BACKGROUND:  Many military families with disabled children face a dilemma about whether or not to choose the Survivor Benefit Plan (SBP) retirement option.  SBP will pay up to 55% (with annual inflation adjustments) of the military member’s retirement pay to a spouse and/or dependent child. The member can select a lesser benefit, at less cost, if they choose.

The military member can select between coverage for a spouse only, a spouse and children, or children only. The member pays about 6.5% of retirement pay for SBP for a spouse and only about $20/month for dependent children. The member can only refuse this benefit if the spouse waives the benefit in writing.  In addition to or in place of SBP, a military member can provide an array of benefits for a child with a disability. In most cases a disabled child over age 18 can be designated as an Incapacitated Dependent (DD Form 137-5) and be permanently eligible for Commissary and Exchange privileges as well as TriCare health benefits.

However, these benefits are often not enough to support a child with a disability and the family looks to other programs. If the disabled child over age 18 has assets of less than $2,000 and minimal income, the disabled child will be eligible for Supplemental Security Income (SSI) and Medicaid. Although SSI only pays $674 monthly and Medicaid may seem to duplicate TriCare, these programs can be critical to the long term support for a disabled child. If a disabled child is living independently, SSI money pays for food and shelter while Medicaid pays for supported living programs (24/7 supervised residential living options), day programs, job coaching and other supports. Thus, Tricare does not provide the same benefits as Medicaid; they complement each other for the disabled child.

SSI payments are offset by income received by the disabled child. Any unearned income over $20 offsets SSI income dollar-for-dollar.  If the military member dies having chosen SBP for his or her child, the disabled child will receive 55% of the member’s income. If that 55% of retirement pay amounts to more than $674 this year, the child with disabilities will lose SSI, and in most States, Medicaid health care benefits, as well as all supported living assistance, job coaching, respite care and other services provided under Medicaid “waiver” programs. 

In a recent example in Virginia, the child with disabilities lived in a group home for 18 years and attended a day program for individuals with disabilities. His only income was SSI and Medicaid paid for his residential and day programs.

Then his father, a retired Navy officer, died. His son began to receive SBP in the amount of $2,030 per month. This SBP made him ineligible for SSI and Medicaid. The private pay cost of these programs was $8,600 per month and his SBP could not cover that. He lost his group home placement as well as his day program.  What about just canceling the SBP beneficiary payments? Unfortunately, once they start, there is no way to stop them. The only options are to not elect the benefit in the first place or, if you have already made an SBP election including children and you have a child with disabilities, is to apply to the Board for Correction of Military Records to modify your SBP election.

This option must be completed while the member is still alive since SBP beneficiary payments to the child with disabilities starts upon death. The member must complete DD Form 149 justifying why the SBP selection option must not include children (i.e. spouse only). For example, you might tell them you did not understand when you originally made the selection, such as the severe negative impact on your child with disabilities other benefits such as SSI and Medicaid. When completed, the DD Form 149 is sent to the respective service address (listed on the form). The individual services each have a Board for the Correction of Military Records that will consider such requests.

Non-military parents can easily assign their pension and life insurance benefits to a special needs trust for their child with disabilities. This allows the child to receive SSI and Medicaid and supplement those funds with a special needs trust containing other assets or benefits the parents have earned to help care for their child.

Defense Finance and Accounting regulations state that the SBP may only be paid to a “person” and they interpret that literally and will not allow assignment of the SBP to a special needs trust for the benefit of that “person”.  Many States, such as Illinois, have already changed their Public Pension regulations to allow for such pension benefits to be paid to a special needs trust.  In Illinois, the State Teacher’s Pension, the State Police and Fire Pension, the State University Employee Pensions, have all been modified to allow for special needs trusts and therefore.

HOUSE BILL – H. R. 2059, introduced in Congress in 2009, but failed to pass, would have amended title 10, United States Code, to provide for the payment of monthly annuities under the Survivor Benefit Plan to a supplemental or special needs trust established for the sole benefit of a child with disabilities of a participant in the Survivor Benefit Plan.  Congressman Foster, on April 23, 2009, introduced H.R. 2059, to amend title 10, United States Code, to provide for the payment of monthly annuities under the Survivor Benefit Plan to a supplemental or special needs trust established for the sole benefit of a disabled dependent child of a participant in the Survivor Benefit Plan.