The Survivor Benefit Plan (SBP): Assessing Retirees' Cost Share.
Abstract
The Survivor Benefit Plan (SBP) was created to enable a surviving beneficiary of a retired military service member to continue to receive a portion of the retiree's retirement benefits upon the death of the retiree. The cost of the plan was to be paid by both the retiree and the government, with the retiree paying 60 percent of the cost and the government paying 40 percent, for an indefinite period of time. In 1998 Congress passed legislation (P.L. l05-261) that terminated premium payments once the retiree had paid premiums for 30 years and attained 70 years of age. This thesis seeks to determine whether 30 years is an equitable amount of time for retirees to pay SBP premiums in order to achieve a balance between future benefits and future costs; and, if it is not, to determine the correct number of years to achieve this balance. Spreadsheets were developed to determine present values of benefits payable to beneficiaries and present values of payments made by retirees. The point in time in which the present value of benefits equaled the present value of costs determined the number of years that retirees should pay into the plan to maintain their 60 percent cost share. The data indicate that the number of years required to pay into the plan for the paygrades E-5 through E-9 and OA through 0-10 varies from 13 to 21 years, with the higher number of years corresponding to the higher paygrades. Reducing paid up coverage from 30 to 21 years enables retirees to pay costs that more accurately reflect their future benefits.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 1999
- Accession Number
- ADA366823
Entities
People
- Andrew A. Dipuccio
Organizations
- Naval Postgraduate School