Survivor Benefit Plan- Dependency and Indemnity Compensation Offset

Each year, the Military Officers Association of America (MOAA) chooses the most important issues to military families, and brings these issues to the attention of our lawmakers.  For several years, the elimination of the Survivor Benefit Plan (SBP) – Dependency and Indemnity Compensation (DIC) offset has been a hot topic.

On Wednesday, 17 July 2013, MOAA will “Storm the Hill,” meaning that they will go out to the offices of Senators and Congressmen, educating our elected officials about that issue and explaining the impact on military families.  MOAA is requesting that military families support MOAA’s efforts by contacting their lawmakers and explaining their thoughts on this issue.  Of course, MOAA is expecting that everyone will support their efforts to eliminate the SBP-DIC offset.

I’m not completely sure.  I understand what MOAA wants, and I understand why they want it.  However, I am not sure if I agree with them, and I’ll tell you why.

There are two benefits that provide financial support to survivors of military personnel who die as a result of their military service:  Survivor Benefit Plan (SBP) and Dependency and Indemnity Compensation (DIC).

Survivor Benefit Plan

The Survivor Benefit Plan has two parts:  active duty coverage and retirement coverage.  It is similar to life insurance in that it pays a cash benefit to eligible survivors, as long as they remain eligible.  Provided the beneficiary does not lose their eligibility, they may continue to receive SBP payments for the length of their life.  Coverage is automatic and free while on active duty, but it requires a decision at retirement and retirees pay a premium each month to continue their SBP coverage.  While not free after retirement, it is quite inexpensive compared to similar policies available on the commercial market.  Annuity payments from SBP are taxable to the recipient.

Dependency and Indemnity Compensation

Dependency and Indemnity Compensation is a benefit paid to survivors of servicemembers who die while on active duty, or veterans who die of a service-connected condition.  It provides monthly cash payments.  DIC payments are non-taxable.

SBP-DIC Offset

The way the law is currently written, a beneficiary cannot receive the full amount of both SBP and DIC.  The amount of SBP is offset, or reduced, by the amount of DIC received by the beneficiary.

What MOAA Wants

MOAA’s position is that there should be no offset because they are two different programs and retirees have paid into SBP in order to provide for their survivors, and that the survivors are being denied the benefits for which they have been paying.  MOAA also makes the argument that servicemembers, retirees and their families don’t know about this offset until the retiree dies and they receive fewer benefits than expected.  Seem simple and right, doesn’t it?

Why I’m Not So Sure

This is a complicated issue, and I’m not completely convinced that the complete elimination of the offset is right.  As you know, I firmly believe that is the consumer’s responsibility to fully understand all their benefits.  I teach entire classes on SBP and DIC, and I am sure to spend extra time explaining how the SBP-DIC offset works.  I don’t have a huge amount of sympathy for the “I didn’t know” argument.

In addition, SBP is set up in such a way that if your SBP benefits are reduced due to the receipt of DIC benefits, you can receive a refund of the appropriate amount of SBP premiums paid.  In that sense, the beneficiaries are being compensated (thought perhaps not enough considering the time value of money) for the payments they are not receiving.

Thirdly, because it is an offset, SBP recipients are still receiving the total amount they were expecting to receive under SBP, it is just being paid through two different payments.  In addition, because DIC payments are non-taxable, the survivors total income after taxes is increased.

My last concern regards the cost of SBP.  One of the reasons that this government-subsidized coverage is so inexpensive is because of the way payments are calculated.  If you eliminate the SBP-DIC offset, it is possible that SBP premiums will need to increase.  I am not in favor of this.  It will mean that retirees will have smaller take-home retirement pay, and that fewer people will sign up for SBP.  It is a great plan, and we want to encourage people to participate.  Changes to the SBP plan may make it less great.

