Action in Congress

Feb. 1, 2004

Key Disabled-Vet Programs Begin

The tangible result of a recent legislative victory for seriously disabled military retirees this month begins to appear in hundreds of thousands of federal paychecks.

Two provisions of the 2004 Defense Authorization Act will add at least $2 billion a year to the combined incomes of 200,000 disabled retirees. They are limited Concurrent Receipt (CR), a program that defense officials call Concurrent Disability Pay (CDP), and expanded Combat-Related Special Compensation (CRSC).

Both took effect Jan. 1, but arranging payments, retroactive to that date, will take time.

CDP is now payable to retirees with disability ratings of 50 percent or higher. It will be phased in over 10 years, gradually ending the dollar-for-dollar offset in retired pay that occurs when retirees elect to draw tax-exempt VA disability compensation for service connected ailments.

Retirees need not apply for CDP payments. They will be automatic.

Expanded CRSC is a tax-exempt payment for retirees with 20 or more years of service who have disabilities from combat or from combat-related training.

When CRSC first took effect last June, it was limited to retirees with combat-related disabilities rated 60 percent or higher, or disabilities tied to the award of a Purple Heart. The new threshold will be any combat-related disabilities down to 10 percent. Roughly 100,000 additional retirees are expected to qualify and join with the 35,000 eligible under the first set of rules.

Retirees must apply for CRSC. Review and approval of new applications could take several months.

Shrinking BAH Gap

January brought a seven percent average increase in basic allowance for housing for 820,000 service members living off base in the United States, thanks to Congress following through on its promise to continue to narrow—and, by 2005, eliminate—a gap between BAH and local rental costs.

The 2004 BAH rate hikes continued a string of annual increases exceeding the rise in rental costs nationwide—2.9 percent this year—and therefore lower out-of-pocket costs for military renters. Military homeowners benefit identically from the BAH increases, but actual rates are based on local rents rather than, say, average home mortgages.

The new BAH levels cover, on average, all but 3.5 percent of off base rental costs. The next adjustment, in 2005, should close the gap entirely, a goal set by the Pentagon and Congress in the final years of the Clinton Administration.

In the late 1990s, service members were paying, out of pocket, an average of 22 percent of rental costs for housing deemed adequate for their pay grades.

In 2004, the service will spend $9.8 billion on Stateside housing allowances, an increase of $785 million over 2003. Once again, individual raises vary by pay grade, family status, and military housing area.

New BAH rates for all Stateside areas can be viewed online at:

Service Members Civil Relief Act

President Bush in late December signed legislation to ease financial and legal burdens on both active duty members and mobilized reservists serving away from home in the war on terrorism.

The Service Members Civil Relief Act, authored by Rep. Chris Smith (R-N.J.), the chairman of the House Veterans’ Affairs Committee, modernizes the 1940 Soldiers and Sailors Civil Relief Act. It has dozens of new provisions to help meet or manage financial and legal obligations, from car lease agreements to civil law proceedings.

Smith noted that many Guard and Reserve members called to active duty for a year or more in Operation Iraqi Freedom face income losses and financial pressures that call for “special relief” from obligations and liabilities such as rents, mortgages, installment contracts, and leases. Here are some of the most important revisions:

  • Eviction protection. Landlords previously could not evict a service member without a court order for nonpayment of monthly rent of $1,200 or less. Now, the figure is $2,400, and it will rise with inflation.
  • Housing leases. Service members who receive permanent change of station orders, or who deploy to a new location for 90 days or more, may terminate a lease without penalty.
  • Interest obligations. Creditors of a reservist must lower to six percent the interest rate charged on debts, including credit card debt, when the reservist is mobilized. The foregone amount can’t be made payable when the reservist is deactivated.
  • Life insurance. The law raises from $10,000 to $250,000 the maximum policy coverage that the government will provide to cover default for nonpayment while on active duty.

    Residence tax. While a member is on duty away from a permanent residence, a state cannot use income earned by that member to compute a spouse’s tax rate.

Commissary Fight

Pentagon moves to cut spending on commissaries and to give a political appointee greater oversight of store policy drew a sharp rebuke from Congressional guardians of military grocery stores.

It appears that the Pentagon has begun “a process to fundamentally change, reduce, or eliminate the defense commissary system,” charged Reps. John McHugh (R-N.Y.) and Vic Snyder (D-Ark.) in a late November protest letter to Secretary of Defense Donald H. Rumsfeld.

