Think of the Survivor Benefit Plan (SBP) as an insurance policy, focused on protecting a survivor's income flow from the military retirement if the retiree dies first. It has a premium, and a payout in the form of a monthly payment from DFAS.
Without SBP, if the retiree dies, the military retirement stops as well. However, to protect a surviving former spouse's share of military retirement after a Colorado divorce or legal separation, family courts can require a servicemember to elect former spouse SBP coverage.
As the retiree can only have one beneficiary (except for children coverage, outlined in more detail below), one effect of court-ordered SBP coverage for a former spouse is that if the service member remarries, the new spouse or children are precluded from coverage.
Amount of SBP Coverage
In the event of the servicemember's death, the former spouse receives a monthly payment of 55% of the designated base amount. This designated base amount is an amount not greater than the servicemember's full gross retired pay, and not less than $300 per month. Spousal consent or a court order is required to elect less than maximum coverage. 10 U.S. Code §1448(a)(3)(A).
Previously, there was a coverage reduction to 35% upon the survivor's 62nd birthday. However, that reduction was phased out over several years, and fully eliminated as of April 1, 2008.
So how do you calculate the base amount necessary to provide sufficient coverage? This takes a little algebra.
- Assume the former spouse share of the retirement comes to $650 in the year of the retirement.
- That $650 is 55% of the necessary base amount.
- Formula: $650 / 0.55 = $1181.82. That's the base amount necessary to provide $650 coverage.
The coverage is indexed to inflation, so increases annually with a COLA.