SBP DIC Offset

Posted: August 21, 2012 in Uncategorized
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The 11th Quadrennial Review of Military Compensation (QRMC) has recommended that the Pentagon end its opposition to allowing any deduction of VA survivor benefits from military Survivor Benefit Plan (SBP) annuities. That's the good news. Under current law, when an active duty or retired servicemember dies of a service-caused condition, the surviving spouse receives about $1,200 a month in Dependency and Indemnity Compensation (DIC) from the VA. If the survivor also qualifies for SBP, the DIC amount in most cases is deducted from SBP. For years, The Military Coalition (TMC) has fought to eliminate that offset, while Pentagon leaders have opposed that effort. The QRMC logic for changing that position is that retirees paid premiums for SBP coverage, and it's not right to just cancel most or all of the coverage and refund the premiums (without interest) if the survivor also qualifies for DIC.
The QRMC report acknowledges that SBP is heavily subsidized by the government. But since retiree premiums cover about 50% of SBP annuity payouts overall, the QRMC report recommends that SBP widows affected by the DIC offset should be allowed to keep 50% of their SBP annuity in addition to DIC. That is, they should get to keep the half that retiree premiums paid for. The QRMC proposal would apply that rule for all SBP-DIC survivors, including those whose sponsors died on active duty and never had a chance to pay any premiums. The Military Officers Association Of America (MOAA) appreciates the QRMC's effort to make an objective assessment and its acknowledgement that the current offset is inequitable. But they believe its proposal to "divide the SBP baby" misses the point. First, there are some categories of survivors who already have been exempted from the offset. Surviving spouses of members who died on active duty after 9/11 can avoid the offset by transferring the SBP annuity to their children. Second, a court decision several years ago ruled that SBP-DIC survivors who remarry after age 57 can retain both SBP and DIC. So current law is a hodge-podge of conflicting provisions that belie almost any single rationalization, and the most recent changes have been aimed at eliminating the offset for selected categories of survivors.
MOAA believes the answer is to recognize the reality that SBP is, by-and-large, a member-purchased annuity intended to replace 55% of earned retired pay in the event of the member's death (for any reason). Any caveat that members who died on active duty didn't pay premiums ignores the obvious – they paid the highest premium of all. Similarly, any argument that survivors should only get the portion of the benefit that retiree premiums funded would subvert the whole intent of SBP, which was expressly designed as a government-subsidized program to incentivize participation and maximize survivor protection. By enacting SBP, Congress acknowledged that the previous, unsubsidized survivor annuity program was inadequate. In contrast, VA Dependency and Indemnity Compensation is a separate plan whose intent is to compensate survivors when uniformed service causes the member's death. That's what "indemnity" means. The law already recognizes that distinction by allowing some survivors to keep both payments. The route to consistency is to extend that logic to all SBP-DIC survivors, rather than applying tortured math to create a new class of "half-SBP-eligibles." [Source: MOAA Leg Up 6 Jul 2012 ++]

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