Military Update: Pentagon floats alternatives to congressional SBP reform
July 24, 2004
As House-Senate conferees prepare to deliberate differences in their separate plans for phasing out a sharp drop in military survivor benefits that occurs at age 62, the Bush administration says it has some “better alternatives” to improving the Survivor Benefit Plan.
Rather than phase out the age-62 drop in benefits, Congress should defer it “until the surviving spouse reaches full retirement age” under Social Security, Defense Department officials argue. That would put off the unpopular reduction in benefits until age 65, age 67 or somewhere in between depending on the surviving spouse’s birth year.
Another alternative to phasing out the drop in benefits at 62 — when payments typically fall from 55 percent of covered retired pay down to as low as 35 percent — is to lower SBP premiums, Defense officials suggest. That would make SBP more affordable to enlisted retirees. [About 80 percent of retired officers enroll in SBP versus 65 percent of enlisted retirees.]
Defense officials seek a return to bilevel premiums, as set before 1988, with “substantial discounts for those with lowest retired pay.”
DOD floated these alternatives in a package of “appeal” documents on the 2005 defense bill sent to the Office of Management and Budget and the Senate Armed Services Committee on July 7.
Steve Strobridge, director of government relations for the Military Officers Association of America, described the proposal as a last-minute attempt “to sell out the interests of all current and future survivors.”
The House, in passing its version of the 2005 defense authorization bill, voted to phase out what’s also called the age-62 “offset” within four years.
The Senate too voted to phase out the age-62 reduction, but over 10 years, not four. Benefits would be fully restored, to 55 percent, by October 2014.
The cost of the House plan is estimated at $2.2 billion over five years, $6.8 billion over 10 — roughly three times higher than the Senate plan. That proposal would cost $700 million over five years, $2.2 billion over 10.
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