The Survivor Benefit Plan (SBP), as originally enacted, provided an annuity equal to 55 percent of the annuity base amount until the annuitant reached the age of 62. Upon reaching the age of 62, the annuity was reduced by the Social Security Offset (SSO).

Public Law 99-145, effective March 1, 1986, eliminated the SSO and created a two-tier method of calculating annuity reduction. Under the two-tier method, an annuitant receives 55 percent of the annuity base amount until the age of 62, then 35 percent of the annuity base amount after age 62. However, the law contains a "grandfather" clause whereby an annuitant will receive whichever payment is more favorable under the two methods of calculation, providing the retiree was retirement eligible on or before October 1, 1985.

Section 644 of the Ronald Reagan National Defense Authorization Act for Fiscal Year 2005, provides for a phased-in elimination of the Social Security Offset from the SBP annuity. Under this legislation, annuitants over age 62 will eventually receive their entire annuity amount (55 percent of the amount elected by the retiree). There will no longer be an offset for Social Security effective April 1, 2008.

This act increases the SBP annuity percentage upon reaching the age of 62 from:

· 35 percent to 40 percent effective October 2005

· 40 percent to 45 percent effective April 2006

· 45 percent to 50 percent effective April 2007

· 50 percent to 55 percent effective April 2008