The White Falcon - 20.06.1986, Síða 6

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__________Survivor RQr,ofitc
With this issue, NES introduces a series on Navy Rights and Benefits, which is a
reprint from All Hands magazine. The first article is on Survivor Benefits, one of the
most important considerations to every Navy member. In fiscal year 1985, more than
$10 million was paid out in Navy survivor benefits.
Other articles in the series, one each month, will cover Pay and Allowances, Retire-
ment Benefits, Medical and Health Care, Education Opportunities and all of the other
benefits which have the common objective of providing protection for and raising the
morale of active duty people, their families and their survivors, members of the Naval
Reserve, and active duty and Reserve retirees.
Survivor Benefit Plan—Spouse Only—Monthly Amounts
Base Amount Monthly Payment for Surviving Monthly Cost Net Balance
of Retired Pay Spouse to Retiree* to Retiree***
$ 100.00** $ 55.00 $ 2.50 $ 97.50
200.00** 110.00 5.00 195.00
300.00 165.00 7.50 292.50
350.00 192.50 12.50 337.50
400.00 220.00 17.50 382.50
450.00 247.50 22.50 427.50
500.00 275.00 27.50 472.50
550.00 302.50 32.50 517.50
600.00 330.00 37.50 562.50
650.00 357.50 42.50 607.50
700.00 386.00 47.50 652.50
750.00 412.50 52.50 697.50
800.00 440.00 57.50 742.50
850.00 467.50 62.50 787.50
900.00 495.00 67.50 832.50
950.00 522.50 72.50 877.50
1000.00 550.00 77.50 922.50
1100.00 605.00 87.50 1012.50
1200.00 660.00 97.50 1102.50
1300.00 715.00 107.50 1192.50
1400.00 770.00 117.50 1282.50
1500.00 825.00 127.50 1372.50
1600.00 880.00 137.50 1462.50
1700.00 935.00 147.50 1552.50
1800.00 990.00 157.50 1642.50
‘Withheld from retired pay. Monthly premiums are discontinued if marriage is terminated
by death, divorce or annulment.
‘‘Applicable only if full retired pay is less than $300 per month.
‘‘‘Remainder of Base Amount of Retired, Pay.
Table Copyright 1986 Uniformed Services Almanac. Reprinted with permission.
_____________Computing Insurable Interest Coverage______________________
Suppose you are 50 years old when you retire from the Navy and you wish to
provide Insurable Interest Coverage under the Survivor Benefit Plan to your 30-
year-old married daughter. Your monthly gross retired pay is $750. The cost of
such coverage is 10 percent of full retired pay plus 5 percent of full retired pay
for each full five years the designated beneficiary is younger than the retiree.
The total cost will not exceed 40 percent of retired pay.
Thus, daughter is 20 years younger: 20 -r 5 = 4; 4 x 5% = 20%;
10% + 20% = 30%; 30% x $750 = $225
The annuity equals 55% of the reduced retirement pay (gross pay less cost of
coverage).
Thus: $750 - $225 = $525.
The annuity equals $525 x .55 = $288.75.
The benefits of a Navy career are not
always evident to those who only look at
base pay. To appreciate the full value of
a Navy career, a person must consider the
entire range of benefits available to active
duty, retired and family members; includ-
ing benefits for survivors.
The following section describes survivor
benefits with an explanation of the Sur-
vivor Benefit Plan, followed by a table
briefly outlining the range of survivor
benefits established for active duty mem-
bers and retirees. Since space limitations
restrict more detailed descriptions, it is
important that the member directly contact
the sources listed for more information.
Also included is a form which you can
use in planning your family's future, it is
useful in establishing total survivor benefits
and for maintaining an account of where
you and your family stand financially.
Survivor Benefit Plan
Sometimes the hardest things to talk
about in life are also the most important.
Death and the benefits available to our
survivors arc among those things.
When people retire from the Navy they
are often secure in the belief that a retire-
ment check will arrive in the mail each
month, like clockwork, for the rest of their
lives. It is sobering, however, to realize that
the checks stop when the retiree dies. What
about the family? How will the bills get
paid? What about the children’s educa-
tion? An avalanche of questions pour
forth with the realization that one’s family
may be financially secure now,* but not
necessarily later.
