It appears that the 2020 National Defense Authorization Act (NDAA) will pass. It has come out of conference and as of this writing, it has passed in the House. Senate passage is expected and the President has said that he will sign it. This is significant for widow(er)s of military retirees and those who die on active duty.
When an active duty service member dies or when a retiree dies from a condition related to his or her military service or is 100% disabled the surviving spouse receives Dependency Indemnity Compensation (DIC). The exact rules are a little more complicated, but you can read about them here. DIC is a flat payment, regardless of rank and is approximately $1,300 per month, inflation adjusted.
Unfortunately, under current law for every dollar of DIC received the Survivor’s Benefit Plan (SBP) payment is reduced by $1.00. Again, you can read about how this works at this link. It is important to note that survivors of those who die on active duty are automatically covered by SBP. Retirees must select and pay for SBP benefits. The 2020 NDAA changes the offset.
New Law Removes DIC Offset
The 2020 NDAA will phase out the offset with one third being removed in 2021, 2022, and 2023. So, starting in 2023 affected widow(er)s will receive full SBP and DIC. This is good news for them.
Also, in 2023 the child-only option for those who die on active duty will be removed. This makes sense as the child-only option was established to provide a work around for the offset. Those who selected child only coverage will transition to spousal coverage by 2023. It appears that the child-only option will remain for those selecting SBP at retirement.
Military and Veterans Benefits Change All the Time
It’s tough to keep up with all the benefits and benefit changes that affect military members and veterans. We think that a Financial Planning firm that doesn’t eat, drink and breathe military finances each and every day will have a hard time keeping up with them. If you’re looking for financial advice, you might want to keep that in mind.
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