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Educate your beneficiaries about their benefits

CLEVELAND — The Defense Finance and Accounting Service (DFAS) pays more than 2.5 million retired service members. A large portion of their customers have elected to cover one or more of their loved ones with the Survivor Benefit Plan (SBP). Although they are willing to pay to cover their loved ones, many retirees neglect to educate their loved ones about the benefits they have provided for them. Unfortunately, this can complicate or slow down the application process to receive benefits when they are eventually requested by the family member.

Every member should consider educating their beneficiaries to help them better understand how SBP works. Here are a few guidelines you can cover with your beneficiaries. Please print this article, share it with your designated beneficiary, and store it with other important documents.

The Nature and Extent of the SBP Benefit

SBP provides your eligible beneficiaries with a monthly payment known as an annuity. The amount of the benefit is a percentage of your retired pay and it depends upon whether you choose full or reduced coverage. The recipient of your SBP annuity is referred to as the annuitant.

The Benefit's Duration

The SBP entitlement begins upon your death and ends either when your elected beneficiary becomes ineligible to receive the annuity or when your beneficiary dies.

Reasons Payments May Be Temporarily Stopped

Each year, DFAS mails annuitants a Certificate of Eligibility (COE). DFAS uses the information on that form to determine an annuitant's continued eligibility for monthly payments. If DFAS does not receive the COE by the deadline on the form, they will stop all payments until they receive a properly completed COE. If you have not received a COE from DFAS recently and feel you should have, please call their customer care center to request one at (800) 321-1080.

Reasons Payments Can Be Stopped

Annuity payments stop when a beneficiary dies or becomes ineligible to receive the annuity. For example, payments to children normally stop when they reach age 18. Payments stop for spouses if they remarry before age 55.

Continuing Children's Benefits after Age 18

Payments typically stop for children covered under SBP when they reach age 18. If an unmarried child attends school in a full time status at an accredited college or university, the payments will continue until they reach age 22. Each semester, DFAS mails a Child Annuitant's School Certification form to verify the child is still enrolled. If DFAS does not receive the form by the deadline listed, they will stop all payments until they receive a properly completed form. The SBP annuity will terminate at any time if the child marries. If you have not received a School Certification recently and feel you should have, please call the DFAS customer care center to request one at (800) 321-1080. Children who became incapacitated while still eligible SBP beneficiaries could receive payments for life if the conditions are permanent.

Effects of Remarriage on an Annuity

If the annuitant remarries before age 55, annuity payments will stop. However, if the annuitant's marriage later ends, for any reason, the annuity payment will restart from the date the marriage ends. The annuitant is responsible for notifying DFAS of any changes to their marital status.

Benefits from the Department of Veterans' Affairs (VA)

Dependency and Indemnity Compensation (DIC) is an award benefit offered by the VA. Federal law prevents annuitants from receiving both SBP and DIC concurrently. When DFAS is informed that an annuitant is eligible to receive DIC from the VA, DFAS will deduct the amount of DIC received from the amount of SBP. For example, a surviving spouse is eligible for a monthly annuity of $1500 from DFAS and a monthly DIC award of $1254.19 from the VA, DFAS will deduct the $1254.19 DIC from the $1500 SBP and pay the remaining $245.81 to the annuitant.

If the SBP is greater than the DIC award, DFAS will partially refund the premiums paid into the program during the service member's retirement for the portion of the SBP that is offset. If the DIC is greater than the SBP payment, SBP will be completely offset and DFAS will refund all basic spouse premiums paid into the program during the service member's retirement.

What initiates the SBP benefit and what will my beneficiary have to do?

Your designated beneficiary becomes eligible to receive SBP benefits on the day after your death. The first step a beneficiary must take to receive benefits is to report your death to DFAS.

What happens if there is a delay in reporting a retiree's death?

Late notification of a retiree's death may result in burdensome consequences, including delays in finalizing a member's account, payment of arrears of pay and the establishment of an SBP annuity. A retiree's entitlement to retired pay ends on the date he or she dies. Therefore, delayed reporting of a retiree's death may result in an overpayment of retired pay that will be collected from a financial institution, the member's estate, or from the annuitant if the annuitant is receiving retired pay funds.