# 87 - MILITARY - SBP-DIC Offset No Longer Applies If Remarriage Occurs at Age 57 or Older
Monograph # 87 February, 2010 (v. 3.2)
MILITARY: SBP-DIC OFFSET NO LONGER APPLIES IF REMARRIAGE OCCURS AT AGE 57 OR OLDER
© Lawrence D. Gorin, Attorney at Law, Portland, Oregon
A WEDDING GIFT FROM THE DEPT. OF DEFENSE......
or a slap in the face to widows who choose not to remarry?
Background
For qualifying and eligible surviving spouses of deceased military servicemembers and retirees, there are two principal long-term financial benefit programs offered through the federal government.
First, the Department of Defense administers the Survivor Benefit Plan (SBP), which is a government-subsidized insurance plan that provides a deceased servicemember’s or retiree’s qualifying surviving spouse with a monthly annuity payment, commencing upon the death of the servicemember or retiree. SBP coverage is provided at no cost to all servicemembers while on active duty. Upon retirement, the servicemember may "elect" to continue SBP participation, with the retiree's portion of the premium cost then being paid by way of a reduced monthly retirement benefit during the retiree's lifetime. Upon the retiree's death, a monthly annuity, the maximum amount being 55% of the amount of retired pay, is then paid to the retiree’s surviving spouse.
Second, the Department of Veterans Affairs (the VA) administers a program, funded entirely by the government, that provides monthly Dependency and Indemnity Compensation (DIC) payments for the surviving spouse of a servicemember in the event the servicemember dies as a result of service-connected causes as well as for the surviving spouse of a retiree if the retiree’s death is due to injury or disease contracted while on active duty.
While each program is independent of the other and each is administrated by a different agency (SBP by the Department of Defense; DIC by the Department of Veterans Affairs), there are several situations in which eligibility for benefits under one program may affect eligibility under the other.
Eligibility restrictions based on age and marital status
Prior to January 1, 2004, eligibility of a deceased veteran’s surviving spouse to receive benefits from the Department of Veterans Affairs under the VA’s Dependency and Indemnity Compensation (DIC) program was lost in the event of the surviving spouse’s remarriage, regardless of age at time of remarriage.
Concerned about the “marriage penalty,” at least for “older” women, Congress changed the law through the Veterans Benefits Act of 2003, Pub L 108-183. Under the revised law, codified as 38 USC § 103(d)(2)(B), eligibility for receipt of DIC benefits would no longer be lost in the event of the surviving spouse’s remarriage, provided, however, the remarriage occurred at age 57 or thereafter. (The act also provided for the restoration of DIC benefits for those otherwise eligible surviving spouses who, prior to December 16, 2003, the date the new law took effect, had remarried at age 57 or older and who had thereby lost their DIC eligibility.)
But surviving spouses who are eligible to receive both DIC benefits as well as SBP annuity payments, often referred to as “dual-eligible” surviving spouses, suffer an economic set-back in the amount of their SBP benefit. Specifically, under 10 USC § 1450(c)(1), the federal law applicable to this class of surviving spouses, DOD is required to reduce (“offset”) the amount of the surviving spouse’s SBP payment on a dollar-for-dollar basis by the amount of the DIC benefit (regardless of the surviving spouse’s age or marital status). In essence, the DIC dollars simply replace the SBP dollars. (Of course, there is a tax advantage to receiving DIC dollars in place of SBP dollars, since the SBP dollars are taxable whereas the DIC dollars are not. But the “offset” still results in a net loss.)
For example, if a veteran’s surviving widow is entitled to a DIC benefit of $1,154 per month (the standard DIC amount for 2009) and an SBP benefit of $1,400 per month, the SBP payment would be reduced by $1,154 (the amount of the DIC benefit). Thus, instead of receiving a total of $2,554 per month (the full amount both DIC and SBP payments), the surviving spouse would receive only $1,400 (being the $1,154 DIC benefit and a reduced SBP payment of $246).
