Another way to look at it —
helps if he or she knows it exists. Think about it — since when did Uncle Sam give you money just for being nice?
Option A — delayed decision SBP Option A is delayed decision, mean- ing, “I’ll think about it and decide when I apply for retired pay.” If you die in the interim, so does your re- tired pay. (You assume all the risk.)
Option B — delayed annuity SBP Option B is delayed annuity, mean- ing, “If I die while I’m in the gray area, the annuity is payable to my beneficiary when I would have been age 60.” This option mitigates your risk and provides an annuity at your full retirement age.
Choosing an amount Because SBP passes on a portion of your retired pay to your survivors, you can select what portion of your pay you would like that to be. You can choose as little as $300, up to the maximum allowed 55 percent of your retired pay. Your spouse must sign off on any SBP election less than full and immediate — option C — coverage. Electing the $300 level would result in a monthly annuity to your
Fred’s wife is grief- stricken. Fred filled in the paperwork with option A, and he didn’t buy life insurance either. His wife is only now realizing she won’t receive a dime. She calculates she’ll be working until she’s 67.
spouse of $165, hardly a living wage! This is part of the impetus for spou- sal concurrence; ideally spouses will understand what they are giving up.
60 MILITARY OFFICER AUGUST 2012 SBP Election
Option A (Deferred Decision)
Option B (Deferred Annuity)
Option C (Immediate Annuity)
Beneficiary Receives (upon servicemember’s death)
Before Age 60 Immediately
At service- member’s age 60
0% 0% 0% 55%*
55%* 55%* *Of the elected annuity base amount After Age 60
Option A, Deferred Decision election option upon
application for retired pay
No - 0%
Yes - 55%* 55%* 55%* 55%* 55%*
Fred’s sons plan to go to college soon, but their mom says they will have to pay their own ways. Looking back, it would have been nice to have some cushion for the loss of Fred’s income.
Cost So, what’s it going to cost you? The base fee for SBP elected upon ap- plication for retired pay (option A) is 6.5 percent of the annuity base amount. If your retired pay is $1,000 a month and you elect full coverage, your pretax monthly pre- mium will be $65. Both options B and C have a Reserve Component SBP (RCSBP) fee added to the base fee. The RCSBP fee ranges from an additional 2 to 4 percent, with op- tion B being at the lower end and option C at the higher end.
Coverage Now that you understand your SBP election and cost options, whom can you cover? Elections are available for a spouse, spouse and child(ren), child(ren) only, or an insurable inter- est (a person who would be financial- ly affected by your death.) Your choice depends upon your
life circumstances. Hopefully this has helped clarify some of the mystery surrounding the date- stamped NOE.
MO
— Cmdr. Katherine Tracy, USN-Ret., is a retired reservist and deputy director in MOAA’s Benefits Information and Financial Education Department.
WE WANT TO HEAR FROM YOU
Which SBP option did you take, and what affected your choice? Weigh in by clicking on SBP Options at
www.moaa.org/ discussion, or write to MOAA, Attn: Editor, 201 N. Washington St., Alexandria, VA 22314.
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