MAY 12, 2015, FORT WORTH, Texas – America’s career servicemembers are turning a cold shoulder to a new proposal to reform a government insurance plan that pays lifetime monetary benefits to the survivors of military retirees.
The latest results of the First Command Financial Behaviors Index® reveal that the majority of middle-class military families (commissioned officers and senior NCOs in pay grades E-6 and above with household incomes of at least $50,000) like the military’s current Survivor Benefit Plan better than the Military Compensation and Retirement Modernization Commission’s recent recommendation to create a new option that is fully funded by servicemembers but removes the unpopular Dependency and Indemnity Compensation offset. Roughly two thirds (64 percent) of survey respondents say they prefer to be grandfathered in under the current system.
While 57 percent of servicemember families say they are in favor of the new proposal, that broad backing doesn’t necessarily translate into support for the change. The proposal gives existing servicemembers the option of staying with the current Survivor Benefit Plan.
“These survey results show that most career servicemembers are not interested in trading in their current Survivor Benefit Plan for a newer model,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Cost appears to be a significant consideration. A recent survey by the Military Officers Association of America found that nearly two-thirds of respondents said they would be unwilling to pay higher premiums in exchange for the elimination of the Dependency and Indemnity Compensation offset.”
Under current law, retirees contribute 6.5 percent of pre-tax retired pay for Survivor Benefit Plan coverage. The Military Officers Association of America writes that “survivors who are eligible for both the Survivor Benefit Plan (SBP) and Dependency and Indemnity Compensation (DIC) must forfeit a dollar of their SBP annuity for every dollar of DIC received from the Department of Veterans Affairs (VA). Often, the offset wipes out the SBP annuity for which the military retiree paid.” The Commission’s recommendation to remove the offset would raise retirees’ Survivor Benefit Plan contributions to 11.5 percent.
Retirement benefits are of high interest to career servicemember families. March survey results reveal that one in four families say they are being impacted by sequestration-related reductions in retirement benefits. And one in five rank retirement pay as their most important military benefit.