Military Officer - December 2007 - (Page 40) washingtonscene SBP Cash Flow SBP is heavily subsidized by the government, and premiums are set to cover only 60 percent of expected benefits. That means annual benefit payouts grow much faster than annual premiums. In 2006, SBP annuities totalled $2.5 billion, versus $1.2 billion in premiums paid in. 75 53 68 48 1985 2000 pay raise, concurrent receipt, SBP, MGIB, and many other improvements in this year’s Defense Authorization Act; and ■ Rep. Tom Davis (R-Va.) for championing improvements for the National Guard and legislation that would allow active duty and retired servicemembers to deduct their health and dental premiums from federal income taxes. The coalition also presented awards to Debra Wada, senior staff member for former chair Snyder on the House Armed Services Military Personnel Subcommittee, and Grace Washbourne, senior staff member for Davis, ranking member on the House Oversight and Government Reform Committee. Both were honored for their behind-the-scenes efforts in supporting a wide variety of initiatives in support of the military community. 2005 ■ Retiree Premiums ■ Survivor Benefits Paid 2006 SBP: Show Me the Money Payouts far exceed premiums. A question MOAA frequently hears from its older members is, “I’ve been paying into SBP for decades. The government has made a lot of money on me. Why can’t I get some of that money back after all these years?” On the flip side, those younger members who are nearing military retirement want to know, “Is SBP really worth it? It seems awfully expensive — how much bang for my buck am I going to get?” Anyone who thinks the government is making money on SBP is way off base. As shown in the chart above, the government currently pays out more than twice as much in SBP benefits to survivors than it collects in retiree premiums. And that difference will continue to grow, because MOAA recently won a large benefit increase for survivors age 62 and older. For servicemembers retiring after 20 or more years of active duty, the government expects the average retiree’s lifetime SBP premiums will cover only about 60 percent of the average benefits that will be paid to the retiree’s survivor. That means three things: ■ SBP benefits are 40-percent subsidized by the government to help recognize the value of your service (much different than the negative subsidy of civilian insurance, for which premiums must cover 100 percent of benefit costs, as well as company overhead, salaries, commissions, and profit). ■ Much like Social Security, every dollar you pay in SBP premiums goes toward paying part of the benefit for someone else’s survivor, just as other retirees’ premiums will help fund your survivor’s benefits in the event of your death. ■ Any civilian insurance that provides “cash back” if you don’t die is going to cost you a much bigger premium per death benefit dollar. (MOAA is unaware of any civilian insurance that provides a fully inflation-protected annuity like SBP does.) That’s not to say older servicemembers haven’t already paid more than their share. Thousands who enrolled when SBP began in 1972 already have paid premiums for 35 years — five years longer than servicemembers who retired after 1978 will have to. And most officer retirees paid significantly larger premiums between 1972 and 1990. So we’re not saying there are no problems that need fixing. What we’re pointing out is the government definitely is not making any money off retirees’ SBP premiums. On the contrary, it’s heavily subsidizing this important benefit program. MO — Contributors are Col. Steve Strobridge, USAF-Ret., director; Col. Mike Hayden, USAFRet.; Col. Bob Norton, USA-Ret.; Cmdr. René Campos, USN-Ret.; Cmdr. John Class, USN-Ret.; Col. Phil Odom, USAF-Ret.; Cass Vreeland; and Bret Shea, MOAA’s Government Relations Department. 40 MILITARY OFFICER DECEMBER 2007
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