Reserve Component Survivor Benefit Plan

Reserve Component Survivor Benefit Plan
SSG Katy Digby LTC Kathleen Couillard

Army G-1 Retirement Services Office
UNCLASSIFIED G-1 Department of the Army Reserve Component Survivor Benefit Plan (RCSBP) Soldier and Spouse Brief Updated April 2010 Army G-1 Retirement Services Office UNCLASSIFIED

Our Goal CHANGE.... MISINFORMATION you may have heard on RCSBP/SBP from MISINFORMED People INTO..... INFORMATION from INFORMED Experts Our goal in this briefing is to provide information to you on RCSBP. Along the way, we expect to replace some common misconceptions about the Plan with facts. We ask only that you unlock your assumptions and listen openly to this presentation. Your decision regarding whether or not to participate in RCSBP affects your family’s future, and so, rather than making the decision based on someone else’s opinion, we encourage you to consider your situation. Use what you learn in this briefing to make an informed decision that suits your family’s need. It’s a decision you will have to live with!

RCSBP and SBP RCSBP: Reserve Component Survivor Benefit Plan. Coverage from the 15 or 20 year letter until age 60 in most cases. SBP: Survivor Benefit Plan. Starts at age 60 and coverage is from age 60 going forward. No payment on either until you start drawing retired pay (usually age 60)

PURPOSE manageable understandable blocks informed decisions on their
Break RCSBP and SBP down into manageable understandable blocks Allows RC Soldiers to make informed decisions on their individual RCSBP/SBP elections As stated.

THE BOTTOM LINE Without RCSBP/SBP
There is no annuity if the RC Soldier dies The fact is a reservists entitlement to retired pay resides with, and dies with the RC Soldier....period! RCSBP participation and SBP is the ONLY way to provide an annuity based on qualifying for a nonregular retirement The Army’s pledge to “take care of its own” is met by offering Reserve Soldiers a way to take care of THEIR own, through RCSBP.

RCSBP or SBP are paid as a monthly annuity to eligible survivors
WHAT IS RCSBP? Enacted by Congress in 1978 Sole means for a RC Soldier with 20 years of qualifying reserve service for retirement to provide a portion of their retired pay to survivors if they die before Non-regular Reserve Retirement RCSBP or SBP are paid as a monthly annuity to eligible survivors RCSBP decision affects SBP coverage at retirement Certain elections constitute an early SBP decision If retired from active duty, RCSBP elections are voided and there is no RCSBP cost for coverage received RCSBP was the Plan Congress created in 1978 to provide RC Soldiers, with 20 years of qualifying reserve service for retirement, a means to provide a portion of their retired pay to survivors if they die before Non-regular Reserve Retirement. Your RCSBP election has an effect on your SBP election at your nonregular retirement which will be covered in this briefing. RCSBP elections are voided, if retired from active duty. There is no cost for coverage previously received. Exception is Medical Retirement – Must have 15 years of qualifying service but less than 20 years of qualifying service

20 Year Letter Issued when RC Soldier attains 20 qualifying years of service Qualifying year is a complete year in which the RC Soldier earns 50 or more points Prior to 26 Apr 05, last 6 qualifying years of service for retirement must have been in the Reserves 15 year letter issued by RC only after Medical Board, RC Soldier asks for transfer to Retired Reserves, USAR requires HRC final approval. Public law terminated the requirement of Title 10 USC, Sec , requiring RC Soldiers to serve the last 6 years of qualifying service in the RC.

Reserve Component Survivor Benefit Plan (RCSBP) Election Certificate
DD FORM Reserve Component Survivor Benefit Plan (RCSBP) Election Certificate

Certain elections need spouse concurrence
ABOUT ELECTIONS Must be made within 90 days of receipt of Notice of Eligibility for Retired Pay (20 Year Letter) packet from the Human Resource Command or State Headquarters Certain elections need spouse concurrence Certain elections effect your SBP election RCSBP elections must be made within 90 days of receipt of your 20 year letter. What happens if the election is NOT made. By law, the RCSBP election defaults to full coverage Option C for any spouse or eligible children. Congress in 2001 required married Reserve Soldiers to provide their spouse’s written concurrence in order to make certain RCSBP elections (details on the next slide). RCSBP elections effect the SBP election at the nonregular retirement. Certain RCSBP election Options become the SBP election and you will not be able to make a new SBP election. Later we’ll talk about the RCSBP elections and their effect on SBP elections at nonregular retirement.

RCSBP Election Options
All Elections made upon receipt of Notice of Eligibility to Receive Retired Pay (20 Year Letter) Option A: No RCSBP Coverage with option to elect coverage when eligible to receive retired pay Option B: RCSBP coverage with deferred annuity when the RC Soldier would turn age 60 Option C: RCSBP coverage with immediate annuity There are three RCSBP election Options at retirement which we will be discussed in detail in the following slides.

