2022 AFBA Financial Planning Guide

on the option selected. For Option A, the cost is 6.5% of the annuity base amount. If the annuity base amount is $1,000, the monthly cost will be $65. The cost of Options B and C include both the 6.5% associated with Option A plus an additional fee of 2-4%. The purpose of the additional fee is to offset the cost of coverage provided during the “gray area” period when not receiving retired pay. Additional information on the Survivor Benefit Program is provided in Chapter 5. 2–8. LIFE INSURANCE. Members of the guard and reserve have a couple life insurance options available to them. The State Sponsored Life Insurance (SSLI) program provides group term life insurance exclusively for actively serving members of the Army and Air National Guard organizations and their dependents. The program is derived from United States Public Law 93-289, May 24, 1974, to encourage persons to join and remain in the National Guard. Check with your state guard association for further details. Members may also be eligible for Servicemembers’ Group Life Insurance (SGLI) coverage under the following circumstances. a. Members of the Ready Reserve/Guard of a uniformed service who are assigned to a unit or position in which they may be required to perform active duty or active duty for training and each year will be scheduled to perform at least 12 periods of inactive duty training that is creditable for retirement purposes. b. Members of the Individual Ready Reserve (IRR) who volunteer for assignment to a “mobilization” category. Under SGLI, coverage is available in increments of $50,000 to a maximum of $400,000. See Chapter 6 for more information on SGLI.

2–7. RESERVE COMPONENT SURVIVOR BENEFIT PLAN (RCSBP). The RCSBP is an annuity program designed to provide a degree of financial security for survivors of reserve personnel. The plan has several valuable features including government subsidization of program costs, payment of lifetime benefits and inflation protection through annual cost of living adjustments. Additionally, RCSBP is paid from pretax dollars which means that the monthly premium payments reduces taxable income when retired. Reserve members become eligible for retired pay after completing 20 years of service and they begin to draw retired pay at 60 years of age. The period of time between the date of retirement and 60 years of age is referred to as the “gray area”. Members who die while in the “gray area” do not receive retired pay nor do their spouses receive RCSBP. To ensure that spouses have an opportunity to receive RCSBP, members receive a Notice of Eligibility (NOE) for Retired Pay at the 20 year point of service. The NOE requires a choice between three options regarding participation in RCSBP: Option A: Deferred Decision— By choosing this option members are postponing the decision regarding participation in RCSBP until he/she applies for and begins to draw retired pay. The disadvantage of this option is that if the member dies before age 60, his/ her spouse will not receive RCSBP benefits. Spousal concurrence is required. Option B: Deferred Annuity— If the member dies after age 60, his/her spouse will immediately receive annuity benefits. If the member dies before age 60, his/her spouse will receive annuity benefits at the time the member would have been 60. Spousal concurrence is required. Option C: Immediate Annuity— This option immediately provides annuity benefits regardless of whether the member dies before or after age 60. If the member fails to elect an option on a timely basis, Option C will be automatically selected. The amount of the RCSBP coverage, called the “base amount,” can range from $300 up to a maximum of 55% of retired pay. The law requires written spouse concurrence on any RCSBP election that provides less than full and immediate coverage (Option C at 55%). The cost of the RCSBP program depends


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