As a result of my involvement in a couple of recent DIC cases and related discussions with the SBP Annuity Section of DFAS Denver, I have a few changes to make to paragraph 3 of my article in the August 2001 Free Press. I apologize for the misleading information. The VA doesn’t seem to understand the SBP rules and the right hand at DFAS doesn’t seem to know how the left works. Hopefully, the following will bring closure to the issue for all.


As it turns out, the way the SBP/DIC interface really works is, step by step, as follows:


1.    You bit the dust and you were 100% VA disabled, or you died of a service connected condition if you were less than 100%.

2.    Your spouse IMMEDIATELY notifies DFAS, the VA, and Social Security of your death. This is a very important step and your spouse should not delay doing it. It sets everything else in motion. The 800 numbers for all three agencies are in all of the service retired newsletters.

3.    Your spouse contacts a qualified Veterans Service Officer ASAP and files for DIC through the VA.

4.    The SBP Annuity Section at DFAS Denver gets your file from the Retired Pay Section of DFAS Cleveland or Denver, whichever has your retired pay account.

5.    The SBP Annuity Section mails your spouse an SBP form to fill out. On that form your spouse indicates that she has filed for DIC with the VA, along with the other information required, and she mails the form back to Denver.

6.    DFAS Denver starts SBP payments at your spouse’s annuity amount. If you had opted out of  SBP after 10 years at 100% VA disability, it is at this point that the SBP Annuity Section would refund all premiums paid into the program by you in one lump sum. The discussion of that action in paragraph 4 of my Free Press article remains valid.

7.    The VA approves DIC and notifies DFAS of the commencement of payments.

8.    DFAS Denver adjusts SBP. If DIC is more than the SBP annuity amount ( you were enlisted or you were in the SBP program at less than full coverage ), DFAS refunds all premiums paid into the program in one lump sum, less 10% federal tax ( it is unclear whether the tax on the lump sum amount would be withheld if the spouse had indicated on the SBP form in step 5 that she did not want tax withheld from her SBP payments ), and less any  SBP payments already made to your spouse during the period that it took for DIC to be approved ( up to three months, depending on the VA Regional Office involved ). If DIC is less than the SBP annuity amount, then the spouse would receive DIC from the VA and the difference from SBP. She would also receive a partial refund of the premiums you paid into the SBP program. I’m sorry, but I don’t know the DFAS formula for determining the partial refund amount. The SBP action and refund is all automatic once DIC is approved; there are no options.


The odds are one out of one that all of us are going to bite the dust. Get your act together and don’t leave  your spouse hanging. One other point regarding SBP. Remember that once you have paid into the SBP program for 30 years, you no longer have to pay premiums. If you’re in that boat, make sure DFAS stops withholding premiums from your retired pay when you hit the 30 year mark.