Active Duty Line of Duty Survivors Spotlight: The 2023 SBP Optional Annuity for Dependent Children Elimination/Reversion to Surviving Spouses

The next two years will bring a number of changes to the Survivor Benefit Plan as a result of the National Defense Authorization Act for Fiscal Year 2020. Phase Two of the SBP-DIC Offset Phased Elimination begins in 2022. And in 2023, the SBP-DIC Offset will be eliminated entirely.

Also in 2023, of special note for many Active Duty/Line of Duty survivors, the “Optional Child Annuity” will be eliminated, with annuities reverting to the documented, eligible surviving spouse.

The SBP 2023 Active Duty/Line of Duty Optional Annuity for Dependent Children elimination/annuity reversion to surviving spouses.

The National Defense Authorization Act for Fiscal Year 2020 directed that as of January 1, 2023, the Optional Annuity for Dependent Children will be eliminated and the SBP annuity payment must revert to the surviving spouse (if the spouse submits documentation and is eligible).

The Department of Defense Survivor Benefit Plan (SBP) provides financial support to military spouses and/or children when a military member dies on active duty or inactive duty in the line of duty, or after retirement if the retiree elects coverage and pays premiums.

Survivor Benefit Plan (SBP) coverage for service members who die in the line of duty is generally for spouse and child (if the service member was married and had a dependent child or children). Typically, for most SBP beneficiaries, this means that the spouse receives the SBP annuity unless the spouse loses eligibility. Only if the spouse loses eligibility will the child or children (if eligible) receive the SBP annuity payment.

However, when a currently-serving member dies in the line of duty on active or inactive duty, the surviving spouse has the option, in consultation with the Secretary of the Military Department, to choose to have the Survivor Benefit Plan (SBP) annuity paid directly to an eligible dependent child or children instead. This is called the Optional Annuity for Dependent Children. 

This allows the surviving spouse to receive Dependency and Indemnity Compensation (DIC) from the VA in full without it affecting the SBP payments. SBP paid to a child or children is not offset by DIC.

The Optional Annuity for Dependent Children, often called the “Optional Child Annuity,” is only allowed when the service member died on active or inactive duty, in the line of duty, after October 7, 2001.
 
What Will Change in 2023?

As of January 1, 2023, the Optional Annuity for Dependent Children will be eliminated and the SBP annuity payment must revert to the surviving spouse (if the spouse submits documentation and is eligible).

 If the spouse is documented as ineligible, the payments can continue to an eligible child or children after January of 2023. However, if we do not receive documentation, the annuity payments will be suspended.

DFAS has a special webpage with detailed information on the change, the eligibility packet and instructions, and Frequently Asked Questions: https://www.dfas.mil/sbp2023childoptrev

What Surviving Spouses Need to Do

If you are the surviving spouse of a service member who died on active duty or on inactive duty in the line of duty after October 7, 2001 and you requested the SBP Optional Child Annuity, please watch for an eligibility packet in your mail (mailed in mid-November 2021) from DFAS.

This packet includes the documents we need you to fill out and return. The documents will help us determine your eligibility for SBP annuity payments and set up your account to begin your payments (if you are eligible) when the changes take effect on January 1, 2023.

Although the effective date of this change is not until 2023, we are reaching out early with the documents we need to assess your eligibility. If we receive the documents with the information needed early, we can provide you with the assessment of your future SBP eligibility well in advance of 2023.

If you do not receive a packet in the mail, you can download the eligibility packet from the DFAS special webpage: https://www.dfas.mil/sbp2023childoptrev    

The packet includes a copy of the letter, instructions, and the forms we need you to complete and return.

On the special webpage, there are specific instructions for filling out and returning the documents. There is also a helpful how-to checklist for filling out the forms.

You can upload your completed and signed documents online on DFAS.mil, mail them, or fax them.

Please see the webpage for details and instructions: https://www.dfas.mil/sbp2023childoptrev

When we receive your completed documents, we will review them within 30-45 days and send you a postal letter with your eligibility information and the current amount of the annuity.

Please note that we do need to receive information from all surviving spouses, even if you are not eligible for the annuity due to remarriage prior to age 55.

If you are a surviving spouse who remarried prior to 55, please see the information on remarriage, below.

