“Help – I Missed the Boat!” The Survivor Benefit Plan Open Season
Introduction: SILENT PARTNER is a lawyer-to-lawyer resource for military legal assistance attorneys and civilian lawyers, published by the North Carolina State Bar’s military committee. Please send any comments, corrections and suggestions to the address at the end of this Silent Partner. There are many SILENT PARTNER infoletters on military pension division, and other aspects of military divorce. Just go to www.nclamp.gov > “For Lawyers” (the website of the military committee, N.C. State Bar).
SBP – WHAT’S THAT?
One of the time limits in the military divorce process is the one-year deadline for the Survivor Benefit Plan, or SBP. Since this survivor annuity pays 55% of the selected base amount to the surviving spouse/former spouse, adjusted annually for inflation, it can be a significant measure of protection if the SM/retiree dies before the beneficiary. But the SBP election must be registered with the retired pay center within one year of the divorce.
The one-year deadline is often missed because the parties and their attorneys are unaware of this SBP time limit. If there is no timely election of SBP, then it’s lost – a big problem for the retiree’s former spouse in a military divorce case, since payment of the military pension stops when the retiree dies, thus terminating the former spouse’s share of the retired pay. Overlooking this important deadline can also give rise to a malpractice claim.
OPEN SEASON – A LIFELINE FOR THE FORMER SPOUSE
A new law provides a possible solution to the "missed SBP" issue; last December, Congress enacted a statute which opens the door to obtaining SBP when “John Doe,” the
servicemember/retiree, has not enrolled a spouse or former spouse in the program. The statute is called the Survivor Benefit Plan Open Season and it's contained in the 2023 National Defense Authorization Act (NDAA). We’re in the "Open Season" window right now; the time for the SM/retiree to apply ends January 1, 2024.
This amendment to the SBP statutes provides potential SBP coverage for -
- retirees receiving retired pay, and
- eligible servicemembers or former members who are awaiting retired pay who were not enrolled in SBP or RCSBP (Reserve Component Survivor Benefit Plan) as of December 22, 2022.
In general, a SM/retiree who enrolls during the SBP Open Season will be required to pay retroactive SBP premium costs which would have been paid if he had enrolled at retirement (or enrolled at another earlier date, depending on his family circumstances).
RESOURCES, LINKS AND OVERVIEW
A general overview of the SBP Open Season program is at: https://www.dfas.mil/RetiredMilitary/newsevents/newsletter/December2022-SBPOS23/
The details are in a notice at the Defense Department’s “Military Compensation” page: https://militarypay.defense.gov/Benefits/Survivor-Benefit-Program/. And you can also see the important information in a notice titled “NDAA 2023 Survivor Benefit Plan (SBP) Open Season” which may be found at: https://www.dfas.mil/RetiredMilitary/provide/sbp/SBP-Open-Season-NDAA2023/. This web page includes a link to “SBP Open Season Enrollment - Frequently Asked Questions,” as well as a link to the Enrollment Information and the “Letter of Intent” which the servicemember/retiree completes in order to apply. This is a voluntary election of “Open Season SBP,” and it cannot be imposed by a court ordering John Doe to “Make that Open Season application or else!”
Here is a general outline of the process for the servicemember/retiree:
- He downloads and saves the LOI and completes it.
- Then he submits it, using the information shown on the documents.
- DFAS then sends him a cost estimate, and he works out an arrangement for payment of the cost. This can be in a lump-sum amount, a partial lump sum with subsequent monthly payments, or a "payment plan."
- The next step is for the retired pay center to confirm the enrollment.
Each one-time buy-in arrangement and premium is unique. The SBP costs are based on individual factors and data, such as the ages of the parties, who is the older one, and the age differential. Estimated costs are provided as soon as John Doe submits a Letter of Intent.
How long does it take from beginning to end? The Defense Finance and Accounting Service (DFAS) advises that the normal time for processing an application (through the LOI) is thirty days from when the retired pay center receives a valid, completed and signed Letter of Intent.
Some cautious former spouses, reluctant retirees or wary servicemembers might raise a concern about the requirement that the Open Season application be voluntary and not coerced by a court order that imposes the requirement to apply for this one-time opportunity. Many military divorce cases contain a divorce decree, a court order, or a settlement that is incorporated into the dissolution, requiring the election of former-spouse SBP coverage. Does that prior court ruling mean that John Doe may not elect Open Season SBP due to the previous court order in the case?
