. 1550(f)(4).

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The Military Survivor Benefit Plan: A Description of Its Provisions

electing Former Spouse coverage in the past and chose not to do so, the option of electing Former

Spouse coverage.”23 Those electing Former Spouse coverage after March 1, 1986, have the cost

of this coverage and benefit amount computed in the same manner as in the case of Spouse Only

coverage.

Because a retiree may provide only one type of SBP coverage for one category of beneficiary,

election of coverage for a former spouse can have the effect of denying SBP protection to a

second or future spouse. However, it is not clear whether courts have the authority to divide SBP

benefits between a former spouse and current/subsequent spouse. In other words, although the

services will provide SBP benefits to only one category of beneficiary (former spouse, for

example), it is not clear whether or not a court, as part of an equitable divorce property

settlement, has the authority to divide SBP benefits between a former spouse (designated to

receive them in this example) and a current/subsequent spouse.

The FY2000 National Defense Authorization Act provided for the “effectuation of intended SBP

annuity for [a] former spouse when not elected by reason of [the] untimely death of [the]

retiree.”24 This language pertains to any retiree who, on or after August 21, 1983, agreed to (or

was required by a court to) provide SBP coverage to a former spouse, but who died within 21

days of making such an agreement (or being so required). Under this language, the former spouse

of such a retiree is deemed to have been covered effective November 5, 1999.

Former Spouse and Child(ren) Coverage

Coverage for a former spouse and child(ren) became available on March 1, 1986.25 This coverage

is provided on the same terms as Spouse and Child(ren) coverage described above.

Coverage for Military Members Retired from the Reserve

Components

As with the Survivor Benefit Plan for active duty retirees, retirement eligible members of the

reserves (Army Reserve, Naval Reserve, Marine Corps Reserve, Air Force Reserve and Coast

Guard Reserve) and National Guard (Army National Guard and Air National Guard) may elect to

provide SBP protection for their survivors. However, when the SBP was created, because

members of the Reserve Components26 were not eligible to receive Reserve Component retired

pay until age 60, regardless of the age at which they actually retire, the structure of the Reserve

Component SBP (RCSBP) is different from that applicable to active duty members.

Prior to 1978, Reserve Component personnel could not provide survivor protection for an eligible

beneficiary until they were eligible to draw retired pay-then at age 60. (In 2008, Congress

modified the law to allow reservists on extended active duty to reduce the age at which they can

U.S. Congress, House Conference Committee, Department of Defense Authorization Act, 1986. S.Rept. 99-235, S.

1160. 99th Cong., 1st Sess., July 29, 1985: 443. (Hereafter cited as Conference Committee, DOD 1986 Authorization.)

P.L. 106-65; 113 Stat. 668; Nov. 5, 1999.

Conference Committee, DOD 1986 Authorization: 96.

“Reserve Components” refers to both Reserve and National Guard personnel.

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The Military Survivor Benefit Plan: A Description of Its Provisions

begin to receive retired. This reduction was limited to 50 years of age.)27 Legislation passed in

197828 allows Reserve Component members to decide whether or how they will participate in the

RCSBP when they are notified of retirement eligibility (not yet eligible to receive retired pay)—

in almost all cases, many years before reaching age 60 or earlier if based on active duty credit.

Reserve Component members who are not yet eligible to receive retired pay and who are

retirement eligible (aka “gray area retirees”) may elect to provide SBP protection under one of

three options. The costs and amount of coverage available depend on the option selected and the

category of beneficiary. A prospective Reserve Component retiree must select one of the

following RCSBP options within 90 days of being notified of retirement eligibility:

Option A - The retiree may decline RCSBP protection. Should the retiree die before

reaching eligibility to draw retired pay, no RCSBP benefit will be paid. The retiree will again

be offered the opportunity to participate in the SBP when they become eligible to receive

retired pay.

Option B - The retiree may elect RCSBP coverage such that survivor payments will begin

on (1) the date of the retiree’s death of (2) the date the retiree would have become eligible to

receive retired pay, whichever is later.

Option C - The retiree may elect, under this option, to provide an RCSBP benefit that would

begin immediately following the death of the retiree, regardless of the retiree’s age at the

time of death.

