IN THE CASE OF:	  

		BOARD DATE:	    26 September 2013

		DOCKET NUMBER:  AR20130003085 


THE BOARD CONSIDERED THE FOLLOWING EVIDENCE:

1.  Application for correction of military records (with supporting documents provided, if any).

2.  Military Personnel Records and advisory opinions (if any).


THE APPLICANT'S REQUEST, STATEMENT, AND EVIDENCE:

1.  The applicant, the spouse of a deceased former service member (FSM), requests reimbursement of all premiums paid into the Survivor Benefit Plan (SBP), including the buy-in costs, from the date of "paid-up SBP" premiums.  

2.  The applicant states, in effect:

	a.  As a surviving spouse, she has not received all of her paid-up SBP premiums refund from the Defense Finance and Accounting Service (DFAS).  She paid approximately $27,826.94 in SBP premiums and she only received $17,519.71 from DFAS.  There is a $10,307.23 difference between what she paid and what DFAS reimbursed her.  Copies of her deceased husband's retired pay statements show SBP deductions over a 20-year period to equal approximately $27,826.94.  She believes this is the approximate amount because she does not have copies of statements for 1994 or for 2006 through 2009.  For example, for the year 2000 her husband's pay statements show $121.53 was deducted each month for SBP premiums.  A letter from DFAS shows $80.69 was paid in premiums each month in 2000.  

	b.  DFAS states the additional money her husband was paying was due to the buy-in premiums or "Open Season" cost.  Her husband died at age 72 and he had paid-up SBP premiums.  She received 4 months of SBP payments before the Dependency and Indemnity Compensation (DIC) payments began.  The DIC payments were higher than the SBP annuity payments; therefore, the SBP payments stopped.  DFAS deducted the 4 months of SBP payments she received from the premium refund check.  She is in agreement with that but they have not refunded her in full for the SBP premiums. 

	c.  DFAS cites Public Law 92-425 in their defense, which states that buy-in premiums are not refundable.  To her, premiums are premiums whether you pay them over a 20 or 30 year period.  Using their logic, if she and the FSM had started paying into the SBP when they first became eligible (at the time of marriage in 1981) instead of waiting 12 years until an open season she would receive the $27,826.94 the FSM paid in and not the $17,519.71 she received.  If the $10,307.23 is indeed a buy-in cost, then she should have been alerted from the onset that she would not get the full amount paid in back if she, the surviving spouse, became eligible for DIC payments that were higher.

3.  The applicant provides:

* Letters, dated 12 June, 3 August, and 2 October 2012 written to DFAS
* Letters, dated 16 July, 29 August, and 22 October 2012, she received from DFAS
* Multiple Retiree Account Statements
* Two DFAS Retired/Annuitant Statements
* DD Form 214 (Report of Separation from Active Duty)
* Record of Marriage Certificate
* Certificate of Death

CONSIDERATION OF EVIDENCE:

1.  The FSM's records are not available for review with this case.  The available evidence is based on documents provided by the applicant and input from DFAS. 

2.  The available evidence shows the FSM was born on 17 June 1939.  After having prior service (November 1958 to December 1960), the FSM enlisted in the Regular Army on 21 September 1966.  He served through multiple reenlistments in a variety of assignments and he attained the rank/grade of sergeant first class (SFC)/E-7.  

3.  On 30 November 1978, he retired and he was placed on the Retired List on 
1 December 1978, in his retired rank/grade of SFC/E-7.  

4.  The FSM and the applicant were married 7 March 1981.

5.  Based on the correspondence provided by the applicant, it appears the FSM enrolled in the SBP for spouse coverage during the 1992/1993 Open Season. 

6.  The FSM completed 360 payments of SBP premiums on 1 October 2008 and he reached age 70 on 17 June 2009.  

7.  The FSM died on 11 October 2011. 

8.  On 12 June 2012, by letter to DFAS, the applicant requested an audit of the SBP premiums that she and the FSM paid in from their first payment in April 1993 to their last payment in August 2011.  She stated that as the surviving spouse, she received a total of $3,337.00 in SBP benefits between 2011 and 2012.  She also received a refund of SBP payments in the amount of $10,606.89 on 6 April 2012.  She indicated that she was now disputing this amount.  She was missing records for 1994 and from 2006 through 2009.  According to her records (including her guess/estimation for the missing years) she believed she was due approximately an additional $13,663.05 in refund SBP payments.  

