Act This Year on SBP-DIC Offset

Issue: Under current law (10 USC 1450), survivors of deceased active and retired military
members must forfeit part or all of their military Survivor Benefit Plan (SBP) annuity when military
service caused the death. This is often referred to as the “widows tax.”

Background: Retiring servicemembers can purchase SBP coverage to provide their spouses 55
percent of their retired pay in the event of their death for any reason. SBP coverage is provided
automatically for deaths on active duty. When the VA determines the death was caused by
service, it pays the survivor Dependency and Indemnity Compensation (DIC) in the amount of
$1,254 monthly for 2016 ($15,048 per year). Under current law, the amount of DIC must be
deducted from military SBP annuities. The offset wipes out most or all of the SBP check for the
vast majority of survivors. (See top chart for examples.)

Tasked by Congress to review the “widows tax” in October 2007, the Veterans Disability Benefits
Commission (VDBC) concurred with MOAA and other veterans associations that when military
service causes the member’s death, the VA indemnity compensation should be paid in addition to
the SBP annuity, not subtracted from it. In that regard, DIC is not deducted from federal survivor
annuities for military veterans in civil service jobs.

The VDBC recommended equal treatment for survivors, regardless of whether the service-caused
death occurred during or after active service. While only retired members paid SBP premiums,
active duty deaths occur earlier in life and often cause even more family disruption and financial
penalties. For both active duty and retiree service-connected deaths, military service extracted the
ultimate premium from member and spouse – the very life of the servicemember.
In 2008, Congress authorized a Special Survivor Indemnity Allowance (SSIA) as partial recompense
for the SBP-DIC inequity. (See bottom chart) Then-House Armed Services Committee
Chairman, Rep. Ike Skelton, expressed the intent to continue increasing the SSIA and ultimately
phase out the offset. SSIA is $275 per month in FY2016, and will rise to $310 per month for
FY2017—when it will compensate for about 25% of the SBP-DIC offset. However, statutory
authority to pay SSIA will expire as of Oct 1, 2017.

Unless Congress repeals the SBP-DIC offset or extends the SSIA authority this year, SBP-DIC survivors
will suffer the additional loss of the SSIA -- $3,700 per year.

MOAA Position:    -The SBP-DIC offset should be repealed.
                             - If sufficient funding can’t be found to do that, the SSIA should be extended and increased to

                               continue toward phasing out the offset entirely.

Recommendation:   Senate: Cosponsor/pass Sen. Bill Nelson’s S. 979 (repeal offset)

                                House: Cosponsor/pass Rep. Joe Wilson’s H.R. 1594 (repeal offset)
                                            Cosponsor/pass Rep. Alan Grayson’s H.R. 4519 (extend and increase SSIA)

Examples of SBP/DIC Offset Impact

Survivor Annuity, Retiree Death

                                         SBP Is                      DIC Is                            SBP Left
                                                                                                                After Offset                        Lost SBP

O-5 average                    $30,091                    $15,050                            $15,041                             $15,050

E-8 average                    $16,713                    $15,050                             $1,633                              $15,050

Congress recognized the unfairness of the offset in 2008
by authorizing SBP/DIC survivors a Special Survivor
Indemnity Allowance (SSIA) – monthly rate shown below.
But SSIA payment authority terminates October 1, 2017.

                                                                     FY 2009         $50
                                                                     FY 2010         $60
                                                                     FY 2011         $70
                                                                     FY 2012         $80
                                                                     FY 2013         $90
                                                                     FY 2014        $150
                                                                     FY 2015        $200
                                                                     FY2016         $275
                                                                     FY 2017        $310
                                                                     FY 2018         $0

Fact Sheet (PDF)
Brochure (PDF)