Change in the law
However, as a result of an August 26, 2009, decision of the US Court of Appeals, DOD has changed its policy. From now on, the dollar-for-dollar SPB-DIC “offset” will no longer apply to surviving spouses who otherwise qualify for both DIC and SBP benefits AND who remarry at age 57 or later. Consequently, for surviving spouses whose SBP annuity has been previously reduced due to receipt of DIC benefits, getting married at age 57 or later will now result in receipt of the full unreduced amount of the SBP benefit as well as the full DIC benefit.
In sum, a surviving spouse who is eligible to receive both DIC and SBP benefits will now be provided with a financial reward from DOD for remarrying as soon as possible upon attaining age 57. For surviving spouses in this particular group, it literally pays to get married. Indeed, using the 2009 DIC payment rate, the qualifying surviving spouse who remarries at age 57 or older will be effectively paid $1,154 per month by DOD for doing so.
But the financial reward accorded to dual-eligible surviving spouses who remarry at age 57 or older (and thus retain their DIC benefit and regain their full and unreduced SBP benefit) is not accorded to dual-eligible surviving spouses who (perhaps for moral, religious, ethical or other personal reasons) choose not to remarry and who thus continue to be subjected to the SBP-DIC offset. In effect, the financial boon for the former class (widows who remarry at age 57 or older) is a financial bust of the latter class (those who choose not to remarry). Although the servicemember paid for both benefits (SBP with premiums and DIC with his life), the only way his widow can collect the full amount of both benefits is to do something she perhaps finds disloyal to her original vows of marriage and the memory of her deceased husband. The law that allows this to occur is arguably unfair, unreasonable, illogical and irrational, but nonetheless perfectly legal.
The “rest of the story”........
On August 26, 2009, the US Court of Appeals for the Federal Circuit, in the case of Sharp v. United States, 580 F.3d 1234 (DC Cir, 2009), held that the SBP-DIC “offset” as applied by the Department of Defense, effectively reducing SBP benefits for surviving spouses who also qualify for DIC benefits, is in fact not authorized by the controlling congressional enactments, at least not as to otherwise eligible surviving spouses who remarry at age 57 or later.
The lead plaintiff in the case, Patricia Sharp, is the surviving spouse of Brig. Gen. Richard H. Sharp (USA), who died in 1983 while on active duty. At the time of his death, he and Mrs. Sharp had been married for 23 years, and she was her husband’s designated beneficiary for SBP annuity payments. Mrs. Sharp thus became eligible to receive both SBP benefits and DIC benefits, with the former (SBP) being reduced (“offset”) to the extent of the latter (DIC). Subsequently, on November 25, 2000, at the age of 60, Mrs. Sharp remarried. As a result of her remarriage, she lost her DIC eligibility in its entirety (but did regain the full amount of her SBP entitlement). This was in accord with the law in effect at the time of her remarriage in 2000 that barred surviving spouses from continued receipt of DIC benefits if and when they remarried, regardless of age at time of remarriage.
But 38 USC § 103(d)(2)(B), the statute that mandated the “DIC marriage penalty” (loss of DIC eligibility due to remarriage), was amended by Congress through the enactment of the Veterans Benefits Act of 2003, Pub L 108-183. Specifically, section 101(a) of the act amended 38 USC § 103(d)(2)(B) so as to declare that “The remarriage after age 57 of the surviving spouse of a veteran shall not bar the furnishing of [DIC] benefits * * *.”
Further, section 101(b) of the act created a new provision, codified as 38 USC § 1311(e), stating that “In the case of an individual who is eligible for dependency and indemnity compensation under this section by reason of section 103(d)(2)(B) of this title who is also eligible for benefits under another provision of law by reason of such individual’s status as the surviving spouse of a veteran, then, notwithstanding any other provision of law * * * no reduction in benefits under such other provision of law shall be made by reason of such individuals eligibility for benefits under this section.”
Lastly, section 101(e) of the act included a “grandmother provision” that restored DIC benefits to those qualifying surviving spouses (such as Mrs. Sharp) who had remarried at age 57 or older prior to December 16, 2003 (the date the new law took effect) and had thereby lost their DIC eligibility.