RCSBP Option A If Option A (Decline election until Age 60)
No RCSBP coverage Pay no annuity if death occurs pre-reserve retirement If no eligible beneficiary at election, may elect RCSBP within one year of first obtaining an eligible beneficiary Effect on Non-regular retirement SBP Must make SBP election on DD Form 2656, Data for Payment of Retired Personnel Pay SBP premium for coverage elected RCSBP cost No RCSBP coverage no cost If RCSBP Option A is elected at the 20 year letter, there is no RCSBP coverage. No RCSBP annuity will be paid if you die prior to non-regular retirement and there is no RCSBP cost. At nonregular retirement you must make an SBP election and if coverage is elected pay SBP cost. If you had no eligible RCSBP beneficiary at retirement, spouse and or child, you may elect RCSBP coverage within one year of first obtaining an eligible beneficiary either through marriage or acquiring a child. Failure to take action within one year of obtaining an eligible RCSBP beneficiary will result in you being locked into Option A until nonregular retirement.

RCSBP Option B If Option B (Deferred Annuity) RCSBP coverage
Annuity paid when RC Soldier would have qualified for non-regular retirement Must maintain election prior to non-regular retirement Effect on SBP at non-regular retirement RCSBP becomes SBP election RCSBP cost when in receipt of retired pay Pay RCSBP premium for RCSBP coverage received Pay SBP premium for current coverage after receipt of retired pay If RCSBP Option B is elected at the 20 year letter, there is RCSBP coverage but the RCSBP annuity is deferred until the Reservist would have qualified for nonregular retirement. There is a RCSBP cost when in receipt of retired pay. At nonregular retirement you will not make an SBP election as your RCSBP election will become your SBP election. You must maintain your RCSBP election and make changes resulting from divorce, death, or gaining a beneficiary.

RCSBP Option C If Option C (Immediate Annuity) RCSBP coverage
Pay annuity immediately at RC Soldiers death Must maintain election prior to non-regular retirement Effect on non-regular retirement SBP RCSBP becomes SBP election RCSBP cost RCSBP premium for RCSBP coverage received SBP cost for coverage after receipt of retired pay RCSBP is more expensive than for Option B due to immediate payment of annuity If RCSBP Option C is elected at the 20 year letter, there is immediate RCSBP coverage. RCSBP annuity will be paid immediately at your death. There is a RCSBP cost when in receipt of retired pay. At nonregular retirement you will not make an SBP election as your RCSBP election will become your SBP election. Option C RCSBP is more expensive than Option B because the RCSBP annuity is paid immediately. You must maintain your RCSBP election and make changes resulting from divorce, death, or gaining a beneficiary.

RCSBP Options Summarized
OPTION A OPTION B OPTION C ANNUITY NONE AT AGE 60 IMMEDIATE COST +/- 25% LESS THAN C ROUGHLY 3.5% OF RETIRED PAY AUTOMATIC DEFAULT? NO YES full coverage for spouse and or dependent children at receipt of 20 year letter REQUIRES SPOUSE CONCURRANCE YES NO (If Spouse or Spouse and Child full base amount elected) REQUIRES SBP ELECTION? NO RCSBP becomes SBP

Six Election Categories
Spouse Only Spouse & Child Child Only Former Spouse Only FS & Child Insurable Interest Six RCSBP election Categories exist. An election enrolls eligible beneficiaries within a category. The most important feature about electing by category is this: -- The decision you make for each category you have available to you at decision time is binding. -- In other words, if you have an eligible spouse or child who you do not enroll, then later gain a spouse or child, or simply wish you would have enrolled -- you have closed these categories forever! Your only ability to change this decision might be through a future Open Season. -- Conversely, if you DO enroll your eligible beneficiaries at election time, all future eligible persons in those categories will be automatically covered. Let’s look at each category a little more closely now.

Spouse Option provides annuity of 55% of base amount chosen
annuity paid forever (unless remarriage occurs pre-55) if remarriage ends, annuity reinstated increased annual by COLA taxable as an annuity RCSBP premiums stop when there is no eligible spouse or former spouse The RCSBP annuity based on amount of retired pay covered. The annuity is 55% of the base amount minus the RCSBP premium. The annuity is infinite -- meaning, it’s paid for the surviving spouse’s lifetime! It cannot be outlived! Also important is the fact that the annuity is inflation-protected by cost-of-living-adjustments, just like retired pay. A spouse annuitant loses RCSBP eligibility by remarrying before age 55; but even in that case, RCSBP can be resumed if that remarriage ends. RCSBP premiums stop when there is no eligible spouse or former spouse. Former spouses are eligible for coverage under a separate category -- under the same cost and benefit rules as spouses.

