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SBP-DIC Offset for Survivors

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January 26, 2015

Issue :  Current law unfairly makes military survivors forfeit part or all of their military Survivor Benefit Plan (SBP) annuity when military service causes the member's death.  

Background SBP allows uniformed services retirees to elect to provide continuing financial support for an eligible survivor.  SBP provides the survivor 55% of the servicemember's military retired pay.  Enrollment is elected at the time of retirement, and the retired member pays 6.5% of retired pay as a premium.  Automatic coverage is extended to survivors of servicemembers who die on duty.

Dependency and Indemnity Compensation is a VA program providing a modest annuity for survivors of veterans whose death is determined to have been caused by military service.

Under current law, survivors who are eligible for both SBP and DIC must forfeit a dollar of their SBP annuity for every dollar of DIC received from the VA.  Often, the offset wipes out the SBP annuity the military retiree paid for.  In such cases, the survivor receives a proportional refund of SBP premiums - with no interest on what often has been many years of premium payments.

The October 2007 report of the Veterans Disability Benefits Commission urged elimination of the offset for all SBP-DIC widows, asserting that when military service causes the member's death, the indemnity compensation from the VA should be paidin addition to SBP coverage, not subtracted from it. 

In multiple Congresses, a majority of House and Senate members acknowledged the inequity and cosponsored corrective legislation to recognize SBP and DIC are paid for different reasons.  SBP is a servicemember-purchased annuity, whereas DIC is an indemnity payment when military service caused the member's death.  Further, service-disabled retirees have limited opportunities to purchase additional life insurance, and policies that are available impose exorbitant premiums.

In 2008, Congress acknowledged the inequity in law, authorizing a modest Special Survivor Indemnity Allowance (SSIA) for SBP-DIC widows to begin phasing out the offset.  In June 2009, Congress took the next step, increasing SSIA monthly payments to $150 beginning in FY2014 and rising to $310 in FY2017.  Barring an additional law change, SSIA authority will expire October 1, 2017.  The accompanying House Armed Services Committee press release said,"This legislation (SSIA) is latest step in our continuing effort to eliminate the so-called 'widow's tax', which has long denied surviving family members the full payment of their Survivor Benefit Plan benefits… this bill does not completely end the offset … the House Committee …will continue to explore every opportunity to pursue legislation that brings us closer to eliminating the 'widow's tax'."

In the ultimate irony, a separate law, validated by the courts, terminates the offset for SBP-DIC-eligibles who remarry at age 57 or later.  So current law punishes survivors who remarry before age 55 by ending their SBP and DIC eligibility - and punishes survivors age 57 or older who don't remarry by imposing the SBP-DIC offset.

No other federal surviving spouse is required to forfeit his or her federal annuity because military service caused their sponsor's death.  Further, the offset does not apply to surviving military children - only to the spouse.  And no other federal survivor is required to remarry to avoid a reduction in his or her survivor annuity eligibility.

MOAA Position:  End the SBP-DIC offset. Even in a budget-constrained environment, fair treatment for survivors of servicemembers who gave their lives for their country must not be a low funding priority. 

Key Bills/Status:   Rep Joe Wilson (R-S.C.) introduced H.R. 1594 , the Military Surviving Spouses Equity Act. Sen. Bill Nelson (D-Fl.) introduced S. 979 , the Senate companion bill. These bills eliminate the SBP-DIC offset for survivors.