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The Phased Elimination of the SBP-DIC Offset Begins in January of 2021



Congress enacted changes to the Survivor Benefit Plan (SBP) that will eventually eliminate the SBP-DIC offset for surviving spouses who are also receiving Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs (VA). 

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. 

Beginning in 2023, the law also affects 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 (see Phase Three)

The changes will happen in three phases and only affect SBP and SSIA payments issued by DFAS. The changes do NOT affect Dependency and Indemnity Compensation (DIC) payments from the Department of Veterans Affairs (VA). Eligible surviving spouses will continue to receive the full amount of DIC from the Department of Veterans Affairs. 

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. Please note: only annuitants who are currently receiving an SBP or SSIA payment from DFAS can access myPay. Adding an email address in myPay will allow DFAS to update you via myPay SmartDoc emails as the phase-out unfolds. Updates via email SmartDocs will be more frequent than the annual paper mailing planned.

In addition, please note that 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.

To help you understand how the 2021 changes will affect your SBP and/or SSIA payment, we mailed letters with individual estimates for the first phase of the elimination to the spouse SBP annuitants who will be affected by the first phase. Please note these are pre-estimates based on current information (with a 1.3% COLA), and the actual amounts in 2021 may differ slightly from the pre-estimates. 

Letters are mailed in groups and should arrive no later than mid-December (for U.S. addresses). Please do not call our Customer Care Center for your estimate

Your individual letter will have the following estimates (the estimates include the 2021 COLA):
A-2021 Gross SBP annuity estimate
B-2021 DIC offset amount (amount of DIC that will be deducted from your gross SBP annuity) estimate
C-2021 SBP annuity payment after DIC offset - estimate (before taxes)
D-2021 SSIA payment – estimate

Please note that Amount “B,” the 2021 DIC offset amount, is an estimate of the amount of DIC that will be deducted from your gross SBP annuity in 2021 (2/3 of your full DIC amount). It is NOT the amount of DIC you will receive from the VA. This law does NOT affect the amount of DIC you receive from the VA. Unless there are circumstances other than this change in the law that affect your DIC, you should continue to receive the FULL amount of your DIC from the VA. 

Please keep the letter for your reference. We will send you a new pre-estimate toward the end of 2021 for the second phase of the offset elimination that begins on January 1, 2022.

You will also receive a January 2021 Annuitant Account Statement (AAS) near the time of your February 1, 2021 payment that will show changes to your SBP and/or SSIA payment because of the first phase of the SBP-DIC Offset Phased Elimination. 

Below is an outline of each phase of the upcoming changes to the SBP-DIC Offset. 

Phase One – Offset Reduced to Two-Thirds – Begins January 1, 2021

In 2021, surviving spouse SBP annuity payments issued by DFAS will be reduced (offset) by no more than two-thirds of the amount of DIC (issued by the VA) rather than by the entire amount of DIC. 

Eligible survivors will also continue to receive the Special Survivors Indemnity Allowance (SSIA), up to the maximum amount of $327 per month (for 2021), or up to the amount of SBP reduced by DIC (if the amount of the reduction is less than $327).

This means that spouse SBP annuitants with a gross SBP amount that is more than two-thirds of their DIC amount will see an SBP payment in 2021, some of them for the first time since they began to receive both entitlements. 

Each month, beginning with the payment they receive on February 1, 2021, the spouse SBP annuitants in this group will receive:
1-Their full DIC amount from VA; and 
2-The SBP annuity amount that is more than two-thirds of their DIC amount (issued by DFAS); and
3-SSIA up to $327 (or up to the amount of SBP reduced by DIC if the amount of the reduction is less than $327 – issued by DFAS). 

