SBP-DIC Offset for Survivors
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.
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.
The FY2018 NDAA permanently extended SSIA payments at $310, and will adjust that payment according to COLA each year going forward.
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SENCLAND Chapter maintains a non-partisan policy just as the National and NC Council of Chapters. We are dedicated to maintaining a strong national defense and ensuring our nation keeps its commitment to all serving and all who have served our country.
MOAA SENCLAND Report on NC Veterans Legislative Day 10 April 2019
Ken Klassen and Barry Coyle
1. The day began at 0830 with a meeting of all participants at the Raleigh office of the American Legion. There were 45 people in attendance, representing all the member organizations of the NC Veterans' Council (NCVC). 7 of these were MOAA members from around the state, including David Lee, President of MOAA NC Council of Chapters, and President Ken Klassen and Legislative Affairs Chair Barry Coyle from SENCLAND. During this meeting we discussed the top legislative priorities of the NCVC and received handouts to give to our state legislators.
2. Following the morning meeting, we broke up for individual visits to our legislators. Barry met with Rep Deb Butler (D-9). They discussed the top 4 priorities and I thanked her for her sponsorship of several veteran-related bills. Her primary interests are in healthcare and fiscal issues. So while she supports veterans’ healthcare improvements, she was cautious about the fiscal climate in the state.
3. At 1100, we reconvened as a group on the floor of the NC House. We received a briefing by Speaker of the House Tim Moore, who is a strong supporter of veterans and military personnel. He gave us updates on various budget items and bills currently being considered in the House. And while he voiced strong support for retiree and disabled veteran tax relief, he too was cautious about the fiscal impact of these proposals. Following his briefing, Speaker Moore led a spirited Q&A session with the assembled vets. This session closed with a brief address by Sen Alexander. He is also a strong supporter of veterans issues in the Senate and thanked the group for our service and for participation in the legislative process.
4. Following that group meeting, we again broke up for individual legislator meetings. First, Ken and Barry visited with Sen Harper Peterson (D-9). Sen Peterson is just beginning his first term, so is very busy learning the ropes. His committee assignments and personal interests have not yet brought him into close association with veteran/military issues. But as a former Mayor of Wilmington, he is very familiar with the contributions that MOAA and other VSOs make to the city and state. Very good and long meeting that spilled over into discussion of infrastructure and transportation issues. His Legislative Assistant, Rita Harris, who is very experienced and familiar with veterans’ issues also spent several minutes with us and asked us to keep her informed on upcoming issues that she could bring to the Senator's attention.
Ken then made a stop at the office of Rep Ted Davis of District 19 and was able to discuss Veteran issues with his administrative assistant. Rep Davis was not available due to a packed schedule for the day.
Barry’s final meeting of the day was with Rep Holly Grange (R-20). She is a West Point graduate and Army veteran who is a strong supporter of veterans and active duty personnel in NC. She is a sponsor or co-sponsor of almost every veteran-related bill (except HB 213!) filed this Session. She said there is again virtually no hope of HB 213 passing because of the fiscal impact. Surprisingly, she was also not very confident of passage of the military retiree only tax deduction bills (SB 188/HB 650) of which she is a sponsor. She says it will depend on the Fiscal Note that will be prepared in the Finance Committee. She said the House and Senate sponsors of these bills are convinced that there is no viable legal challenge to providing a tax deduction only for military retirees, if they can get it passed. She offered no documentation to support that position.
Overall, an interesting and productive day. There was another group meeting in the House later in the day, but we did not attend because we had a long drive home.
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Great news... On Wednesday, HB 213 "Equal Tax Treatment of Gov't Retirees," was filed in the NC House to address the unfair tax issue faced by our advocates (and many others) - taxation of government retirement benefits. The bill's primary sponsors are: Rep. George Cleveland (R-Onslow); Rep. Hugh Blackwell (R-Burke); Rep. Pat Hurley (R-Randolph); and, Rep. Michael Speciale (R-Craven).
Now is a great time to thank these legislators and remind them of the impact of their work, and we ask that you take a moment to send them an email which you can personalize. Be sure to add your contact info! (There will likely be additional sponsors added, but this email will target only the four primary sponsors.)
The 4th Branch Team
Primary Sponsor Email Addresses:
Subject: Thank you for Sponsoring HB213
As one of our state's hundreds of thousands of local, state and federal government employees and retirees, as well as active-duty and retired members of the military, thank you for sponsoring HB 213, "Equal Tax Treatment of Gov't Retirees." The time has come to end the unfair taxation of hard-earned government retirement benefits, and your bill is a step in the right direction.
All those who serve in government and the military, regardless of when they retire, deserve the same treatment. Thank you for your service to our state, for standing up for these workers and retirees, and for honoring our service.
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