Phase Out of the SBP-DIC Offset (Widow's Tax)
Military surviving spouses subject to the Survivor Benefit Plan (SBP) and Dependency and Indemnity Compensation (DIC) offset, commonly known as the "Widow's Tax," will potentially see an increase in their SBP payments beginning February 1, 2021.
The National Defense Authorization Act for Fiscal Year 2020, signed into law on December 20, 2019, repealed the dollar-for-dollar offset of SBP payments from the Department of Defense (DoD) by the amount of DIC paid by the Department of Veterans Affairs (VA).
The SBP-DIC offset repeal will be phased in over three years beginning on January 1, 2021 (paid as of February 1) with full elimination of the offset on January 1, 2023. The changes do not affect DIC payments from the VA. Eligible surviving spouses will continue to receive the full amount of DIC from the VA.
- In 2021 – SBP will be reduced by no more than two-thirds of the amount of DIC rather than by the entire amount. Eligible survivors will also continue to receive the Special Survivors Indemnity Allowance (SSIA), up to the maximum amount of $327 per month or up to the amount of SBP reduced by DIC (if the amount of the reduction is less than $327). Eligible surviving spouses will continue to receive the full amount of DIC.
- In 2022 – SBP will be reduced by no more than one-third of the amount of DIC received. Eligible survivors will also continue to receive the SSIA, up to the maximum amount per month, or up to the amount of SBP reduced by DIC (if the amount of the reduction is less than the maximum).
- In 2023 – the SBP-DIC offset will be eliminated completely. Surviving spouses eligible for both programs will receive both SBP and DIC payments in full, effective January 1 and paid as of February 1, 2023. SSIA payments will no longer be made.
TAPS Instrumental in this Legislation
TAPS was instrumental in working with Congress, organization partners, and survivors to finally eliminate the SBP-DIC offset. For over four decades, as many as 65,000 surviving military spouses were denied their service members’ earned benefits, an average loss of $925 a month or $11,000 annually.
TAPS is very proud of the leadership role we played in getting this over the finish line. In 2023, surviving spouses will receive their full survivor benefits without offset and future generations of surviving spouses will receive their benefits in full, amounting to millions of dollars in benefit payments.
The Defense Finance and Accounting Service (DFAS) has stood up an SBP-DIC Offset Phased Elimination News webpage and created a Frequently Asked Questions (FAQ) to help answer survivors questions regarding the SBP-DIC offset repeal. TAPS has reviewed these questions and answers and reflected some of the most pertinent ones below.
Who will be impacted by the repeal of the SBP-DIC offset?
This change affects surviving spouses who are, or who will become in the future, eligible for both Survivor Benefit Plan (SBP) payments and Dependency and Indemnity Compensation (DIC) payments, and who were previously subject to a full or partial SBP-DIC offset. The law also impacts the children of service members who died while on active duty or inactive duty, in the line of duty, who are currently receiving SBP payments because the surviving spouse chose the optional child annuity.
It does not impact surviving spouses who receive only SBP but not DIC. It also does not impact spouses who are in receipt of DIC-only, either because SBP was declined by the service member at retirement or because the service member was a disabled veteran who was not also a retiree. It is important to note that this change does not impact any retirees or surviving spouses if SBP coverage was previously declined, and does not create opportunities for new enrollment in SBP for retirees who previously declined coverage.
Does any form, document, or supporting statement need to be submitted to take advantage of these increased Survivor Benefit Plan (SBP) payments? If yes, when is the cutoff date?
No, the increase in benefits will occur automatically for surviving spouses subject to the SBP-DIC offset. All surviving spouses subject to the offset will have their benefit recalculated for the month of January 2021, which they will receive on February 1, 2021. We would encourage you to ensure your contact and bank account information is updated through the Defense Finance and Accounting Service’s self-service portal, myPay.
How much will the average survivor get?
