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New Law Lets Participants Drop Survivor Benefit Plan

By Staff Sgt. Alicia K. Borlik, USA
American Forces Press Service

WASHINGTON, July 20, 1998 – Survivor Benefit Plan participants may now drop the program because of a public law passed recently.

The law went into effect May 17 and gives persons retired two or more years until May 16, l999, to opt out. In the future, all SBP participants reaching their second anniversary of retirement have a one-year window to quit.

Retirees' pay stops with their death. The optional Survivor Benefit Plan pays their families or other designated beneficiaries up to 55 percent of their monthly retired pay.

Retirement-eligible active duty service members -- those going over 20 years' service -- receive automatic, free maximum SBP coverage for their spouses and children as long as they remain on active duty. Once they retire, they get a one-shot chance to continue coverage by paying premiums.

Decisions to decline coverage are irrevocable. Until the new law, a decision to enroll also was irrevocable, although participants could change coverage in strictly limited instances, such as a change in marital status. The rules for change still apply.

The U.S. government backs the Survivor Benefit Plan. Benefits pace inflation through regular cost of living adjustments, and surviving spouses can never outlive their benefits. The program also is tax-advantaged because premiums are deducted from income before taxes are computed.

Despite SBP's benefits, however, many felt the program was too inflexible, said Tom Tower, DoD's assistant director for retired pay and survivor benefits. Retirees can now try out the program and drop it after two years if they decide it isn't for them, he explained.

"When people retire, there's a lot of decision-making going on," Tower said. "[This law] allows retirees to give [SBP] full consideration at a more leisurely time. We feel it's a pretty useful program, but we recognize it may not meet some people's retirement needs."

To quit under the new law, eligible participants must send a DD Form 2656-2 to the Defense Finance and Accounting Service's Cleveland Center. SBP participation ends the first day of the month following the month the center receives the request. The member will be notified when coverage ends.

Once coverage ends, survivors receive no benefits stemming from retirees' past participation. Premiums deducted for coverage on or after the effective quit date will be refunded. Premiums for prior coverage are nonrefundable.

The law provides retirees who submit forms to quit a 30-day cooling-off period to change their minds. The 30-day clock starts the day the finance service center receives a retiree's request to quit. Retirees who quit cannot later resume SBP participation.

The services will publish notices in their retiree newsletters, and the finance service will attach a notice to December 1998 retiree account statements. For more information, contact a military retirement services office or visit the SBP Web sites at www.afpc.af.mil/sbp/hrdfacts.stm or http://www.dfas.mil/money/retired/survbnft.htm.

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