In December 2019, the 2020 National Defense Authorization Act (NDAA) voted to repeal the law commonly known as the “Widow’s Tax,” which requires an offset of Survivor Benefit Plan (SBP) payments for surviving spouses who are also entitled to Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs (VA).
The original law states that a surviving spouse who receives DIC is subject to a reduction of SBP payments, resulting in a SBP offset. With the NDAA’s repeal of the “Widow’s Tax,” this offset will be phased-out in three steps, beginning with a partial reduction in January 2021 and ending with a total elimination of the offset in January 2023.
Here’s what you need to know about the repeal of the “Widow’s Tax”:
- There will be no changes to the SBP-DIC offset in 2020.
- In 2021, SBP will be reduced by two-thirds of the amount of DIC.
- In 2022, SBP will be reduced by one-third of the amount of DIC.
- In 2023, the offset will be fully eliminated.
- The increase in benefits will occur automatically for all surviving spouses subject to the SBP-DIC offset. You do not need to take any actions to initiate the offset.
- Eligible survivors will continue to receive Special Survivor Indemnity Allowance (SSIA), currently $323 per month for 2020, up to the current SSIA amount or the amount of SBP that is offset due to DIC, whichever is less. However, SSIA will no longer be paid once the offset is fully eliminated in 2023.
Stay up to date with information about the elimination of the offset through the official DFAS SBP-DIC Offset Phased Elimination News page, and tune into AAFMAA Member Benefits’ upcoming webinar on the repeal of the “Widow’s Tax” on June 25.