How Long Do You Pay Survivor Benefit Plan Premiums?

The Survivor Benefit Plan (SBP) is a government program designed to provide financial security for military families. Its core purpose is to offer a continuous income stream to eligible survivors of deceased service members or retirees, including spouses, children, or former spouses. This ensures they receive a portion of the military retired pay that would otherwise cease upon the retiree’s death. The SBP acts as a form of insurance, safeguarding a family’s financial well-being against the loss of a service member’s retirement income.

Standard Duration of SBP Premium Payments

SBP premiums are generally paid for a defined period, rather than indefinitely. Their cessation is determined by the satisfaction of two specific conditions, both of which must be met for premium payments to stop. At this point, the SBP policy is considered “paid-up,” meaning no further premiums are collected, but the SBP annuity benefit continues to be paid to the eligible beneficiary if the retiree passes away.

The first condition involves a 30-year paid-up rule, meaning premiums are collected for 360 months of coverage. This refers to the total number of months premiums have been collected, not necessarily 30 calendar years from the date of enrollment. Premium collection might be deferred or paused in certain situations, affecting the exact calendar duration to reach the 360-month mark.

The second condition requires that even after 30 years of payments, premiums must continue until the retiree reaches age 70. Both the 360 months of payments and the retiree reaching age 70 must be satisfied for premium deductions to cease.

A retiree might pay premiums for more than 30 calendar years if they enroll at a young age and reach the 30-year payment mark before turning 70. Conversely, if a retiree is already over age 70 when they reach the 30-year payment threshold, premiums would stop immediately upon hitting the 360th payment.

Premiums are typically deducted directly from the retiree’s gross retired pay, which can also offer some tax advantages as they do not count as taxable income. The Defense Finance and Accounting Service (DFAS) administers these payments and manages the cessation process once both criteria are fulfilled.

Circumstances Leading to Early Cessation of Payments

While the standard duration for SBP premium payments involves meeting both the 30-year payment rule and the retiree reaching age 70, several specific circumstances can lead to premium payments ceasing earlier. These situations typically involve changes in the status of the retiree or the designated beneficiary.

Death of the Military Retiree

One direct cause for premiums to cease is the death of the military retiree. Upon the retiree’s death, premium deductions from their retired pay immediately stop. The SBP annuity payments to the designated beneficiary would then commence, provided they remain eligible. The SBP is specifically designed to provide this financial transition upon the service member’s passing.

Death of the Designated Beneficiary

The death of the designated SBP beneficiary can also lead to an early cessation of premium payments. If the sole designated beneficiary passes away before the retiree, and there are no other eligible beneficiaries designated to receive the annuity, then premium payments for that coverage will stop. This is because there is no longer an eligible recipient for the future benefit.

Loss of Beneficiary Eligibility

Loss of beneficiary eligibility represents another scenario where SBP premiums may cease. For instance, a child beneficiary typically loses eligibility upon reaching a certain age or upon marriage. A spouse beneficiary may lose eligibility if they remarry before age 55; however, if remarriage occurs after age 55, eligibility for the SBP annuity is retained. If the loss of eligibility applies to the only designated beneficiary and no other eligible beneficiaries exist, premium payments will be terminated.

Divorce

Divorce introduces complexities that can affect SBP premium obligations. If a divorce decree mandates that a former spouse receive SBP coverage, premiums will typically continue to be deducted from the retiree’s pay to fund that coverage. However, if the former spouse is not awarded SBP in the divorce settlement, or if the former spouse later remarries, premium payments related to their coverage may cease. While SBP elections made at retirement are generally irrevocable, divorce is one of the limited events that may allow for certain modifications to coverage and, consequently, premium payments.

Implications After Premiums Cease

Once SBP premiums cease, whether due to reaching the standard paid-up status or an early cessation event, the implications primarily revolve around the continuation of the underlying benefit and the cessation of financial deductions. The cessation of premium payments does not mean the SBP benefit itself is terminated or diminished. Instead, it signifies that the funding obligation from the retiree’s side has been fulfilled.

A crucial point is that the SBP annuity continues to be paid to the eligible beneficiary upon the retiree’s death, provided the beneficiary still meets all eligibility requirements. This remains true even if premiums stopped early due to circumstances like the death or loss of eligibility of a prior beneficiary, as long as a new eligible beneficiary has been properly designated and covered. The “paid-up” status simply means the policy is fully funded from the premium perspective.

Upon premiums ceasing, no further deductions for SBP coverage will be taken from the retiree’s pay or retired pay. This can result in a slight increase in the retiree’s net monthly income, as the premium amount is no longer withheld.

The SBP benefit remains intact and undiminished despite the cessation of premium payments. The amount of the potential future annuity for the eligible survivor is determined by the election made at retirement, typically a percentage of the retiree’s gross retired pay, and is generally adjusted for cost of living. The stopping of premium payments does not reduce this elected benefit amount; it merely signifies that the financial obligation for the coverage has been met.