Spouse & Child Option spouse = primary beneficiary
children are secondary beneficiary and receive the annuity only if spouse can’t (pre-55 remarriage or death) and they are still eligible child cost is based on yrs age difference between Soldier and youngest child cost of child coverage - very low When no eligible children remain, Child SBP cost stops but RCSBP cost continues Spouses are primary and children are secondary beneficiaries under this option. That means that an annuity is not paid to the children unless the spouse first loses eligibility through remarriage before age 55 or death. Even then, the children must be under 18 or 22 to be eligible. Note that if an election is made for a former spouse and children, only the children which resulted from that marriage are eligible beneficiaries. This means that if you gain children in the future, they could not be added to a “Former Spouse and Child” election. However, for a “spouse and child” election, all your children, of any union, are eligible.

Child Only Option eligible until 18, or 22 if full-time, unmarried student unmarried incapacitated child - eligible forever (if condition was incurred pre-18 or 22) Note: It is recommended you research the impact of SBP for a fully disabled child may have on other benefits the child has or will receive. cost based on age difference at time of election all eligible children covered at one cost when no eligible children remain, Child SBP cost stops but RCSBP cost continues cheaper than “spouse” due to finite benefit but costlier option than child when with spouse since child is primary beneficiary annuity divided equally among all eligible This slide shows the basic rules for “child only” participation. Child coverage should be considered when determining your family’s needs. And, since child costs are so low, we can think of NO reason NOT to cover eligible children - either alone or as part of a spouse & child election. Once again, when there are no eligible children SBP cost stops but RCSBP continues Note: It is recommended that you research the impact SBP for a fully disabled child may have on other benefits the child is or will receive.

Advice--Seriously Consider Child Coverage!
Q: Why bother to cover my 21-year old son who graduates from college soon? A: Because, if you elected Option B or Option C and did not elect RCSBP for an eligible child... you are “closing” the child category when there are eligible children for both RCSBP and SBP forever family complete? perhaps a step-, grand-, foster- or natural child is in your future incapacitation may occur while still eligible Cost stops when no eligible children remain Remember: If you elect Option B or Option C, the action you take for a category available to you on date of retirement sets in stone your treatment of that category for RCSBP and SBP FOREVER. That means that if you have an eligible child at election, elect Option B or Option C but decline child coverage, you’ve closed the door on RCSBP/SBP child coverage forever. While you may feel certain today that there are no additional children in your future, please think twice before barring the door, since dependent children come in many wrappings: -- step-children obtained through remarriage -- grandchildren who qualify as your dependents -- foster children, or -- natural children

Former Spouse (FS) “Particulars”
FS coverage can be: purely voluntary incorporated into a written agreement court-ordered If divorce prior to election: If court Ordered, Soldier must elect FS or FS and child RCSBP at 20 year letter or could be held in contempt of court. FS can provide HRC divorce decree plus written request (DD Form , Request for Deemed Election) for a deemed election within one year of the court order FS coverage can be changed if court order is amended or vacated by FS’s death. Former spouse RCSBP issues remain among the most emotional and most misunderstood within both the active and retired military communities. The main point we want to stress is that passage of the Uniformed Services Former Spouses’ Protection Act in 1982 did not change the basic premise that retired pay entitlement rests with the retiree. What it DID do was give state courts legal authority to order members to elect “former spouse” RCSBP or SBP coverage; a Reservist to convert existing spouse RCSBP coverage to former spouse; a retired member to convert existing spouse SBP coverage to former spouse. Do not confuse this with the issue of a court dividing one’s retired pay - a separate matter. If divorce occurs prior to 20 year letter and the court orders the Soldier to elect FS coverage at retirement, the following applies -- (1) The Soldier has no action to take until 20 year letter, at which time he/she should comply with the court order to avoid being in contempt of court - regardless of the Soldier’s marital status at 20 year letter. (2) The former spouse has one year from date of divorce to submit a DD Form () to HRC St. Louis to request a “deemed” election. A deemed election will override any failure on the part of the Soldier to follow the court’s order. The court cannot order the member to participate in RCSBP if they had a spouse at their 20 year election and did not cover that spouse. If the member did elected Option A, the court can order them to make an SBP election at nonregular retirement or active duty retirement. If divorce occurs after retirement, the court can order a retiree to cover a FS only if that FS was the retiree’s covered “spouse” beneficiary previously. They cannot order a member to enroll the former spouse in a plan in which he/she do not participate. Remember, when former spouse coverage IS ordered, either party can make a written request within one year of the divorce to facilitate the switch from spouse to former spouse category. For an existing former spouse RCSBP election, if action is not initiated within one year of court order awarding FS RCSBP, the FS option is lost.

