Reserve Component Survivor Benefit Plan Premiums (RCSBP) vs. Active Duty SBP Premiums

Active duty retirees are eligible for retired pay immediately upon retirement.  When a Spouse or Former Spouse Survivor Benefit Plan (SBP) annuity has been elected or court-ordered, premiums are deducted from each month’s retired pay.  The standard premium for active duty retirees is 6.5% of the “base amount.”  The base amount is the amount of retired pay insured, which typically is the retiree’s gross retired pay.  So, it is not uncommon for an active duty retiree to begin making monthly SBP premium payments when they begin to receive retired pay at age, 40, 45, or 50, for example.

Reserve Component (RC) servicemembers (e.g. Reservists or Guardsmen) are eligible for Reserve Component SBP (RCSBP) when notified the RC servicemember achieved the required “20 good years” of service to be eligible for a Reserve Component retirement.  A key difference from an active duty retiree is that the Reserve Component (RC) retiree generally does not start to receive monthly retired pay payments until age 60.  RCSBP premium payments, therefore, generally do not start prior to the RC servicemember reaching age 60, since there is no retired pay from which to deduct the premium.

For RC servicemembers with a Spouse or court-ordered Former Spouse beneficiary, the SBP coverage normally provided is known as “Option C.”  Under Option C, RCSBP coverage is immediate once the RC servicemember becomes eligible for retirement.  Should the RC servicemember who is eligible for retirement (or later applies for retirement) die prior to the time at which retired pay commences (e.g. generally, dies prior to age 60), the Spouse or Former Spouse still receives SBP annuity payments. 

The Dep’t of Defense compensates for the benefit of RCSBP’s immediate coverage versus the delay in RCSBP premium payments by structuring the RCSBP premium different from the active duty premium.  Once a RC retiree begins receiving retired pay, generally at age 60, the RCSBP premium has two components.  The first component is the “Standard Premium.”  In simple terms, this is the same premium paid by active duty retirees.  The second component is the “Reserve Component Premium.”  The Reserve Component Premium is in addition to the Standard Premium.  This extra payment is calculated to compensate for the years during which RCSBP coverage was provided prior to the RC retiree receiving retired pay.

Remember, in cases where the RC servicemember is eligible for retirement, or has applied for retirement, but has yet to begin receiving retired pay, the Spouse or Former Spouse beneficiary still receives a SBP annuity despite the fact a single premium has yet to have been paid.  The Dep’t of Defense compensates for this fact through a “Survivor Annuity Premium Deduction.”  In other words, the SBP annuity paid to the Spouse or Former Spouse is decreased to recoup “post-death” premium payments.  This annuity reduction to recoup premium payments never made is unique to the RCSBP program.

Information about how the “Reserve Component Premium” and “Survivor Annuity Premium Deduction” are calculated is available in Department of Defense Financial Management Regulation 7000.14-R, Volume 7B, Retired Pay Policies and Procedures-Retired Pay, Chapter 54, Reserve Component Survivor Benefit Plan (RCSBP).

Author Jim Cramp is a retired active duty colonel and the founder and principal attorney at the Cramp Law Firm, PLLC.  The firm provides a spectrum of family law-related services to clients in the greater San Antonio region, across the United States and throughout the world.  The firm specializes in Federal Civil Service and Military Divorce matters.