The FY 2020 National Defense Authorization Act terminated the so-called “widows tax,” allowing eligible military surviving spouses to collect the full Dependency and Indemnity Compensation (DIC) and Survivor Benefit Plan (SBP) in full, with no offset (no reduction) after a three-year phase-in period. We are now entering the third and final phase. What happens now?

Survivor benefits. DIC, SBP, and the Special Survivor Indemnity Allowance (SSIA) were increased by the annual cost-of-living adjustment (COLA) of 8.7% with the January 2023 payments. Beginning Feb. 1, 2023, eligible surviving spouses will receive their full SBP payment from the Defense Finance and Accounting Service (DFAS) and their full DIC payment from the VA without offset. The SSIA payment will stop, as this payment essentially becomes part of the full SBP payment. If you recall, the SSIA was a temporary solution to the offset, which is no longer necessary due to the aforementioned legislation. Although the SSIA goes away, the total these surviving spouses receive in their name will not be less than what was received the month prior for these specific benefits. There is no change to DIC other than the COLA increase.

[UPDATED MONTHLY: MOAA's Surviving Spouse Corner]

Child Option Annuitants. Beginning Feb. 1, 2023, the annuity will transfer to the servicemember’s surviving spouse provided they are an eligible spouse and have completed the appropriate paperwork for the transfer. If the surviving children are currently receiving the annuity, they have been receiving the full SBP, plus COLA increases, so what they receive in January 2023 will be the amount the eligible surviving spouse will receive. If the surviving children have already aged out of the program, the SBP will be recalculated to incorporate all prior years’ COLAs. You can read more by clicking here or here. You will be able to sign up for MyPay once the annuity transfers to you by clicking here. Please note that recent changes in the SBP law do not impact the retiree child option SBP election, only that for the post-9/11 active duty child option election that was primarily made due to the SBP-DIC offset rules.

Eligible surviving spouses should have received a letter from DFAS in late 2022 detailing the background of the change, an example calculation, and a personalized SBP estimate. (Please note these were estimates only.) Find additional details about these updates from DFAS and MOAA. Be sure to follow the MOAA Surviving Spouses and Friends Facebook page as well.

Please note this article is not intended to address all possible scenarios. And remember, military retirees who previously opted out of SBP will soon have a second chance to enroll. Click here to read a recent MOAA article on the topic.