“Insurable Interest” Option
Who Can Elect: unmarried Soldiers with no or one dependent child Eligible Beneficiaries: relative more closely related than cousin; or business associate w/financial interest in Soldier (proof needed) Base Amount: Must be full retired pay Cost: Very expensive option RCSBP: same as SBP SBP: 10% plus 5% for each full 5 yrs younger beneficiary is than Soldier (maximum 40%) Benefit: 55% of full retired pay base amount Loss of Beneficiary: May elect new beneficiary within 180 days of current beneficiary’s death. RCSBP/SBP offers something to single Soldiers too. They can cover “a natural person with an insurable interest” if they are either unmarried with no children or have a sole dependent child. The child’s age or marital status is not considered. The insurable interest option allows a Soldier to protect a person who would be financially impacted by his/her death. Its main use is by single Soldiers who are the sole support of a family member, perhaps a mother, father or sibling. It is expensive. Proof of financial interest is required when the named beneficiary is unrelated or is more distantly related than first cousin. If you gain a spouse or child after election, you have one year to change your election to protect someone in the newly-gained category. Since Oct. 1994, this coverage may be cancelled at any time. Effective 24 Nov 03, if retired for disability and death occurs within one year of retirement for a cause related to a disability for which retired, Insurable Interest election SBP is invalid with the exception of Insurable Interest elections made for a dependent authorized a Military ID Card. Premiums paid will be refunded to designated beneficiary. Does not apply to length of service retirees. Effective 17 Oct 06, when the beneficiary dies, retiree may elect a new Insurable Interest beneficiary within 180 days.

RCSBP Spouse Concurrence
A “JOINT” Decision For Married Soldiers Who . . . Elect Option A, decline RCSBP Cover less than full retired pay Elect “child only” Elect Option B, deferred annuity It is the Soldier’s election The spouse can only concur or non concur These are the three elections that require written spouse concurrence. Since elections are valid only if completed prior to retirement, please build sufficient time into your retirement processing to allow your Retirement Services Officer (RSO) to obtain spouse concurrence. The process is: the Soldier and spouse receive SBP counseling. the Soldier makes an SBP election. if the election requires spouse concurrence, the spouse is notified of the decision and given the opportunity to concur. if concurrence is provided before retirement, the election is valid. if it is not, the election is invalid and full spouse coverage is established, in accordance with federal law. certified mail is used to obtain concurrence when the spouse cannot be present for counseling.

No Beneficiary at 20 Year Letter?
Keep RCSBP literature Keep “Echoes” Contact nearest RC RSO for a new briefing as soon as eligible beneficiary is gained Decision whether or not to enroll new family members MUST be made within one year of gaining them New spouse becomes eligible at 1-year marriage anniversary. Submit RCSBP change on a DD Form , Election Change Certificate It is important to note that Soldiers without a spouse or children on date of RCSBP election may have future options. Since they have no eligible beneficiaries now, they have not closed the door on future RCSBP enrollment. If that is you - “What action should you take if you gain eligible family members after retirement?” The answer - “Contact a Reserve Retirement Services Officer for a refresher briefing to help you decide if SBP has a role to play in your new family circumstances.” Most importantly, remember the ONE YEAR time limit on making all RCSBP changes. In you gain a spouse and or child, the coverage is effective after one year of gaining the beneficiary. If you gain a spouse, you MUST take the action BEFORE your one-year anniversary (i.e., make a written request and provide a marriage certificate) -- a spouse gained after your 20 year letter is NOT eligible until completing one year of marriage, or earlier, if a child is borne of the marriage. Submit RCSBP change on a DD Form

amount of retired pay (in dollars) participation is based on
Base Amount amount of retired pay (in dollars) participation is based on minimum, by law = $300 maximum, by law = full retired pay may choose any $$ amount between Now, let’s turn our focus to SBP’s cost. The base amount is the dollar amount of retired pay selected by the Soldier, upon which both the cost and benefit are based. During this briefing, SBP costs & benefits are referred to in “monthly” terms. The SBP “benefit” is called an annuity, which is defined as any regular, continuing payment. The DoD Actuary’s SBP valuation disk demonstrates what base amount gives you the “most bang for your retirement buck,” so-to-speak -- meaning, which base amount maximizes the value of your retired pay.

Can I Tailor RCSBP/SBP To Meet My Needs? Yes....Think “Base Amount”
Challenge: What base amount should I cover to meet our needs? Solution: Divide the goal amount by 55%. Examples: $1000 annuity -- choose $1818 as base $ 500 annuity -- choose $ 909 as base If you conclude after studying SBP that your family’s needs can be met by covering less than your full retired pay, this slide shows you how to personalize your participation. First, determine your goal - what annuity you wish to produce for your family (considering all other guaranteed sources of survivor income). Then, divide that goal amount by .55 (or 55%) to determine how many of your retirement dollars you should cover as your base amount to achieve that result.

