Financial Frontlines®

Have you created a special needs trust to be the beneficiary of your SBP for your dependent adult child?  Hopefully not…

The SBP does not allow the survivor annuity to be paid to a special needs trust or any trust for that matter.  The beneficiary of a SBP annuity must be a person with a Social Security number.  If the person designated as the beneficiary cannot manage his/her financial responsibilities, then the SBP annuity must be paid to an approved third party for the benefit of the incapacitated beneficiary.

This third party person can be a court appointed guardian, custodian or fiduciary.  The annuity may also be paid to a representative payee who is responsible for the care of the beneficiary once approved by DFAS or your Service SBP administrator.  To appoint a representative payee, provide your SBP administrator (DFAS for military and your pay agency for other uniform services) with the proper documentation:

• Determination of incompetency per a state court, doctor or psychologist.
• Representative Payee Form (http://www.dfas.mil/dfas/retiredmilitary/forms.html) appointing the representative payee by the Service member.

The representative payee is required to use the SBP payments solely for the benefit of the beneficiary and must certify/report this fact regularly.

MOAA has ongoing efforts on the Hill to allow special needs trusts for SBP beneficiaries.  Until you read something official about the passage of a law from MOAA, please plan accordingly.  See your Pay Agent’s web site or call them for details.

In a previous post , I explained how concurrent receipt works and tried to dispel some of the common misconceptions.  The application of concurrent receipt for a Guard/Reserve (G/R) member who is medically retired prior to age 60 is another source of confusion.

When tallying your years of service for retirement, G/R members can have active duty years of service and drilling years of service.  The drilling years are combined with the active duty years to provide the total years of service; ‘good’ years of service vested for retirement eligibility (= or >20 years) and for retirement pay at age 60.  If medically retired, the medical retirement orders separately indicate your vested active duty and your total years of service.  Distinguishing between these two types of years of service is critical when a person is medically retired for determining eligibility for concurrent receipt.

A medical retirement is categorized as an ‘active duty’ retirement.  That’s why you don’t have to wait until age 60 for your retired pay; you get paid retired pay immediately.  Being an active duty retirement, you only get credit for your active duty time served; not your total time served.  However, for pay purposes only, your total years of service are used.

Here’s where the confusion and problems develop.  As a retired active duty member, which a medical retirement is, it takes 20 or more years of active duty service before you are eligible to receive CRDP.  Or, you’re eligible for CRDP if you have 20(+) years of total service and you are age 60 with a G/R retirement.  If you are G/R and medically retired with less than 20 years active duty service, you don’t qualify for CRDP.

The rub…“but I do have more than 20 years service!”  You have more than 20 years service vested for a G/R retirement.  Your 20+ years are a combination of drilling years and active duty years.  Active duty years count for active duty retirement and total years count for a G/R retirement.  The G/R retirement doesn’t pay retired pay until age 60 and that’s when CRDP eligibility begins.

Let’s say you’re medically retired with less than 20 years active duty time but more than 20 years total time served.  You received your retirement Notice of Eligibility letter prior to your medical retirement.  You may want to do some math to see if at age 60 you are better off with a G/R retirement since you will be CRDP qualified under a G/R retirement.  Check with your G/R Retirement office for details.

On the other hand, you can qualify for CRSC IF your disabilities are the result of combat and you have less than 20 years of active duty time served.  The combat nature of your disabilities is also noted on the medical retirement orders.

At this time, the future of the HAP is no different than the past—there are no changes on the horizon.

The HAP for PCSs was a generous benefit passed because the cosmic planets aligned and money was made available at a time when everyone seemed to receive consideration for a bail out.  The original legislation came from out of the blue, MOAA supported the cause and the bill passed.  But honestly, even we were a bit surprised.

There is a current bill (H.R. 237) that has been referred to the Subcommittee on Insurance, Housing and Community Opportunity for consideration that would give DOD more authority to expand the HAP eligibility requirements.  However, while this bill gives the DOD authority it does not provide any money that would be necessary to expand the HAP to more members.

MOAA has written letters of support for efforts to expand the HAP to more members.  We support H.R. 237 even though in reality we realize there are no teeth in the bill…but you never know how things can change.  Heck, no one expected the original HAP would pass.  But I wouldn’t bet your lunch money on HAP expansion.  The calls for big cuts in the budget make asking for programs that cost money more than a challenge.

Some of you retired or separated from the Service soon after implementation of the Post 9-11 GI Bill in August 2009.  You probably didn’t realize at the time (who did?) that you had to transfer the educational benefit to dependents BEFORE you actually separated from the Service.

Maybe others of you didn’t find out about the “…before you separate policy…” until after separation.  Of course, the longer the time period after the P911GIB implementation, the less likely it is that you couldn’t have known about the policy.

If you didn’t transfer benefits but intended to, you have an option to try and fight for your transfer benefit.  The Services control the transfer benefit, not the VA.  If you were still in the Service after the Aug 2009 Post 9-11 GI Bill start date, you were eligible to transfer the benefit up until your retirement or separation date.

Your option is the Board for Correction of Military Records (BCMR) program.  Each Service has a BCMR program.  This is not an automatic approval process.  You can be turned down under this program.  If, and this is a big IF, the Board decides in your favor, your transfer benefit can be reinstated.

You have to apply to the BCMR for consideration.  The burden is on you to prove the Service neglected to provide proper management or counsel that denied you benefits you intended to exercise or tried to exercise.  Saying something was “unfair” won’t cut it.  You have to show evidence that you were wronged by the Service per laws, regs, policies, directives, deficient base-level program, etc.  Why didn’t you apply prior to you leaving the Service?  How is this the Service’s problem and not a personal problem?

Think you have a case?  Put together your BCMR package and see what happens.  See the appropriate web site for information on the process:

Army:  http://arba.army.pentagon.mil/

Navy/Marines:  http://www.donhq.navy.mil/bcnr/bcnr.htm

Air Force:  http://www.afpc.af.mil/afveteraninformation/afbcmr.asp

Post 9-11 GI Bill law: http://www.law.cornell.edu/uscode/html/uscode38/usc_sup_01_38_10_III_20_33.html

I hear it all the time.  We assume when we have several VA disabilities with their associated ratings, to come up with the combined rating, we should add the ratings together.  That’s obviously not how it works because you’ve tried this.

The VA figures your combined disability rating by calculating your non-disability rating first.  Actually, the VA calls it your “efficiency” rating.  It goes like this.  A person with a disability rating of 30% is considered 70% efficient, able to function normally so to speak.

To combine your ratings, rack and stack your disability ratings from the most severe rating to the least severe.  Let’s say you have disability ratings of 70% and a 40% rating.  That means you have efficiency ratings of 30% and 60%.

Multiply the efficiency ratings together to get an 18% efficiency rating.  Subtract this from 100% to get 82%.  Round up or down to the nearest number divisible by 10.  80% in this case.

Have more than two ratings?  Factor each additional rating by multiplying the combined ratings before it.  Example, multiply the first two efficiency ratings.  Use the result from the first two ratings to multiply by the third efficiency rating.  Use the result of the three ratings to multiply by the fourth rating and so on.

For more information and the chart used to combine ratings, click here and do your own math.