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By Mark E. Sullivan

The Survivor Benefit Plan – What is it?

Attorneys who handle divorce cases will sometimes encounter a military divorce settlement. An often-overlooked aspect of the pension divisions is the Survivor Benefit Plan (SBP) – a survivor annuity for the former spouse. This article deals with retrieving a potentially overlooked death benefit, and how to apply for SBP coverage.

An essential element to consider in the military divorce settlement is the Survivor Benefit Plan (SBP).[1] This death benefit provides monthly payments to the surviving former spouse for the rest of her life, adjusted annually for inflation. Since the military pension ends at the death of the retiree, this survivor annuity can be a significant measure of protection if the servicemember or retiree dies before the beneficiary. But the SBP election must be registered with the retired pay center[2] within one year of the divorce.[3]

The one-year deadline is often missed because no one is aware of this SBP time limit. Without a timely election of SBP, it’s lost. And that is a big problem for the retiree’s former spouse, since her share of the pension dries up at the death of the retiree. Overlooking the benefit or ignoring this important deadline can also give rise to a malpractice claim.

Open Season to the Rescue

In December 2022, Congress passed legislation to open the door in those case where the servicemember or retiree, “Major John Doe,” is not participating in the SBP program. The Survivor Benefit Plan Open Season rules are found in the 2023 National Defense Authorization Act (NDAA).[4] The “Open Season” window closes December 31, 2023. The statute provides potential Survivor Benefit Plan coverage for A) military retirees who are in receipt of retired pay, and B) those eligible servicemembers or former members who are awaiting retired pay (such as members of the National Guard or Reserves) who were not enrolled in SBP or RCSBP (Reserve Component Survivor Benefit Plan) as of December 22, 2022.

If our hypothetical Major Doe enrolls during the SBP Open Season, there will likely be “back payments” to confront. John will have to pay retroactive SBP premium costs which would have been paid if he had enrolled at retirement (or enrolled at another earlier date, depending on his family circumstances).

Resources, Links and Overview

There is a general overview of the SBP Open Season program at: https://www.dfas.mil/RetiredMilitary/newsevents/newsletter/December2022-SBPOS23/

Details are in a notice at the Defense Department’s “Military Compensation” page: https://militarypay.defense.gov/Benefits/Survivor-Benefit-Program/. Important information is in a notice titled “NDAA 2023 Survivor Benefit Plan (SBP) Open Season,” which is found at: https://www.dfas.mil/RetiredMilitary/provide/sbp/SBP-Open-Season-NDAA2023/. This web page includes a link to “SBP Open Season Enrollment – Frequently Asked Questions” and also a link to the enrollment information and the Letter of Intent (LOI), which John needs to complete as his preliminary inquiry about applying for Open Season coverage. This is a voluntary election of “Open Season SBP,” and it may not be imposed by a court ordering John Doe to, “Make that Open Season application or else!”

The steps for the application process for John Doe are as follows:

• First, he downloads and saves the LOI and completes it.
• Then he submits it, using the information shown on the documents.
• He will be sent a cost estimate so that he can work out an arrangement for payment of the cost. This can be done with a partial lump sum and subsequent monthly payments, a “payment plan” for all the money due, or a single lump-sum payment.
• The next step is for the retired pay center to confirm the enrollment.

Each one-time buy-in arrangement and premium is unique. This is because SBP premiums are based on individual factors and data, such as the ages of the parties and their age differential. Estimated costs are provided to John soon after he submits a Letter of Intent.

How long does it take from beginning to end? The Defense Finance and Accounting Service (DFAS) advises that the normal time for processing an application (through the LOI) is 30 days from the date of receipt of the LOI.

Court-Ordered SBP

Some cautious former spouses, reluctant retirees, or wary servicemembers might raise a concern about the requirement that the Open Season application be voluntary and not coerced by a court order that imposes the requirement to apply for this one-time opportunity. Many military divorce cases contain a divorce decree, a court order, or a settlement that is incorporated into the divorce, requiring the election of former-spouse SBP coverage. Does that prior court ruling mean that John Doe may not elect Open Season SBP due to the previous court order in the case?

The answer is at Q12-13 in “Frequently Asked Questions.” The text contains a reference to an election to opt into the Open Season SBP being voluntarily made and not subject to a court order requiring Open Season enrollment. In response to a question about whether the individual can be required to enroll in “Open Season SBP,” the answer DFAS provides makes it clear that it’s not just any previous court order; it’s a current court order requiring Open Season participation which is involved. Here is the statutory section:

(3) Election must be voluntary. An election under subsection (a) or (b) is not effective unless the person making the election declares the election to be voluntary. An election under subsection (a) or (b) to participate or not to participate in the Survivor Benefit Plan may not be required by any court.

