The Reserve Component Survivor Benefit Plan

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This earlier post describes the SBP and its options, as well as the pros and cons of buying it for your survivors. If you landed here from a search engine or some other link then I’d recommend reading the previous two posts before proceeding with this one.

Some of the references and links in this post include articles from the Association of the United States Navy (AUSN), a support group for sailors and officers formerly known as the Navy Reserve Association. Although AUSN is a Navy organization, the SBP is covered by Congressional legislation implemented by the Department of Defense for all services, both active & Reserve/Guard components. The AUSN links to their February-April 2009 magazine may only be accessible if you’re a member. (AUSN is a great group, and I’d highly recommend joining just for their career advice and their benefits updates.) Please let me know if you have public links from the DoD or another service and I’ll add them here.

The SBP was enacted by Congress in 1972, and the Reserve Component SBP was added in 1978. The RCSBP sells insurance to Reserve/Guard who have applied for retirement but who are not yet age 60 (“gray area”). Once they reach age 60, their RCSBP is the same program as the SBP but with slightly different premiums to cover a portion of the cost of the years before age 60. Congress pays about 40% of the program and the rest is covered by the retiree’s premiums paid to the SBP and the RCSBP.

Although only about 75% of active duty retirees buy the SBP, over 90% of retiring Reserve/Guard enroll in the RCSBP. The difference appears to be the inexpensive insurance coverage during the “gray area” years before age 60, and the fact that premiums aren’t due until age 60.

RCSBP is another incentive offered by the Department of Defense to encourage Reserve/Guard to retire awaiting pay instead of resigning pending retirement. When Reserve/Guard reach 20 years of qualifying service they can either apply for retirement (awaiting pension at age 60) or resign from the Reserve/Guard until their pension starts (at age 60). For the DoD, the difference is that “retired awaiting pay” means the member can be recalled in the event of a full mobilization of the armed forces. (Even though recalling a retiree is highly unlikely.) There are a number of financial reasons to retire instead of resigning, and an additional reason is that Reserve/Guard who have “retired awaiting pay” can buy SBP coverage for their beneficiaries.

Another reason to buy RCSBP coverage is because it starts as soon as the Reserve/Guard member retires instead of at age 60. It’s possible to reach 20 years of qualifying service in your late 30s and wait over two decades before drawing the pension at age 60. If SBP is elected at the time of applying for retirement, then the Reserve/Guard member has SBP coverage for that entire time before age 60. (By law, upon retirement the member is automatically signed up for full coverage. The decision to reduce or decline coverage is actually made by the spouse.) If the retiree dies prematurely then one of their survivor’s options would be to receive up to 55% of their pension immediately instead of waiting until they would have been age 60. The Reserve/Guard member doesn’t actually have to pay the SBP premiums for that coverage until their pension starts. In other words, Reserve/Guard who have “retired awaiting pay” can have over two decades of “free” insurance coverage before they even start drawing their pension. Better still, at age 62 (after paying two years of SBP premiums) they can either continue their SBP coverage or cancel it.

The RCSBP has three options:

  • A: Decline coverage until age 60 and revisit the decision then.
  • B: Deferred Coverage – If you die before age 60, a RCSBP annuity begins paying out on what would have been your 60th birthday.
  • C: Immediate Coverage – The RCSBP annuity would begin on the day after your death, even before age 60. This is the default option.

The RCSBP’s enhanced “free” gray-area coverage comes at a price: the premiums are calculated at a slightly higher rate than the conventional SBP’s 6.5%. The premiums are determined from data tables and fact sheets provided when the Reserve/Guard member receives their notice of eligibility for retirement (20 good years). Members can also estimate their payments from a RCSBP calculator.

Spouses can elect the full amount of coverage (55% of the Reserve/Guard pension) or smaller amounts. As discussed in the last post, the decision should be based on the survivor’s projected spending or to insure the ability to pay off a large expense such as a mortgage.

Related articles:
Survivor Benefit Plan
Retiring from the Reserves and National Guard
Guard and Reserve Handbook

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. Nords, et all

    Discovered that Reserve Component Survivor Benefit Plan selections are irrevocable. I have been on active duty in the Army Reserve AGR program since 1990. I received my Notice of Eligibility (NOE) -20 year letter – in 1998. never thought about my selection figuring I would use the active duty retirement benefits and decide on life insurance or the SBP when retirement time came. Now I am 13 months from retirement and discovered that the selection I made 19 years ago will most likely change my choice of selecting non regular -reserve -retirement because I am locked into the RCSBP coverage. I have a choice between regular and non regular retirement – the reserve retirement based on 11,300 was $400 more than the 29 active federal service retirement pay. I have appointments with the retirement services officer next week and will provide an update after the retired pay is calculated. For regular reservists and guardsmen the RCSBP selection is a good thing because if one is retired awaiting pay their family members are covered for all that time with out cost. You can withdraw from the RCSBP between your 25th and 36th month of retirement HOWEVER, you will continue to pay the premiums for 360 months to pay for the RCSBP coverage you had while awaiting retired pay.

    • Thanks for your comment, Steve, that’s an interesting change. Do you happen to have a reference for being required to pay 360 months of RCSBP premiums if you had the coverage during retired awaiting pay and wanted to withdraw in the 25-36 month window after starting your pension?

