Defense Bill Wins

December 19, 2014

The FY 2015 defense authorization bill included several wins on issues MOAA has been working for years. We take a closer look at two of these lesser-known wins.  

Early Reserve Retirement Credit    

The defense bill partially resolves a long-sought technical glitch concerning the full crediting of earned early reserve retirement credit for reservists called to federal active duty.  

The FY 2008 National Defense Authorization Act authorized National Guard and Reserve members to begin receiving retired pay earlier than age 60 for qualifying active duty service performed after 28 January 2008.  

Each aggregate of 90 days active duty yields three months’ early retirement, but only if the call-up time is served within a single fiscal year. Consequently, many operational reservists are losing the credit.    

For example, a 120-day call-up commencing on August 1 and ending on November 30 would receive no early reserve retirement credit because the 90-day clock resets at the start of the fiscal year (October 1).  

The defense bill permits credit of qualifying active service totaling aggregates of 90 days served over two consecutive fiscal years.    

The change is an important step towards improving compensation for reservists that matches the enormous increase in the nation’s reliance on them for operational missions.  Unfortunately, however, the provision only applies to activations after September 30, 2014.    

Guard and Reserve members who retire early are not eligible for TRICARE Standard or Prime coverage before age 60, an issue for which MOAA continues to seek a legislative remedy.   

MOAA also continues to support crediting Guard and Reservists’ active duty service from September 11, 2001 until January 27, 2008, but the $2 billion dollar mandatory spending price tag deters lawmakers from taking it up.  

SBP Special Needs Trust   

The defense bill also includes a provision authorizing the payment of Survivor Benefit Plan (SBP) annuities into a special needs trust for permanently disabled dependent children.   

A special needs trust exempts income from means-testing for assistance provided by state governments and social services. MOAA and its partners have been advocating for this change since 2007.  

DFAS must now establish and implement the administrative rules necessary to accommodate retirees who wish to designate a special needs trust as the recipient of their SBP annuity.   

This guidance will likely involve soliciting public comments via the Federal Register. MOAA will be monitoring the process to ensure comments and concerns from retirees are considered.  

Our best guess at this point is that DoD will allow an SBP “open season” to accommodate this new category of beneficiary. Retirees with a permanently disabled child who elected not to enroll in SBP because of the potential adverse effects of the annuity receipt may be considered for open enrollment. MOAA will provide more information as it becomes available.  

Special needs trusts are complex legal instruments and any retired member contemplating the use of one should consult with a qualified lawyer. We caution that it will likely take months for DFAS to develop guidance.