Under option A, the costs and types of coverage available once the retiree becomes eligible to

receive retired pay are the same as under the active duty SBP. Under options B and C, the cost of

RCSBP protection is shared by the retiree, the Government, and the beneficiary. The retiree’s

portion is paid through deductions in retired pay when the retiree becomes eligible to receive

retired pay. The beneficiary’s or beneficiaries’ share is paid through benefit reductions. The costs

under options B and C are dependent upon the type of coverage (see active duty retirees), as well

as the age of the retiree and selected beneficiary(ies).

Under certain circumstances, an RCSBP benefit may be paid to the eligible surviving spouse,

dependent child(ren), or former spouse of a member of the Reserve Components who dies

(1) before being notified that he or she had completed the years of service required to be

eligible for Reserve Component retired pay; or

(2) during the 90-day period beginning on the date of notification that the member had

completed the years of service required for eligibility for Reserve Component retired pay, if

he or she had not already rejected participation in the RCSBP.

The income payable is equal to 55% of retired pay which the member would have been entitled to

receive had the service member been retired and at least age 60 at the time of death (less any

Veterans Affairs Dependency and Indemnity Compensation payable, see below).

P.L. 110-181, sec. 647, January 28, 2008.

P.L. 95-397, 92 Stat. 843, Sept. 30, 1978.

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The Military Survivor Benefit Plan: A Description of Its Provisions

“Forgotten Widow” Coverage

In 1997, Congress created a special annuity of then-$165, now $229.89, (subject to cost of living

adjustments) payable monthly to certain surviving spouses. These widows were married to certain

retired or retirement-eligible members who died without electing SBP coverage. Subject to

certain restrictions on remarriage and the receipt of certain other government-sponsored

compensation, the eligible surviving spouse must have been married to a member who

(A) became entitled to retired or retainer pay before September 21, 1972, died before March

21, 1974, and was entitled to retired or retainer pay on the date of death; or

(B) died before October 1, 1978, and at the time of his death would have been entitled to

retired pay under chapter 67 [Retired Pay for Non-Regular Service] of title 10, United States

Code (as in effect before December 1, 1994), but for the fact that he was under 60 years of

age.29

Coverage for Military Members Serving on Active Duty

Under the original SBP, an SBP benefit may be paid to an eligible spouse, dependent child(ren),

eligible former spouse, or eligible former spouse and dependent child(ren) following the death of

an active duty member. This benefit will be paid if the deceased active duty service member, at

the time of death,

(1) was eligible to receive retired pay; or

(2) was a commissioned officer, had completed 20 years of service, but was not yet eligible

to retire as a commissioned officer.30

The SBP benefit payable to the survivor of such a deceased active duty member is equal to 55%

of the amount of retired pay (less any amount received on the basis of Department of Veterans

Affairs (VA) Dependency and Indemnity Compensation or DIC; see section below on VA DIC)

that the deceased service member would have been eligible for had he or she elected maximum

coverage and retired on the day of his or her death.

Recent legislation31 has expanded the coverage to the survivors of individuals who die while on

active duty and who are not retirement-eligible, effective September 10, 2001. Under these

provisions, the surviving spouses of active duty personnel who die are provided an annuity. This

annuity for an active duty (non-retirement-eligible member) is determined by assuming the

individual would have been eligible to retire under Sec. 1201, Title 10 USC,32 with a total

disability. The surviving spouse’s annuity is based on the amount of disability retired pay the

servicemember would have received under Sec. 1201. The spouse’s share is 55% of that amount

P.L. 105-85; 111 Stat. 1800; Nov. 18, 1997 as amended by P.L. 106-65; 113 Stat. 668; Nov. 5, 1999 as amended by

P.L. 107-314; sec. 634; Dec. 2, 2002.

Former enlisted personnel or warrant officers who are commissioned must complete at least 10 years of active duty

as commissioned officers before they are allowed to retire as commissioned officers. Section 523, P.L. 101-510, Nov.

5, 1990, reduced the ten-year minimum to eight years, through Oct. 1, 1995, to assist in the drawdown of the Armed

Forces.

P.L. 107-107, 115 Stat. 1151 et seq.; Dec. 28, 2001.

Under these provisions, the member’s disability may not be the result of intentional neglect of misconduct.

