The National Defense Authorization Act (NDAA) for Fiscal Year 2020 was signed into law on December 20, 2019. The law included the elimination of the Survivor Benefit Plan (SBP) – Dependency and Indemnity Compensation (DIC) offset or “Widows Tax”. It applies to surviving spouses who qualify for both benefits. The law is not retroactive, and no back payments will be made. The elimination of the SBP-DIC offset will be phased in over 3 years.
No changes will take place in 2020. Beginning February 1, 2021, surviving spouses who qualify for both benefits will have one-third of their SBP restored, in addition to getting the full DIC. Beginning in 2022, surviving spouses who qualify for both benefits will have two-thirds of their SBP restored, in addition to getting the full DIC. Beginning in 2023, surviving spouses who qualify for both benefits will receive both their SBP and DIC in FULL.
If you elected the child-only option, nothing will change for you until January 1, 2023, when you’ll have the option to re-select SBP in your name permanently and the child-only option will be phased out. If your children had previously aged out, you will still be able to re-select on January 1, 2023.
The Defense Finance and Accounting Services (DFAS) has stood up a webpage, SBP-DIC Offset Phased Elimination News, to keep everyone informed and updated on the status of the implementation.
Here are a few key points to keep in mind:
• Based on the NDAA, Spouse SBP annuitants who are subject to the DIC offset will see the first change in the SBP annuity payment they receive on February 1, 2021. You do not need to notify us that your SBP payment is affected by this change in the law.
• The most important action SBP annuitants can take at this time is to ensure your annuity account information is up-to-date and includes your correct mailing address so we can contact you, if needed. Also, if you’re not using myPay, set up a profile now and add your email address.
• We are unable to provide individual estimates of the upcoming changes in spouse SBP annuity payments due to this change in the law. Please do not call our Customer Care Center to request an individual estimate.
• If you previously received a refund of SBP premiums paid due to the SBP-DIC offset, you will not need to pay back that refund because of this change in the law.
• The “Repeal of Authority for Optional Annuity for Dependent Children” and “Restoration of Eligibility for Previously Eligible Spouses” in the NDAA only affect those spouses and children of service members who died on active duty or inactive duty when the surviving spouse previously elected to transfer the SBP annuity to a child or children. They do not affect previous or future SBP elections by retirees or SBP annuities for a retiree’s beneficiaries.