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Survivor Benefit Plan (SBP) and Special Needs Families

When retirement looms, many military families with children with special needs face a decision about whether or not to choose the Survivor Benefit Plan (SBP) retirement option. Receipt of SBP payments could jeopardize the child's eligibility for SSI and Medicaid.

If a military member contributes approximately 6.5 percent of his retirement pay towards this program (or approximately $20 a month for a child with disabilities), SBP will pay up to 55 percent of the military member's retirement pay to a spouse or dependent child, or both, upon the military member's death. The military member can select between coverage for a spouse only, a spouse and children, or children only.

If the military member dies having chosen SBP for the disabled child only, the child will receive 55 percent of the member's retirement income. The same is true if the member and spouse die after having chosen SBP for both the spouse and child. In either case, receipt of SBP payments could affect the child's eligibility for SSI and Medicaid. This happens because SSI is a needs-based program. If an SSI beneficiary begins to receive unearned income from SBP, his SSI benefit will be reduced on a dollar-for-dollar basis. If the SBP payment exceeds the child with disabilities' SSI award, the child will lose SSI and the essential access to Medicaid that accompanies it.

A bipartisan bill has been introduced in the House of Representatives that fixes a flaw in earlier legislation and would finally allow all veterans to allocate pension payments to their survivors with special needs without fear that the payments will jeopardize the survivor’s receipt of other government benefits.

Up until 2014, if a child with special needs received the pension payment, she could lose other important government benefits like Supplemental Security Income or Medicaid because the income from the pension was counted as the child's for purposes of calculating her eligibility for those other government benefits. That year, Congress passed a law allowing veteran retirees to designate a Special Needs Trust as their beneficiary to avoid the benefit being counted as belonging to the child.

However, only those veterans who had previously designated “Spouse and Child” or “Child Only” as their beneficiary could shift the designation to a special needs trust. Those veterans with special needs dependents who had already designated “Spouse Only” as the beneficiary to avoid jeopardizing their child’s other benefits were blocked from switching the beneficiary to a special needs trust.

One such veteran was Debra Nixon, a veteran of the Uniformed Public Health Corps and a resident of New Jersey’s 11th Congressional District. Nixon’s representative, Democrat Mikie Sherrill, has introduced a bill to repair this defect in the law. The Debra Nixon Special Needs Trust Inclusion Act, cosponsored by Florida Republican representative Gus Bilirakis, would authorize a limited period when enrollees could change their designee to “Spouse and Child” or “Child Only” and take full advantage of the benefits of the 2014 law. The legislation would also designate the creation of a special needs trust as a “qualifying life event” that would permit parents to change their beneficiary designee once the trust has been established.

“The Survivor Benefit Plan is an earned benefit for our men and women in uniform,” Rep. Sherrill said in a press release. “The families of our service members deserve to take full advantage of the program. Many of our veterans with dependents with special needs, including Debra Nixon in my district, haven’t been able to designate their children as beneficiaries for fear of imperiling the other benefits their dependent receives. It is past time for that to change.”

The bill, H.R. 2109, was delivered to the House Armed Services Committee in March. There is no companion measure in the Senate so far.

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