Bills
| 3.23.22

Should the ‘Widow’s Tax’ Be Eliminated to Give Spouses & Survivors of Fallen Servicemembers Full Benefit Eligibility? (H.R. 553)

Do you support or oppose this bill?

What is H.R. 553?

(Updated August 23, 2019)

This bill — the Military Surviving Spouses Equity Act — would permit the surviving spouses of deceased veterans who are eligible for Survivor Benefit Plan (SBP) annuities and Dependency and Indemnity Compensation (DIC) to receive the full amount of both of these benefits. Under current law, SBP benefits paid to surviving spouses of servicemembers who die while on active duty are reduced by the amount of DIC benefits (referred to as the “widow’s tax”). This bill would also apply to surviving spouses of retirees who pass away due to a service-connected cause. 

Specifically, this bill would: 

  • Permit surviving spouses of deceased veterans who are eligible for Survivor Benefit Plan (SBP) annuities and Dependency and Indemnity Compensation (DIC) to receive the full amount of both of those benefits; 
  • Eliminate the Special Survivor Indemnity Allowance that is available to surviving spouses who have SBP annuities reduced by the amount of their DIC benefit;
  • Eliminate the refund of SBP premiums that are paid to surviving spouses whose SBP payments are reduced; and
  • Eliminate the optional SBP annuities paid to dependent children of service members who died on active duty and restore the SBP annuities to the surviving spouses of those service members.

This bill would allow as many as 67,000 surviving military spouses nationwide to receive full Dept. of Defense (DOD) and Veterans Affairs (VA) survivor benefits. Currently, military widows and widowers who qualify for the VA’s Dependency and Indemnity Compensation (DIC) must take prorated annuities from the Survivors Benefits Plan (SBP), even though they elected to pay into the program.

Argument in favor

Military spouses deserve the full benefits associated with their loved ones’ service in the event of their death. Penalizing military families with a per-dollar-deduction from Survivor Benefit Plan benefits for every dollar they receive from the Disability and Indemnity Compensation is shameful, given their loved ones’ service to the country.

Argument opposed

The deduction from Survivor Benefit Plan benefits when Disability and Indemnity Compensation benefits apply makes sense, as both programs are DOD funds that are used to help military widows and surviving beneficiaries and there is clearly overlap.

Impact

Widows and widowers of military spouses and veterans; non-spousal beneficiaries of military spouses and veterans; widows’ benefits for military spouses and veterans; VA; DoD; Survivor Benefit Plan (SBP) annuities; and Dependency and Indemnity Compensation (DIC).

Cost of H.R. 553

The CBO estimates that implementing this bill would cost $2.6 billion over the 2019-2024 period and $5.7 billion over the 2019-2029 period.

Additional Info

In-Depth: Rep. Joe Wilson (R-SC) introduced this bill to eliminate an offset placed on surviving spouses of service members who pass away during active duty or spouses of retirees who die of a service-connected cause: 

“Members of our military risk their lives for our freedoms every day. It is unconscionable to think there is a ‘Widow’s Tax’ on the surviving family members of our courageous men and women. We owe it to them to secure stable benefits in the event of their retirement or death. For too long, the Survivors Benefit Plan (SBP) reduction by the amount of paid Dependency and Indemnity Compensation (DIC) has been an unfair penalty that cuts earned benefits to military survivors. This issue creates a substantial burden for the surviving families, and we must act now.”

Original cosponsor Rep. John Yarmuth (D-KY) adds: 

“The brave men and women who put their lives on the line in defense of our nation deserve to know that their loved ones will be taken care of should tragedy strike. I’m proud to join Congressman Joe Wilson in introducing legislation to end the so-called Widow’s Tax and ensure that the survivors of military servicemembers who give their lives for our country get the benefits they have more than earned. This legislation corrects a terrible wrong and makes clear that we support members of our military not just when we need them, but when their families need us.”

