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Military Divorces — Former Spouse
Survivor Benefits
Drating Advisory

Query
What is the exact name of the plan that provides survivor benefits to the spouse or Former Spouse of a member?

Answer
Survivor Benefit Plan (SBP)

Query
Unless a Member elects out is a Survivor Benefit automatic for the spouse of a member of the military?

Answer:
Yes.

Query:
Does a Former Spouse automatically have SBP protection?

Answer
No. Additional Q&A’s regarding a Former Spouse, the SBP and the Supplemental SBP are found below.

Query
Can a member elect out of the Survivor Benefit Plan?

Answer
Yes. However, the written consent of the member’s spouse is required for a married member to elect out of survivor benefit coverage for the member’s spouse.

Query
When does a Regular Component member elect to participate in the Survivor Benefit Plan?

Answer
Participation in the SBP is automatic for service members who are married or have dependent children when they become eligible to participate in the SBP, i.e., when they become eligible for retired pay.

Query
When does a Reserve Component member elect to participate in the Survivor Benefit Plan?

Answer
A Reserve Component member has two opportunities to elect SBP. The first opportunity is upon the completion of 20 years of qualifying service. The second opportunity is upon attaining age 60. However, a properly crafted Order for the division of military retired pay can mandate this option prior to the member’s attaining either of the dates herein mentioned.

Query
How many Spouses/Former Spouse’s can participate in the SBP?

Answer
The member can have only one SBP. If the member divorces and remarries the new spouse cannot have SBP if the member previously designated his or her Former Spouse as the SBP beneficiary. This is the outcome even if the member elects less than the maximum SBP for a Former Spouse.

Query:
What is meant by the term “deemed election”?

Answer:
The procedure by which Former spouse coverage can be established without the member's active participation, pursuant to the following:

1. The member was required by a court order to provide Former Spouse coverage, or the member agreed in writing to provide Former Spouse coverage.
2. The Former Spouse sent a letter to the Defense Finance and Accounting Service, US Military Retirement Pay, requesting that an election for Former Spouse coverage be deemed to have been made. The Former Spouse's deemed election request must be received by DFAS within one year of the date of divorce or it cannot be honored. This is true even if the court order was issued more than a year before a member's retirement date, in which case the Former Spouse's request for a "deemed" election would be maintained on file at DFAS until the member retired. The deemed election must include:
(a) The member's name, Social Security Number (SSN), and whether the member is retired or on active duty.
(b) The Former Spouse's SSN, date of birth, and mailing address.
(c) A certified copy of the court order which required the member to elect to provide an annuity to the Former Spouse, or a copy of the member's written agreement to make such an election along with a statement from the clerk of the court or other appropriate official that the written agreement was filed with the court as the applicable state law requires.

Query:
What is the result of the failure of a Former Spouse to make a timely “deemed election”?

Answer:
Loss of the Former Spouse’s SBP rights.

Query:
Is an award of Survivor Benefits in a divorce decree sufficient to obtain such rights for a Former Spouse?

No! A timely deemed election must be made. Additionally, the court order must be timely filed with DFAS.

Query:
What is the procedure to change Spouse Coverage To Former Spouse Coverage Upon Divorce After Retirement?

Answer:
If the member had spouse coverage and later divorces and the intent of the settlement is to continue SBP for the Former Spouse, the member MUST convert his or her SBP election from spouse coverage to former spouse coverage WITHIN one year of the date of the divorce. To convert the member’s SBP election from spouse to Former Spouse coverage the must submit a DD Form 2656-1 (Survivor Benefit Plan Election - Statement for Former Spouse Coverage) to DFAS within the first year following divorce. The member must also include a copy of his or her divorce decree and Property Settlement Agreement. It is not correct to assume coverage will continue for the Former Spouse if the member simply continues to pay premiums for spouse coverage.

Additionally:
The benefit level for Former Spouse coverage has to remain the same as for spouse coverage. A court may not dictate a level of coverage greater or lower than that elected before the divorce, nor can the court order Supplemental SBP (SSBP) coverage to be elected. The election must not be for a Former Spouse whom the member married afte r becoming eligible for retired pay unless the member was married to the Former Spouse for at least one year, or the Former Spouse is the parent of issue by that marriage.

Query:
If the Former Spouse remarries prior to age 55 is the SBP coverage lost?

Answer:
Yes, however, it the subsequent marriage ends or the Former Spouse’s mate dies then this coverage is restored.

Query
How is the amount payable to a surviving spouse or surviving Former Spouse determined or what are the amounts of survivor benefits that may be awarded to a Former Spouse incident to a divorce?

Answer
The maximum survivor benefit is 55% of the member’s retired pay. For clarification of retired pay see 10 USCS 1447(1). Thus, the maximum monthly survivor annuity benefit payable to a Former Spouse is 55% of the member’s retired pay. For example:
If the members total monthly retired pay was $3,160.00 and the maximum survivor annuity benefit was elected for the Former Spouse then the Former Spouse would upon the member’s death receive each month $1,738.00 (as adjusted annually for COLA).