Sections (a) and (b) in this text refer to SBP Open Season enrollment, not to a previous court order that required SBP coverage for a former spouse. Thus, John’s Open Season SBP election cannot be compelled by a court order, but this doesn’t mean that he cannot make a voluntary election, acting according to a previous divorce settlement (from months or years ago) which specifically required him to elect former-spouse SBP coverage.

Questions and Answers

Nothing is simple in the world of military pension division. Here are some questions and answers that may help to clarify the Open Season for SBP:

Q: My ex-spouse elected a LOW amount for the SBP base. Can the Open Season statute fix that?

A: No – the statute does not address raising the basis for SBP. The highest amount for the SBP base is full retired pay. The bottom is $300 per month. The court order or the separation agreement should define the SBP base amount.

The problem of divorce settlements which do not specify the SBP base is illustrated in a 2018 Michigan case, Weatherford v. Bayless.[5] The parties married in 1986, and they executed a consent order in 2010 for divorce which required the ex-wife to get half of the disposable retired pay of her former husband, a rear admiral, and to be assigned as his former-spouse SBP beneficiary within one year of the divorce decree. There was no mention of the SBP base amount.

The former husband elected a base amount of $300 per month, which would mean only $165 per month for the former wife upon his death – “a precipitous drop,” according to the Court of Appeals opinion, from the current $3,000 per month which the ex-wife was receiving as half of his disposable retired pay. The ex-wife filed suit in 2014 to enforce the parties’ 2010 divorce consent judgment. The trial judge ordered the former husband to elect the ex-wife for full former-spouse SBP coverage based on his full retired pay.

Q: My former wife, after her retirement from the Navy, selected her new husband as the SBP beneficiary. The divorce decree said that I was supposed to be the SBP beneficiary after the dissolution. Is this statute the answer to my prayers? Can it be used to ditch the new husband and replace him with me, the “military spouse” during the entire term of my ex-wife’s service?

A: No – there is no indication in the Open Season statute that the law allows for swaps and replacements for the designated SBP beneficiary (the new husband in this case). This problem and the one above (the level of SBP coverage and the minimum base) would need to be sent to the appropriate Board for Correction of Military Records to try to persuade the board that the relief requested is needed to prevent “an injustice.”[6]

Q: My ex-wife and I have agreed to get rid of SBP; we think it’s too costly and it doesn’t fit our needs. Can the Open Season statute help us?

A: Yes. The statute allows the retiree to get rid of coverage (with consent of the beneficiary). See the instructions and links above to find out about how to discontinue coverage.

Conclusion

If the Open Season process is successful, then it will certainly bring peace of mind to the parties regarding the death benefit for the former spouse and the SBP coverage which has been obtain when it was thought to be lost. And it would eliminate the need to apply to the Board for Correction of Military Records, with the expected waiting time of about two years, to try to get the records of the retiree changed to lock in SBP coverage.

Endnotes

[1] The Alabama Court of Civil Appeals in 2011 described the Survivor Benefit Plan as a plan to provide a death benefit to surviving spouses and dependent children of deceased military retirees. Upon the death of an SBP participant, the participant’s beneficiaries receive monthly annuity payments. Smith v. McIntosh, 70 So. 3d 1277, 1281 (Ala. Civ. App. 2011). It cited a West Virginia Supreme Court decision as providing a succinct description of the SBP: “The survivor benefit plan is designed to provide financial security to a designated beneficiary of a military member, payable only upon the member’s death in the form of an annuity. Upon the death of the member, all pension rights are extinguished, and the only means of support available to survivors is in the form of the survivor benefit plan.” Id. at n.1 (citing Smith v. Smith, 438 S.E. 2d 582, 584 (W. Va. 1993)).

[2] This is the Defense Finance and Accounting Service for the Army, Navy, Air Force, Marine Corps, and Space Force. The Coast Guard Pay and Personnel Center handles retired pay for members of the Coast Guard and the commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration.

[3] Courts in Alabama have the authority to award SBP coverage to a former spouse in a divorce proceeding. Schado v. Schado, 648 So. 2d 1169, 1171 (Ala. Civ. App. 1994).

[4] The statute is also known as Public Law 117-263. “SBP Open Season” is found at Section 643.

[5] Weatherford v. Bayless, No. 337635, 2018 Mich. App. LEXIS 2504 (Ct. App. May 17, 2018) (unpublished opinion).

[6] The statute establishing the service boards is 10 U.S.C. § 1552.