Thus, under the revised law, Mrs. Sharp was entitled to have her DIC benefits from the VA restored, which is what then occurred. But when that happened, DOD then applied the “SBP-DIC offset” and reduced Mrs. Sharp's SBP benefit by the amount of her restored DIC benefit. DOD’s action was taken pursuant to 10 USC § 1450(c)(1), the provision of the SBP law that mandates the dollar-for-dollar reduction of SBP payments for a surviving spouse who is also eligible for DIC benefits. It was DOD’s position that 10 USC § 1450(c)(1) was applicable and controlling in Mrs. Sharp’s circumstances.
Not being happy with DOD’s reduction of her SBP annuity amount, Mrs. Sharp (along with two other similarly situated widows) then sued the government in 2007. According to Mrs. Sharp, the Veterans Benefits Act of 2003, at section 101(a), not only removed remarriage as a DIC eligibility disqualification factor, at least if the remarriage occurs at age 57 or later, but also provided, in section 101(b), that as for such surviving spouses, there shall be “no reduction in benefits under such other provision of law * * * by reason of such individual’s eligibility for [DIC] benefits.”
Mrs. Sharp correctly pointed out that 10 USC § 1450(c)(1), the provision of law that mandates the dollar-for-dollar offset of the SBP annuity payments for surviving spouses who also qualify for DIC payments, is a “provision of law” that, if applied to surviving spouses in her situation (being eligible for DIC benefits even though remarried at age 57 or older), would result in a reduction of her SBP annuity. Mrs. Sharp argued that the language used in section 101(b) of the Veterans Benefits Act of 2003 (“no reduction in benefits under such other provision of law shall be made”) means exactly what it says and effectively bars DOD from reducing her SBP annuity as otherwise required by 10 USC § 1450(c)(1).
Consequently, said Mrs. Sharp, dual-eligible widows who remarry after age 57 are entitled to receive BOTH Survivor Benefit Plan (SBP) annuity payments from DOD and Dependency and Indemnity Compensation (DIC) benefits from the VA, in full and without any offset between the two.
In response, DOD urged the Court of Appeals to determine the intent of Congress by considering the legislative history leading up to the enactment of the Veterans Benefits Act of 2003. DOD argued that Congress never intended the law to have the result urged by Mrs. Sharp. The court rejected DOD’s “unconvincing argument,” noting that the text of 38 USC § 1311(e) is clear and unambiguous. Said the Court of Appeals:
Net result: DOD was ordered by the court to commence acting in conformance with the law as enacted by Congress (which DOD had erroneously not been doing), thereby restoring to Mrs. Sharp the SBP reduction that it had been applying in her case. Mrs. Sharp, having remarried after attaining age 57, was thus allowed to retain her full DIC benefit (notwithstanding her remarriage) and also receive her full and unreduced SBP benefit (notwithstanding her receipt of the DIC benefit).
See entire court decision at:
http://scholar.google.com/scholar_case?case=5422111345562531106
http://www.cafc.uscourts.gov/opinions/08-5105.pdf
Follow-up note. Following the court’s decision in Sharp v. US, DOD decided not to further appeal the decision. Thus, the SBP-DIC offset that applies to surviving spouses who are eligible for both SBP and DIC benefits will NOT apply to those surviving spouses who remarry at age 57 or thereafter. For that particular group, they will get their full unreduced SBP benefit AND the full DIC benefit. However, surviving spouses who are eligible for both SBP and DIC benefits but who remain unmarried will continue to have their SBP benefit reduced on a dollar-for-dollar basis by the amount of the DIC benefit.
See DOD Memorandum for DFAS Director at:
http://www.naus.org/news/documents/DoDMemo10-22-09-SBP-DICOffset.pdf
================================
LAWRENCE D. GORIN
Attorney at Law
521 S.W. Clay St., Suite 205
Portland, Oregon 97201
Phone: 503-224-8884
Fax: 503-226-1321
E-mail: LDGorin@pcez.com
http://ldgorin.justia.net/index.com
MILITARY: SBP-DIC OFFSET NO LONGER APPLIES IF REMARRIAGE OCCURS AT AGE 57 OR OLDER
© Lawrence D. Gorin, Attorney at Law, Portland, Oregon
A WEDDING GIFT FROM THE DEPT. OF DEFENSE......
or a slap in the face to widows who choose not to remarry?