The practitioner will note that the member may designate less than his or her total retirement pay as the basis for coverage under the SBP. The procedure used to determine the amount of retired pay to be awarded to a Former Spouse is a proper subject of negotiation. The minimum retired pay (base amount) that may be allocated is $300.00. The SBP will be 55% of the minimum base amount. If the maximum SBP is elected then the surviving Former Spouse will receive the maximum 55% annuity until the Former Spouse attains age 62. Upon the surviving Former Spouse’s attaining age 62 the maximum coverage is reduced to 35% of retired pay. This tends to be a complex issue, especially when the practitioner seeks to utilize both SBP and the Supplemental SBP (SSBP) [see Q&A’s below]. For drafting support contact a QDRO attorney at Troyan Inc.

Query:
How is the cost to compute an election of the maximum amount of SBP coverage for a Former Spouse computed?

Answer:
The cost of maximum spouse or Former Spouse SBP coverage is 6.5% of gross military retired pay. Remember this is the cost only when maximum coverage is elected. As subsequent Q&A’s discuss the cost is different if SSBP is also elected and is different if less than maximum coverage is elected.
This example assumes a maximum SBP election
If the member’s total retired pay was $3,160.00 and he or she elected the maximum SBP then the Former Spouse would receive $1,738 monthly ($3,160.00 x 55% = $1,738.00).
The monthly cost of this SBP is:

$3,160.00 x 6.5% = $205.40.

This cost is not paid by the member, rather this cost is paid by a reduction to the retired pay of the member. Based on our example: the member’s monthly retired pay would be reduced to reflect this SBP cost:

$3,160.00 - $205.40 = $2,954.60

Each month the member receives $2,954.60 and upon the member’s death the Former Spouse will receive $1,738.00.

Query:
If the member elects or a court orders less than the maximum SBP for the Former Spouse, how is such survivor benefit for the Former Spouse computed?

Answer:
The cost of this SBP coverage may be computed using either annual or monthly retired pay. For ease of illustration we show monthly costs. To convert such costs to annual costs simply multiply the monthly cost by 12.
The base amount of retired pay that is elected by the member will determine the SBP. The SBP will always be 55% of this base amount.

Example One:
Assume the member’s gross monthly retired pay was $2,600.00 and $1,500.00 was the base amount to be used to compute the SBP then the Former Spouse’s survivor benefit would be $1,500.00 multiplied by .55. The Former Spouse’s monthly survivor benefit would be $825.00.

Second example:
Assume the member’s gross monthly retired pay was $3,100.00 and the member decided to determine the Former Spouse’s survivor benefit on $2,000.00 of his or her gross monthly retired pay. Then the Former Spouse’s monthly survivor benefit would be:
$2,000.00 x 55% = $1,100.00.

Alternatively the member can first determine the amount of monthly survivor benefit he or she wishes to provide for the Former Spouse and then determine from this negotiated or court ordered Former Spouse survivor benefit the amount of base pay that would be required to provide the agreed or ordered Former Spouse survivor annuity benefit. For example, incident to the Property Settlement Agreement the member must provide the Former Spouse with a monthly survivor benefit of $539.00. To provide this Former Spouse monthly survivor benefit the member would have to use $980 of his or her monthly base pay. To compute the amount of base pay required to provide a specific monthly survivor benefit simply divide the specific monthly survivor benefit by .55. In this example:
$539.00 ÷ .55 = $980.00

Let’s try another example.

The court has ordered the member to provide a Former Spouse with a monthly survivor annuity of $759.00. How much of the member’s base pay (retired pay) is to be used to provide this monthly survivor annuity?

$759.00 ÷ .55 = $1,380.00.

COMMENTARY
The immediately above questions have covered the procedure to determine the amount of the Former Spouse’s survivor annuity. Now let us learn how to compute the cost to the member of the Former Spouse’s survivor annuity.

Query:
How does the practitioner compute the cost of the SBP, when the SBP to be given to the Former Spouse is less than the maximum?

There are two parts to this calculation.
Part One Calculation: “threshold amount”
The threshold amount is revised (increased) annually. For 2003 the threshold is a monthly base of $572.00. The cost for this part is 2.5%

Part Two Calculation:
First determine the retired pay base in excess of $572.00 monthly or $6,864.00 annually (572 x 12 = 6,864). The base in excess of the threshold amount is charged at 10%.

For example:
Assume the members total monthly retired pay is $3,250.00 and the members is ordered by the court to provide a monthly survivor annuity to the Former Spouse in the amount of $1,100.00.

From the illustrations above we know that the amount of retired base pay needed to provide a monthly Former Spouse survivor annuity of $1,100.00 is $2,000.00.

Remember $1,100.00 ÷ .55 = $2,000.00.

So the amount of monthly retired base pay to be used for determination of cost is $2,000.00 (remember this is not the gross retired pay, rather it is pay used to determine the size of the Former Spouse’s SBP benefit) compute the cost of the Former Spouse’s monthly survivor benefit of $1,100.00.

Alert:
Before we proceed to Step I, recall that the 2003 threshold will be adjusted each year.

