Can somebody explain the DD Form 2656-5 (Reserve Component Survivor Benefits Plan) and best option?

SGT Robert K. — Mon, 07 Nov 2016 13:51:53 -0500

Response by SSG Robert Smith made Nov 7 at 2016 1:55 PM

SSG Robert Smith — Mon, 07 Nov 2016 13:55:05 -0500

It provides for your dependents in case of youreally death as long as they are under 18 or 21 if in school. They only take 3% of your retired pay to fund it.

Response by SMSgt Lawrence McCarter made Nov 7 at 2016 2:20 PM

SMSgt Lawrence McCarter — Mon, 07 Nov 2016 14:20:17 -0500

Also without that plan in the event of Your death Your survivors will get some of their other entitlements but not any of Your retired pay unless You select an option to do so. They still will only get a percentage, less than half of what You receive bu that sure better than leaving them with nothing. If However You outlive them all then it would not apply and would not pass on. Make sure You check on this, many have found it isn't explained very well and it sure is important.

Response by MSG Private RallyPoint Member made Nov 7 at 2016 2:59 PM

MSG Private RallyPoint Member — Mon, 07 Nov 2016 14:59:32 -0500

IMO, the best option is to decline it and get good life insurance policy.

Response by CAPT Hiram Patterson made Nov 8 at 2016 8:13 AM

CAPT Hiram Patterson — Tue, 08 Nov 2016 08:13:53 -0500

If you choose the option where you pay a monthly premium, your surviving spouse will receive 55% of your retired pay. Some people say to decline it and buy life insurance instead. In the end it really depends on your life situation. I'd look at the DFAS (Defense Finance and Accounting Service) website for information. Try talking to a retiree who may be able to offer personal insight.

Response by SMSgt Private RallyPoint Member made Nov 8 at 2016 11:06 AM

SMSgt Private RallyPoint Member — Tue, 08 Nov 2016 11:06:18 -0500

It is your survivors portion of your retirement pay to provide in addition to life insurance when you pass. If you choose to elect to not take the spousal option, you must have your spouse sign in agreement. If you are divorced and you were married for over the XX years required, you will also have to have them sign approval of declining the spousal election. Go talk to your personnel section and JAG office about this to get the correct information for your situation. You can also go to the Air Force's legal assistance website (don't need a CAC or .mil computer to log on to it), it has links to the closed military legal office (any branch) and links to topics regarding this and many other legal questions we have as military members.

Response by LtCol William Bentley made Nov 15 at 2016 3:29 AM

LtCol William Bentley — Tue, 15 Nov 2016 03:29:28 -0500

The best option is the one you choose. Nobody else can make the decision, except if you are married your spouse can veto your decision. that is to protect the spouse...not you.

To be clear, the entire SBP/RCSBP program is not about the servicemember at all: it is about transferring wealth to the surviving spouse (or other eligible beneficiary) after you die. Simple, right?

Without it, when you die, your retired pay stops. Or if you were a gray area reserve retiree awaiting pay at a later age, your retired pay will never start.

With it, at least a portion (maximum is 55%, although with spouse concurrence it can be lower) of your retired pay will continue (with some exceptions regarding age of spouse and their re-marriage, etc.) unabated until your spouse or other eligible beneficiary also dies.

All premiums for SBP/RCSBP are pre-tax, so there is a built-in benefit today to lower your taxable earnings somewhat, but the pay-outs, if any, are taxable.

I pay about $300/month in SBP premiums, so it reduces my taxable income by about $3600 per year. What do I get from this other than tax reduction? Well, peace of mind that my spouse and/or children until they are no longer eligible will continue to receive 55% of my retired pay should I die before them. SBP is a heavily subsidized program, so the true costs are higher than what you pay. It is also difficult to compare to civilian-style insurance products because of the subsidies, tax benefits, costs, and limitations. It is designed to do just the one thing...keep an annuity stream of income for your beneficiaries who outlive you. it is very good at that one thing. Not so good at many others.

I struggled mightily with my decision to buy SBP or not. In the end, because I was medically retired, and thus became very difficult to insure at a young age with reasonable premiums, I went with SBP. I figure my life expectancy was already less than my wife, so adding various ailments, it's probably even less. If I could even get reasonably priced whole life insurance at all, in an amount to "break even" with the expected income stream from the SBP annuity, I would pay at least as much as I would pay for SBP...after tax today and tax free later. But I would then have to have the willpower and financial acumen to keep paying those premiums for the rest of my life (or dump a huge cash wad to fund it up front), whereas SBP takes it off the top of every retired paycheck, and then after 30 cumulative years of payments, you stop paying. Forever. The benefit remains, however.

The biggest drawback of the SBP/RCSBP plans is you may pay into them for years, and then your spouse pre-deceases you. What do you do? Nothing, because it insured you, not your spouse. So, in that respect, it's like you bought a big term life plan on yourself, figuring your would die first, but when your spouse died first all the money you spent on insuring yourself didn't help at all. But in the civilian insurance case, you can keep what you already had and keep paying, just change the beneficiary. For SBP, you won't keep making payments, can't get back what you already spent, but you DID get a pre-tax benefit up front AND if you remarry, you can begin payments again where you left off, and finish out the 30 years of total payments and have a paid up SBP plan.

As a gray area reserve retiree, you should at least choose the option that covers your spouse right away if you die...because your Service pays for it all until you begin to draw retired pay, at which time your RCSPB premiums will be proportionately higher because you got better coverage for those years, and now you have to pay more. But it's not a lot more, and the life insurance game you will have provided for your family. You could also choose not to allow any RCSBP pay outs if you die before you would first have been eligible for reserve retired pay. Then, your premiums will be somewhat lower...but if you died at age 38 after 20 qualifying reserve retirement years, and weren't eligible to draw reserve retired pay until you turned age 60, then your beneficiaries will have to wait 22 years to begin receiving payments. Is that what you want? If so go for it. It would be cheaper (probably) to get more insurance up front at age 38 for both you and your spouse, than at a later age.

talk it over with others, read the literature and reports on the subject, and above all else, ENSURE YOU FULLY UNDERSTAND WHAT YOU ARE SIGNING. And your spouse knows, as well, to avoid ugly future divorce issues when the SBP/RCSBP becomes marital property to be disposed of or maintained by the Court...