Repealing the SBP/DIC Offset

S. 260 Senator Bill Nelson, FL and James Inhofe, OK and HR 178 Rep Joe Wilson, SC Objective: To repeal the Federal law that requires a $1 reduction in a Department of Defense (DoD) Survivor Benefit Plan (SBP) annuity for each $1 received in benefits from the Department of Veterans Affairs (VA) Dependency and Indemnity Compensation (DIC) program. Survivor Benefit Plan (SBP) - a DoD program that was established in1972 to provide income protection to survivors of retired military personnel. y A voluntary insurance program for which military retirees pay premiums from their retired pay; currently a maximum of 6.5% monthly. Provides a maximum annuity payment of 55% of retired pay dependent upon the amount purchased. Most Disabled retirees do not receive full retired pay and pay a greater percentage if they do receive retired pay. Following 9/11, eligibility was expanded to include all servicemembers who die on active duty. For these 9/11 active duty servicemembers, SBP provides the maximum coverage of 55% of projected retired pay, which is established at 100% disability and 30 years of service.

Dependency and Indemnity Compensation (DIC) - a VA benefit that is paid to the survivor of a servicemember, active duty or veteran, who dies from a service-connected condition, including non-combat conditions, such as certain medical disabilities. y y Serves as a reparation or indemnity payment for the death. Provides a flat rate payment, currently $1,154 per month, regardless of the servicemembers' grade or length of service.

The Offset - Federal law requires a $1 reduction in SBP annuity for each $1 received in DIC. y For most active duty enlisted deaths, the SBP/DIC offset eliminates the SBP annuity, leaving survivors a total annual income of $13,848 ($1,154 X 12 months). Retirees who receive DIC often have limited options to purchase life insurance at a reasonable cost, because of their history of disability.

DIC should be added to and not substituted from the military SBP annuity earned by years of service or paid for as income protection for surviving family members. It is not standard practice for insurance programs to deny an insurance payment simply because a beneficiary receives income from another source.

Widows who remarry after age 57 and surviving spouses of government civilians are exempt from the offset: y On December 16, 2003, the Veterans' Benefits Act of 2003, P.L. 108-183, repealed DIC offsets for widows who remarry after the age of 57. On July 19, 2007, three widows sued the U.S. government, arguing that the Act applies equally to the DIC offset of SBP. On August 26, 2009, in Sharp v. United States, the United States Court of Appeals for the Federal Circuit ruled that widows who remarry after age 57 must receive full SBP and DIC payments without an offset.

The ruling created two distinct classes of widows affected by the SBP-DIC offset, those who remarry after age 57 and those who do not. If you do not remarry, your SBP will be offset. y Surviving spouses of federal civilian retirees, who are also disabled veteran retirees that paid for SBP and die of a service-connected cause, can receive both DIC and SBP without incurring the offset or losing any of their purchased SBP benefits. This is because the retiree's status is converted from a military retiree to civilian annuity, which is not offset.

Congressional History: y Since 2005, the Senate has overwhelming supported repeal of the SPB/DIC offset. When considering the FY 2009 Defense Authorization Act, the Senate passed an amendment by a vote of 94-2 and last year, the same amendment passed by a voice vote. The provision, however, has yet to be included in the final bill. Congress acknowledged the inequity of the offset in the fiscal year (FY) 2008 Defense Authorization Act when it cracked open the door to eliminating the offset by establishing a Special Survivor Indemnity Allowance (SSIA) -- a taxable $50 monthly payment to SBP/DIC-affected widows, which will increase $10 per year for the next five years. Congress again acknowledged the offset's inequity when it increased SSIA to $310 per month by fiscal year 2017 in the Family Smoking Prevention and Tobacco Control Act, which became law on June 22, 2009. For active duty deaths since 7 October 2001, Congress authorized surviving spouses to assign the SBP annuity to their children, thus allowing the family to draw both SBP and DIC. o Unfortunately, however, surviving spouses who elect to assign this pay lose SBP eligibility when their children attain majority, which leaves the spouse with only DIC for the rest of their lives. Cost: The Congressional Budget Office estimates the cost to be $6.6 billion over 10 years.