Background
For qualifying and eligible surviving spouses of deceased military servicemembers and retirees, there are two principal long-term financial benefit programs offered through the federal government.
First, the Department of Defense administers the Survivor Benefit Plan (SBP), which is a government-subsidized insurance plan that provides a deceased servicemember’s or retiree’s qualifying surviving spouse with a monthly annuity payment, commencing upon the death of the servicemember or retiree. SBP coverage is provided at no cost to all servicemembers while on active duty. Upon retirement, the servicemember may "elect" to continue SBP participation, with the retiree's portion of the premium cost then being paid by way of a reduced monthly retirement benefit during the retiree's lifetime. Upon the retiree's death, a monthly annuity, the maximum amount being 55% of the amount of retired pay, is then paid to the retiree’s surviving spouse.
Second, the Department of Veterans Affairs (the VA) administers a program, funded entirely by the government, that provides monthly Dependency and Indemnity Compensation (DIC) payments for the surviving spouse of a servicemember in the event the servicemember dies as a result of service-connected causes as well as for the surviving spouse of a retiree if the retiree’s death is due to injury or disease contracted while on active duty.
While each program is independent of the other and each is administrated by a different agency (SBP by the Department of Defense; DIC by the Department of Veterans Affairs), there are several situations in which eligibility for benefits under one program may affect eligibility under the other.
Eligibility restrictions based on age and marital status
Prior to January 1, 2004, eligibility of a deceased veteran’s surviving spouse to receive benefits from the Department of Veterans Affairs under the VA’s Dependency and Indemnity Compensation (DIC) program was lost in the event of the surviving spouse’s remarriage, regardless of age at time of remarriage.
Concerned about the “marriage penalty,” at least for “older” women, Congress changed the law through the Veterans Benefits Act of 2003, Pub L 108-183. Under the revised law, codified as 38 USC § 103(d)(2)(B), eligibility for receipt of DIC benefits would no longer be lost in the event of the surviving spouse’s remarriage, provided, however, the remarriage occurred at age 57 or thereafter. (The act also provided for the restoration of DIC benefits for those otherwise eligible surviving spouses who, prior to December 16, 2003, the date the new law took effect, had remarried at age 57 or older and who had thereby lost their DIC eligibility.)
But surviving spouses who are eligible to receive both DIC benefits as well as SBP annuity payments, often referred to as “dual-eligible” surviving spouses, suffer an economic set-back in the amount of their SBP benefit. Specifically, under 10 USC § 1450(c)(1), the federal law applicable to this class of surviving spouses, DOD is required to reduce (“offset”) the amount of the surviving spouse’s SBP payment on a dollar-for-dollar basis by the amount of the DIC benefit (regardless of the surviving spouse’s age or marital status). In essence, the DIC dollars simply replace the SBP dollars. (Of course, there is a tax advantage to receiving DIC dollars in place of SBP dollars, since the SBP dollars are taxable whereas the DIC dollars are not. But the “offset” still results in a net loss.)
For example, if a veteran’s surviving widow is entitled to a DIC benefit of $1,154 per month (the standard DIC amount for 2009) and an SBP benefit of $1,400 per month, the SBP payment would be reduced by $1,154 (the amount of the DIC benefit). Thus, instead of receiving a total of $2,554 per month (the full amount both DIC and SBP payments), the surviving spouse would receive only $1,400 (being the $1,154 DIC benefit and a reduced SBP payment of $246).
Change in the law
However, as a result of an August 26, 2009, decision of the US Court of Appeals, DOD has changed its policy. From now on, the dollar-for-dollar SPB-DIC “offset” will no longer apply to surviving spouses who otherwise qualify for both DIC and SBP benefits AND who remarry at age 57 or later. Consequently, for surviving spouses whose SBP annuity has been previously reduced due to receipt of DIC benefits, getting married at age 57 or later will now result in receipt of the full unreduced amount of the SBP benefit as well as the full DIC benefit.