9.  On 16 July 2012, DFAS responded to her inquiry and stated:  

	a.  Public Law 92-425, enacted September 21, 1972, states that an annuitant cannot receive the full amount of both the SBP annuity and the DIC that may be payable by the Department of Veterans Affairs (VA).  An annuitant is only entitled to the amount of the SBP annuity that exceeds the DIC payment that may be payable or the DIC payment only if that payment is greater than the SBP annuity. There is no provision of law that allows concurrent receipt of SBP and DIC.  

	b.  DFAS was notified by the VA that she became entitled to DIC effective 
1 November 2011.  When the effective date for a DIC award is the first day of the month after the death of the retiree, a refund of spouse SBP premiums is made to the annuitant.  Since her late husband elected to participate in the SBP during the 1992/1993 SBP Open Season, the law required all members to buy into the program and to pay an additional Open Season cost with the monthly SBP payment.  However, only the spouse SBP premiums are refundable through Public Law 92-425.  After further review of her account, it has been determined that her DIC cost refund was processed and paid correctly.  She was provided a worksheet for the details. 

	c.  Public Law 105-261 states all SBP premiums will be terminated effective 1 October 2008 for all members who are at least 70 years old and have paid SBP premiums for 360 or more months.  This is commonly referred to as "paid-up SBP."  DFAS records show the FSM became eligible for the paid-up status starting 1 June 2009. 

10.  On 3 August 2012, by letter to DFAS, she indicated that she did not agree and provided DFAS a breakdown of the amount paid ($27,826.94) and the amount she was refunded ($17,519.721).  She again claimed she was entitled to an additional refund of $10,307.23.

11.  On 29 August 2012, by letter, DFAS responded to her inquiry and she was advised as previously stated in the letter written to her, dated 6 July 2012.  Additionally, DFAS stated that:

   a.  The discrepancy reflected in her records between the original costs calculated (worksheet) and the costs paid (her records) was a result of open season buy-in premiums.  Those premiums were not refunded. 

	b.  After further review of her account, it has been determined that her DIC cost refund was processed and paid correctly.  She was provided a worksheet for details.  In accordance with Public Law 105-261, all SBP premiums will be terminated effective 1 October 2008 for all members who are at least 70 years old and have paid SBP premiums for 360 or more months.  This is commonly referred to as "paid-up SBP."  DFAS records indicated that the FSM became eligible for paid-up status starting on 1 June 2009. 

12.  On 2 October 2012, by letter to DFAS, the applicant disagreed.  She stated:  

	a.  According to a DFAS letter, dated 29 August 2012, Open Season buy-in premiums are not refundable.  However, when she spoke to a DFAS representative recently, she referred to these premiums as "administrative costs" and suggested that she (the applicant) wrote to DFAS asking for an explanation of how DFAS arrived at these costs.  In her case they were approximately $10,307.23.  This is the "not refunded" cost that she paid for a plan that she is not using.  She also understood that if she and the FSM had first joined the plan when they became eligible, which would have been 7 March 1981, the date of their marriage, they would have begun paying premiums in 1981.  But, they did not join until Open Season in 1992.  When they joined the plan in 1992 and began paying monthly premiums, she understood from talking to the representative that part of that monthly premium included the ''back payment," so to speak, for the previous years' premiums.  If this is the case, premiums are premiums regardless when paid and she is due $10,307.23.  

	b.  If there are other "administrative costs" then she would also like to know how they were calculated at the time her husband joined the plan.  The amount in question is significant.  She has wondered if there are other surviving spouses who have had this problem.  She contacted her local Retirement Services Officer and he suggested this could be an issue that she could bring up at any Survivor Outreach activity that she might attend or that she could address her concern to her elected representatives.  
13.  On 22 October 2012, by letter, DFAS responded to the applicant and again made the exact points that were made in the letters dated 16 July, and 29 August 2012. 

14.  Public Law 92-425, enacted 21 September 1972, established the SBP.  The SBP provided that military members on active duty could elect to have their retired pay reduced to provide for an annuity after death to surviving dependents.

15.  Public Law 101-189, enacted 29 November 1989, established an Open Season to be conducted 1 October 1991 through 30 September 1992.  It required that enrollees live two years from the effective date of election for beneficiaries to be eligible for an annuity.

16.  Section 641 of the National Defense Authorization Act for Fiscal Year 1999, Public Law 105-261, amended the SBP with regard to the deduction of SBP monthly premiums.  Effective 1 October 2008, no reduction in the retired pay of a participant in the SBP will be made for any month after the later of (1) the 360th month of paid premiums; and (2) the month during which the participant attains 70 years of age.  These changes allow qualified retirees to stop paying SBP premiums while maintaining their current annuity coverage.  The change is commonly referred to as "Paid-up SBP."  Beginning on 1 October 2008, a member who is a least 70 years of age and has made a minimum of 360 months of premium payments is eligible to have their monthly premiums stopped.  No action is required by the member to initiate the termination of premiums. 

17.  The VA pays a benefit called DIC to a member's surviving spouse and dependent children if the member dies of service-connected causes.  This includes deaths after retirement if the cause of death is due to an injury or disease contracted while the member was on active duty.  Any spouse DIC paid to a member's spouse is subtracted from spouse SBP payments, although DIC payments to or for children do not affect SBP payments.  A refund is paid to a member's surviving spouse for the costs deducted for that part of the SBP benefit not received due to DIC being paid.  If the DIC payment offsets the entire SBP payment, all costs will be refunded.  These refunds are taxed as income to the survivor since they were not taxed when deducted from retired pay.  By law refunds are not made for added costs associated with 1992-93 Open Season enrollments. 

