The final mark-up of the House Armed Services Committee’s version of the defense authorization act is a provision to end the "widow's tax" – otherwise known as the SBP/DIC offset -- for 57,000 surviving military spouses.
This so-called widow’s tax is a situation in which surviving spouses of servicemembers and retirees become eligible for tax-free Dependency and Indemnity Compensation (DIC) from the VA, but are also covered by the Survivor Benefit Plan and are forced to have their SBP benefit reduced by DIC, by about $1200 a month. The SBP is an annuity which is paid through monthly premiums. Like military retirees who draw a monthly military pension and disability compensation for rated service-connected disabilities argue for concurrent receipt, these widows believe offset is unfair.
In the past Congress has authorized a Special Survivor Indemnity Allowance (SSIA) which partially eliminated the offset by$70 a month.
According to Tom Philpott’s recent article, Panel Votes 'Sensible' TRICARE Hike, 'Widows' Tax' Cut, The HASC defense bill would fund SSIAin part by accepting the DoD plan to curb costs associated with TRICARE by forcing older retirees out of Uniformed Services Family Health Plan and into TRICARE For Life.