In sum, a surviving spouse who is eligible to receive both DIC and SBP benefits will now be provided with a financial reward from DOD for remarrying as soon as possible upon attaining age 57. For surviving spouses in this particular group, it literally pays to get married. Indeed, using the 2009 DIC payment rate, the qualifying surviving spouse who remarries at age 57 or older will be effectively paid $1,154 per month by DOD for doing so.
But the financial reward accorded to dual-eligible surviving spouses who remarry at age 57 or older (and thus retain their DIC benefit and regain their full and unreduced SBP benefit) is not accorded to dual-eligible surviving spouses who (perhaps for moral, religious, ethical or other personal reasons) choose not to remarry and who thus continue to be subjected to the SBP-DIC offset. In effect, the financial boon for the former class (widows who remarry at age 57 or older) is a financial bust of the latter class (those who choose not to remarry). Although the servicemember paid for both benefits (SBP with premiums and DIC with his life), the only way his widow can collect the full amount of both benefits is to do something she perhaps finds disloyal to her original vows of marriage and the memory of her deceased husband. The law that allows this to occur is arguably unfair, unreasonable, illogical and irrational, but nonetheless perfectly legal.
The “rest of the story”........
On August 26, 2009, the US Court of Appeals for the Federal Circuit, in the case of Sharp v. United States, 580 F.3d 1234 (DC Cir, 2009), held that the SBP-DIC “offset” as applied by the Department of Defense, effectively reducing SBP benefits for surviving spouses who also qualify for DIC benefits, is in fact not authorized by the controlling congressional enactments, at least not as to otherwise eligible surviving spouses who remarry at age 57 or later.
The lead plaintiff in the case, Patricia Sharp, is the surviving spouse of Brig. Gen. Richard H. Sharp (USA), who died in 1983 while on active duty. At the time of his death, he and Mrs. Sharp had been married for 23 years, and she was her husband’s designated beneficiary for SBP annuity payments. Mrs. Sharp thus became eligible to receive both SBP benefits and DIC benefits, with the former (SBP) being reduced (“offset”) to the extent of the latter (DIC). Subsequently, on November 25, 2000, at the age of 60, Mrs. Sharp remarried. As a result of her remarriage, she lost her DIC eligibility in its entirety (but did regain the full amount of her SBP entitlement). This was in accord with the law in effect at the time of her remarriage in 2000 that barred surviving spouses from continued receipt of DIC benefits if and when they remarried, regardless of age at time of remarriage.
But 38 USC § 103(d)(2)(B), the statute that mandated the “DIC marriage penalty” (loss of DIC eligibility due to remarriage), was amended by Congress through the enactment of the Veterans Benefits Act of 2003, Pub L 108-183. Specifically, section 101(a) of the act amended 38 USC § 103(d)(2)(B) so as to declare that “The remarriage after age 57 of the surviving spouse of a veteran shall not bar the furnishing of [DIC] benefits * * *.”
Further, section 101(b) of the act created a new provision, codified as 38 USC § 1311(e), stating that “In the case of an individual who is eligible for dependency and indemnity compensation under this section by reason of section 103(d)(2)(B) of this title who is also eligible for benefits under another provision of law by reason of such individual’s status as the surviving spouse of a veteran, then, notwithstanding any other provision of law * * * no reduction in benefits under such other provision of law shall be made by reason of such individuals eligibility for benefits under this section.”
Lastly, section 101(e) of the act included a “grandmother provision” that restored DIC benefits to those qualifying surviving spouses (such as Mrs. Sharp) who had remarried at age 57 or older prior to December 16, 2003 (the date the new law took effect) and had thereby lost their DIC eligibility.
Thus, under the revised law, Mrs. Sharp was entitled to have her DIC benefits from the VA restored, which is what then occurred. But when that happened, DOD then applied the “SBP-DIC offset” and reduced Mrs. Sharp's SBP benefit by the amount of her restored DIC benefit. DOD’s action was taken pursuant to 10 USC § 1450(c)(1), the provision of the SBP law that mandates the dollar-for-dollar reduction of SBP payments for a surviving spouse who is also eligible for DIC benefits. It was DOD’s position that 10 USC § 1450(c)(1) was applicable and controlling in Mrs. Sharp’s circumstances.