How Remarriage Before Age 55 Affects SBP Eligibility

If a surviving spouse remarried after the death of the member (before age 55) and is still married, they may not be eligible for the SBP annuity. We need to receive a response with just two of the documents (and supporting documentation requested) in the eligibility packet, even if you believe you may not be eligible due to remarriage. Please remember to include a photocopy of your marriage license if you remarried prior to age 55.

If we have the documentation to make a determination that you are not eligible, DFAS can continue to pay the annuity to an eligible child, even after January of 2023. However, if we do not receive documentation allowing us to confirm a surviving spouse is not eligible, the child annuity payments must be suspended as of January 2023 until we receive the documentation.

Surviving spouses maintain their eligibility for SBP until death, as long as they do not remarry before the age of 55.

If the annuitant remarries before age 55, annuity payments will stop. However, if the annuitant's marriage later ends for any reason, the annuity payments can restart once DFAS is notified. See more information at: https://www.dfas.mil/managesbp

Surviving Spouses of Active Duty/Line of Duty Service Members Who Are Currently Entitled to SBP/SSIA

If you are currently entitled to and receiving an SBP and/or SSIA monthly payment, you did NOT request the Optional Child Annuity and the 2023 reversion does NOT apply to you.

SBP is paid either to the surviving spouse OR to the surviving child/children; it is NOT paid to both spouse and child. The Optional Child Annuity is not an additional annuity payment. It is the option to pay the SBP annuity to the child/children instead of to the surviving spouse.

If you are currently entitled to and receiving an SBP and/or SSIA monthly payment, please see the article in this issue about Phase Two of the SBP-DIC Offset Phased Elimination.

What Happens Between Now and 2023

If a child or children are the designated SBP beneficiaries because the surviving spouse selected the Optional Annuity for Dependent Children, the child/children will continue to receive the SBP payments (if they are eligible) until the SBP-DIC offset is fully eliminated in January of 2023.

If the child or children loses eligibility because they marry or reach age 18 (or age 22 if a full-time student) prior to January 1, 2023, the annuity will be suspended until January 1, 2023, at which time it will revert to the surviving spouse (if they are eligible and submit documentation). 

If the child or children already lost eligibility in previous years, the annuity is suspended until January 1, 2023, at which time it will revert to the surviving spouse (if they are eligible and submit documentation). 

Surviving spouses should update DFAS if their mailing address, direct deposit, or marital status changes between the time they send in the eligibility documents and January 1, 2023.

What Will Happen in 2023

SBP annuities that were directed to a child rather than a surviving spouse for active duty/line of duty deaths will revert to the surviving spouse (if she or he submits documentation and is eligible) as of January 1, 2023.

SBP Payments in 2023 for the Surviving Spouses Who are Eligible

January 2023 benefits will be paid on February 1, 2023.

SBP benefits are paid on the first business day of the following month.

SBP-DIC Offset Elimination in 2023

The SBP-DIC offset will also be fully eliminated as of January 1, 2023. That means spouses will begin to receive full SBP payments with no offset (reduction) on February 1, 2023.

How Much SBP Will the Surviving Spouse Receive?

SBP payments vary. Surviving spouses who send eligibility documents will receive a determination letter in the mail that will include the current amount of the SBP annuity payment.

Are Survivor Benefit Plan Payments Taxable?

SBP payments are subject to federal taxes. State and local taxes vary. DFAS is not able to withhold state or local taxes from SBP payments.

myPay Access in 2023 for the Surviving Spouses Who are Eligible

Surviving spouses who are eligible for the SBP payment will have access to their myPay account AFTER their first payment is made on February 1, 2023.

Can a Surviving Spouse Refuse the Annuity so the Child Can Continue to Receive It?

The repeal of the Optional Annuity for Dependent Children and the reversion of the annuity to the surviving spouse is mandated by the law, so it is not voluntary.

Spouses/Children of Retired Service Members with SBP Coverage

This change has NO impact on SBP coverage or SBP annuities for spouses or children of retired service members. It ONLY affects the surviving spouses/children of service members who died on active or inactive duty, in the line of duty, after October 7, 2001.

Premium Refunds Do Not Apply

Unlike military retirees, military service members do not pay premiums for SBP coverage. SBP coverage is automatic and is provided by DoD at no cost for members on active duty and for Reserve Component members while performing inactive-duty training. Therefore, the premium refund information only applies to surviving spouses of retired service members.

If You Have Additional Questions

Check out the full range of information on this special webpage: https://www.dfas.mil/sbp2023childoptrev