William Hursh Army Retirement Services Office 11 January 2018 - PowerPoint Presentation

William HurshArmy Retirement Services Office11 January 2018 Department of the Army Reserve Component Survivor Benefit Plan (RCSBP) Soldier and Spouse Brief

CHANGE.... MISINFORMATION you may have heard on RCSBP from MISINFORMED PeopleINTO..... INFORMATION from INFORMED Experts Our Goal

Break RCSBP down into manageable understandable blocks Allows RC Soldiers to make informed decisions on their individual RCSBP elections PURPOSE

THE BOTTOM LINE Without RCSBP There is no annuity if the RC Soldier dies prior to receipt of retired pay

What Are The Risks?No RCSBP : Higher risk of leaving your loved ones with insufficientincome RCSBP : Cost versus ReturnsWhat if I don’t diebefore my non-regular retirement? /

WHAT IS RCSBP?Enacted by Congress in 1978Sole 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 RetirementRCSBP and SBP are paid as a monthly annuity to eligible survivorsRCSBP 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

Notification of Eligibility for Non- Regular Retirement (NOE) Commonly referred to as the 20 Year LetterIssued when RC Soldier attains 20 qualifying years of serviceContains a DD Form 2656-5 Reserve Component Survivor Benefit Plan (RCSBP) Election Certificate Qualifying year is a complete year in which the RC Soldier earns 50 or more points 15 year letter issued by NG only after Medical Board, NG Soldier asks for transfer to Retired Reserves, CG authorizes and publishes order. USAR requires HRC final approval and issue of the 15 year letter NOE

ABOUT ELECTIONS Must be made within 90 days of receipt of Notice of Eligibility (NOE) for Retired Pay (20 Year Letter) packet from the Human Resource Command, Fort Knox for USAR or State Headquarters for National Guard Certain elections need spouse concurrence Certain elections affect your SBP election Certain elections require payment of RCSBP premiums when in receipt of retired pay for Reserve non-regular retirement

RCSBP Election Options 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 60Option C: RCSBP coverage with immediate annuity If at the date of the NOE you are not married, have no eligible children, and do not desire to elect for a former spouse or insurable interest, complete the DD Form 2656 and elect no RCSBP option First must chose one of three RCSBP election options; A, B, or C

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 SBP coverage is elected at non-regular retirement, SBP premiums and coverage starts at non-regular retirement A

RCSBP Option B If Option B (Deferred Annuity) RCSBP coverage Annuity paid when RC Soldier would have qualified for non-regular retirement to elected beneficiary categories who are still eligible 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 SBP will not start paying annuity until age 60 if non-regular retirement is prior to age 60B

RCSBP Option C If Option C (Immediate Annuity) RCSBP coverage Pay annuity i mmediately 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 SBP will not start paying annuity immediately even if non-regular retirement is prior to age 60 C

RCSBP Options Comparisons RCSBP Option RCSBP Coverage RCSBP Cost SBP Election SBP Coverage SBP Cost Option A Decline RCSBP Coverage No coverage and no RCSBP annuity payable None Yes, must make SBP election at non-regular retirement Only if SBP coverage is elected Only if SBP coverage is elected SBP even if non-regular retirement was prior to age 60 Option B Deferred Annuity Yes, annuity deferred until Deceased Reservist’s Age 60 even if retired prior to age 60 due to deployment Yes, paid after non-regular retirement even if prior to age 60 but approximately 25% less than Option C No RCSBP election becomes SBP election at non- regular retirement Yes, paid after non-regular retirement even if prior to age 60 Option C Immediate Annuity Yes, Annuity Immediate Yes, paid after non-regular retirement even if prior to age 60 No RCSBP election becomes SBP election at non- regular retirement Yes, paid after non-regular retirement even if prior to age 60 No Beneficiary At NOE Can elect Option B or C within one year of acquiring first spouse and or child following NOE None, unless they elect Option B or C within one year of acquiring first spouse and or child following NOE Yes, if election not changed to Option B or C for first spouse and or child acquired following NOE and defaulted to Option A or never married or had a child Only if SBP coverage is elected or RCSBP election was elected for spouse or child Option B or C Only if SBP coverage is elected or RCSBP election was elected for Option B or C and became SBP election This chart provides a RCSBP Comparison as they apply to coverage, cost, and SBP