For many military retirees, the answers
to these and other money questions can be
found—at least in part—in the Survivor
Benefit Plan for the Uniformed Services.
The Survivor Benefit Plan (SBP) pro-
vides a limited income to the deceased
retiree’s beneficiaries. The amount of that
income is determined by the monthly con-
tribution the member elects to have
deducted from his/her pay. This monthly
income is equal to 55 percent of the full
amount of the member’s retired pay or 55
percent of any selected amount of retired
pay over $300 per month. This amount is
adjusted periodically by cost-of-living
increases.
For example, if a typical chief petty offi-
cer receives $1,000 per month in retainer
pay, the SBP monthly payment to his
beneficiaries after his death would be $550
(base amount x 55 percent = annuity).
Suppose that same chief petty officer,
before retirement elected a lesser amount
than the maximum coverage, say $300 (the
minimum amount which may be desig-
nated under SBP). Then the monthly SBP
annuity would be $165.
Keep in mind that the above figures
represent gross amounts; annuities paid
under SBP are subject to federal income
taxes. SBP annuities are excluded, how-
ever, from federal and state inheritance
taxes.
Military retirees will automatically be
enrolled in the Survivor Benefit Plan at the
maximum coverage level at the time of
their retirement or transfer to the Fleet
Reserve, unless they request coverage less
than the maximum or decline participation
in the program. Since March 1, 1986, if
a member elects less than maximum cover-
age his/her spouse must concur with this
decision.
So far, SBP is a pretty simple plan to
understand. You pay money in return for
a guaranteed income for designated bene-
ficiaries after your death. But, there are
a couple of things that tend to complicate
the picture without decreasing the annuity
paid to those beneficiaries. The two central
ideas to understand are: the D1C offset;
and the two-tiered SBP benefit system.
DIC - Offset—A surviving spouse may
be eligible for Dependency and Indemnity
Compensation (DIC) payments from the
Veterans Administration after the retiree
dies. These benefits may offset or reduce
the amount of SBP payments being made
to the spouse under varying circumstances.
First, we look at how DIC works in relation
to SBP.
Suppose Senior Chief Jones suffered a
service-related injury while on active duty.
After retirement. Senior Chief Jones (who
had enrolled in the Survivor Benefit Plan)
died as a result of complications which
developed from that injury. Since his was
a service-connected death, his widow, any
unmarried children under the age of 18 (as
well as certain handicapped children), chil-
dren between the ages of 18 and 22 attend-
ing a VA-approved school, and certain
dependent parents are eligible for DIC.
DIC is a monthly benefit based on the
member’s paygrade. It is exempt from fed-
eral income tax and may be received simul-
taneously with full Social Security benefits.
Senior Chief Jones’ widow receives a
monthly DIC of $621. This $621 is de-
ducted from any SBP benefits she receives
each month, so there is no change in her
monthly annuity (although that tax-free
$621 will result in less overall tax on her
annuity). That’s the DIC offset.
(For more information about Veterans
Administration Dependency and Indem-
nity Compensation as well as facts on
other VA programs, see the pamphlet
"Federal Benefits for Veterans and De-
pendents,” available from the Veterans
Administration.)
In this discussion of the DIC, the word
"offset” may be a bit misleading since the
total amount of money the spouse receives
each month is never reduced as a result of
DIC. It’s simply that the money may come
from a different source under different
circumstances.
Two-Tiered System—The Social Secu-
rity offset has been eliminated and was
replaced with a two-tiered benefit system
on March 1, 1986. Under the new two-
tiered system the beneficiary will receive 55
percent of the base amount selected until
age 62, and 35 percent thereafter. Current
beneficiaries and future survivors of
anyone who was eligible for retirement on
or before Oct. 1, 1985, are “grand-
fathered.” (When the survivor reaches age
62, the Navy Finance Center will compute
the annuity both ways, using the two-tiered
system and using the Social Security offset,
and give the survivor the greater annuity
of the two methods.) Former spouse elec-
tions made after March 1, 1986, will be
computed under the new two-tiered system.
For members who became eligible for
retirement after Oct. I, 1985, annuities will
be computed using the two-tiered formula.
