House votes to increase widows' pay

April 9, 2009 

  • TSP: Thrift Savings Plan DIC: Dependency and Indemnity Compensation SBP: Survivor Benefit Plan SSIA: Special Survivor Indemnity Allowance

The House has approved increases in a special monthly allowance paid to 54,000 military widows who have seen their survivor benefits cut or stopped because they also receive compensation from the Department of Veterans Affairs for their spouses' service-related deaths.

The same legislation, headed to the Senate, would give participants in the federal Thrift Savings Plan, including service members, a Roth 401(k) investment option and allow automatic TSP enrollment for new employees or service members.

These provisions are nestled into the same bill because the TSP changes would lower income tax deferrals enough to help to pay for higher allowances for widows.

Here are the details:

Military widows have asked Congress for years to end the offset in Survivor Benefit Plan payments that occurs when surviving spouses also qualify for VA Dependency and Indemnity Compensation.

DIC, with a basic rate of $1,154 a month, is payable if the service member dies on active duty or if a military retiree dies from service-connected ailments or injuries.

About 33,000 of widows in receipt of DIC lose their entire SBP as a result. SBP premiums that retirees had paid are refunded to surviving spouses for lost coverage. But many widows don't understand why they lose SBP annuities that their spouses believed they had been secured for them.

In late 2007, Congress approved a modest alternative to lifting the offset. Widows impacted by the offset as of Oct. 1, 2008, began receiving a Special Survivor Indemnity Allowance of $50 a month. SSIA is to increase by $10 each October until it hits $100 a month at the start of fiscal 2014. A year later it is due to end, unless Congress extends or replaces it.

The House Wednesday approved by voice vote the Federal Retirement Reform Act, with a provision to boost and lengthen the SSIA, thus taking another step to ease the effect of the SBP-DIC offset.

This October SSIA would increase to $95 instead of $60. For fiscal 2011, it would climb to $105 instead of the scheduled $70. For fiscal 2012 it would be $120, not $80; the next year would be $130, not $90, and in fiscal 2014 it would be $330 rather than $100. SSIA would be extended by two years too, paying widows $335 a month in fiscal 2015 and $345 in 2016.

If these SSIA changes become law, widows hit by the offset will be pleased but not satisfied.

"I don't think there is any recipient of the special allowance who thinks getting $50 a month ... is an adequate answer to removing an offset that causes these people to lose $1000 a month," said Margaret McCloud, widow of a Marine Corps officer killed in Iraq, in comments Feb. 25 for repeal of the offset made before the House military personnel subcommittee.

Her husband, Lt. Col. Joseph Trane McCloud, had worked for Rep. Joe Wilson, R-S.C., ranking Republican on the subcommittee, as a defense fellow in 2003. At the time, lawmakers were pushing through legislation to allow concurrent receipt of military retired pay and VA disability compensation.

His widow recalled Trane "coming home when Congress was working on this. ... He was so proud that Congress was addressing this ... to help so many disabled retirees. One of my fellow Gold Star Wives even remembers meeting with Trane. How ironic ... that the very legislation he was so excited about, so proud about, left out his own family."

Rep. Ike Skelton, D-Mo., House Armed Services Committee chairman, acknowledged that HR 1804 falls short on what widows want and deserve. But he said his committee "will continue to explore every opportunity to pursue legislation that brings us closer to eliminating the 'widow's tax.' "

Skelton teamed with Rep. Edolphus Towns, D-N.Y., chairman of the Government Reform and Oversight Committee, to attach the SSIA increases to a bill to reform federal retirement. The idea is that changes to the TSP plan will free up tax dollars to be able to raise SSIA for widows.

The first change would allow TSP participants to make Roth 401(k)

contributions as an alternative method to current TSP contributions which are all pre-taxed and thus immediately affect Treasury receipts. A second changed would make TSP enrollment automatic for new service members and federal employee unless they opt out, which they can do at any time.

The TSP changes combined are projected to boost Treasury revenues by $2.2 billion over the next decade. About $500 million would be used to pay for raising the widows' allowance over the same period. The rest would pay for a bill to impose tighter regulations on tobacco products including giving the Food and Drug Administration enforcement authority.

Defense officials have advised the Federal Retirement Thrift Investment Board, which oversees federal TSP accounts, that they favor automatic TSP enrollment for new members, presumably after completing boot camp or initial officer training, if Roth contributions are made an option.

Current enrollees also would be able to open a Roth TSP. The option is expected to be popular with military participants because service members, with their tax-free allowances, typically fall into lower tax brackets than civilian peers, and therefore stand to benefit more from a Roth design.

The House bill does not include a specific date to start the Roth option, at the thrift boards request, citing the extensive work involved setting it up. A survey of TSP participants shows 56 percent favor having a Roth option.

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