Six Election Categories Spouse Only Spouse & Child Child Only Former Spouse Only FS & Child Insurable Interest

Spouse Optionprovides annuity of 55% minus the RCSBP premium (Current factors to calculate RCSBP premium cost for survivors is set so low there is no RCSBP premiums cost to survivors) annuity paid forever (unless remarriage occurs pre-55) if remarriage ends, annuity reinstated increased annual by COLAtaxable as an annuity RCSBP premiums stop when there is no eligible spouse or former spouse in election category

“Threshold” Spouse Premium Calculation Threshold is portion of base amount which costs 2.5% Only applies to Soldiers whose Date Initially Entered Military Service (DIEMS) date was prior to 1 Mar 90, medical retirements, or reserve non-regular age 60 retirement. Indexed annually to AD pay raise(s)Instead of a $300 base, cover threshold amount at 2.5% The threshold spouse premium calculation is more beneficial in cost for a base amount less than $1,806Threshold spouse premium calculation 2.5% for threshold plus 10% for base amount that exceeds thresholdNew spouse SBP premium calculation is 6.5% of the base amountDFAS will apply the calculation with the least cost The chart on the next page shows spouse SBP cost examples comparing the threshold calculation and the new 6.5% calculation with the point, $1,806, where all base amounts exceeding that amount cost less with the 6.5% calculation

Threshold Spouse SBP Calculation 2019 SBP Cost Examples Effective for 1 Jan 19   Based on 2.6% Active Duty Pay Raise Effective 1 Jan 19 (Note 6) Base Amount Annuity PremiumPremiumMonthly Amount of Retired Pay Covered Monthly Annuity Either MethodOld Method Threshold Monthly Cost (Note 1) 6.5% of Base Amount Monthly Cost (Note 2)$300 $165 $7.50 $19.50 $843 $464 $21.08 $54.80 $900 $495 $26.78 $58.50 $1,000 $550 $36.78 $65.00 $1,200 $660 $56.78 $78.00 $1,300 $715 $66.78 $84.50 $1,400 $770 $76.78 $91.00 $1,500 $825 $86.78 $97.50 $1,600 $880 $96.78 $104.00 $ 1,806.43 $994 $117.42 $117.42 $2,000 $1,100 $136.78 $130.00 $2,200 $1,210 $156.78 $143.00 $2,400 $1,320 $176.78 $156.00 $2,600 $1,430 $196.78 $169.00 $2,800 $1,540 $216.78 $182.00 $3,000 $1,650 $236.78 $195.00 The SBP threshold method applies to a Soldier who meets one of the following criteria: entered service prior to 1 Mar 90 if retiring for active duty length of service, medically retiring, or retiring from the Reserves with a non-regular retirement. For these Soldiers, two SBP spouse cost methods are available. The most advantageous one is used by DFAS. Note 1. SBP Cost Threshold Method: 2.5% of threshold amount + 10% of the remainder of base amount. Note 2. SBP Cost 6.5% Base Amount Method: 6.5% of the base amount.Note 3. Threshold Amount. (that which costs 2.5%) is $843; cost is $21.08.Note 4. Breakeven Point. Base amounts on or above $1,806.43 receive best treatment under SBP cost 6.5% method cited above (.065 times base amount). Note 4Note 3

Spouse & Child Optionspouse = primary beneficiary children are secondary beneficiary and receive the annuity only if spouse becomes ineligible (pre-55 remarriage or death) and they are still eligible child cost is based on years age difference between Soldier, spouse and youngest childcost of child coverage - very low when no eligible children remain, Child SBP cost stops but RCSBP cost continuesall eligible children are covered at one cost

Child Only RCSBP cost based on age difference between Soldier and youngest child at time of electioncheaper than “spouse” due to finite benefit but costlier option than child when with spouse since child is primary beneficiary can elect for children only because there is no spouse or exclude the spouseIf married and child only SBP is elected, spouse must concur

Child SBP Rules and Eligibility Applies to Spouse and Child election and Child Only electioneligible until 18, or 22 if full-time, unmarried studentunmarried incapacitated child - eligible forever (if condition was incurred pre-18 or 22) 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. The NDAA FY2015 contained a provision that allows the SBP for an incapacitated child to be paid to a special needs trust (SNT) for that child. all eligible children covered at one costwhen no eligible children remain, Child SBP cost stops but RCSBP cost continues