      • Thanks for the in depth reply Nords. Went to the Retirement Services office and the RCSBP specialist confirmed your understanding of the RCSBP premiums and the requirement to pay them for 360 months. however, I strongly concur with your recommendation about a JAG review for all service members when selecting an RCSBP option. Additionally, I discovered after reading my NOE (20 year letter) again I realized that I was not enrolled by default when I did NOT select an option for RCSBP at that time. In stead I had no coverage which did not matter since my spouse was covered by the active duty SBP if I passed before retirement. The RSO informed that the law changed in 2001, service members have been automatically enrolled in RCSBP if they do not make a selection since the change. Thank you again for the vast amount open source information and analysis on retirement and financial management. I have shared this website with a lot of Soldiers. Next move is the official calculation of my retired pay with the finance people.

      • AR 600-8-7, paragraph 3-6,

        (9) Beneficiary changes that are permitted by law after election and/or retirement.
        (10) Using DD Form 2656–2, a retired Soldier receiving retired pay can terminate the SBP, with the spouse’s concurrence, if applicable, between the second and third anniversary of commencement of retired pay (10 USC 1448a). A decision to terminate coverage under this provision is irrevocable. Re-enrollment is denied, even during an open enrollment period. Premiums paid through the date of termination will not be refunded.
        (11) Retired RC Soldiers or their survivors will pay the RCSBP premiums for 360 months or death, whichever occurs first, regardless of a decision to terminate RCSBP coverage.”

        • I think I see the issue, Steve, although you’d definitely want to review this with a JAG and do your math. The Army instruction uses the term “RCSBP premium” when it should specify “RCSPB Reserve Component Premium”.

          Here’s the federal law regarding the RCSPB premiums. It actually consists of the regular SBP premium plus an additional “Reserve Component Premium” charged to cover the insurance between the time you retire awaiting pay and the date on which the pension actually starts.

          The pertinent part is in section (a).(1).(B).(i) at that link.

          The RCSBP premium definitions are covered under DoD 7000.14-R, the Financial Management Regulation. This includes Chapter 45 in volume 7B.

          Sections 5409 (on page 54-16) and 540902.C describe the RCSBP’s Reserve Component Premium:
          “The SBP Premium consists of a Standard Premium, Reserve Component Premium, and a Survivor’s Annuity Premium Deduction. The Standard Premium is the reduction in retired pay made to provide coverage for the period after a member becomes entitled to retired pay. The Reserve Component Premium is the reduction in retired pay made for the RCSBP coverage that was already provided while the member awaited the requisite age of entitlement to retired pay. The Survivor’s Annuity Premium Deduction is a further premium applied to the survivor’s annuity for the RCSBP coverage provided while the member awaited the requisite age of entitlement to retired pay. The premiums described in paragraph 541002 pertain only to the Reserve Component Premium and the Survivor’s Annuity Premium Deduction. The method to compute the Standard Premium may be found in Chapter 45. The amount of the Reserve Component Premium depends on the type of beneficiary option elected, the annuity type elected, and the ages of the member and the beneficiary.”

          Section 540902 goes on:
          “C. To calculate the Reserve Component Premium, multiply the member’s base amount at age 60 by .03 (3 percent).”

          That’s just the basic rule, and the chapter goes on to cover a lot of different situations for spouses, ex-spouses, children, and “insured interests”.

          My interpretation (subject to your JAG’s check) is that the Reserve Component Premium is the only part which continues after you opt out of the SBP. You’d opt out during months 25-36 of coverage, which would cancel the SBP premium. However the Reserve Component Premium would continue “for life”.

  2. Thanks!

    I think the AF is unique among the services in letting their retired members return as drilling Reservists, but I don’t know each of the services’ Reserves or Guard as well as I know Navy.

    Navy Reserve would also prefer that their members not “homestead”, and eventually it can count against them at promotion boards. However in the Reserves there’s at least a choice, while we all know what would happen if we tried to homestead on active duty…

  3. Wow another great article! While I am not very familar with the Reserve system (other than they do a great job and are interchangable with AD folks), I sure do wish someone would have talked to me about them years ago. At that time the perception was “join the military for college money or just be a weekend warrior.” Boy how times have changed. We have great reserve/NG units.

    One thing that I have not see a lot of discussion on is how much more beneficial reserves could be overtime in terms of “secondary affects.” I think we always hit the main points, however AD can actually have a negative impact on ones ability to accumulate wealth and have a good quality of life over time. (No one should serve for the money that is for sure.) I guess what I am hinting at is that with all the moves, uncertainty, potential for impacting spouses career, impact on family etc. it seems to me the Reserves/NG has some great points. The best of both worlds. I would love to see a pro/con list of both options. I am sure many topics would show up on each side.

    I see a lot of AD folks in an all or nothing mindset in planning life “after” the military. Even with planning my upcoming retirement it is like changing chapters in a book. I have really worked hard on continuity and making the event as seemless as possible. I can imagine this would be real rough on folks that go back to a hometown after being away for 20 plus years.

    Talk about unit cohesion. I bet if you stayed in your home reserve unit over a 20 year career (or longer), you would definately have a sense of belonging. Plus the additional “opportunities” that would present themselves through the contacts you serve with in your own community. There has got to be a way to put value on these!

    Great post Nords!


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