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The Military Survivor Benefit Plan: A Description of Its Provisions

of the member’s disability retired pay. Depending on when the individual entered the service, the

amount used may be either the terminal monthly basic pay (for those who entered service on or

before September 7, 1980) or the average basic pay for the 36- month period (i.e., “high three”

years) the member earned the highest rate of basic pay (for those who entered the service after

September 7, 1980).33 The amount of monthly disability pay is computed either by multiplying

the determined amount of basic pay by the percentage disability or by computing 2.5% of basic

pay times the member’s years of service, whichever is higher. The legislation assumes the level of

disability is 100. In 2003, Congress allowed for these benefits to be paid to the surviving children,

if any, of an active member who dies.34 This provision was made effective November 23, 2003.

As part of the National Defense Act for Fiscal Year 2007, Congress replaced the November 23,

2003 effective date with October 7, 2001.35 With the children as the SBP beneficiaries, the

surviving spouse avoids any offsets from the receipt of Dependency and Indemnity Compensation

(see “Survivor Benefit Plan and Veterans’ Affairs Dependency and Indemnity Compensation”).

Survivor Benefit Plan and Social Security

Prior to 2004, SBP benefits were either “offset” in part by the receipt of Social Security benefits

earned as a result of the military members service (aka the Social Security offset), or subjected to

a two-tier benefit structure. Both reduced SBP benefits when the recipient turned age 62. Many

congressional constituents expressed confusion and dissatisfaction with these provisions. The

FY2005 National Defense Authorization Act36 contained language that made a substantial change

in the computation of the SBP benefit for those age 62 and over. Simply stated, this law phased

out the two-tier and Social Security offset formulas discussed above.

This change substantially increased the survivors’ benefits but was criticized as a form of “double

dipping” since it allowed the beneficiary to receive overlapping federally supported payments

from Social Security and SBP based on the same career.

Survivor Benefit Plan and Veterans’ Affairs

Dependency and Indemnity Compensation

Department of Veterans Affairs (VA) Dependency and Indemnity Compensation (DIC) was

established in 1956 by the Servicemen’s and Veteran’s Survivor Benefit Act.37 “Under this Act, as

amended, DIC is paid to the survivors ... of servicemen or veterans who died on or after January

1, 1957, from: (1) a disease or injury incurred or aggravated in line of duty while on active duty

P.L. 108-375, sec. 641, Oct. 28, 2004 modified the computation of retired pay for reservist who die on active duty

“by calculating the average monthly basic pay for purposes of ... annuity payments as if they had been entitled to basic

pay for the 36 months preceding their retirement [or active duty death] regardless of whether the member served the

entire period on active duty.” Congressional Record, Oct. 8, 2004: H9544.

P.L. 108-136, Nov. 24, 2003.

U.S. Congress. Conference Committee, National Defense Authorization Act for Fiscal Year 2007, H.Rept. 109-720,

109th Cong., 2nd Sess., H.R. 5122, September 29, 2006: 748.

P.L. 108-375; 118 Stat. 1811; Secs. 644-645; Oct. 28, 2004.

P.L. 84-881, 70 Stat. 862, 867.

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The Military Survivor Benefit Plan: A Description of Its Provisions

or active duty training; or (2) an injury incurred or aggravated in line of duty while on inactive

duty training; or (3) a disability compensable under laws administered by the VA.”38

A service member can, for example, (1) contract a disease or incur an injury during active duty or

active duty training, (2) recover and return to active duty, (3) retire from an active duty or

Reserve Component military career and participate in the SBP, and (4) subsequently die because

of complications resulting from the original service-related disease or injury. The surviving

spouse or former spouse of the retiree is then entitled to DIC payments from the VA. In this

situation, however, the surviving spouse or former spouse of the retiree is not entitled to receive

the combined total of full SBP and DIC benefits. Instead, the SBP benefit is offset by the

amount of DIC received (with certain limitations). 39 This offset occurs regardless of the retiree’s

enrollment in the SBP Supplemental.