Please educate yourself about this important issue, and contact your legislators if you feel that you should.  You don’t have to agree with me, or agree with MOAA , to learn more.  There is no single right answer here, except that you should understand all sides.  I’d love to hear your thoughts on this subject; I am sure that there are many.



About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • George C. Dinsmore

    I’ve been retired since 6/1/94, paying into SBP monthly, if ya’ll decide to take away this benefit, will this so called administration, congress re-inburse the monies payed into my SBP. Sure would like a feed back. @ delaying answers shows that the time served meant not a thing, but take heart GOD STILL LOVES YA’LL.

    • KateKashman

      Mr. Dinsmore, sorry for the delay in responding. I missed your comment somehow :)

      This is not a change to the SBP plan. The SBP-DIC offset has been part of the SBP program since it’s inception. Military groups have been lobbying to have this offset removed since at least the 1990s, and legislation to remove the offset is presented to Congress every year.

      If you pass away, and your spouse receives DIC, she will be eligible for a pro-rated refund of premiums paid into the system. This, too, has always been part of the SBP program.

      Please take a chunk of time and learn all the nuances of the Survivor Benefit Plan. It is a fantastic program, but understanding the details is important. The Defense Finance and Accounting Service (DFAS) website explains every single little part of the program.

      I hope that I have helped answer some of your questions.

      • Jean Permenter

        How do we apply for the pro-rated refund. I was never given that choice in all the paperwork received with the DIC and SBP offset?? I cannot find how to apply for this refund?!?

    • TiredofPols

      In 1972 during the height of anti-war sentiment, 92nd Dem Congress rewrote RSFPP into its current SBP. An RSFPP annuity is not reduced by a surviving spouse’s entitlement to Dependency and Indemnity Compensation. As widows come to find out later, at a very crucial time, SBP’s are offset by DIC.

      The anti-war crowd made sure to punish their political enemies. At the same time, they made sure their overwhelming supporters in the civil sector kept their benefits. There is no conflict between Civil Service survivor payments and an RSFPP/SBP annuity.

      Why sell this program to military families and not make it clear what happens at the end stages? These brave soldiers give a lot if not their actual lives, their families endure the military lifestyle, they should be compensated not punished or used as political fodder.

      You need to understand that this is pure ugly politics punishing enemies, this needs to stop. Equality for all, military families deserve the same treatment as their civilian counterparts.

      As to being reimbursed, if SBP is more then DIC, you are reimbursed by the offset. If DIC is more than SBP, you are refunded all SBP premiums, minus over payments, which would have been what they had payed during any DIC payments. You will also receive the SSIA, which is $90 monthly for 2013, $150-2014, $200-2015, $275-2016, and SSIA ends in 2017 Oct at $310 monthly.

      I’m pretty sure if you were to talk to new soldiers/recruiters, they have zero clue about what’s down the road in regards to how these programs are marketed while marketing leaves out the offset portion. Oops.

      • Kelly

        In 19772 the program for SBP was a cost share program DOD was suppose to put in 60 percent and the soldier on retirement 40 percent , From 1972 to 1996 DOD never put in a dime eventually the servicemember was paying 116 percent of the SBP. My refund was prorated, no interest waas paid back or the other 60 percent. This issue was presented to Congress a long time ago. Nothing was ever done.

  • Debi C

    I am a widow since Feb 14 2006. My husband served From 1960-1986. He paid in SBP from day one. Survived the war but later suffer multiple cancers from Agent Orange. Chemicals our own Government created and used knowing the dangers from the 50’s to 70’s. I watched him suffer and die before my eyes. I know there are many more families that suffered in the same manner. And then to have the government say I get no help is slap in the face. If a civilian insurance tried to cancel a policy for no reason and not pay the annuity the would be in court. But this government has feels no shame in hurting those who defend it. He served many years and paid into SBP it was earned. He suffered and die because of bad decisions by Pentagon.

