Archive for the 'VA Benefits' Category

Yes, The VA Does Provide a Survivor Benefit, However…

Dec 06 2010

It’s getting worse. Commercial financial firms are now phone soliciting for business using the VA’s survivor benefit to get their foot in the door with you. Be warned.

Originally, we heard about commercial financial firms presenting the VA’s survivor benefit to residents of retirement communities and assisted living facilities. Now these firms are directly contacting people over the phones.

Yes, the VA has a survivor benefit but there are conditions for eligibility. First off, the military member has to be deceased. I mention this because some firms try to get you to apply before the member has passed. This indicates some firms don’t even know how the VA programs work; a clear sign that the firm’s objective is not helping you with VA benefits but getting into your pocket. Eligibility for the VA’s Dependency and Indemnity Compensation (DIC) is:

• The military member’s death must be Service-connected, or,
• Immediately preceding death, the member was VA rated totally disabled for a period of least 10 years, or,
• From the date of discharge from the Service, the member was rated totally disabled for at least 5 years preceding death, or,
• Former POWs who died after 30 Sept 1999, and were totally disabled for at least 1 years preceding death.

DIC is not based on financial need. There are other VA programs for survivors that are based on financial need and by that I mean very low income—poverty level. DIC provides $1154 a month and the other programs vary but are around $650 a month. All VA benefits are tax-free.

The objective behind these financial firms is to get access to your financial data and sale you other financial products. Some of these VA programs require you to submit a financial report and that is the point of the solicitations. These firms gain your financial info in order to apply for the VA benefit and the sales pitches follow.

Some of these firms also pitch legal products like trusts to hide your assets so you appear low-income to qualify for a VA program. They will also pitch insurance, annuity and investment products. All products that produce large commissions for the firms.

These organizations are not authorized Veteran Service Organizations (VSO) yet they may lead you to believe they are. A real VSO is chartered by the VA to help people apply and follow-up on VA claims. The VSO service is free. Go to a VSO if you have questions or need help. Here’s where to find a VSO in your area:

Search for the County Veteran Service Office in your state at http://www.va.gov/statedva.htm.

A complete list of all VSOs is at http://www1.va.gov/vso/index.cfm

The VA does not solicit for your business. If you are approached to conduct business with the VA, either walk away or proceed carefully.

10 responses so far

Email Fraud Alert—No Substantial VA Compensation Increases

Sep 30 2010

If you receive an email about a proposed substantial VA compensation increase, delete it. It is not true.

The email references a bill, H.R. 4667, which is a real bill, but the increases noted in the email are phony.

The actual bill expected to be signed by the President soon allows VA benefits to rise in conjunction with Social Security pay increases in 2011. There is no lump-sum rise in VA compensation of over 100% as the email states.

VA compensation is not tied to the same formula for Cost Of Living Adjustment (COLA) increases as Social Security and military pensions. As a result, each year Congress has to pass a bill specifically addressing increases in VA comp. They typically do so by tying a VA comp increase to the Social Security increase.

The bad news is Social Security and military retirement pay will not increase in 2011. The formula used for COLA increases in Social Security and military pensions adds up to no COLA for 2011—same as last year.

See the real bill for yourself here: http://www.govtrack.us/congress/bill.xpd?bill=h111-4667

The person who put this fake email together has a sick sense of humor.

Check out MOAA’s Battle of the Bilge blog for more information about the hoax.

10 responses so far

Post 9-11 GI Bill: Major Changes in the Works…

Aug 23 2010

Legislation including a host of upgrades and changes to the Post 9-11 GI Bill just passed a key congressional committee.  Major proposed changes include:

  • Giving credit for Title 32 (Full-Time National Guard/Reserve Service) service members back to September 11, 2001.  This will greatly assist these service members in qualifying for a more robust benefit.
  • $1,000 books and supplies stipend for Active Duty service members and their spouses (they are currently inelgible).
  • Addition of vocational training (on-the-job training and apprenticeships) and expanded licensing/certification benefits.
  • Adjustment of the housing allowance to include full-time distance learners (at 50 percent rate) and base the housing allowance on enrollment level.
  • Capping the tuition and fees paid for Active Duty service members and their spouses at $20,000 annually.  This is big potential hit, since these populations currently have no tuition cap (but give up the books and supplies stipend/housing allowance under the Post 9-11 GI Bill).

For full details, see this article in the Military Times.

We will keep you informed on the progress of this legislation.  While we think there is a good chance that much of it will pass this year, there is so much uncertainty/acrimony around any budget issues in Congress that there are no guarantees.

Phil Dyer, CFP®, RLP®. CPCC

3 responses so far

VA Life Insurance and Insurance Companies Retaining Death Benefits

Aug 02 2010

The following is the result of a July 28, 2010 Bloomberg magazine article and an August 1, 2010 Washington Post Business section article.  The articles shed light on the fact that the insurance companies, contracted by the VA, initially retain the death benefit proceeds for the survivor in an interest bearing saving account.  This is done rather than making an immediate lump sum payment of the full amount upon the servicemember’s death.  Beneficiaries have immediate access to the full amount, in total or in bits and pieces, at their discretion, through the use of ‘bank drafts.’  These ‘bank drafts’ are not for retail use like a bank’s checkbook but instead are used by the beneficiary to make withdrawals directly from the insurance account.