The total of DIC and offset SBP payments combined is, at least, equal to the full SBP benefit. A

surviving spouse or former spouse who remarries loses his or her entitlement to Dependency and

Indemnity Compensation payments. Upon losing Dependency and Indemnity Compensation,

however, the remarried spouse or former spouse has his or her full SBP benefit restored, provided

the remarriage—in accordance with SBP restrictions—occurs after age 60 or age 55 if the

remarriage occurs after November 14, 1986. Also, if the DIC is paid to an SBP-eligible surviving

spouse or former spouse, a percentage of the deceased retiree’s original contributions to the SBP

offset by DIC will be returned to the surviving spouse or former spouse. In other words, if the

SBP is offset by DIC, that proportion of deductions from the deceased retiree’s retired pay which

financed the offset portion of the SBP will be refunded to the surviving spouse or former spouse.

SBP payments can be restored, if the beneficiary becomes ineligible for DIC and remains eligible

for SBP, provided that the refunded SBP payments are returned.

As noted above, effective January 1, 2004, SBP-DIC offset surviving spouses who remarry after

attaining the age of 57 are eligible to receive both the full SBP and DIC. This concurrent receipt

benefit for those remarrying after attaining age 57 is called the “Special Rule Concerning DIC

Offset.”

“Concurrent Receipt”

In recent years, Congress has addressed an issue concerning the payment of military retired pay to

retirees who qualify for disability compensation from the Department of Veterans Affairs (VA). In

1891, Congress passed language prohibiting what it regarded as “dual compensation” for either

past or current service and a disability pension. 40 As modified in 1941, the law prevented the

concurrent receipt of both military nondisability retired pay and VA disability compensation. For

those eligible for both, military retired pay was offset or reduced, dollar for dollar, by VA

disability benefits.

Military Compensation Background Papers: 457.

The amount of DIC payable to a surviving spouse is contained in one section of law—title 38 U.S.C. 411(a). Under

three other sections—38 U.S.C. if, for example, the spouse 1) is supporting a dependent child or children, 2) is in a

nursing home, blind or requiring aid or assistance from another person, or, 3) is, because of a disability, housebound or

institutionalized in a ward or clinic. SBP annuities are only offset by the amount of DIC received under 38 U.S.C.

411(a) and not by any increase to this amount as a result of eligibility under 38 U.S.C. 411(b)-(d).

See CRS Report 95-469, Military Retirement and Veterans' Compensation: Concurrent Receipt Issues, by (name reda

cted).

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The Military Survivor Benefit Plan: A Description of Its Provisions

Numerous attempts to address this issue over the past few years or so resulted initially in the

creation of “Combat Related Special Compensation” for certain disabled military retirees whose

disability was a direct result of military combat operations or training and whose disability is

rated at 10% or more.

Later, in FY2004, Congress authorized concurrent receipt for all retirees with at least a 50%

disability, regardless of the cause of the disability. However, 100% disabled retirees were entitled

to immediate concurrent receipt effective January 1, 2005.41

Although such changes do not affect the receipt of an SBP annuity, some have claimed that if

concurrent receipt or “special pays” for military retirees is allowed, such should also be afforded

their survivors. Under this reasoning, if a military retiree is allowed to receive both military

retired pay and VA disability payments or other “special pay”, it is only fair that the surviving

spouse also receive both the SBP annuity and DIC benefits. Critics contend that concurrent

receipt was originally barred because Congress viewed it as “double dipping” or paying someone

twice for the same period of service. These critics reason that allowing concurrent receipt to the

retiree or the retiree’s survivor are forms of “double dipping” that are inherently unfair to the

taxpayer.

In order to avoid this SBP-DIC offset, surviving spouses of active duty personnel are allowed to

designate their children, if any, as the recipient of the SBP benefit. Unlike retirees, active duty

personnel do not designate a beneficiary. (As stated earlier, children remain eligible to receive

SBP until they reach age 18 or 22; or for life if mentally or physically incapacitated and if the

incapacitating condition existed prior to age 18. Eligibility terminates if the child marries.)42

The Senate version of the National Defense Authorization Act for Fiscal Year 2006 contained a

provision that woud eliminate the SBP-DIC offset entirely. This language was dropped by the

conference committee prior to final passage.43 Again, the Senate version of the National Defense