    • KateKashman

      Debi, I am assuming that you are receiving Dependency and Indemnity Compensation (DIC) from the VA, and that it is more than the amount of the SBP annuity that you would have received it you were not eligible for DIC. If this is true, you are eligible for a refund of the premiums that your husband paid in to SBP. Unfortunately, I haven’t been able to find out how to apply for this refund. I’ve sent a letter to some smart people and I’m looking forward getting a response.

      If this isn’t your situation, please let me know. I’d love to be able to provide more informaiton.

      • Darlene Bristol

        I think you may be mistaken by stating that a refund of premiums your husband paid for SBP is due you. However, you may request a refund to the Feds and your state for the taxes you paid on the SBP funds you received. This is the case I have experienced just recently.

        • KateKashman

          Darlene, it is pretty clear from the Defense Finance and Accounting Service (DFAS) website and at other Department of Defense information sources: “If the SBP is greater than the DIC award, a partial refund of premiums paid into the program during the service member’s retirement will be made. If the DIC payment is greater than the SBP payment, SBP will be stopped completely and all premiums paid into the program during the service member’s retirement will be refunded.”… I would be curious to learn more about your tax situation, if you would like to share.

    • Mariel

      Yes, the same has happened to me. My husband served in the Marines in Vietnam in 1968, he was sprayed by Agent Orange and suffered a mortar wound to his leg. He kept going after college serving as a Naval Officer in the reserves. He retired with 20 years. He died at age 55. I do not get both DIC and SPB. How is this ignorance on my part that my husband died when we had no expectation of it? I am not a fortune teller! My husband and I did not see that the government would not honor the programs that were “sold” to us. Especially when I am told that he “just died too young”. The Army has semi-trucks driving around saying “we take care of our military families”, BALONEY!

  • Carolyn

    The regulations do say that if you collect a VA benefit (DIC), your SPB stops.
    They do send a check for payments made into SBP and a very small monthly amount. ( which is supposed to end in 2014 or 15) True, in most cases the DIC is more than the SBP, however this does not make it right. What if the military member never chose to contribute to SPB?
    Can the survivor still collect DIC? To me SPB was an insured annuity that was paid for. It was not a gift but one that was taken away.

  • Lynne

    I’ve been the widow of a retired military member since 2004, when you file for DIC if its approved they will send paperwork to DFAS … and if your DIC is more than what your SBP would have been DFAS will automatically send you a refund check for what was paid in for the SBP. And DFAS will send start sending you SSIA (a small amount monthly – it is now $150 a month).

    What really stinks – if you’re a widow who qualifies for both DIC and SBP – but are not getting SBP due to the offset – when you turn 57 – if you get remarried – you’ll be able to draw both DIC and SBP – if you pay back the SBP amount that was refunded – the catch is you have to get remarried after you turn 57

  • Gina Park

    I have been receiving DIC since 2002 when my husband died of cancers caused by Agent Orange… (Don’t get me started on the term. “Compensation” being used… I am over 57 and just got remarried in April. I sent several notices to the VA informing them of my remarriage. I received a letter this last week, not only telling me I will not receive DIC any longer, but that I would be receiving a schedule to repay the amount I have been over paid since 2006. I am freaking out! Can you give me a heads up on what is happening??

  • Carroll Johnson

    Carroll Johnson M/Sgt. USAF Retired

    DIC is a survivors benifit that is erned by the pain and suffering of the deceased spouse. You have to suffer with your ailments for ten years or die because of them in order to receive monthly payments. Most likely your spouse is your caretaker during most of these years that you are 100 percent plus another high percentage of disability.
    V A benifits in this country are great and it is hard to believe that our elected officials have tied SBP and DIC together. One you have paid for in cash and the other in pain and suffering. Viet Nam 1966. Home bound with long time diabeties and severe neuropathy.

