2022 AFBA Financial Planning Guide

would be reduced by the amount of the DIC payment, the spouse would not receive a SBP annuity for the amount of the DIC offset. A cost refund of SBP premiums would be paid to the surviving spouse upon the member’s death. Upon retiring from the military, many members become civil service employees. After completion of a civil service career, these members usually have an option to combine their military and civil service in order to receive a combined retirement annuity. A member who combines their military retirement with Federal Civil Service retirement may have only one SBP for the combined service. If the retiree has military SBP they may retain it or withdraw and elect civil service SBP. There is no refund of premiums paid for the coverage previously received under military SBP. If the member does not combine military and civil service to qualify for a civil service retirement, he or she can participate in both the SBP and the civil service survivor annuity program. A member with insurable interest coverage may voluntarily terminate coverage at any time without the beneficiary’s concurrence with the exception of an insurable interest election for former spouse prior to November 8, 1985. 5–7. DEPENDENCY & INDEMNITY COMPENSATION (DIC). When the death of an active duty or retired member of the Armed Forces is the result of a service–connected injury or disease, certain members of his or her family may qualify to receive monthly Dependency and Indemnity Compensation (DIC) benefit payments from the Department of Veterans Affairs (the VA). DIC benefits are paid to the member’s surviving spouse and children. In their absence, benefits may also be payable to the member’s dependent parent or parents whose income and assets are below certain levels. When a surviving spouse receiving SBP annuity benefits becomes eligible for monthly DIC benefits, his or her SBP annuity will be reduced (or “offset”) by the amount of DIC benefits being paid. This offset is sometimes called a “widow’s tax.” The offset is gradually being eliminated until 2023 when surviving spouses will receive their SBP and DIC payments in full. The offset does not apply to VA benefit payments the surviving spouse is receiving for his or her children, educational assistance, or for aid and attendance. Further, SBP benefits being paid to a child or children of the deceased member are not reduced by any DIC benefit payments they are entitled to receive.

Members, who had retired prior to March 1990 and benefited from the new computation method, had their monthly premiums automatically adjusted to the lower rates. However, since the old method uses a graduated premium schedule, while the new method charges a single rate, premium costs under the new method are higher at the lower levels of participation. To correct this situation the SBP premium cost is computed under both plans and the lower premium is the amount payable. This alternative computation is applicable to the following retirees: a. All active duty members whose Date Initially Entered Military Service (DIEMS) is prior to 1 March 1990. b. All members who are medically retiring. c. Members of the reserves selecting non-regular retirement. The SBP cost for all other members whose DIEMS is on or after March 1, 1990 is computed under the new plan. The table on the previous page details the benefits and compares SBP premium costs at various levels of participation. Paid–Up Premium Provision. Once a retired member has made 360 months of premium contributions and is at least 70 years of age, the member is considered “paid–up” and does not have to make additional premium contributions. This paid–up provision also applies to members who enrolled during the FY 1992-1993, FY 1999–2000 and FY 2005–2006 “open seasons” and to members who participate in either the Retired Serviceman’s Family Protection Plan (RSFPP) or the Reserve Component SBP. The 360 payments must be in each individual program and cannot be combined. 5–6. DISENROLLMENT. There are a few circumstances in which a member may terminate his or her SBP coverage. SBP participants have a one time, one year window of opportunity to terminate coverage between the 25th and 36th month following commencement of retired pay. Termination requires spousal or former spouse concurrence and no premiums are refunded for coverage already received. Also, the member is barred from re–enrolling at a future point in time. A member may also withdraw with their spouse’s consent, if he or she has been rated by the VA as totally disabled for ten continuous years (or five continuous years since retirement). This withdrawal is based on the fact that the retiree’s spouse would, after his or her death, be eligible for DIC payments regardless of the cause of death. Since the SBP benefits


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