Sen. Doug Jones (D-AL), sponsor of this bill’s Senate companion, the Military Widow's Tax Elimination Act of 2019 (S. 622), says: 

“It is absolutely unacceptable that our federal government refuses to pay the widows and widowers of our nation’s heroes the full benefits they are entitled to, especially those benefit plans for which they have voluntarily paid into. No surviving spouse should be faced with this unexpected and completely unfair cut to the benefits they count on in these tragic circumstances. This is a tax on military families who have already sacrificed so much. We are going to work to right this wrong.”

Generally, this bill’s supporters argue that government bureaucracy shouldn’t accidentally deprive widowed military spouses of financial support that they often desperately need immediately following their military spouse’s passing. Gold Star Wives of America, Inc. supports this bill. Its president, Crystal Wenum, says: 

“I am thankful that a bipartisan effort has been undertaken in the United States Senate to ensure that our military surviving spouses receive all the funds that have been earned through the sacrifice of our nation’s finest. Ensuring that the Survivor Benefit Plan no longer offsets the Dependency and Indemnity Compensation benefit is one way to ensure that the promise this nation has made to our veterans and their surviving families is kept.”

This bill passed the House Armed Services Committee with the support of 365 bipartisan House cosponsors, including 202 Democrats and 163 Republicans. With this many House cosponosrs, this bill has the second-most House cosponsors of any bill in the current Congress thus far, behind only the Middle Class Health Benefits Tax Repeal Act (367 bipartisan House cosponosrs as of July 16, 2019). Its Senate companion bill, sponsored by Sen. Doug Jones (D-AL), has 75 bipartisan cosponsors (including 42 Democrats, 32 Republicans and one Independent) and has yet to receive a committee vote.

Last Congress, Rep. Wilson introduced this bill with 271 bipartisan House cosponsors’ (including 149 Republicans and 122 Democrats) support and it didn’t receive a committee vote. Its Senate companion, the Military Widow's Tax Elimination Act of 2017 (S. 339), was sponsored by then-Sen. Bill Nelson (D-FL) with the support of 51 bipartisan Senate cosponsors (34 Democrats, 16 Republicans and one Independent) and also didn’t receive a committee vote.

A number of veterans’ groups, including Gold Star Wives of America, Inc.; the Military Officers Association of America (MOAA); the National Military Family Association; Tragedy Assistance Program for Survivors (TAPS); and Veterans of Foreign Wars of the United States (VFW), support this bill.

Although over 70% of both the House and Senate support this bill, it stalled in the past four Congresses. The 2017 version had 271 cosponsors, the 2015 version had 208 cosponsors, the 2013 version had 237 cosponsors, and the 2011 version had 207 cosponsors. None even received a House vote, let alone passage.


Of Note: The SBP provides a monthly payment to surviving beneficiaries of deceased military retirees and survivors of certain service members who died while on active duty. These benefits are paid to beneficiaries chosen by retirees. Military retirees have the option of purchasing survivor annuities, whose value can be as high as 55% of their monthly retired pay, through withholding from their monthly retired pay. Under this program, retirees are required to pay up to 6.5% of their gross retired pay, depending on the desired coverage amount, into the program, much like an insurance plan. Generally, most new retirees elect to purchase the maximum allowed annuity. In FY 2018, DoD paid $3.9 billion to 315,000 survivors, about 95% of whom were surviving spouses.

SBP annuities are also paid to survivors of service members who died on active duty while in the line of duty, or who qualified for military retirement at their time of death. In 2018, nearly 11,000 survivors received SBP benefits because of a service member’s death on active duty — over 66% of these beneficiaries were surviving children.

Dependency and Indemnity Compensation (DIC) is paid to surviving spouses and children of veterans who die from an injury or illness that was incurred or aggravated in the line of duty. It is also paid to survivors of service members who die in the line of duty. Under this program, survivors of veterans or troops who die of service-related causes are awarded around $15,000 per year. There is no cost to troops or families to enroll.

Generally, surviving spouses cannot receive both SBP and DIC payments. DoD reduces the SBP annuities of surviving spouses by the amount of the DIC they receive, such that every dollar paid out in DIC reduces the SBP payment by a dollar — a reduction called the SBP-DIC offset. If the SBP payment exceeds the DIC payment, the SBP payment is partially offset. If the DIC payment exceeds the SBP payment, the SBP payment is fully offset. In such cases, survivors’ benefits can be subtracted by as much as $15,828 per year. Some families have avoided the offset penalty by transferring benefits into their childrens’ accounts — but that creates other tax liability issues. 