  • Judy

    My husband died Nov. 14th 2005. At the time of death, he was receiving 30% disability due to multiple cancers due to agent orange exposure. At that time, I was financially ok so I didn’t apply for DIC. Due to a trusted financial advisor, who invested my money in unsuitable investments because he received large commissions, I’m no longer financially secure. I applied for DIC on May 22, 2011. Since the person who signed his death certificate, did not know how to properly fill out a death certificate, my case has been denied. It lists “cause of death” Pancreatic cancer, none of the other cancers leading up to the last cancers were listed. This individule never once saw my husband, plus he died at home, didn’t even know that the primary was ever discovered. We went through 10 years of turmoil. I write all of this to say, be sure that a death certificate is properly filled out. Research will tell you that this is so important as it can cause your family and survivors much grief .its such a shame as the military dependents went through great sacrifice, in my case it was 26 years. I spite of my disappointment, my kids and I can still say we too are proud to have “served”.

    • Jane

      Please use your County Veterans Service Officer and find out where your closest Disabled American Veterans organization is. You are eligible to become a member of the Auxiliary. Use the service of the Disabled American Veterans National Service Officer. If anyone can help, it is the wonderful people there. The National Service officers are just the fit for you. I know you will be pleased with their help.

  • David Benson

    It just is not right to offset DICOMP and SBP. Here’s why. I retired in 1985 and being being a Business Administration major and a newly crowned series seven, (general securities broker) I knew how to figure the worth of electing to pay part of my retirement pay into the SBP program and decided it was a bad deal for several reasons. A Vietnam vet I was exposed to agent orange and as a result have several of the maladies associated with that exposure. I receive 100% disability from the VA. It is more than likely that when my life ends it will be related to one of the illnesses associated with agent orange and therefore my wife will receive DICOMP! My friend who lived down the street died of lung cancer that had spread throughout his body as a result of agent orange exposure while on patrol on the Saigon River. He retired, Chief USN and elected to pay into SBP. His wife receives an annuity from the SBP plan and since he died from a service connected disability she now gets DIC as well, however her DIC is offset by the same amount as her SBP. The result? He paid for an annuity for her all those years and took a lot less retirement pay and she she gets exactly the same amount that my wife will get and I didn’t pay for anything! Is that right? Is it fair? Not by my rules!!!

    • Kate

      Regardless of my feelings on the SBP-DIC offset, I completely disagree with your reasoning. There are several flaws in your logic:

      1. Your neighbor’s wife is entitled to a refund of the SBP premiums paid for benefits she is unable to receive due to the SBP-DIC offset.

      2. You have the offset backwards. DIC is not offset by SBP. SBP is offset by DIC. SBP payments are usually more than DIC payments. Your friend’s wife receives the full amount of her husband’s SBP election, which is likely more than the current $1,233 per month current DIC payment. (I can not calculate this with certainty without knowing is exact pay grade, years of service, time in grade, date of retirement,and SBP election.)

      3. There is no guarantee that you will die of your service-related disabilities. You could be hit by a car tomorrow, and your wife will have neither DIC or SBP.

      4. It is INSURANCE. As a financial professional, you should certainly understand that insurance is not designed to be a guaranteed payout. You buy home insurance but still avoid having a fire in your home. You by auto insurance and try to avoid accidents. You purchase SBP to protect your spouse from poverty if you predecease her.

  • Edgardo

    How long can a spouse of a divorce retire continue to receive the 50% of the military retire monthly paycheck. We were married for over ten years and then divorce?

    • Kate

      Edgardo, divison of retirement pay is generally a permanent thing. If it was the desire of the parties to have a less permanent form of support, it should be constructed as alimony or some other form of payment and not constructed as a division of military retirement pay.

