DOD SBP and VA DIC - am I understanding it correctly?

[jj306215]

I'm 100% P&T (VA)/ 75% Perm (DOD) and trying to ensure I get things correct regarding financial benefits following my death.

Currently, DFAS is taking out a big chunk of my retirement pay for Survivor's Benefit Plan (SBP), and I believe I am eligible for Dependency and Indemnity Compensation (DIC) from the VA.

Is it advisable to have both? I noticed that DIC only pays a set amount while SBP will pay 55%. In that case, if I have SBP and DIC and I pass away, will DOD SBP ramp up to cover the drop from VA pension shifting to DIC and ensure that 55% of my total retired pay goes to my surviving spouse?

Example w/ made up numbers:
VA payment - $4,000
DOD retirement payment - $1,000
Total of both add up to 75% of my base pay.

I die.

VA Payment - Gone
DOD retirement payment - Gone
VA DIC - $1,700
SBP - Would this end up being ~$800 to bring total pay to 55% of my retired pay?

I appreciate any clarification. Thanks!

 

[RonG]

From MOAA last year:

The Value of SBP and DIC​

In 2022, the basic DIC rate for a surviving spouse is $1,437.66 per month. That amount may be increased for children and/or certain special situations. The DIC payment rate receives an annual cost-of-living adjustment. DIC payments are tax-free.

SBP payments are 55% of the covered amount of military retirement pay. Most SBP coverage is for the full amount of military retirement pay, though the servicemember and spouse may have elected reduced coverage at retirement.

SBP also receives an annual cost-of-living adjustment. SBP payments are federally taxable income to the recipient.

Elimination of the Offset​

In the past, it may have made more sense to opt out of SBP if you anticipated that your survivor was going to receive DIC. This was because federal law did not allow survivors to receive the full amount of SBP and DIC. SBP benefits were reduced, or offset, by the amount of DIC received. Recent changes to the law fix that. The phased-in elimination of this offset will be complete on Jan. 1, 2023; eligible survivors will receive the full amount of DIC and the full amount of SBP.

The decision to stop SBP coverage is irrevocable unless your VA disability rating decreases. If that happens, you have one year to restart SBP coverage.

If you decide to disenroll in the SBP, you must submit the SBP Withdrawal Consent Form to the Defense Finance and Accounting Service. It’s important to note that the current beneficiary or beneficiaries must provide written consent to stop SBP coverage.

Ron
(My knowledge on this subject is limited to what I just read above.)

 

[jj306215]

From MOAA last year:

The Value of SBP and DIC​

In 2022, the basic DIC rate for a surviving spouse is $1,437.66 per month. That amount may be increased for children and/or certain special situations. The DIC payment rate receives an annual cost-of-living adjustment. DIC payments are tax-free.

SBP payments are 55% of the covered amount of military retirement pay. Most SBP coverage is for the full amount of military retirement pay, though the servicemember and spouse may have elected reduced coverage at retirement.

SBP also receives an annual cost-of-living adjustment. SBP payments are federally taxable income to the recipient.

Elimination of the Offset​

In the past, it may have made more sense to opt out of SBP if you anticipated that your survivor was going to receive DIC. This was because federal law did not allow survivors to receive the full amount of SBP and DIC. SBP benefits were reduced, or offset, by the amount of DIC received. Recent changes to the law fix that. The phased-in elimination of this offset will be complete on Jan. 1, 2023; eligible survivors will receive the full amount of DIC and the full amount of SBP.

The decision to stop SBP coverage is irrevocable unless your VA disability rating decreases. If that happens, you have one year to restart SBP coverage.

If you decide to disenroll in the SBP, you must submit the SBP Withdrawal Consent Form to the Defense Finance and Accounting Service. It’s important to note that the current beneficiary or beneficiaries must provide written consent to stop SBP coverage.

Ron
(My knowledge on this subject is limited to what I just read above.)

That makes it more clear than what I've been reading. It looks like it would be a good idea to keep the SBP to guarantee my spouse/family the income they need to get by once I pass away (hopefully not soon!).

As always, thank you for the help!