IN THE CASE OF: BOARD DATE: 31 March 2011 DOCKET NUMBER: AR20100023396 THE BOARD CONSIDERED THE FOLLOWING EVIDENCE: 1. Application for correction of military records (with supporting documents provided, if any). 2. Military Personnel Records and advisory opinions (if any). THE APPLICANT'S REQUEST, STATEMENT, AND EVIDENCE: 1. The applicant requests she be granted Survivor Benefit Plan (SBP) benefits. 2. The applicant states her deceased husband, a former service member (FSM), applied for spouse and child(ren) SBP participation during the open season extending from 1 October 2005 to 30 September 2006. He completed a DD Form 2656-9 (SBP) and Reserve Component Survivor Benefit Plan (RCSBP) Open Enrollment Election), dated 12 November 2005, and submitted it. It was received by the Defense Finance and Accounting Service (DFAS) on 20 December 2005. DFAS responded to the FSM's application on 6 April 2007 stating: * the application could not be processed because the FSM did not have sufficient monthly net income to cover the monthly buy-in premium * the FSM would have to remit $13,892.10 within 30 days or the application would be cancelled 3. The applicant states she and the FSM had just purchased a new home and did not have funds available to cover the remittance requested by DFAS. She adds the FSM died on 11 June 2010 and she began reviewing the open season application. She now asks two questions: * why did DFAS wait 17 [sic] months to process the application? * why did DFAS pro-rate the buy-in premium for only 7 months instead of 24 months as the FSM requested on the DD Form 2656-9? 4. The applicant provides: * a letter * a DFAS letter dated 6 April 2007 * a copy of the DD Form 2656-9 * Death Certificate CONSIDERATION OF EVIDENCE: 1. The FSM was a retired first sergeant, having retired from active duty on 31 October 1993. A DA Form 4240 (Data for Payment of Retired Army Personnel) shows he elected SBP coverage for dependent child[ren] only. He listed one child, a daughter named Kristen, born on 22 January 1976. The form was signed by the FSM and his spouse, and properly witnessed. 2. Public Law 108-375, enacted 28 October 2004, established an SBP and RCSBP Open Season to be conducted 1 October 2005 to 30 September 2006. 3. In November 2005, the FSM submitted a DD Form 2656-9 to DFAS requesting spouse and child[ren] coverage based on the full amount of his gross retired pay, then approximately $1,637.00 (with a net of approximately $1,125.77). He named the applicant as his spouse, and his daughter, Kristen, whom he listed as incapacitated, as his child. He also indicated in Part VI (Enrollment Premium Payment Information) that he wanted the buy-in enrollment premium deducted from his monthly retired pay on a pro-rata basis over 24 months. 4. In a letter dated 6 April 2007, DFAS responded to the FSM's open season enrollment application. The letter indicated DFAS received the application on 20 December 2005. It calculated the FSM's buy-in enrollment premium at $19,956.51, but it only pro-rated the buy-in over 7 months, which made the monthly buy-in premium $2,850.94. The letter concluded the FSM could not elect SBP without first remitting $13,892.10, and required that amount within 30 days or the application would be rejected. 5. There is no indication the FSM responded to the DFAS letter by remitting the $13,892.10. 6. The FSM died on 11 June 2010. 7. The SBP was created by Public Law 92-425, enacted on 21 September 1972, and has been modified by later legislation. Under the SBP, a military retiree can have a portion of his or her monthly retired pay withheld in order to provide, after his or her death, a monthly survivor benefit (55% of base amount of military retired pay at the time of the retiree’s death) to a surviving spouse or other eligible recipients. The cost of this protection is shared by the retiree (in the form of reductions from monthly military retired pay after retirement), the government, and possibly the beneficiary (under certain types of coverage). The original intended purpose of the SBP (and its antecedents) is to “insure that the surviving dependents of military personnel who die in retirement or after becoming eligible for retirement will continue to have a reasonable level of income.” Coverage was later expanded to active duty personnel as well. 8. Generally, a retiree is automatically enrolled in the SBP upon retirement at the maximum level of coverage to his or her respective surviving spouse and surviving dependent children, unless the retiree elects not to participate, to participate at a lesser level of coverage, elects other than spouse coverage, or is ordered by a court to provide such benefits to a former spouse. If a retiree elects not to participate, or to participate at a reduced level of coverage, the retiree’s spouse must be notified, and in the case of such an election made on or after 1 March 1986, the spouse must concur with the election for it to be effective. 9. The open season established by Public Law 108-375 began on 1 October 2005 and lasted 1 year. Those who took advantage of the open season were required to participate for at least 2 years from the date of making such an election in order to qualify their survivors for benefits. If the retiree died before the end of this 2-year period, amounts deducted from retired pay to effectuate the benefits resulting from the open season would be returned to the designated survivor. Premiums charged were calculated based on the total amount of the premium, plus interest, by which the members’ retired pay would have been reduced if they had elected to participate in the SBP at the first opportunity that they had been afforded. One-time, buy-in enrollment premiums were due at the time the retiree filed an open enrollment election, although the retiree could elect to defer any portion of the open enrollment premium and have the amount deducted from retired pay in 24 equal monthly installments. DISCUSSION AND CONCLUSIONS: 1. The applicant requests SBP benefits. 2. The FSM made a timely application for SBP during an authorized open season. The open season began on 1 October 2005; he completed his application on 12 November 2005; DFAS received the application on 20 December 2005. 3. DFAS did not handle the FSM's request correctly. First, it took DFAS an inordinate amount of time, more than 67 weeks, to process the FSM's application. Next, DFAS calculated the monthly buy-in premium based on a 7-month buy-in vice the applicant's requested 24-month buy-in. This had the effect of requiring a lump sum cash payment from the FSM in order to complete the application process. 4. The FSM's gross retired pay at the time was approximately $1,637.00, with a net retired pay of approximately $1,125.77. If DFAS had calculated his pro-rata buy-in premium of $19.956.51 over 24 months, it would have been approximately $831.52 and he would have easily qualified for the SBP. 5. Had the FSM's SBP application been processed correctly his effective date would have been 1 January 2006 and he would have paid up the buy-in premium on 30 December 2008. He died on 11 June 2010, so he would have met the 2-year participation requirement. 6. As a matter of equity, the applicant's request should be approved as indicated below. BOARD VOTE: ____X___ ____X___ ___X____ GRANT FULL RELIEF ________ ________ ________ GRANT PARTIAL RELIEF ________ ________ ________ GRANT FORMAL HEARING ________ ________ ________ DENY APPLICATION BOARD DETERMINATION/RECOMMENDATION: The Board determined that the evidence presented was sufficient to warrant a recommendation for relief. As a result, the Board recommends that all Department of the Army records of the individual concerned be corrected by: * showing the FSM's open season SBP application was approved with an effective date of election of 1 January 2006 * calculating the applicant's annuity based upon the FSM's final retired pay data * withholding the applicant's SBP annuity until such time as the original $19.956.51 buy-in premium is recouped as well as premiums that would have been paid until the time of the FSM's death, and by * thereafter paying the applicant her SBP annuity _______ _ __X_____ ___ CHAIRPERSON I certify that herein is recorded the true and complete record of the proceedings of the Army Board for Correction of Military Records in this case. ABCMR Record of Proceedings (cont) AR20100023396 3 ARMY BOARD FOR CORRECTION OF MILITARY RECORDS RECORD OF PROCEEDINGS 1 ABCMR Record of Proceedings (cont) AR20100023396 2 ARMY BOARD FOR CORRECTION OF MILITARY RECORDS RECORD OF PROCEEDINGS 1