The Annuity Amount: Annuity is 55% of the base amount elected regardless of the annuitants age Annuity is 55% regardless of annuitants age

RCSBP Cost Calculations
RCSBP calculator based on retired pay and age at time of enrollment. RC retired pay based on retired grade, service longevity, and creditable retirement points. RC cost factor calculated by the DA Actuary Steve/COL Hagan, Put in verbiage to explain. Briefly describe the HRC Calculator.

“30-Year Paid-Up Provision”
effective 1 Oct 2008 no further cost (but annuity payable) AFTER... 30 years of paying RCSBP/SBP Premiums (360 payments)… AND reaching age 70 Note: Must make 360 RCSBP payments to be paid-up for RCSBP and 360 SBP payments to be paid-up for SBP and RCSBP Our last item on “cost” is this. Legislation passed in 1998 provides that SBP will reach “paid-up” status for members when they make 30 years of payments (360 monthly payments) and reach age 70. “Paid-up” = no further cost obligation; but the annuity remains payable to your designated beneficiary. Remember that adding this paid-up feature results in stopping premium from a significant number of participants; yet continuing the governments obligation to pay annuities. Must make 360 RCSBP payments to be paid-up for RCSBP and 360 SBP payments to be paid-up for SBP.

RCSBP Election and Active Duty
Retirement Affect of RCSBP election on active duty retirement RCSBP election has no affect on active duty retirement Must make separate SBP election There is no cost for RCSBP coverage already received prior to active duty retirement Example is an AGR Soldier

SBP Particulars How RCSBP influences SBP elections Termination Feature
Cost difference

Termination Feature can terminate SBP after 2 years of ret.
one-year window between 25th and 36th months after start of retired pay spouse concurrence required barred from future enrollment no refund of past premiums No termination of RCSBP because it is for coverage already received Since May 17, 1998 the law has given all participants a one-time, one-year window of opportunity - between the 25th and 36th month following start of retired pay - to terminate their SBP coverage. This requires spouse concurrence; there is no refund for past protection; and future enrollment is barred. RCSBP cannot be terminated as the premium is for coverage already received prior to receipt of retired pay.

RCSBP/SBP and Dependency and Indemnity Compensation (DIC)
SBP and DIC SBP premiums are refunded to the spouse for any portion of SBP that is offset by DIC RCSBP/SBP is offset dollar for dollar by DIC. Exception: if survivor remarries after age 57, can collect both SBP and DIC. Currently DIC is only payable if member’s death is determined by the VA to be service connected RCSBP/SBP provides annuity if death is not determined to be service connected (Note: important slide for Medically retired Soldiers). RCSBP/SBP is offset by DIC dollar for dollar. RCSBP/SBP premiums paid for any portion of RCSBP/SBP that is offset is refunded to the surviving spouse. Any spouse RCSBP/SBP above DIC would be paid to the surviving spouse. DIC is only payable if the member’s death is service connected. If death is not service connected, RCSBP/SBP provides the survivor annuity.

Withdrawal from SBP Based on VA Total Disability Rating
You may withdraw from SBP if: You have a service-connected disability that has been rated by the VA as totally disabling for not less than five continuous years from the date of retirement --or-- if awarded after retirement for ten or more continuous years. Withdrawal is allowed because surviving spouse will qualify for DIC benefits because death will be presumed to be from service-connected reasons When retiree dies, the surviving spouse will be entitled to a refund of all the SBP costs that were paid (Note: important slide for Medically retired Soldiers). Retiree’s who are rated 100% disabled after retirement by the VA for ten or more continuous years, or were rated by the VA 100% from for not less than five continuous years from the last date of active duty, may withdrawal from SBP. The withdrawal is allowed because surviving spouse will qualify for DIC benefits because death will be presumed to be from service-connected reasons. The premiums will not be refunded to the retiree. However, when retiree dies, the surviving spouse will be entitled to a refund of all the SBP costs that were paid.

Special Survivor Indemnity Allowance (SSIA)
SSIA is paid to spouses whose SBP annuity is fully or partially offset by DIC. SSIA will be paid to the surviving spouse if entitled to DIC, receiving an SBP annuity either partially or completely offset by DIC; and SBP offset is at least equal to the SSIA Payments will be paid in the following monthly amounts: For months during fiscal year 2010, $60; 2011, $70; 2012, $80; 2013, $90; 2014, $150; 2015, $200; 2016, $275; 2017, $310 Ends 1 Oct 2017 unless extended by Congress (Note: important slide for Medically retired Soldiers). Special Survivor Indemnity Allowance for persons affected by required SBP annuity offset for DIC. A monthly special survivor indemnity allowance will be paid to the surviving spouse if the surviving spouse is entitled to DIC and is eligible to receive an annuity by reason of an election of SBP who, except for the DIC offset, would be eligible to receive the annuity, shall be paid the monthly amounts equal to- For months during fiscal year 2010, $60.00; For months during fiscal year 2011, $70.00; For months during fiscal year 2012, $80.00; For months during fiscal year 2013, $90.00; For months during n FY 2014, $150; for months during FY 2015, $200; for months during FY 2016; $275; for FY 2017, $310. SSIA will end on 1 October 2017, if not extended by congress.

