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Widows Fight SBP-DIC Offset
Tom Philpott | March 02, 2007

Widows Left Out of ‘Concurrent Receipt’ Reforms

Army Sgt. Maj. Keith Witt had been a soldier 29 years when illness forced him to retire in 1993. The Department of Veterans Affairs rated him fully disabled with multiple sclerosis and later with cancer presumed to have been caused by exposure to the defoliant Agent Orange in Vietnam.

Witt had signed up for the military Survivor Benefit Plan for his wife Kay. His retired pay was reduced by 6.5 percent a month for SBP premiums.

By 1997, Keith’s conditions had worsened to a point that Kay retired early from her federal civilian career to be his fulltime caregiver. She estimates the decision reduced her pension by about half.

When Keith died in 2001, Kay became eligible for an SBP annuity equal to 55 percent of Keith’s retired pay. Because Keith had died of service-connected illnesses, she also was eligible for Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs.

Here, however, is the catch. To accept DIC, which pays a basic benefit now of $1067 a month, the law requires an equal cut in SBP. Premiums paid on the portion of SBP that disappears are returned to the widow.

This so-called SBP-DIC offset impacts 59,000 military survivors and simply isn’t fair, Witt and other widows told the Veterans’ Disability Benefits Commission last week. The two payments have distinct purposes, they said.

DIC, which is tax free, compensates for a service-connected death and the resulting economic loss. SBP is like life insurance. Kay qualified for SBP only because her husband bought it for her with monthly premiums.

“It would be illegal if a civilian company did that --refunded your premiums, without interest, and said, ‘You know, we’ve changed our minds. We don’t want to pay this,’ ” she told me.

The Veterans’ Disability Benefits Commission is examining all facets of the veterans’ disability system. A final report is due in October. But the commission could decide what it will recommend regarding the SBP-DIC offset within a month or two.

Witt and several other widows appeared briefly before the commission to describe how the offset has impacted them. A more detailed argument for ending it was presented by Edith G. Smith, a long-time advocate for military widows. Smith spoke on behalf of Gold Star Wives of America, which represents all survivors of service members who die on active duty or from service-connected disabilities in retirement.

The commission staff presented three options for handling the SBP-DIC offset issue:

-- Endorse the offset and continued partial refunds of SBP benefits.

-- Recommend eliminating the offset for all recipients, including survivors of members who die in service.

-- Recommend eliminating the offset only for survivors of retirees who paid SBP premiums before their death. Under this option, the offset would continue to impact SBP payments for deaths in service.

Smith, widow of a retired Marine officer who died in 1998 after many years disabled by a severe heart ailment, said Gold Star Wives strongly supports the second option and strongly opposes the others.

“To change nothing is unconscionable,” Smith said. “And to eliminate the SBP-DIC offset for all survivors where the disabled retiree paid SBP premiums but not for survivors of in-service deaths, because no SBP premiums were paid, is not a fair and equitable solution.”

Smith noted that Congress over the last several years has taken several steps to end the long-standing “offset” of military retirement for severely disabled retirees who draw VA disability compensation. In allowing “concurrent receipt” for these disabled retirees, Congress has failed to act on survivors’ concurrent receipt.  Widows, Smith said, are left behind.

The issue has had its champions. In the last Congress, Sen. Bill Nelson (D-Fla.) introduced the Military Retiree Survivor Benefit Equity Act and is expected to do so again this year.

Smith said of 59,000 survivors who would benefit from an end to the offset, about 4,000 of them lost active duty spouses.

“Most of the youngest surviving spouses would receive about $700-$800 a month, [making] barely a dent to the Military Retirement Trust Fund.  …The smallest SBP amounts, when combined with [DIC], might enable a young widow to put a roof over her head. It certainly doesn’t replace the service member’s contribution to family income.”

Widows like Witt and Smith draw an additional DIC allowance of $228 a month, on top of basic DIC, because their husbands were totally disabled for at least eight years before their deaths which can deepen the financial strain. But the extra DIC allowance further lowers their SBP.

The common argument against ending the SBP-DIC offset is the cost, $6 billion to $8 billion over its first 10 years. Because it’s an entitlement change that doesn’t help recruiting or retention, Defense officials argue, it’s an imprudent step to take, particularly in wartime with defense costs rising.

Smith reminded commissioners that Congress paid almost $3 billion to fewer than 3000 families who lost loved ones in the attacks of 9-11. Ending the offset merely would ensure that surviving military spouses “receive their pro rata share of earned retired pay,” she said.

Both Witt and Smith said they were impressed by sympathetic comments and questions from commissioners. 

“The commissioners understand that [SBP] is not a gift from the government,” Smith said. “It’s a purchased benefit. If they didn’t purchase it with money they purchased it with their lives.”

To comment, write Military Update, P.O. Box 231111, Centreville, VA, 20120-1111, e-mail milupdate@aol.com or visit www.militaryupdate.com

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Copyright 2013 Tom Philpott. All opinions expressed in this article are the author's and do not necessarily reflect those of Military.com.

About Tom Philpott

Tom Philpott has been breaking news for and about military people since 1977. After service in the Coast Guard, and 17 years as a reporter and senior editor with Army Times Publishing Company, Tom launched "Military Update," his syndicated weekly news column, in 1994. "Military Update" features timely news and analysis on issues affecting active duty members, reservists, retirees and their families. Tom also edits a reader reaction column, "Military Forum." The online "home" for both features is Military.com.

Tom's freelance articles have appeared in numerous magazines including The New Yorker, Reader's Digest and Washingtonian. His critically-acclaimed book, Glory Denied, on the extraordinary ordeal and heroism of Col. Floyd "Jim" Thompson, the longest-held prisoner of war in American history, is available in hardcover and paperback.