McHugh is chairman of the House armed services subcommittee on total force, and Snyder is the subcommittee’s ranking Democrat.

The Congressmen said that DOD seems intent on cutting store operating costs without concern for the impact those cuts may have on the quality of life of service members, retirees, and their families.

The lawmakers said they were angered by three recent internal DOD memos. In one, David S.C. Chu, undersecretary of defense for personnel and readiness, announced plans to install his principal deputy, Charles S. Abell, as chairman of the Commissary Operating Board, a position previously held only by a general officer. Another memo, signed by Abell last August, directed closure of 14 smaller commissaries, most of them overseas, and listed another 19 stores for possible closure. A third memo, signed in October by John M. Molino, Abell’s deputy, announced that a defense contractor will conduct a study of “variable pricing” for commissaries, a study opposed by the Commissary Operating Board. All commissary items now sell at cost plus a five percent surcharge. Variable pricing is seen as a way to use pricing to make a profit and reduce the $1 billion-a-year commissary subsidy.

Congress doesn’t want commissary funding cut, said McHugh and Snyder, warning Rumsfeld that DOD is “sending the wrong message” on its commitment to quality of life for service families “at the very moment when we can least afford to alienate the force.”

Veterans Benefits Act …

In December, Bush signed into law H.R. 2297, a catchall veterans bill that improves benefits for the disabled, surviving spouses, and their children. It has 39 substantive provisions that will cost taxpayers $1 billion over 10 years.

Among the bill’s highlights is a provision that, some argue, takes a first step toward ending a “concurrent-receipt” prohibition for surviving spouses of military retirees. It restores dependency and indemnity compensation (DIC)—as well as home loan, education, and burial benefit eligibility—for widows of disabled veterans and military retirees who remarry after age 57.

When a veteran dies of a service-connected ailment, the survivor spouse can receive tax-free DIC. However, the spouse faces a dollar-for-dollar offset in benefits. Their Survivor Benefit Plan annuity is reduced by monthly DIC, even though SBP is not given away but bought with premiums paid by the retiree.

Under previous law, DIC always has been suspended if the surviving spouse remarries. SBP then can begin again. DIC can be restored, too, however, if the remarriage ends because of death, annulment, or divorce.

Effective Jan. 1, the law allows DIC to continue if a widow or widower remarries after age 57, and with no reduction in other federal benefits, including SBP.

… And More Key Provisions

H.R. 2297 also:

Increases monthly educational benefits for spouses and dependent children of disabled veterans from $695 to $788 for full-time study, from $522 to $592 for three-quarter time study, and from $347 to $394 for half-time study.

Allows a specially adapted housing grant for severely disabled service members who remain on active duty.

Raises the specially adapted automobile grant from $9,000 to $11,000 and the specially adapted housing grants, for the most severely disabled veterans, from $48,000 to $50,000. For less severely disabled vets, the housing grant is raised by $750 to reach $10,000.

Expands benefits eligibility to children with spina bifida who were born to certain Vietnam-era veterans who served in Korea near the demilitarized zone.

Allows the surviving spouse or dependent children to receive the full amount of accrued benefits if the veteran dies while their claim is still pending.

Expands the Montgomery GI Bill program to cover self-employment training programs of less than six months and entrepreneurship courses at approved institutions.

New Push for SBP Reform

Sen. Mary Landrieu (D-La.) and Rep. Jeff Miller (R-Fla.) are primary sponsors of Survivor Benefit Plan (SBP) reform legislation that The Military Coalition, an umbrella group of service organizations and veterans groups, will push in the new term of Congress.

S. 401 and H.R. 548 would phase out the sharp drop in SBP benefits that occurs when a survivor spouse turns 62 and becomes eligible for Social Security. Survivor annuities now drop to as low as 35 percent. The bills would raise the pre-62 annuity formula in phases so that, eventually, spouses receive 55 percent of the covered amount, from the time of the member’s death through old age.

Proponents argue for the higher benefit because some retirees and their spouses were not briefed well on the drop in benefits at age 62 when they enrolled for SBP. Also, because retirees are living longer, the government’s share of the cost of SBP has declined over the last 30 years, from 40 percent down to under 20 percent. Raising the subsidy again, proponents argue, would go a long way toward covering the cost of ending the drop in benefits at age 62.