Step I.
The threshold monthly benefit for 2003 is $572.00.

Compute the cost of the first $572.00 of base pay.
The cost for this part is 2.5%
Thus: $572.00 x 2.5% = $14.30

Step II
Determine the amount of monthly retired pay in excess of $572.00.
So:

$2000.00 less $572.00 = $1,428.00

Reminder: The base in excess of the threshold amount is charged at 10%.

$1,428.00 x 10% = $142.80

Step III

Add the SBP costs computed at Steps I and II above

$14.30 + $142.80 = $157.10

Step IV

Reduce the retired pay by the Step III total.

Recall: the members total monthly retired pay is $3,250.00, so

$3,250.00 less $157.10 = $3,092.90

Summary:

Gross Retired Pay $3,250.00

Base for SBP $2,000.00

SBP Benefit $1,100.00

Cost of SBP $157.10

Result of Above:

Member’ Monthly Retired Pay
After reduction for SBP: $3,250.00 less $157.10 = $3,092.90

Query:
Is the amount of SBP to a Former Spouse a fixed or increasing amount?

Answer:
The amount of the SBP payable to a Former Spouse increases annually based on the post-retirement COLA increase in the member’s retired pay. Additionally, the cost of the Former Spouse’s SBP coverage also increases annually.

Query:
How is the cost of the SBP allocated between spouses?

Answer:
When a Former Spouse is awarded a percentage of a military retiree's retired pay, and SBP coverage is elected for the Former Spouse (either voluntarily or involuntarily), the Former Spouse, in effect, pays a portion of the SBP premiums in an amount proportionate to the division of retired pay. This happens automatically because divisions of retired pay are based upon disposable retired pay, which has already been reduced by the amount of the SBP premium. However, an agreement between the member and a Former Spouse in which the Former Spouse must pay the entire cost of the member's participation in SBP is a matter between the member and the Former Spouse. There are no provisions in Federal law which permit the Defense Finance and Accounting Service (DFAS) to withhold all SBP premiums from a Former Spouse's portion of a member's retired pay. If the Former Spouse is to bear the total cost of a member's SBP participation, a Former Spouse must reimburse the member by some other means.

Query:
Is there a second tier of Survivor Benefits available to a Former Spouse?

Answer:
Yes, the Supplemental Survivor Benefit Plan (SSBP).

Query:
What is the SSBP?

Answer:
This program allows replacement of all or a portion of the SBP that will automatically be reduced from 55 percent of gross retired pay to 35 percent upon the member’s attaining age 62. SSBP allows the member to replace that loss in 5-percent increments with various costs depending on your age. The SSBP is limited to Members who elected maximum coverage under basic SBP. These members may also enroll in SSBP, making possible an increase in the Former Spouse’s post-age 62 survivor annuity by 5, 10, 15, or 20 percent of the member’s retired pay. The result is a total annuity benefit equal to 40, 45, 50, or 55 percent of the member’s monthly gross retired pay. Additionally, SSBP benefits enjoy the same cost of living adjustments (COLAs) as SBP benefits. This coverage is clearly not automatic for either a spouse or Former Spouse. Participation in SSBP is totally voluntary and requires an affirmation election by the member. Spousal concurrence is not required if a member does not elect SSBP coverage.

Query:
Who can purchase the SSBP?

Answer:
The SSBP may be purchased by any member electing spouse or former spouse coverage at the maximum level (55 percent of gross retired pay).

Query: Is the cost of the SSBP determined in the same manner as the cost of the SBP?

Answer:
No. The stand alone SBP coverage is less costly. This is due to the fact that there is a government subsidy that helps offset the actuarial cost of this plan. When the SSBP is added to the package, this second tier survivor benefit is not subsidized, thus is on a dollar for dollar basis more costly. The cost of the SSBP is comparable to a commercial insurance program. If you are considering giving this second tier of protection for a Former Spouse, consult Troyan, Inc. to obtain the current cost of this plan. This cost is not a flat 6.5% of the basic annuity, rather the cost of this combined plan is determined according to the member’s age on his or her birthday nearest the date the election first becomes effective. The SSBP premium reductions in retired pay begin immediately and continue for the life of the retiree, while the SSBP benefits cannot be paid until the spouse or Former surviving spouse attains age 62.

Query:
If a Former Spouse is to obtain the SSBP, when must this benefit be so awarded?

Answer:
The SSBP must be negotiated for and provision for SSBP clearly inserted into the Property Settlement Agreement, Final Judgment of Divorce and Court Order. This assignment of SBP to the Former Spouse must be made clear to the military in writing, not later than one year from entry of the Final Judgment of Divorce. Once again, this is a rather complex drafting issue. It is suggested that you contact a QDRO attorney at Troyan, Inc. for negotiating and drafting support on this subject.

Query:
Is the cost of the SBP taxable to the member?

Answer:
No, Form 1099-R issued to the member by DFAS will indicate net taxable pay after deducting the cost of the SBP

Query:
Are SBP payments to a Former Spouse taxable?

Answer:
Yes.