The Survivor Benefit Plan (SBP) is a Department of Defense program that allows military retirees to set aside a portion of their retirement pay to ensure their surviving spouse (or other eligible beneficiary) continues to receive income after the retiree's death. Understanding SBP before retirement is critical — the enrollment window is permanent, and the decision made at retirement cannot easily be reversed.

How SBP Works

SBP is an annuity program administered by DFAS. At retirement, you elect whether to enroll and at what coverage level. The premium is deducted from your monthly retirement pay.

Coverage levels: You can elect SBP at the full base amount (which equals your monthly retirement pay) or at a reduced base amount. Most financial guidance from militarypay.defense.gov recommends the full base amount election to maximize survivor coverage.

Premium: The standard SBP premium for spouse coverage is 6.5% of your elected base amount. This is paid pre-tax from your retirement pay, which reduces the taxable amount of your retirement income.

Survivor benefit: Your surviving spouse receives 55% of the elected base amount for life, with annual COLA adjustments tied to the Consumer Price Index (CPI).

Enrollment Decisions at Retirement

Per militarypay.defense.gov, at retirement you must actively choose one of the following:

  1. Enroll at the full base amount
  2. Enroll at a reduced base amount
  3. Decline coverage entirely (requires your spouse's written consent)

If you are married and decline SBP, your spouse must sign a notarized statement acknowledging this decision. The VA requires this spousal consent because the surviving spouse otherwise loses all ongoing retirement income at the retiree's death.

Open Enrollment Periods

Under normal circumstances, you can only enroll in SBP at retirement. Congress has authorized limited Open Season periods in the past, but these are rare and not guaranteed. If you retired and declined SBP, assuming an Open Season will come before you die is not a sound plan. The 2023 National Defense Authorization Act (NDAA) did not include a new SBP Open Season.

SBP and VA Dependency and Indemnity Compensation (DIC)

If a veteran dies from a service-connected condition, their surviving spouse may qualify for VA Dependency and Indemnity Compensation (DIC) — a monthly payment from the VA. Under previous law, DIC was offset dollar-for-dollar against SBP. The Special Survivors Indemnity Allowance (SSIA) partially offset this.

The Dole-Shalala Act of 2003 eliminated the SBP-DIC offset over a phased period. As of January 1, 2023, eligible surviving spouses receive their full SBP payment AND their full DIC payment with no offset. This is a significant change that increases income for surviving spouses of veterans who die of service-connected conditions.

KEY TAKEAWAYS:

  • SBP costs 6.5% of elected base amount; surviving spouse receives 55% of base amount for life with COLA
  • The enrollment decision at retirement is generally permanent — declining SBP requires notarized spousal consent
  • Surviving spouses now receive both full SBP and full VA DIC simultaneously — the offset was eliminated as of January 1, 2023
  • SBP premiums are paid pre-tax, reducing the taxable portion of your retirement pay
  • There is no guaranteed future Open Season for those who declined SBP at retirement — do not plan on one

DOMAIN: HOUSING (4 Articles)