  • MTC

    My father died recently from a long term (10+ years, most with full disability) illness that was tied to Agent Orange exposure in Vietnam. VA paid benefits the last two years after we realized we could apply). He elected SBP and paid premiums throughout retirement. My mother’s SBP payment is larger than the DIC payment, so the SBP will still come, but will be offset dollar for dollar by the DIC (basically converting income from taxable (SBPP to non-taxable (DIC) for my mother. I understand that she is due a refund for the portion of the SBP that my father paid premiums for but, she will not receive due to DIC offset. My questions are as follows: 1) How is the refund computed (Does one simply multiply the percentage of lost SBP annuity by the total (cumulative) premiums paid during retirement?. 2) Once the refund amount has been determined, how will it be paid… as a lump sum? It is taxable so are taxes withheld? 3) What do my mother or I as her rep need to do to GET the refund (is it automatic or do we need to apply). Thanks for any help. Beyond what this did to my father and the loss of more than a decade of my mother’s retirement years caring for him 24-7, they paid significant money for his medical bills and uncovered expenses, even keeping home. Every little bit helps.

    • Kate

      MTC, my condolences on the loss of your father.

      I am not an expert in the SBP premium refund process. These questions are best directed to the Defense Finance and Accounting Service, the same folks who you notified of your father’s death and to whom your mother is applying for SBP benefits.

      I hope that helps.

  • MTC

    And… FWIW, my opinion on the question of the article is that my mom and dad (and the rest of us) paid for SBP and DIC separately and in full. One by premiums,. the other by long-term suffering, toil, anxiety, loss of lifestyle and ultimately death. There should NOT be an offset as it renders the DIC compensation to just a conversion of a portion of the SBP to non-taxable income. Nice, but come on. My dad was a great man who made great sacrifices. His service was worth more than tax break.

  • kathy

    Does my mother have to claim her sbp checks to the irs. My father passed away that is why she receives the sbp.She lives with me her daughter and im not sure if that is an income she has to claim

    • Kate

      Kathy, survivor benefit plan benefits are taxable income. Your mother should receive tax documentation from the Defense Finance and Accounting Service (DFAS).

  • Patty

    Hi, Kate.

    My mother was widowed in December of 1971 when her husband was killed in action [Marine]. Her DIC was discontinued when she married my father [Navy], but she was told that she could continue collecting her first husband’s DIC in the event that she was widowed, divorced, or single after the age of 55.

    My father [second husband] served for 23 years, elected to take the lower amount of SBP so she would continue to receive payments in the event of his death [55% of his retirement], and he died at age 66 of mesothelioma due to asbestos exposure during his tenure in the Navy.

    She feels that she should be entitled to collect DIC on her first husband and SBP on the second [my father]–two separate people with separate benefits–but now she is receiving nothing but a load of bills demanding back pay or giving her conflicting information to the effect that she is due various refunds.

    What is the protocol for this unique situation, and who can she contact? Any help would be appreciated.

    • Kate

      Patty, thanks for helping your mother. Her situation is uncommon and is going to take some unravelling. The best people to help with this are volunteers at Veterans Service Organizations (VSO) such as the American Legion or Veterans of Foreign Wars, or County Veterans Service Officers (CVSO), if your county has one. These people focus solely on veterans benefits and have experience in different situations.

      As a rule, your mother would be eligible to receive DIC on her first marriage. Effective September 30, 1998, the law was changed to allow a surviving spouse to reestablish DIC eligibility after termination of remarriage. So far, pretty simple.

      However, the situation is clouded by the benefits she is receiving from your father’s service and illness. Was your father receiving VA benefits at the time of his death? Is your mother eligible for DIC benefits based upon your father’s illness? Or is she solely eligible for Survivor Benefit Plan (SBP) annuity payments based upon his enrollment in the SBP plan?

      I am nearly certain I have seen the issue of competing benefits discussed, but I have scoured the internet for quite some time and I can not find anything that resembles that which I remember. I feel confident that the VSOs or CVSOs will have better luck in helping you sort this out.

  • Wanda Contee

    I remarried when I was 56 years and 10 month. Was married to my now deceased exhusband who was d100% disabled. Would I still be able to collect DIC?