Not being happy with DOD’s reduction of her SBP annuity amount, Mrs. Sharp (along with two other similarly situated widows) then sued the government in 2007. According to Mrs. Sharp, the Veterans Benefits Act of 2003, at section 101(a), not only removed remarriage as a DIC eligibility disqualification factor, at least if the remarriage occurs at age 57 or later, but also provided, in section 101(b), that as for such surviving spouses, there shall be “no reduction in benefits under such other provision of law * * * by reason of such individual’s eligibility for [DIC] benefits.”
Mrs. Sharp correctly pointed out that 10 USC § 1450(c)(1), the provision of law that mandates the dollar-for-dollar offset of the SBP annuity payments for surviving spouses who also qualify for DIC payments, is a “provision of law” that, if applied to surviving spouses in her situation (being eligible for DIC benefits even though remarried at age 57 or older), would result in a reduction of her SBP annuity. Mrs. Sharp argued that the language used in section 101(b) of the Veterans Benefits Act of 2003 (“no reduction in benefits under such other provision of law shall be made”) means exactly what it says and effectively bars DOD from reducing her SBP annuity as otherwise required by 10 USC § 1450(c)(1).
Consequently, said Mrs. Sharp, dual-eligible widows who remarry after age 57 are entitled to receive BOTH Survivor Benefit Plan (SBP) annuity payments from DOD and Dependency and Indemnity Compensation (DIC) benefits from the VA, in full and without any offset between the two.
In response, DOD urged the Court of Appeals to determine the intent of Congress by considering the legislative history leading up to the enactment of the Veterans Benefits Act of 2003. DOD argued that Congress never intended the law to have the result urged by Mrs. Sharp. The court rejected DOD’s “unconvincing argument,” noting that the text of 38 USC § 1311(e) is clear and unambiguous. Said the Court of Appeals:
“To determine Congress' intent, we use the traditional tools of statutory construction, beginning with the text of the statute. Where the intent is unambiguously expressed by the plain meaning of the statutory text, we give effect to that clear language without rendering any portion of it meaningless. Here, Congress' intention to supersede all other laws (except a provision not at issue in this case), and prevent a decrease in some other benefit payment as a result of section 1311(e)'s restoration of DIC payments to surviving spouses who remarry after age 57, is plain on the face of the statute.”
Net result: DOD was ordered by the court to commence acting in conformance with the law as enacted by Congress (which DOD had erroneously not been doing), thereby restoring to Mrs. Sharp the SBP reduction that it had been applying in her case. Mrs. Sharp, having remarried after attaining age 57, was thus allowed to retain her full DIC benefit (notwithstanding her remarriage) and also receive her full and unreduced SBP benefit (notwithstanding her receipt of the DIC benefit).
See entire court decision at:
http://scholar.google.com/scholar_case?case=5422111345562531106
http://www.cafc.uscourts.gov/opinions/08-5105.pdf
Follow-up note. Following the court’s decision in Sharp v. US, DOD decided not to further appeal the decision. Thus, the SBP-DIC offset that applies to surviving spouses who are eligible for both SBP and DIC benefits will NOT apply to those surviving spouses who remarry at age 57 or thereafter. For that particular group, they will get their full unreduced SBP benefit AND the full DIC benefit. However, surviving spouses who are eligible for both SBP and DIC benefits but who remain unmarried will continue to have their SBP benefit reduced on a dollar-for-dollar basis by the amount of the DIC benefit.
See DOD Memorandum for DFAS Director at:
http://www.naus.org/news/documents/DoDMemo10-22-09-SBP-DICOffset.pdf
================================
LAWRENCE D. GORIN
Attorney at Law
521 S.W. Clay St., Suite 205
Portland, Oregon 97201
Phone: 503-224-8884
Fax: 503-226-1321
E-mail: LDGorin@pcez.com
http://ldgorin.justia.net/index.com