RAO Davao City

United States Military Retiree Activities Office Davao City, Philippines

DIC+SBP UPDATE 1 August 2008

Posted by Service Officer on July 31st, 2008

The husband of Anne Parks– a military policeman exposed to the defoliant Agent Orange during two tours in Vietnam — paid 30 years of premiums on their Defense Department Survivor Benefit Plan (SBP) insurance policy the couple believed would allow her to pay the bills and live comfortably after his death. When he died in 2006, Parks learned that the law allows the government to significantly cut — and in many cases eliminate — that Defense Department insurance payment if the surviving spouse elects to receive a Veterans Affairs benefit (DIC) established to compensate for the loss of a family member whose death was service-related. DoD refunded the Parks’ premiums, but it paid no interest on the money, which was counted as income and taxed. Called an “offset,” the dollar-for-dollar cut was created to limit how much compensation payments cost the government. Nearly 57,000 surviving spouses of military retirees argue that the benefits are separate. One is insurance, bought and paid for through premiums, and the other is a federal benefit for surviving dependents.

In most cases, surviving spouses were unaware they wouldn’t get that money after their husbands or wives died. The offset has forced some elderly surviving spouses to live solely on the VA benefit — with a base rate of about $13,100 a year — or to get a job to make the rent or house payments. Eliminating the offset between the SBP and DIC programs is estimated to cost between $6 billion and $8 billion over the first 10 years, an argument used by some people who oppose eliminating the offset. “That cost is a cost of war,” said Jeanne Thompson, president of the El Paso del Norte Chapter of the Gold Star Wives of America. “They don’t mind spending money” on equipment and operations in Iraq and Afghanistan. The Gold Star Wives have been at the forefront of the effort eliminate the offset. “They (members of Congress) don’t feel they need to find the money because we’re not a very vocal group,” said Edith Smith, a Virginia resident who is on the Gold Star Wives Government Relations Committee and has been trying to persuade lawmakers to remove the offset since 1999. “Most of our members don’t understand the process of

government and how important it is to participate –just to call their representatives in Congress.”

Legislation has been introduced in the past years and amendments to the NDAA have been proposed but neither has gained the support of enough legislators to change the law. Currently S.935 in the Senate has 50 cosponsors but even if it passes it is doubtful the House, which has no bill on the issue, will act by the end of the 110th Congress. Thus, new legislation will have to be introduced in the 111th Congress to keep this issue alive. SBP, for the most part, is offered to military retirees who pay a monthly premium of 6.5% of their retirement pay. It is supposed to provide the surviving spouse up to 55% of that retirement pay. After the 911 terrorist attacks, the benefit was expanded to include military members who die on active duty. DIC is paid to surviving dependents of service members who die on active duty and military retirees who die of a service-related condition. The basic payment is $1,091 a month. If the surviving spouse elects to receive this benefit, that amount is deducted from the SBP payment, in some cases wiping it out completely. Most surviving spouses choose the VA’s DIC benefit because it is not taxed. The Defense Department annuity is.

Anne Parks’ husband died of pneumonia after paying 30 years of SBP premiums. His death was considered service-connected. It took eight months to be approved for the VA benefit, and she was paid retroactively to the date of her husband’s death. But that triggered cuts in her SBP payments, which took her by surprise. The Defense Department paid her a lump sum of $24,000 for the 30 years of premiums the couple had paid, and the federal government immediately took $7,000 of that back in taxes. The cuts to her SBP payment amounted to about $1,100 a month, she said. “It seems that it’s unfair because they give it to you and then they take it away,” Parks said. Melitta Pisarcik’s husband died at the relatively young age of 57. He had been exposed to Agent Orange. She received a refund of $5,000 for payments to the Survivor Benefit Plan, which was taxed. “What happened to the interest?” Pisarcik asked, adding that she was faced with living on $833 a month. [Source: El Paso Times Chris Roberts article 27 Jul 08 ++]

Leave a Reply

You must be logged in to post a comment.