The answer is at Q12-13 in the "Frequently Asked Questions" mentioned above. The text contains a reference to an election to opt into the Open Season SBP being voluntarily made, and not subject to a court order requiring Open Season enrollment. In response to a question about whether the individual can be required to enroll in "Open Season SBP," the answer DFAS provides makes it clear that it's not just any previous court order; it's a current court order requiring Open Season participation which is involved. Here is the statutory section:
(3) Election must be voluntary. - An election under subsection (a) or (b) is not effective unless the person making the election declares the election to be voluntary. An election under subsection (a) or (b) to participate or not to participate in the Survivor Benefit Plan may not be required by any court.
Sections (a) and (b) in this text refer to SBP Open Season enrollment, not to a previous court order that required SBP coverage for a former spouse. So a SM/retiree's Open Season SBP election cannot be compelled by a court order. But this doesn't mean that a SM/retiree cannot make a voluntary election, acting pursuant to a previous divorce settlement (from months or years ago) which specifically required him to elect SBP coverage for his spouse/former spouse.
QUESTIONS AND ANSWERS
Nothing is very simple in the world of military pension division. Here are some questions and answers that may help to clarify the Open Season for SBP:
Q: My ex-spouse elected a LOW amount for the SBP base. Can the Open Season statute fix that?
A: No – the statute does not address raising the basis for SBP. The highest amount for the SBP base is the full retired pay of the servicemember/retiree. The bottom is $300 per month. The court order or the separation agreement should define the SBP base.
The problem of divorce settlements which do not specify the SBP base amount is illustrated in a 2018 Michigan case, Weatherford v. Bayless, 2018 Mich. App. LEXIS 2504 [unpublished opinion]. The parties married July 1986, and they executed in January 2010 a consent order for divorce which required the ex-wife to get half of the disposable retired pay of her former husband, a rear admiral, and to be assigned as the former-spouse beneficiary his SBP within one year of the decree of divorce. There was no mention of the SBP base amount.
The former husband elected a base amount of $300/mo., which would mean only $165/mo. for the former wife upon his death -- “a precipitous drop,” according to the Court of Appeals opinion, from the current $3,000 which the ex-wife was receiving as half of his disposable retired pay. The ex-wife filed suit in 2014 to enforce the parties’ January 2010 divorce consent judgment. The trial judge ordered the former husband to elect the ex-wife for full former-spouse SBP coverage based on his full retired pay. Unfortunately, there is no way that he could have made that election after his retirement, so it’s unclear what remedy, if any, she obtained to replace the low amount of SBP coverage… perhaps a policy of life insurance.
Q: My former wife, after her retirement from the Navy, selected her new husband as the SBP beneficiary. The divorce decree said that I was supposed to be the SBP beneficiary after the dissolution. Is this statute the answer to my prayers? Can it be used to ditch the new husband and replace him with me, the “military spouse” during the entire term of my ex-wife’s service?
A: No – there is no indication in the Open Season statute that the law allows for swaps and replacements for the designated SBP beneficiary (the new husband in this case). This problem, and the one above (the level of SBP coverage and the minimum base) would need to be sent to the appropriate Board for Correction of Military Records to try to persuade the Board that the relief requested is needed to prevent “an injustice” pursuant to 10 U.S.C. 1552.
Q: My ex-wife and I have agreed to get rid of SBP; we think it’s too costly and it doesn’t fit our needs. Can the Open Season statute help us?
A: Yes. The statute allows the servicemember/retiree to get rid of coverage (with spouse/ex-spouse consent). See the instructions and links above to find out about how to discontinue coverage.
If the Open Season process is successful, then it will certainly bring peace of mind to the parties regarding the death benefit for the former spouse and the SBP coverage which has been obtain when it was thought to be lost. And it would eliminate the need to apply to the Board for Correction of Military Records, with the expected waiting time of about two years, to try to get the records of the servicemember/retiree changed to lock in SBP coverage.
This SILENT PARTNER was prepared by COL Mark E. Sullivan (USA-Ret.). For revisions, comments or corrections, contact him at email@example.com or at 919-832-8507.
 This is the Defense Finance and Accounting Service for the Army, Navy, Air Force and Marine Corps. The Coast Guard Pay and Personnel Center services retired pay for members of the Coast Guard and the commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration.
 The statute is also known as Public Law 117-263. “SBP Open Season” is found at Section 643.