When a military service retiree dies, the flurry of payment activity by two federal bureaucracies, who provide no explanation, can be confusing and frustrating to say the least. Here is a breakdown of what happens to the pay of the military survivor:

Arrears of Pay (the last retired pay deposit after the retiree’s death)

• Last month of retired pay is removed by Defense Finance and Accounting Service (DFAS)
• Retired pay audited
• Recalculated retired pay for the final days of life in the last pay month is re-deposited to your account

Survivor Benefit Plan (SBP)

• Paid monthly upon application from the time of death — 90 to 180 days after death; retro pay is applied

Dependency and Indemnity Compensation (DIC)

• Paid upon VA application approval after the servicemember’s death; six months to a year
• Retro pay since time of death to point where monthly pay started
• VA notifies DFAS of DIC payments

SBP/DIC Offset

• DIC amount subtracted from SBP amount going forward
• Payment of retro DIC means prior SBP payments must be reduced; SBP/DIC offset is applied to past SBP payments due to retro period of DIC payments
• Overpayment of past SBP recovered by DFAS
• Refund of SBP premiums paid to survivor due to reduced SBP benefit; taxable one-time lump-sum
• Overpayment of retro SBP is subtracted from refund of premium amount; could be payment or debt

Special Survivor Indemnity Allowance (SSIA)

• Payment of monthly SSIA added to SBP payment; helps ease pain of SBP/DIC offset

Learn more at moaa.org/financeblog.