Authorization Act for Fiscal Year 2007 contained a provision that would eliminate the SBP-DIC

offset entirely. This language was, too, dropped by the conference committee prior to final

passage.44 In both the FY2008 and FY2010 National Defense Authorization Acts, language was

included to eliminate this offset; and again was dropped by the conferees. Legislation (H.R. 775)

was introduced but did not pass in the 111th Congress to eliminate the offset. In 2009, the

Congressional Budget Office estimated the cost of eliminating this offset would be $7.0 billion

over the 2010-2019 period. 45 Despite the additional cost to the taxpayer, critics note that having

eliminated the Social Security offset lead to “double dipping.” Eliminating the SBP-DIC offset,

they contend, would lead to “triple dipping” in that the survivor(s) would be eligible to receive

three overlapping government benefits based on the same military career.

See CRS Report R40589, Concurrent Receipt: Background and Issues for Congress, by (name redacted).

P.L. 108-136; sec. 645; November 24, 2003.

U.S. Congress. Conference Committee, National Defense Authorization Act for Fiscal Year 2006, H.Rept. 109-360,

109th Cong., 1st Sess., H.R. 1815, December 18, 2005: 738.

U.S. Congress. Conference Committee, National Defense Authorization Act for Fiscal Year 2007, H.Rept. 109-720,

109th Cong., 2nd Sess., H.R. 5122, September 29, 2006: 755.

U.S. Congress, Congressional Budget Office, Douglas W. Elmendorf, Director, letter to Honorable John M. Spratt,

Jr., Chairman, Committee on Budget, June 15, 2009.

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The Military Survivor Benefit Plan: A Description of Its Provisions

Special Survivor Indemnity Allowance (SSIA)

Effective 2009, Congress created the Special Survivor Indemnity Allowance or SSIA.46 As

originally created, beginning in 2009, those subject to the SBP-DIC offset began receiving an

additional $50 per month. This amount was scheduled to be increased by $10 each year until

2014 when it would reach $100. The benefit was scheduled to end in 2016. However, during the

111th Congress, SSIA was made more generous in that for the years 2014 through 2017, the

amount would increase from $150, to $200, $275, and finally, $310, after which the benefit will

terminate on October 1, 2017.47 The amount received under SSIA may not be greater than the

amount of the SBP-DIC offset. (SSIA was extended to survivors of active duty members later in

October, 2008.)48 Although, again a generous increase at no cost to the retiree, critics have called

the creation of SSIA a form of “triple dipping.”

Retiree and Government Contributions to SBP

As noted above, the cost of the SBP is shared by the government and the retirees. The amount

paid by a particular retiree varies depending on level of coverage, years of payments, years the

survivor receives an annuity, etc. For active duty personnel who make no contributions, the

benefit is essentially free. Certain retirees and organizations representing their interests have

claimed that, as originally structured, withholdings from retired pay for SBP were expected, on

average, 40% of the cost of this benefit. Further it is claimed that since retirees are living longer

and since the government has manipulated the withholdings formula, the retirees’ share has

increased to more than 73%.49 These claims are made in an effort to increase government

payments into the SBP in hopes of increasing benefits (particularly with regard to the apparently

successful effort of eliminating the reduction in benefits that occurs when the surviving spouse

reaches age 62).

In reviewing these claims, a number of points may be considered. First, as noted, there is no legal

mandate for any ratio of retiree to government contributions. Second, such claims of a shift in the

retiree/government share appear to be based on a selective use of retiree data. Third, the claim

that retirees are living longer and paying more ignores the obvious point that survivors, too, are

living longer and collecting more. Fourth, the above history of this benefit shows that Congress

has expanded eligibility (including “free” benefits to “forgotten widows” and active duty

survivors), increased benefits, reduced costs, will eliminate withholdings under the “paid-up

provision” afforded supplemental coverage, etc. At no time did Congress reduce the benefit. As

such, the claims that the government’s contribution to SBP have been reduced are unreliable. Nor

do such claims rationalize the increase of benefits at age 62 for surviving spouses (a change that

arguably creates a superior benefit relative to those available to the survivors of other federal

employees).

It is noteworthy that after the SBP was introduced, the FY1973 cost to retirees was $36,145,000

with a fiscal year payment to families of only $5,700,000. This is due to the relatively small

P.L. 110-181, January 28, 2008.

P.L. 111-31, June 22, 2009.