To help solve this problem, lawmakers passed a partial solution giving surviving spouses whose SBP payments are offset a monthly payment — called the Special Survivor Indemnity Allowance (SSIA) — to restore some of those benefits. The maximum amount of the SSIA is $318 per month in calendar year 2019. Surviving spouses who are subject to the SBP-DIC offset can receive refunds of part or all of the SBP premiums that their deceased spouses paid during their retirement. However, attempts to eliminate this SSIA offset continue and the monthly dollar value of the offset is lower than the up to $1,000 a month that families lose to the reduction.

Due to a rules change in 2019, the House created a consensus calendar for bills with bipartisan support which haven’t been reported out of committee. Based on the change, when a piece of legislation gets 290 cosponsors the bill sponsor may file a motion to place it onto a calendar for a floor vote. After 25 legislative working days, the House is supposed to consider at least one bill a week from the calendar. 

Since this bill has over 290 House cosponsors, Rep. Wilson filed his motion on May 16 and the bill was scheduled to be placed on the consensus calendar on July 12. That would have prompted a floor vote the same day, since it was the last day of the week. 

Instead, the House Rules Committee inserted this bill’s language in the House’s version of the National Defense Authorization Act (H.R.2500), which passed 220-197 without any Republican votes (Republicans didn’t vote for the bill because it authorizes lower defense spending levels than the Senate’s bipartisan NDAA). In the process, the Rules Committee included language making this standalone legislation introduced by Wilson ineligible for future consideration under the Consensus Calendar. Rep. Wilson wasn’t made aware of this plan until it happened, and he was unhappy about the maneuver. 

Rep. Wilson accused Democrats of sabotaging this bill by tying it to legislation that he characterizes as a poison pill. Calling the Rules Committee’s move a “political gimmick,” he said, “They killed [this bill]. You're not helping it by putting it into a partisan bill. It was supposed to be a nonpartisan bill, a bipartisan bill." He also concluded that Democrats’ decision not to consult him before removing this bill from consideration for a stand-alone vote through the consensus calendar proves “this was not done with good intent.”

In response to Rep. Wilson’s complaints, House Rules Committee Chairman Rep. Jim McGovern (D-MA) said folding this bill into the NDAA was “compliant” with the intent of the consensus calendar process because it brought the measure to the floor. He clarified: 

“We don’t need two votes on it. We need one. The advantage of doing it the way we’re doing it is the [NDAA] is must-pass bill. If we pass this under suspension and we send it over to Mitch McConnell’s graveyard, this will never see the light of day.”

Rep. Wilson says he expects to serve on a House-Senate conference committee to resolve differences between the chambers’ two versions of the NDAA, where he’ll fight for the widow’s tax repeal to be part of the final bill. However, he’s not optimistic that it’ll survive negotiations. He says, “[v]ery likely it’ll be knocked out, then I’ll try to bring it back up” through the consensus calendar.

The Senate version of the NDAA (S. 1790), which passed 86-8, doesn’t include this bill’s language, as attempts to add the language into the bill stalled after encountering Republican opposition.

House Minority Whip Rep. Steve Scalise (R-LA) says House Speaker Nancy Pelosi (D-CA) should allow an up-or-down vote on this bill, stripped of other unrelated matters. He says: 

“It's shameful, shameful, what Speaker Pelosi did to change the rules of the House. Bring it up as a standalone bill. It'll pass with an overwhelming majority, very bipartisan, and ultimately get to the president's desk, and solve a real problem for women and men who are the survivors of our men and women in uniform.”

In response to Scalise, Pelosi spokesman Henry Connolly says Republicans could have fixed the widow’s tax issue when they controlled both chambers of Congress wrote in an email:

“It's a shame that fixing the widow's tax wasn't enough of a priority for Whip Scalise to vote for as part of a defense bill with a pay raise for our heroes in uniform, and wasn't enough of a priority for Whip Scalise to bring to the floor when the GOP held the majority last Congress.” 


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / RichLegg)