Advice--Seriously Consider Child or Spouse and 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 for a spouse 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 SBP cost stops when no eligible children remain but RCSBP cost continue

Former Spouse “Particulars”Former spouse coverage can be: purely voluntaryincorporated into a written agreement court-ordered If divorce prior to election: If court Ordered, Soldier must elect Former spouse or former spouse and child RCSBP at 20 year letter or could be held in contempt of court The Former spouse can provide HRC Reserve Retirement Pay Branch the divorce decree, subsequent court orders or a written agreement if not court ordered and a DD Form 2656-10, Request for Deemed Election, to request a deemed election within one year of the first court order or written agreement awarding former spouse RCSBPFormer spouse coverage can be changed to spouse if court orders are amended or by former spouse’s death If election is former spouse and children, only the children of the marriage to the former spouse are covered

“Insurable Interest” OptionWho 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 optionRCSBP: same as SBP SBP: 10% plus 5% for each full 5 years younger beneficiary is than Soldier (maximum 40%)Benefit: 55% of retired pay less RCSBP costLoss of Beneficiary: May elect new beneficiary within 180 days of current beneficiary’s death.

A “JOINT” Decision For Married Soldiers Who . . . Elect Option A, decline RCSBP Cover less than full retired pay for spouse Elect “child only” Elect Option B, deferred annuity for spouse It is the Soldier’s “ election” The spouse can only concur or non concur RCSBP Spouse Concurrence

Termination Featurecan 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 premiumsNo termination of RCSBP premiums because it is for coverage already received

RCSBP/SBP and Dependency and Indemnity Compensation (DIC)RCSBP/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 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 by the VA to be service connected and DIC is not paid to the surviving spouse

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: Now permanent benefit For months during calendar year 2019, $318SSIA increases with COLA raises

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 A child becomes eligible after one yearSubmit request for SBP to HRC within one year if USAR or Retired Reserve and to State RSO for National Guard TPU Soldiers RCSBP change on a DD Form 2656-5, Reserve Survivor Benefit Plan (RCSBP) Election CertificateIf no action is taken to elect RCSBP within one year of the first spouse or RCSBP eligible child after NOE to elect RCSBP, the RCSBP election option defaults to Option A, decline RCSBP participation

Base Amountamount of retired pay (in dollars) participation is based onminimum, by law = $300maximum, by law = full retired pay may choose any $$ amount between

The Annuity Amount : Annuity is 55% of the amount of your retired pay you elect to cover (base amount) regardless of the annuitants age

Can I Tailor RCSBP 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

RCSBP Cost CalculationsRCSBP premium calculated based on election, period of coverage, ages, and level of coverage 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 HRC RCSBP calculator is being revised

“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

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

Life’s Certainties?Civilians: 1--death 2--taxes Retirees: 3--Can’t outlive retired pay Annuitants: 4--Can’t outlive RCSBP/SBP annuity

RCSBP POSITIVESOnly way to provide an annuity based on your eligibility for retirement if you die prior to your non-regular retirement Tax-free premiums Inflation-adjusted annuity Level-term plan annuity of 55 percent “Paid-up” after 30 years paying premiums + age 70Annuitants cannot outlive RCSBP/SBP annuityAge, health, smoking, sex, lifestyle -- not considered Can only be changed by CongressIncome safety net; peace of mind

Four Main Points When Comparing RCSBP and SBP to Life InsuranceIt 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.

HQDA’s Advice To All Retiring Soldiers “Do not forfeit RCSBP without having full knowledge of what you are giving up.” (Chief, Army Retirement Services )

For More RCSBP Information….Log on to: http://soldierforlife.army.mil/retirement/ https ://www.hrc.army.mil/content/Reserve%20Component%20Retirements http://myarmybenefits.us.army.mil/ Contact information:Human Resources Command, 502-613-8950 Army Reserve RSOs https://soldierforlife.army.mil/retirement/reservecomponentArmy National Guard, contact State RSO

Without RCSBP There is no annuity if the RC Soldier dies prior to receipt of retired pay REMEMBER THE BOTTOM LINE