Most survivors will receive a greater
monthly benefit under the new two-tiered
system. Below is an example, using a base
amount of $1,000.
Under SBP, many types of coverage are
available at varying costs: spouse-only
coverage, former spouse, former spouse
and children, spouse and children, and in-
surable interest coverage.
Spouse-Only Coverage—As its name
says, this is coverage for a retiree’s spouse
only. It is important to keep in mind that
an election to cover spouse-only, once
effective, is irrevocable, although the cost
of coverage will not be deducted in any
month when there is not an eligible spouse
beneficiary. Retired members whose SBP
coverage is suspended because of the loss
of a spouse now have the option to elect
not to resume spouse participation upon
remarriage.
If coverage for a spouse is declined at
time of retirement, coverage for that
spouse, or any subsequent spouse, cannot
be provided at any later time.
If there is no eligible spouse at the time
of retirement, coverage for a spouse ac-
quired after retirement may be provided.
Such an election must be submitted within
one year of the marriage and the spouse
must have been married to the retired mili-
tary member for a minimum of one year
immediately before the retiree’s death (or
a surviving child must have been born of
the marriage) to be eligible to receive an
SBP annuity.
The cost of this spouse-only coverage is
2.5 percent of the first $300 (subject to in-
crease as active duty pay increases) plus 10
percent of any amount over $300. See the
chart on page 42 for more details. For ex-
ample, on March 1, 1986, this low-cost
amount increased to $309, because of the
3 percent.pay raise on Oct. I, 1985 ($300
x 1.03 = $309). Premiums deducted for
SBP are not subject to federal income tax-
ation. This means that if you are in the
20 percent tax bracket and elect coverage
costing $80, the “real” cost (after comput-
ing tax advantage) is only $64. Further-
more, your coverage cannot be cancelled
Benefit Social Security Offset Two-Tiered System
until age 62 $550.00 $550.00
age 62 and older $330.00 $350.00
0 The White Falcon June 20, 1986 June 20, 1986 The White Falcon
or premiums increased because of age or
if you become “uninsurable” for any
reason.
Spouse and Children Coverage—With
this type of SBP coverage, the monthly
annuity is paid to the surviving spouse. If
the spouse is not eligible (because of death
or remarriage), the annuity is paid to eligi-
ble dependent children.
The cost of this coverage is calculated
using the cost of spouse-only coverage plus
a small charge based on the age of the
retiree, spouse and youngest child.
Under this coverage, no DIC offset will
be made when SBP payments are made
only to children.
Children-Only Coverage—The cost of
this type of coverage is computed as a
percentage of the SBP base amount and
varies with the age of the retiree and the
age of the youngest child. For example,
a 40-year-old retiree whose youngest child
is 10 years old would be charged $3.10 on
a base salary of $1,000. An unmarried
child is covered until age 18 (22 if a full-
time student) or for life, should the child
become incapacitated before age 18.
Former Spouse Coverage—A voluntary
election can be made to cover a former
spouse. For elections made after March 1,
1986, former spouses will be subject to the
same restrictions as widows/widowers
(e.g., must remain unmarried until age 60,
may only receive one SBP annuity, and
will be subject to the new two-tiered
system at age 62). Cost for this coverage
is the same as for spouse-only coverage.
Former Spouse and Children—It is now
possible to cover your former spouse and
the children from the marriage to that
former spouse. If the former spouse
becomes ineligible for the annuity, it is
paid to the eligible dependent children. The
cost is the same as for spouse and children
coverage.
Insurable Interest Coverage—The final
type of SBP coverage, Insurable Interest
Coverage, may be provided to guarantee
monthly SBP benefits to any person who
has a reasonable and lawful financial ex-
pectation in the continued life of the
retiree. This is legal talk for someone,
other than the spouse, former spouse, or
children, who is financially dependent on
the retiree. It may be a brother, sister,
parent or non-dependent child. If the “in-
surable interest person” is not one of these
(e.g., a business partner), proof of finan-
cial benefit is required by the Navy
Finance Center.
If there is no spouse or eligible child at
the time of retirement, coverage for an eli-
gible person with an insurable interest may
be elected.
Please see SEP on pg. 11
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