P.L. 110-417, October 14, 2008.

Mike Lazorchak, “ SBP still a good program, but ratio has changed,” Navy Times, Jan. 15, 2001: 18.

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The Military Survivor Benefit Plan: A Description of Its Provisions

number of participants who died shortly after signing up. Ten years later, as more retirees signed

up and more died, the FY1983 cost to retirees grew to $652,536,000 while the payment to

families grew to $406,887,000. In FY1993, as participant deaths increased, the cost to retirees

was $822,955,000 with payments to families reaching $1,177,185,000. Finally, in FY2005, costs

to retirees were reported to be $1,099,363,000 while payments to families surged to

$2,253,728,000. From 1973 through 2005, the cumulative cost to retirees was $22,597,064,000

while cumulative payments to families was $30,923,249,000. Considering the cumulative

payments by retirees and to military families, the government paid $8,326,185,000 more in

benefits to families than it received. The cost to retiree/family payment gap will grow as the age

62 reduction is phased out and the “paid-up provision” is implemented. 50 From this perspective, if

the cost/benefit share has shifted, the shift has been in the favor of recipients with taxpayers

assuming an increasing cost of the program. In FY2009, 874,613 were making payments into

SBP with a cumulative cost to retirees of $27,340,043,000 and cumulative payments of

$43,084,459,000.

The National Defense Authorization Act for Fiscal Year 2006 directed Comptroller General to

report on the actuarial soundness of the Survivor Benefit Plan.51

On July 26, 2006, the Government Accountability Office issued its report.52 The following is

verbatim from that report:

Results in Brief

The significant statutory SBP program changes implemented within the past 7 fiscal years

that we reviewed have resulted in increased DOD normal cost payments and annual Treasury

amortization payments to the Fund in order to maintain the actuarial soundness of the Fund.

When changes are made to SBP coverage or benefits, the DOD OOA [Office of the Actuary]

calculates the necessary DOD and Treasury contributions to ensure that sufficient moneys

are available to make all benefit payments to eligible recipients each year, and that sufficient

Fund assets will be available in the future to liquidate all current unfunded liabilities.

According to the DOD OOA estimates, the significant SBP program changes53 we reviewed

have resulted in the following:

– Eliminating the reduction in surviving spouses’ SBP benefits when such spouses are also

eligible for Social Security benefits at age 62 and thereafter increased the SBP liability by an

estimated $25.2 billion as of September 30, 2004. Of this amount, Treasury and DOD will be

responsible for an estimated $23.7 billion and $1.5 billion, respectively. DOD’s $1.5 billion

liability includes $1.3 billion in normal costs for current active duty and full-time reservists

(full-time employees) and $0.2 billion in normal costs for current part-time reservists (parttime employees).

2006 Retired Military Almanac, (Falls Church, Virginia: Uniformed Services Almanac, Inc., 2004) p. 218.

P.L. 109-163, 119 Stat. 3136, January 6, 2006, sec. 666.

U.S. GAO, Actuarial Soundness of the DOD Survivor Benefit Plan, GAO-06-837R, July 26, 2006.

The DOD OOA estimates the cost of each significant SBP program change as of a specific valuation date.

Subsequent to that date, the costs of each SBP program change become part of the baseline actuarial model and are not

separately identified. According to the DOD OOA, there have been no significant cost reestimates after the valuation

date for the three program changes we reviewed.

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The Military Survivor Benefit Plan: A Description of Its Provisions

– Periodically, Congress has allowed an open season for SBP enrollment, the most current

one being during fiscal year 2006. Although the total effects of the SBP open season cannot

be fully estimable for at least 2 years, the estimated increase in the SBP liability will likely

range from $31 million to $86 million.

– Eliminating further SBP premiums to be paid by retirees who are aged 70 or older and who

have paid such premiums for 30 years increased the SBP liability by an estimated $2.5

billion.54 Of this amount, Treasury will be responsible for an estimated $2.4 billion, and

DOD will be responsible for $0.1 billion in normal costs related to current full-time

employees.

– Extending SBP surviving spouse or child benefits for all personnel who are killed in the

line of duty and are not eligible for retirement at the time of their deaths increased the SBP

liability by an estimated $72 million as of September 30, 2001. Of this amount, Treasury will

be responsible for an estimated $28 million, and DOD will be responsible for $44 million in

normal costs related to current full-time employees.

