MILITARY UPDATE
Drop in survivor benefit still coming as a shock

Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 49, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.

By Tom Philpott

Leroy Johnson, a retired quartermaster first (E-6), got a shock last summer when he looked at his annual benefits statement from the Navy. In the event of his death, it said, his wife, Gliceria, would get a little more than 35 percent of his retired pay under the military's Survivor Benefit Plan.

Johnson, 74, has had SBP coverage for his wife since the program replaced his Retired Serviceman's Family Protection Plan in 1972. During all those years — about $25,000 in premiums — Johnson assumed his wife was in line for 55 percent of his retired pay. That plus Social Security would protect her financially.

"Whenever it came up, I said to her, 'Yeah, you're getting 55 percent,' " Johnson said from their home in Chula Vista, Calif.

He was mistaken. And he wasn't alone. Every year, thousands of military retirees and spouses — and, sadly, some grieving survivors — are hit by the reduction in SBP that occurs when a spouse, widow or widower turns 62.

The drop in benefits, called the Social Security offset, can come as bad news. But it's not a deception or a national disgrace, as some retirees contend, according to Thomas Tower, assistant director of the Defense Department's military compensation office. It is just the way SBP was designed.

Retirees who elect to enroll in SBP pay a monthly premium to guarantee that upon their death a portion of their retired pay will continue going to their surviving spouse or even ex-spouse. Johnson elected maximum coverage for his wife, and pays $92 a month.

Service members briefed on SBP when they retire are told about the reduction in benefits at age 62, Tower said. And at least twice a year, retiree newsletters explain the drop.

The offset continues to surprise, however — particularly older beneficiaries who claim they never were told.

"The theory behind the offset," Tower said, "is that the SBP should give the survivor access to roughly 55 percent of the member's retired pay, but from all benefits derived from the member's time in military service."

That includes tax-free Dependency and Indemnity Compensation from the VA, payable when a retiree's death is service-connected, or Social Security benefits earned through service.

For example, eligibility for DIC triggers a dollar-for-dollar cut in SBP. Because no premiums are required for DIC, a partial refund of SBP premiums is awarded.

The Social Security offset also began as a dollar-for-dollar reduction to SBP based on Social Security benefits tied to service years after 1956, when the military first came under Social Security. By 1985, every member retiring had served a full career under Social Security, so rather than have the offset computed individually, Congress adopted a simple two-tier benefit: 55 percent until age 62 and 35 percent thereafter. Beneficiaries of retirees who were eligible to retire by Oct. 1, 1985, can choose to have the offset computed individually or under the two-tier plan, which provides better benefits.

Under the old method, said Tower, "when you add the Social Security survivor benefit to 35 percent, you should be up to at least 55 percent of the member's retired pay. The lower the grade and the fewer the years served, the more the benefit will exceed 55 percent."

The two-tier system "sort of guaranteed everybody got a fair share from SBP for the premiums that were paid," Tower said.

A lot of confusion over the offset stems from the way it's computed, based on the retiree's earnings during service rather than what a spouse or widow earns. Many spouses who have earned their own Social

Security benefits, and draw nothing from the retiree's service, argue they should see no offset. Tower disagrees.

SBP is not a 55 percent plan, said Tower. "It's a 35 percent plan that pays off more than that if you die early."

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