One part of Navy Mutual’s mission that we are very proud of is our commitment to providing financial education to those who serve. Helping the military community understand their retirement options and how to protect their loved ones financially is foundational to who we are.
The Reserve Component Survivor Benefit Plan, or RC-SBP, is a wonderful benefit for reservists who become eligible to receive a retirement pension. While similar to the active-duty Survivor Benefit Plan (SBP) program in that it is a government-subsidized monthly annuity provided to eligible beneficiaries of a service member, there are differences. Not only is a reserve pension not typically paid out until age 60, but there are also differences in reservists’ SBP options.
One difference between SBP and RC-SBP is when you make your election. As a reservist, you will receive a notice of eligibility, also called the “20-year letter,” when you become eligible for retirement, even if you are actively serving in the reserves. You have 90 days from the issuance of this letter to make your decision.
When deciding whether to participate in RC-SBP, review your current death benefits. If you were to pass away today, what would your loved ones receive? This may include Social Security, employer benefits, personal savings, life insurance, and, in certain circumstances, a death gratuity from the Department of Defense.
With that information, you can determine how much money would be available to your beneficiaries after your passing. If you wish to provide your family another source of income, you may want to consider participating in RC-SBP.
You have three options for enrollment within Reserve Component Survivor Benefit Plans.
Option A, you decline to decide about enrollment until you begin to receive your retirement pension, at which point you will be given another opportunity to elect RC-SBP.
If you choose this option and then pass away before becoming eligible to receive your pension, your loved ones cannot opt into the program in your absence. In this case, no portion of your retirement pension will ever be paid out. Electing this option requires a notarized signature from your spouse.
Option B provides a deferred annuity. Your beneficiary will begin receiving monthly annuity payments on the anniversary of your 60th birthday or the day after your death, whichever occurs later. If you pass away before turning 60 years old, your beneficiary will begin receiving annuity payments when you would have turned 60. If you pass away after turning 60, your beneficiary will begin receiving payments immediately. This option requires a notarized signature from your spouse.
Option C provides an immediate annuity, meaning that annuity payments begin the day after your death, regardless of your age. This option provides coverage for your beneficiary during the “gray area” as a reservist, when you are retirement eligible but not yet receiving your pension. This option is the default option in which you will be enrolled if you fail make your RC-SBP election within the 90-day time frame.
Along with choosing Option A, B, or C, you will have to choose a designated beneficiary category: Spouse Only, Child(ren) Only, Spouse and Child(ren), Former Spouse, Former Spouse and Child(ren), or Insurable Interest. If you have an eligible beneficiary when making your RC-SBP decision (e.g., a dependent child), you must either take it or decline it forever. In most cases, beneficiary elections are irrevocable.
The cost of coverage depends on both the option you choose and the beneficiary category you select. You will start paying premiums when you start receiving your retirement pension; the cost of coverage is made up of the SBP premium, the RC-SBP add-on cost for some categories, and, in some cases, the survivor’s cost. Premium payments must be made for 30 years or until you have no eligible beneficiary. Premiums are not deducted from the benefit if you pass away before making 30 years of payments.
You can visit the Office of the Department of Defense Actuary website and use their tools to estimate your RC-SBP premiums.
What makes RC-SBP unique, and worth considering as part of your overall plan for your survivors, is that the annuity is a guaranteed, inflation-adjusted, monthly income stream that, for a spouse, can be paid for the rest of their life (provided they don’t remarry before age 55). Eligible disabled children are also able to receive benefits for life. RC-SBP participation can protect your legacy and your loved ones after you are gone.
Learn more about Reserve Component Survivor Benefit Plans at the Navy Mutual website.
This article was written by Rear Adm. Brian E. Luther, USN, (Ret.) He served as a naval aviator in the U.S. Navy. He is currently President and Chief Executive Officer of Navy Mutual.