SBP Cost Formula (Spouse Only)
- 6.5% of base amount selected - cost lowered in Mar ‘90 Examples: Base Amount: $ $ $4000 Cost (6.5%): $ $ $260 Net Retired Pay : $ $ $3740 Annuity provided: $ $ $2200 The decision that’s been made by someone who participates in SBP is fairly straight-forward: they choose to receive reduced retired pay during THEIR lifetime in order to continue a portion of their pay after their death. Conversely, one can say that retirees who do not participate have elected to receive full retired pay during their lifetime, knowing that their full retired pay will die with them. Since SBP was designed primarily with military spouses in mind, let’s examine first costs and benefits associated with spouse coverage. (Former spouse costs and benefits follow the same rules.) Simply put, spouse coverage costs 6.5% of the base amount selected. We’ve said that the base amount is any amount between a minimum of $300 and a maximum of your full retired pay. Back when the cost was reduced in 1990, the so-called competition began to fall away. Truthful insurance & investment competitors began to advise Soldiers that their product couldn’t beat SBP, but should be used as a supplement to it. No similar private survivor program we know of matches SBP’s 6.5% tax-free cost, and other features.

(Ages: Member=44; Spouse=41; Youngest Child=12)
Sample SBP Costs (Ages: Member=44; Spouse=41; Youngest Child=12) Monthly Cost Base Spouse Spouse Child Annuity Amount Only & Child Only Amount $ $ $ $ $2200 $3000 $ $ $ $1650 $2000 $ $ $ $1100 These are examples of various base amounts of coverage and their associated costs for: 1) “spouse only”; 2) “spouse and child”; and 3) “child only” elections. Also listed are annuity amounts. The ages of the participants are 44, 41 and 12. All three ages are used to determine child costs in spouse & child elections. Only two ages are used to determine “child only” costs. All eligible children are covered at one cost with the cost stopping for children when the youngest exceeds the age limit.

Considerations With RCSBP/SBP
The Nature of Annuities Positives/Negatives RCSBP/SBP vs Life Insurance Replacement Cost

Life’s Certainties? Civilians: 1--death 2--taxes
Retirees: 3--Can’t outlive retired pay Annuitants: 4--Can’t outlive SBP annuity You’re probably familiar with Ben Franklin’s saying that “only two things in life are certain - death and taxes.” Well, for the military retired community, there’s a new version, with two added certainties: -- retired pay cannot be outlived! -- an SBP annuity cannot be outlived! Can a retiree outlive “savings”? Yes! Can the recipient of a life insurance policy outlive the proceeds? Yes! Obviously, all monthly income can be outspent. But, retirees and SBP annuitants can count on the fact that on the first workday of the next month, they’ll get a fresh start with a new pot of money -- for as long as they live!

RCSBP/SBP POSITIVES Only way to provide an annuity based on your eligibility for retirement is when the Service Member dies Tax-free premiums Inflation-adjusted annuity Level-term plan annuity of 55 percent “Paid-up” after 30 years paying premiums + age 70 Annuitants cannot outlive RCSBP/SBP annuity Age, health, smoking, sex, lifestyle -- not considered Can only be changed by Congress Income safety net; peace of mind The slide summarizes SBP’s positive features. RCSBP is the only way to provide an annuity based on your eligibility for retirement if you die prior to your nonregular retirement. We’d all agree that it’s smart financially to take advantage of a situation which offers you tax avoidance. Your future RCSBP and SBP premiums do - and, you can even use the tax savings to make other investments. Unlike insurance values which are eroded by inflation, RCSBP’s value increases with COLA raises for inflation. The annuity is paid for however long needed - 1 to 50 or more yrs. RCSBP costs don’t consider any factor except level of coverage. Level benefit of 55% without regard to age of spouse or former spouse! NOTE: The 04NDAA changed the post-62 benefit structure, and phases-in an increase to make SBP a level-term, 55% annuity, during the period 1 Oct Apr 08. There are no extra fees, agent commissions or risks. It’s a plus that only Congress can change RCSBP’s or SBP’s features. They make changes on matters affecting survivors very cautiously. While less quantifiable, peace of mind rises in value with age.

