Changes to the Survivor Benefit Program (SBP)

Changes to the Survivor Benefit Program (SBP)

About the Author

Ostrom retired from the Air Force in 2000 after serving in a variety of personnel, education and training, and executive officer assignments. His assignments included tours in North Dakota, Florida, Korea, Australia, and the Pentagon. His final assignment was on the Joint Staff, writing and championing legislation related to joint officer personnel management issues. He earned numerous decorations and awards over his Air Force career.

After Air Force retirement, Ostrom was a practicing investment advisor at a large investment firm and a bank. He specialized in working with clients developing, implementing, and managing investment plans and portfolios.

A native of San Antonio, he earned a Bachelor of Arts and Master of Arts and is a graduate of the Royal Australian Air Command and Staff College and the U.S. Air Command and Staff College.

Ostrom joined the MOAA staff in 2006. His responsibilities include researching and writing articles and answering member inquiries regarding military benefits, health care, survivor issues, and financial concerns. He also travels extensively to discuss these matters with servicemembers and retirees and their families.

Couple of recent legislative changes were passed regarding SBP.

Beneficiary change from “Former Spouse” to current “Spouse”

If you were required to designate a former spouse as your SBP beneficiary due to a divorce court order, this may apply to you.

Previously, if a former spouse was designated as the beneficiary of the Service retiree’s SBP because of a divorce court order and the former spouse died, the SBP “died” with the former spouse. The SBP coverage was cancelled and the Service retiree permanently lost the SBP for future use.

Now if the former spouse dies as the beneficiary of the retiree’s SBP, the retiree can re-designate a current or future spouse as the SBP beneficiary.

Talk to your pay agency that administers SBP for details.

SBP can now pay a Special Needs Trust (SNT)

Previously, the SBP survivor annuity could only pay a person. This caused problems for retirees who had an incapacitated child as their SBP beneficiary.

You see, the SBP survivor income would count as income against financial need requirements that determine eligibility for state and federal assistance. SBP income would disqualify the beneficiary for critical state and federal assistance while at the same time the SBP income wouldn’t be enough to properly care for the child without the assistance.

Now, the SBP can pay a SNT established for an incapacitated child instead of a person. The new law only allows a SNT for an incapacitated child; no other beneficiaries like spouses.

The SNT negates SBP income from counting in the financial need requirements for state and federal assistance. The catch is that the SNT document must stipulate that residual assets in the SNT upon the beneficiary’s death are used to reimburse the governments involved for their extra costs incurred while the child was alive and receiving assistance.

Talk to your pay agency that administers SBP for details.