Survivor Benefit Plan (SBP) annuity payments can vary for each beneficiary because they are based on a number of factors such as retirement date, length of service, pay grade, and disability rating of the sponsor. There is no set amount, so each surviving spouse’s current and future SBP payments could be quite different. We recommend reaching out to a financial counselor or retirement services office on your local installation to discuss individual amounts.
I am currently subject to the SBP-DIC offset. Will I definitely get an increase?
Yes, eventually, although not all survivors will see an increase in the first year. It is possible that if your Survivor Benefit Plan (SBP) payments are currently less than two-thirds of the amount of Dependency Indemnity Compensation (DIC), you may not see an increase in 2021.
For example, if you currently receive $1,500 from VA for DIC, but your gross SBP before offset is only $800, you will not see an increase in 2021 other than the normal annual cost of living adjustment (COLA). This is because your SBP amount, $800, is still less than the amount of DIC that would be subject to offset, which in this example would be $1,000 (i.e., $1,000 is two-thirds of the $1,500 DIC). Eventually, though, you will see an increase as the SBP-DIC offset is further reduced in 2022 and then completely eliminated in 2023.
Now that the offset is being eliminated, will there be any back pay for the years we didn't get Survivor Benefit Plan (SBP) payments we paid for?
No, Section 622 of the National Defense Authorization Act for Fiscal Year 2020 does not authorize back payments. Surviving spouses of retirees who were subject to the SBP-DIC offset received either a partial or full refund of premiums to account for the reduced SBP payments.
I received a Survivor Benefit Plan (SBP) premium refund once I started getting both SBP and the Dependency and Indemnity Compensation (DIC), will I have to pay it back?
No, if you previously received a refund of SBP premiums due to the SBP-DIC offset, you will not have to pay back that refund because of this change in the law.
What is the Special Survivor Indemnity Allowance (SSIA)?
The Special Survivor Indemnity Allowance (SSIA) is a payment made to surviving spouses subject to the SBP-DIC offset that partially restores some of the Survivor Benefit Plan (SBP) amount that is offset. SSIA is a set amount established by Congress and adjusted each year by a cost-of-living adjustment (COLA), if applicable. The SSIA rate for 2021 is $327 per month. Surviving spouses subject to the SBP-DIC offset will continue to receive SSIA, up to the amount that is reduced from their SBP payment (i.e., until the offset is fully-repealed in 2023).
Will the Special Survivor Indemnity Allowance (SSIA) be phased out?
Eligible survivors will continue to receive SSIA, up to the prescribed maximum amount ($327 per month for 2021) or the amount of SBP that is offset due to DIC, whichever is less. SSIA will no longer be paid once the SBP-DIC offset is fully eliminated in 2023 and surviving spouses receive the full amount of SBP and DIC concurrently, without offset.
If I was not subject to the SBP-DIC offset before, does this change affect me?
Most likely not. The change only impacts those surviving spouses who were previously subject to the SBP-DIC offset, and those surviving spouses and children of members who died in the line of duty if the spouse chose to transfer the SBP benefit to a child or children. This law does not create new beneficiaries nor change the eligibility criteria for SBP or DIC.
My spouse declined Survivor Benefit Plan (SBP) when he retired. I am receiving Dependency and Indemnity Compensation (DIC) from VA now because he died of a service-connected issue. Will I now receive SBP also?
No, declining SBP at retirement is an irrevocable decision. Section 622 of the National Defense Authorization Act for Fiscal Year 2020 does not grant the authority to reinstate SBP coverage if it was previously declined at retirement.
What if I got remarried, will I still get the SBP benefit?
The National Defense Authorization Act for Fiscal Year 2020 did not change the eligibility requirements for the Survivor Benefit Plan (SBP). If a surviving spouse remarries prior to age 55, he or she is ineligible to continue receiving SBP. If he or she remarries after turning age 55, that spouse remains eligible to continue receiving the SBP annuity.
TAPS will continue to monitor the DFAS website and keep survivors updated on any additional changes.