RCSBP/SBP’s “Perceived” NEGATIVES
Annuity is taxed to survivor Premiums not returned if spouse dies first Retired pay reduced because of SBP costs Cost increases with COLA No inheritance provision No cash value; can’t borrow against it Each of these negative “perceptions” has a positive side. All income is typically taxed either at the front or back end. Obviously, it is smartest to take a tax break when it’s of most value to you - when you’re in a higher tax bracket as a couple. That’s when tax-free SBP premiums are paid. It is not a viable “counter” to pose that insurance proceeds are tax-free. When they are used, they are taxed. And when they are gone, they are gone! SBP’s goal is to protect military retired pay…period! If it is protection of a spouse’s life you seek, you might want to buy a life insurance policy on your spouse. In fact, you can use the monthly tax savings SBP provides to fund that policy. Choosing to receive reduced retired pay during your lifetime is the only way to continue a portion of it after you die. And it couldn’t be a simpler process. The Finance Center simply deducts the premium before paying you. Such automatic deductions result in coverage that can’t lapse because of a missed payment. Worth thinking about is this….if you find living on 93.5% of your retired pay (retired pay minus 6.5% spouse costs) painful -- how will your family survive on 0% after your death? The 6.5% spouse cost does not increase. However with each retired pay COLA received, your cost becomes 6.5% of a new, higher amount - which produces a higher annuity. Call it a relatively, increasing product. SBP is not intended to be an “inheritance” vehicle. But, consider the notion that the best inheritance you can give your kids is a financially-independent parent. If they aren’t burdened with supporting your spouse, that’s a substantial “inheritance.” Also, when SBP is used to pay monthly living expenses, perhaps other monies can be tucked away or invested to meet your inheritance goals. But without SBP as the work horse, the intended “inheritance” could easily be depleted. True -- SBP does not have insurance-like features. We think that’s a plus - it keeps the Plan affordable. We think SBP is far easier to understand than insurance. Like any such plan, there are exceptions to its general rules. However, basic rules and principles apply to most participants, and are what need to be understood. When you have a more complicated question, your Retirement Services Officer is only a phone call away.

Four Main Points When Comparing RCSBP and SBP to Life Insurance
It takes a surprising amount of insurance to do for the spouse what SBP will (based on averages). It will take a lot more insurance if the spouse outlives the retiree by the longest period of time. The amount of insurance needed over time rises due to inflation. Even though insurance may appear to be an inexpensive “alternative” at retirement, it’s harder to obtain & increasingly expensive as you age. Consider these four main points: 1—(First bullet self explanatory) 2-- (Read Second bullet) Since you don’t know how many years your spouse might outlive you, determining what is adequate regarding insurance is impossible. A crystal ball is not needed with RCSBP - it simply cannot be outlived. 3-- (Read Third bullet) RCSBP’s inflation-fighter is its guaranteed cost-of-living adjustments (COLAs). Increasing life insurance is needed as one ages, due to inflation’s eroding effect on the dollar’s purchasing power. 4-- (Read Last bullet) Try to adjust your thinking from short-sighted to long-term. When you limit your view, life insurance may appear more attractive (i.e., cheaper) than SBP. But, if you compare RCSBP and SBP costs and benefits with life insurance costs and benefits for each year in the future, you’ll see that insurance costs must increase dramatically based on the insurer’s increased risk of paying a policy. Since RCSBP and SBP simply protect your beneficiaries from inflation through yearly COLA increases as needed.

What is the risk of your spouse outliving you?
Life Expectancy: Male 75.1 years Female 80.2 years SBP Annuitants Who Exceed Life Expectancy: 45% or 117,755 Why might these statistics interest you? Well, we assume that your goal for your family is to find a way to create a stream of income which will continue as long as it needs to after your death. We also assume that you can’t know how long that “needed” period of time will be. With SBP, there is no guesswork. SBP will provide a monthly annuity to your surviving spouse forever! Presently most spouse SBP annuitants are female. On the average a female will outlive a male by five years. Statistically 45 percent or 117,755 of SBP annuitants exceed 80.2 years, the life expectancy of a female. So, while at this moment you may feel young, healthy, lucky, and fairly certain you will exceed the statistics on life expectancy.…what if you’re wrong? Is that a risk you and your family members are willing to take? Note 1: US Census Bureau , The 2010 Statistical Abstract Note 2: Source: DOD Actuary Statistical Report on Military Retirement System