We need to distinguish between the federal insurance programs.  Servicemembers’ Group Life Insurance (SGLI) is the military members’ version of employer provided group life insurance.  It provides a death benefit to a max of $400,000 per member for a premium of $27 a month.  Veterans’ Group Life Insurance (VGLI) is the group life program for members post-service.  With a similar maximum death benefit as SGLI, its monthly premium is based on age and increases every 5 years.

The articles are written in the tone of a scandalous affair and that is why I’m writing this post.  As a money guy here at MOAA, my intent is to provide additional financial insights so we can evaluate the articles and the situation with a more complete, balanced point of view.

DISCLOSURE:  Let me be perfectly clear about this…I’m not taking a side in this post.  I’m writing this because, as I read the articles with my financial hat on, I felt the articles were leaving out important points. I don’t know if there is a scandal or not because all the facts are not known.  We’ll see how the story unfolds with time.  If facts develop where servicemembers are being cheated, I figure MOAA will look into the situation as we do in any situation where servicemembers need assistance.  So let’s look at the points to calibrate our meters.

The primary points of the article are;

  • whether or not the insurance firms profited off the backs of servicemembers,
  • the retained funds don’t pay a competitive rate,
  • the deposits aren’t FDIC insured,
  • no visibility in the program.

The situation has now energized state and national-level government officials also a few elected representatives to look into the issue and possibly float new legislation to “correct it.”

Point 1–Profiting off the deaths of Service members.  The insurance firms hold the death benefits in an interest bearing account until the survivor is ready to deal with the aftermath.  Survivors have immediate access to all funds through the use of a checkbook-like device.  The accusation is that the firms earn money off the retained funds until the benefits are paid.  All financial firms profit off of deposits held for customers.  The money in a CD earns the bank more investment return than they pay us in interest.  Had the survivor check been delivered in-full immediately to the survivor, unless the beneficiary put the money under the mattress, the proceeds would have been placed in some other firm’s deposit account earning interest until ready for use.  Then that firm would profit from the money.

Point 2–The interest rate is not competitive.  After a search of money market interest rates paid by banks for large amounts on Bankrate.com, the amounts of interest paid range from .3 to 1.3%.  The insurance rate in these articles is .5%.  Not the worst but not the best.  But is it scandalous given the current interest rate environment?  Those firms paying the highest rates aren’t as conservative as the highly regulated insurance industry.  I’d be careful with firms paying rates much higher than the average rates.  Higher rates come as firms assume greater risks with the deposits or the firm is willing to take a greater loss.

Point 3–No FDIC.  FDIC insurance is $250k.  Insurance firms cannot offer FDIC coverage.  Full FDIC coverage for a $400k survivor benefit requires breaking up the amount in separate banks/accounts or using a bank that participates in the Certificate of Deposit Account Registry Service (CDARS).  CDARS participation automatically breaks up the money to achieve full FDIC coverage but usually results in lower interest rates.  However, the insurance industry is highly regulated for financial stability.  Every insurance product we own (auto, house, life, long term care, annuities) is backed by the financial stability and reputation of the insurance firms we do business with everyday.  In the case of the articles, the firms are Prudential and Met Life.

Point 4–No visibility in the program.  The lack of FDIC on the accounts is not made clear in the account information.  No insurance product explains that it doesn’t have FDIC coverage because insurance companies don’t have FDIC.  However, the whole process of the retained account and the checkbook-device is made clear in the program paperwork.  It is also made clear in the VA’s SGLI/VGLI Handbook and on the VA’s web site.

There are interesting points made about the legalities of insurance firms offering interest bearing deposit accounts in the first place and the fact that the firms are holding the money without the survivors’ intent for them to hold the money.  That’s for the lawyers to fight about.

This isn’t only a military issue.  This situation goes beyond military members as this retained death benefit account works the same for all kinds of insurance proceeds.  Even federal civilian employees receive similar treatment.  The article makes it seem the insurance companies are taking advantage of military members specifically.

There.  I’m not sticking up for the government or the insurance companies.  This is just the way things are on the money front.

The solution is in the hands of the beneficiaries.  If a beneficiary has a problem with any of the above charges, he or she can withdraw all the assets immediately with the checkbook and put the money wherever he/she wants.  I would suggest survivors exercise this power if you are uncomfortable with the program.

We’ll see if something more comes from the investigations.

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Post 9-11 GI Bill Livecast on 6/29!

Jun 28 2010

Please join us for a Post 9-11 GI Bill Livecast on 6/29 at 12 Noon Eastern Time…

During this 45-minute live video cast, we will be sharing the latest information on the Post 9-11 GI Bill and giving you key action tips to make the most of this valuable benefit for currently serving service members, retirees and veterans.

Bookmark this link:

Post 9-11 GI Bill Livestream

You will have the opportunity to submit questions live and have those answered during the Q & A portion of the live cast.  Please note that your computer will need the most recent version of Adode Flash for optimum performance, which you can download here.

We hope to see you there!

Phil Dyer, CFP, RLP, CPCC

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