What Is DFAS Annuity Pay & How Does It Work?

The Defense Finance and Accounting Service (DFAS) administers various annuity payments, providing financial support to eligible beneficiaries of military personnel and federal civilian employees. They provide continued financial assistance to families after the death of a service member or federal employee. This article explains DFAS annuity pay, its main programs, payment calculations, and how recipients manage benefits.

What is DFAS Annuity Pay

DFAS Annuity Pay refers to a consistent series of payments managed and disbursed by the Defense Finance and Accounting Service for military and civilian annuities. In this context, an annuity primarily functions as a survivor benefit, distinct from the direct retirement pay received by the service member or employee themselves.

The purpose of DFAS annuity pay is to offer financial stability to qualifying family members following the death of a military service member or federal civilian employee. These payments ensure dependents have continued financial support. While all federal retirees receiving a pension are considered annuitants, many annuitants are survivors who receive these specific benefits.

Main DFAS Annuity Programs

DFAS administers several annuity programs for survivors. The Survivor Benefit Plan (SBP) is a military annuity program providing monthly income to eligible beneficiaries after the death of a military retiree or a service member who died on active duty. Eligibility typically extends to surviving spouses, former spouses, and dependent children. The SBP aims to replace a portion of the military retiree’s pay, which otherwise ceases upon their death.

For federal civilian employees, the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) offer survivor annuities. Under FERS, a surviving spouse may qualify if the employee had at least 10 years of creditable service, with 18 months of civilian service, and was married for at least nine months, unless an exception applies.

Dependent children who are unmarried and under 18, or under 22 if full-time students, may also be eligible. CSRS survivor benefits also extend to spouses and dependent children, often requiring the deceased to have elected survivor coverage.

Payment Calculation and Adjustments

The initial amount of a DFAS annuity payment depends on several factors specific to the deceased’s service and the elected coverage. For the Survivor Benefit Plan (SBP), the base amount chosen by the service member, which can range from a minimum of $300 up to their full retired pay, directly influences the annuity. The annuity is typically calculated as 55% of this elected base amount.

Annuities may be subject to certain adjustments or offsets. Historically, SBP payments for surviving spouses were reduced by the amount of Dependency and Indemnity Compensation (DIC) received from the Department of Veterans Affairs. However, the SBP-DIC offset was fully eliminated as of January 1, 2023, meaning eligible spouses can now receive full benefits from both programs. A Social Security offset for SBP recipients is no longer a general rule for new beneficiaries.

To maintain purchasing power against inflation, DFAS annuities are generally subject to Cost of Living Adjustments (COLAs). These adjustments are typically applied annually, based on increases in the Consumer Price Index. For most retired pay and SBP annuities, COLAs become effective December 1 for retirees and January 2 for annuitants. This ensures that the value of the benefit keeps pace with economic changes over time.

Receiving and Managing Your Annuity

DFAS annuity payments are typically delivered through direct deposit, offering a secure and efficient method for receiving funds. Annuitants can manage their direct deposit information, view pay statements, and access other account details through the myPay online system. This platform allows for convenient, round-the-clock access to payment information and various self-service options.

Annuitants have a crucial responsibility to report significant life changes to DFAS promptly. Events such as a change of address, banking information, marital status, or the death of a child beneficiary can impact eligibility and payment amounts. For instance, if a spouse annuitant remarries before age 55, their annuity payments will generally stop, though eligibility can be reinstated if the remarriage ends. Reporting these changes is essential to prevent overpayments or interruptions in benefits.

Annuity payments are considered taxable income, and DFAS provides a Form 1099-R annually, typically available electronically via myPay by mid-December or mailed by January 31, for tax reporting purposes. It is advisable for annuitants to consult with a tax professional for personalized guidance regarding their specific tax obligations. DFAS also requires periodic eligibility verification, now simplified to one annual verification.