Replacement Value of Annuity
Ret Pay: $5000 Member’s Age: Spouse’s Age: 42 Spouse’s Age Annual After-Tax Replacement At Soldier’s Death SBP Annuity Value of SBP* $29, $830,444 $38, $944,099 $52, $998,434 $69, $939,095 83 $94, $738,339 *Face value of insurance needed to equal SBP benefit. Assumes an inflation amount of 3% and return on invested insurance of 5.75%. Based on DOD Actuary SBP Program, Spouse will live to 86. Note: To access this program go to DOD Actuary homepage, ww.dod.mil/actuary/, click on “SBP Programs.” This is an abbreviated version of one of the Actuarial printouts available to you (on the Army RSO homepage and through your RSO). Represented is the amount of insurance a 43-year old, male, with a 42-year old, spouse, protecting $5000 of monthly retired pay, needs in order to provide the same benefit as SBP. Assumes an inflation amount of 3% and return on insurance of 5.75%. The first year, $830,444 of insurance is required to provide the same benefit as SBP. If the member died at age 73, the spouse would, by the Actuary tables, collect SBP for 13 years and the insurance required to replace the insurance is $939,095. No smoke and mirrors here. The Actuary’s program gives you the interest, inflation and tax rates, any of which you can change; if you like. Remember, effective 2008 there are no premiums paid for SBP after age 70, and 30 years of payments.

Replacement Value of Annuity
Ret. Pay: $3000 Member’s Age: Spouse’s Age: 42 Spouse’s Annual After-Tax Replacement Age at Death SBP Benefit Value of SBP* 43 $17, $433,516 54 $23, $487,644 64 $31, $506,232 74 $42, $473,925 This is the scenario for a 43-year old, male with a 42-year old spouse. This example uses a pay entitlement and SBP base amount of $3000. The figure $380,027 represents the amount of an insurance product this retiree needs to have in place to equal the SBP benefit. For this member, at age 73, SBP is no-cost. The spouse would, by the Actuary tables, collect SBP for 9 years and $473,683 dollars of insurance would be needed to equal SBP for the surviving spouse’s expected life span. Remember, starting in 2008 there are no premiums paid for SBP after age 70, and 30 years of payments. *Face value of insurance needed to equal SBP benefit. Note: This program can be accessed on the DOD Actuary homepage,

Life Insurance Proceeds-- How Long Do They Last?
(Ret Pay = $3000; Life Insurance = $250K) Death Spouse Insurance After-Tax Year Age Proceeds SBP Benefit $250,000 $17,891 $240,632 $18,991 $163,277 $24,044 $ 68, $27,847 $ $30,459 This example, based on $3,000 retired pay and SBP base amount, illustrates how long $250,000 of life insurance lasts when withdrawn in the amount equal to the annual SBP annuity. Death occurs in this example in 2006, when the spouse is 42. A $250,000 life insurance policy is depleted in 18 years, when the surviving spouse is 60. That doesn’t take into account purchase of any big-ticket items, paying off a mortgage, financing education, etc. Spouse life expectancy based on actuary tables is 82. Therefore, SBP would continue to provide an annuity for an additional 22 years after the proceeds of life insurance were exhausted. Most importantly -- SBP continues for a lifetime, increasing by COLA. Spouse’s expected age at death 82 Years without insurance proceeds 25 Note: To access this program go to DOD Actuary homepage, click on “SBP Programs,” and select the program, “Insurance”.

Years Required for Annuity to Exceed Premiums Paid for Spouse SBP
Length of time Years for Annuity to Premiums Paid Exceed Premiums Paid 5 Years 8 Months 10 Years 1 Year, 1 Months 15 Years 1 Year, 6 Months 20 Years 1 Year, 10 Months 25 Years 2 Years, 2 Months *30 Years 2 Years, 5 Months *No further cost after 360 (30 years) premium payments and age 70) (Based on data provided by the DOD Actuary Office) The annuity your spouse receives will typically quickly exceed the amount you paid in SBP premiums. If the retiree paid premiums for 5 years, the spouse beneficiary will receive the equivalent of the total SBP premiums paid in just eight months of collecting the annuity. If the retiree paid premiums for 15 years, the SBP beneficiary will receive the equivalent of the total SBP premiums paid in one year six months. If the retiree paid premiums for 30 years, the spouse will receive the equivalent of the total SBP premiums paid in two years five months.

HQDA’s Advice To All Retiring Soldiers
“Do not forfeit RCSBP or SBP without having full knowledge of what you are giving up.” (Chief, Army Retirement Services) In conclusion, we hope the information presented in this briefing has accomplished one thing - to have made you better equipped to make an informed decision on RCSBP. If you decide NOT to enroll, it should be because you’ve determined that RCSBP has no role to play in your family’s financial plan - NOT because you are uninformed.

For More RCSBP/SBP Information….
Log on to: Contact: SSG Katy Digby –CA ARNG-RSO SFC Ryan Sturm-CA ARNG-RSO SFC Rosa Fale-AR RSO MAJ Leonani York-AR RSO LTC Kathleen Couillard-AR RSO For more information on RCSBP you can visit the following listed sites or contact the listed contacts. These sites and contacts can also provide information on other retirement related issues.

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