18.  Title 10, U.S. Code, section 1450(e), states if an SBP annuity is not payable because a survivor is eligible for DIC, then any amount deducted from the retired pay of the deceased under section 1452 shall be refunded to the survivor.

19.  Title 10, U.S. Code, section 1452, states the retired pay of a participant in the SBP who is provide spouse coverage shall be reduced (i.e., premiums deducted from the retired pay).

20.  When the last SBP Open Enrollment Season opened in October 2005, guidance was put out that under the law several figures created a cost factor used to calculate a retiree’s buy-in enrollment premium:  back premiums (the total SBP premiums the retiree would have paid if enrolled at the first opportunity), plus interest, plus an amount calculated to protect the actuarial soundness of the DoD Military Retirement Fund.  The buy-in premium could be paid as a lump sum, a combination of a lump sum and 24 equal monthly payments, or 24 equal monthly payments – all in addition to monthly SBP premiums.

21.  Examples of Open Enrollment period costs for first-time participants were provided.  One example given was a member with a base amount of $1,200 and with 10 years since the event (i.e., the time the member could have first enrolled).  The buy-in premium was $11,934.

DISCUSSION AND CONCLUSIONS:

1.  The FSM retired on 1 December 1978.  He made an SBP election for spouse coverage during an Open Season that was conducted from 1 October 1991 through 30 September 1992.  An Open Season is a period authorized by Congress to allow retirees not participating or not fully participating in the SBP to either enroll or increase their participation.  Enrollment during an Open Season carries a "buy-in" enrollment premium in addition to the normal monthly premiums.  The buy-in premium includes back premiums (the total SBP premiums a member would have paid if the member had enrolled at the first opportunity), plus interest, plus an amount calculated to protect the actuarial soundness of the DOD Military Retirement Fund.  Back premiums are calculated using a "years since event" figure.

2.  The term "year since event" means the point at which a member could have first made an SBP election for the category the member wants to cover during an Open Season.  In the applicant's case, she and the FSM were married in March 1981.  Their marriage would have been the event at which he could have first taken spouse coverage.  

3.  The FSM died on 11 October 2011 and the applicant began receiving DIC on 1 November 2011.  In February 2012, the VA notified DFAS that the applicant became entitled to DIC effective 1 November 2011.  Any spouse DIC paid to the spouse is subtracted from spouse SBP payments.  A refund is paid to a member's surviving spouse for the premium costs deducted for that part of the SBP benefit not received due to DIC being paid.  If the DIC payment offsets the entire SBP payment, all costs will be refunded.

4.  By law, when the effective date for a DIC award is the first day of the month after the death of the retiree, a refund of spouse SBP premiums are made to the annuitant.  

5.  However, the FSM first elected to participate in the SBP during the 1992 Open Season.  The law required all members to buy into the program and to pay an additional Open Season cost with the monthly SBP payment.  Only the spouse SBP premiums computed as original cost figures are refundable.  The discrepancy between the original costs calculated and the costs paid is a result of Open Season buy-in premiums.  These premiums are not refunded.  Those premiums were paid in addition to the monthly SBP premiums, and by law they are not considered SBP premiums under Title 10, U.S. Code, section 1452.

6.  One of the examples given when the 2005 SBP Open Enrollment Season opened was for a member who would owe almost $12,000 in buy-in premiums when 10 years had elapsed since the event.  In the applicant’s case, almost 12 years had elapsed since the event.  Therefore, the difference of $10,307.23 she is concerned about does not seem to be out of line.

7.  After comprehensive review of the available evidence, it appears DFAS audited, reviewed, and re-audited her account multiple times and determined that her DIC cost refund was processed and paid correctly.  Her disagreement with the outcome of her case and her dissatisfaction with the governing laws do not mean there has been an error an injustice in her case.  Congress established the SBP laws.  A change to the law is not within the purview of this Board.  She is not entitled to the requested relief. 

BOARD VOTE:

________  ________  ________  GRANT FULL RELIEF 

________  ________  ________  GRANT PARTIAL RELIEF 

________  ________  ________  GRANT FORMAL HEARING

___X___  ____X___  ____X___  DENY APPLICATION


BOARD DETERMINATION/RECOMMENDATION:

The evidence presented does not demonstrate the existence of a probable error or injustice.  Therefore, the Board determined that the overall merits of this case are insufficient as a basis for correction of the records of the individual concerned.



      _______ _  X _______   ___
               CHAIRPERSON
      
I certify that herein is recorded the true and complete record of the proceedings of the Army Board for Correction of Military Records in this case.

ABCMR Record of Proceedings (cont)                                         AR20130003085



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ABCMR Record of Proceedings (cont)                                         AR20130003085



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