Spouse SBP annuitants with a gross SBP amount that is less than two-thirds of their DIC amount will NOT see an SBP payment in 2021. They will continue to receive the full amount of their DIC from VA and SSIA up to $327 (or up to the amount of SBP reduced by DIC if the amount of the reduction is less than $327 – issued by DFAS)

Phase Two – Offset Reduced to One-Third – Begins January 1, 2022

In 2022, surviving spouse SBP annuity payments issued by DFAS will be reduced (offset) by no more than one-third of the amount of DIC (issued by the VA) rather than by the entire amount of DIC. 

Eligible survivors will also continue to receive the Special Survivors Indemnity Allowance (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).

This means that spouse SBP annuitants with a gross SBP amount that is more than one-third of their DIC amount will see an SBP payment in 2022, some of them for the first time since they began to receive both entitlements. 

Each month, beginning with the payment they receive on February 1, 2022, those spouse SBP annuitants will receive:

1-Their full DIC amount from VA; and 
2-The SBP annuity amount that is more than one-third of their DIC amount (issued by DFAS); and
3-SSIA up to maximum amount (or up to the amount of SBP reduced by DIC if the amount of the reduction is less than the maximum – issued by DFAS). 

Spouse SBP annuitants with a gross SBP amount that is less than one-third of their DIC amount will NOT see an SBP payment in 2022. They will continue to receive the full amount of their DIC from VA. They will also receive SSIA up to the maximum amount (or up to the amount of SBP reduced by DIC if the amount of the reduction is less than the maximum – issued by DFAS) The amount of SSIA paid cannot exceed the amount of the SBP annuity that is offset.

Phase Three - Offset Eliminated – Begins January 1, 2023

In 2023, the offset will be eliminated completely. That means, beginning In 2023, surviving spouse SBP annuity payments issued by DFAS will NOT be reduced (offset) by any amount of DIC (issued by the VA).

In 2023, full SBP payments will be made to all spouse SBP annuitants, even those who receive DIC from the VA. 

SSIA payments will no longer be made

Each month, beginning with the payment they receive on February 1, 2023, spouse SBP annuitants will receive:
1-Their full DIC amount from the VA; and 
2-Their full SBP annuity amount (issued by DFAS) 


Phase Three – Repeal of Optional Child Annuity for Active Duty Deaths and Restoration of Eligibility for Previously Eligible Spouses - Begins January 1, 2023

In 2023, the "Repeal of Authority for Optional Annuity for Dependent Children" and "Restoration of Eligibility for Previously Eligible Spouses" will happen. 

This means that the eligible surviving spouses of service members who died on active duty or inactive duty who previously elected to transfer the SBP annuity to a child or children (known as the “optional child annuity”) will begin receiving the SBP annuity instead of the child or children. To be eligible to receive the annuity, the surviving spouse must be unmarried. 

The repeal of the “optional child annuity” is mandated by law. It is not voluntary. 

The eligible surviving spouse will begin receiving the SBP annuity payment on February 1, 2023, even if the child or children who had previously received the SBP payment are/were no longer eligible due to age or marriage. The eligible surviving spouse will receive their full DIC payment from the VA and the full SBP payment issued by DFAS. 

This change only affects those spouses and children of service members who died on active duty or inactive duty when the surviving spouse elected to transfer the SBP annuity to a child or children. The change DOES NOT affect previous or future SBP elections by retirees or SBP annuities for a retiree's beneficiaries.

There is nothing that these surviving spouses need to do at this time. In 2022, DoD and DFAS will begin contacting the surviving spouses and children who are affected by this change to explain the changeover and to gather the information needed to make the necessary changes in payments. 

See News and FAQs on our SBP-DIC News Webpage

DFAS has a special webpage for news and Frequently Asked Questions about the SBP-DIC Offset Phased Elimination. Please plan to check this webpage for updates: www.dfas.mil/sbpdicnews

Also, please see the article in this DFAS Survivor SBP Newsletter on “What to Expect in Your End- of-Year Mailing.” The mailing will include an end-of-year Annuitant Account Statement, which will NOT show any applicable 2021 changes in SBP and/or SSIA payments, but will show changes due to the 2021 COLA. 

 
 
Page updated Dec 3, 2020