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thedrifter
01-30-07, 10:49 AM
U.S. Military (Ret.)

Here’s why your benefit increased in January

By Alex Keenan - Special to the Times
Posted : February 05, 2007

I receive many inquiries from retirees for information on their retirement benefits and whom to contact if changes occur.

I’d like to address some of those issues in this week’s column. But right up front, let me say that your military pay center is the best source of detailed information on how changes in your life circumstances (marriage, divorce, death, annulment, birth — just to name a few) affect your benefits.

In addition, laws constantly change, and you may be eligible for additional benefits in the future or exercise other options pertaining to your benefits.

That said, here is a rundown on changes to three benefits that affect a large number of retirees:

Retiree COLAs

As we moved into the new year, retirees looked forward to the latest annual cost-of-living adjustment in their retirement pay. The increase is based on the rise in the cost of various goods and services as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is tracked by the Labor Department.

The COLA is designed to guarantee that the retirement-income purchasing power of most retirees stays stable for as long as they live.

The annual COLA is based on the average of the CPI-W over the final three months of the fiscal year, July through September.

This year’s COLA, which should already have shown up in January retirement checks, is 3.3 percent for most retirees. This is the second year in a row that the retiree COLA is larger than the active-duty military pay raise (2.2 percent for 2007).

Service members who retired in calendar year 2006 will receive a somewhat smaller, partial COLA for that year only, because they already received a January military pay raise, which also raised their 2007 retired pay.

The amount of the partial COLA depends on exactly when you retired during the year. The later in the year, the less the COLA. In fact, those who retired during the last three months of 2006, October through December, get no COLA this year.

Anyone who retired during 2006 will get the full COLA increase in future years.

Survivor Benefit Plan premiums

A new law will end the payment of Survivor Benefit Plan premiums when a retiree reaches age 70 and has paid SBP premiums for at least 360 months (30 years). The law takes effect Oct. 1, 2008.

If a retiree with less than maximum SBP coverage increased the level of coverage during an open enrollment period or after remarriage, his premiums will continue for the length of time corresponding to the increased coverage, even after termination of premiums for the original coverage.

Retroactive disability ratings

Of the estimated 25.5 million veterans alive, more than 14 percent have had an illness or injury declared “service connected,” and 9 percent of veterans receive monthly payments from the Department of Veterans Affairs.

About 70 percent of initial claims from veterans are approved in whole or in part. When veterans apply for disability compensation and receive a retroactive service-connected disability rating from the VA, their retirement pay for the retroactive period is excluded from their taxable income, up to the amount of VA disability benefits that they would have received.

Basically, you are entitled to a refund of taxes paid. If you are a recipient of disability pay with a retroactive date, you need to file IRS form 1099R. This form reports the entire distribution because the income, when paid, was taxable under the law but is now exempt.

VA or your pay center will not do this for you; it’s your responsibility. Retirees who are affected by this policy should act immediately once they receive their VA disability award letter.

You may also claim a refund of taxes paid on an excludable amount in previous years by filing an amended return on Form 1040X, although there is a statute of limitations for such filings.

Alex Keenan is a retired command master chief petty officer who served 28 years in the Coast Guard. E-mail him at retired@atpco.com.

Ellie