The two potential changes to SBP benefits mentioned in Section 666 of the National Defense

Authorization Act for Fiscal Year 2006 would likely also result in increases to the DOD

normal cost payments and the annual Treasury amortization payments to the Fund as

follows.

– Currently, an unmarried DOD retiree without dependent children may elect to have another

person with an insurable interest as the SBP beneficiary; however, if that beneficiary dies,

designation of another insurable interest is not allowed. Using conservative assumptions, the

DOD OOA calculated that the SBP liability would increase by an estimated $2.2 million if

retirees were allowed the option of choosing a second insurable interest. Of this increase,

Treasury would be responsible for $2 million and DOD for $231,000. Of DOD’s $231,000,

$211,000 would be for normal costs related to current full-time employees and $20,000 for

normal costs related to current part-time employees.

– The survivors of veterans who die because of complications resulting from a serviceconnected disease or injury are entitled to DIC benefits from the Department of Veterans

Affairs (VA).55 Under current law, SBP benefits for survivors of retired veterans are offset

by any DIC payments received. The DOD OOA calculated that eliminating the current offset

requirement would increase the SBP liability by an estimated $12.9 billion. Of this amount,

Treasury and DOD would be responsible for $12.3 billion and $645 million, respectively. Of

DOD’s $645 million, $617 million would be for normal costs related to current full-time

employees and $28 million for normal costs related to current part-time employees.

Enactment of these legislative changes would require the Board of Actuaries and the DOD

OOA to adjust DOD and Treasury payments, subject to future appropriations, by amounts

necessary to offset any increased costs related to expanded benefits; for this reason,

enactment of these changes should not negatively affect the actuarial soundness of the Fund.

In responding to a draft of this report, DOD did not have any objections or substantive

comments. DOD separately provided some technical suggestions, which we incorporated as

appropriate.

The liability estimate for this legislative change was determined as of September 30, 2001, and became effective on

October 1, 2008.

VA’s DIC was established in 1956 by the Servicemen’s and Veterans’ Survivor Benefits Act, P.L. 84-881, 70 Stat.

857, 862 (Aug. 1, 1956) (codified, as amended, at 38 U.S.C. ch. 13).

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The Military Survivor Benefit Plan: A Description of Its Provisions

Table 3. Computation of Original Survivor Benefit Plan Cost to the Retiree for

Spouse Only Coverage (Work Sheet)

Enter base amount of retired pay. If base amount is $1,554 or more, use Table 4 below.

$_____

Enter $735 or total retired pay if less than $735 (see footnote 10). Do not enter less than $300.

$_____

Multiply the figure in line two by 2.5%.

$_____

Subtract $735 from line one. If line one is less than $735, enter 0.

$_____

Multiply line four by 10%.

$_____

Add line three and line five.

$_____

Note: Line 6 is the cost of survivor protection under Spouse Only coverage.

Table 4. Computation of Flat-Rate Survivor Benefit Plan Cost to the Retiree for

Spouse Only Coverage (Work Sheet)

Enter base amount of retired pay

$_____

Multiply line one by 6.5%.

x0.065

Cost of Basic SBP protection.

$_____

Note: Line 3 is the cost of survivor supplemental protection under Spouse Only coverage.

Table 5. Computation of SBP Costs under Persons with an Insurable Interest

Coverage (Work Sheet)

The amount of base military retired pay.

$_____

Multiply line one by 10%.

$_____

Age of the retiree at his/her last birthday.

$_____

Age of prospective beneficiary as of the date of the retiree’s last birthday.

_____

Subtract line three from line four. (If line three is less than line four, enter 0.)

_____

Divide the sum in line five by 5 and round the quotient to the lower whole number.

_____

Multiply 5% by line six.

____%

Multiply line one by line seven.

$_____

Add line two and line eight.

$_____

10.

Multiply line one by 40%.

$_____

11.

Compare lines nine and ten: enter the lesser.

$_____

Note: Line 11 is the cost of survivor protection under the Persons with an Insurable Interest category of

coverage.

Author Contact Information

(name redacted)

Specialist in Military Manpower Policy

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

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