Who Pays for Your SBP Benefits?

August 22, 2014

If your answer is "I do," that's only part of the story.  

Unlike civilian life insurance or annuities, the law requires a significant federal subsidy for Survivor Benefit Plan (SBP) benefits.  

Retiree premiums do, in fact, cover most of the benefit cost for non-disabled retirees who spend at least 20 years on active duty, but DoD picks up the rest of the tab.  

For Guard and Reserve retirees, who usually don't draw retired pay until age 60 or reasonably close to that age, the DoD share of the cost is higher.  

In the case of members who die while on active duty or active duty for training, the Pentagon covers 100 percent of the survivor's SBP benefit.  

The proof of this is that, every year since 1989, the amount of SBP annuity payments to survivors has exceeded the amount of SBP premiums collected from retirees.  

For FY 2013, payments to survivors totaled $3.8 billion vs. $1.25 billion collected in retiree premiums.  

Many retirees believe the government is somehow making money in those cases when a spouse pre-deceases the retiree. But in fact, every single dollar of SBP premiums paid by today's retirees goes to fund survivors' benefits... and the total of the premiums falls significantly short of covering the SBP benefit cost.  

Unlike civilian insurance programs, SBP is a special benefit for military people who complete a career or die in service.  

A federal subsidy for the program is a recognition that military people pay far more for their benefits than their cash premiums. It's partial recompense for the vastly greater premiums servicemembers and their families pay in service and sacrifice over the course of an arduous career in uniform.