Retirement: Retired pay offset

A 19th-century law required disabled military retirees to forfeit $1 of retired pay for every dollar received in VA disability compensation.

In recent years, Congress has enacted two separate but similar programs that enable military retirees to receive both payments and has been slowly widening their scope and reach. In retiree circles, this issue is known as “concurrent receipt.”Concurrent Retirement and Disability Payments.

This program applies to retirees with at least 20 years of service and disabilities rated 50 percent to 90 percent that is not related to combat service. For these retirees, the offset in their retired pay is gradually being phased out over a 10-year period that began in 2005 and is due to end in 2014. Initially, the 10-year phase-out also applied to retirees with disabilities rated at 100 percent that are not related to combat service.

But Congress amended the law effective Jan. 1, 2005, to give these retirees immediate concurrent receipt of full retired pay and VA disability compensation. Those medically retired with less than 20 years of service for disabilities not related to combat, regardless of the disability rating, and those with ratings of 40 percent or below for disabilities that are service-connected but not related to combat, are still subject to the dollar-for-dollar offset in retired pay.

A change in law ordered by the 2008 Defense Authorization Act expands full concurrent receipt to “individual unemployability” retirees with service-connected disabilities. “IU” retirees have formal VA disability ratings of less than 100 percent but are nevertheless considered fully disabled because their medical conditions prevent them from holding a job.

These retirees will get a full concurrent receipt of retired pay and VA disability compensation retroactive to Dec. 31, 2004, and will no longer be subject to the 10-year phase-out of the offset in retired pay. However, Congress included a delayed effective date for this provision; payments will not be made until Oct. 1, 2008.

Payments under the CRDP program are made automatically by the Defense Finance and Accounting Service; retirees do not have to apply.CRDP is taxable. Combat-Related Special Compensation. Under the separate CRSC program, retirees with any VA-rated disabilities, regardless of percentage, that are the result of combat or combat-related training are eligible for a monthly payment that replaces their retirement pay offset and, in effect, gives them the full concurrent receipt of both payments.

The CRSC program became effective on May 31, 2003. It covers retirees who have disabilities that are the direct result of “armed conflict, hazardous military duty, training exercises that simulate war, or caused by an instrumentality of war.” Such disabilities must be compensated by the VA and rated at least 10 percent disabling.

Previously, CRSC had been limited to retirees with qualifying disabilities only if they had at least 20 years of service for retired pay purposes. However, the 2008 Defense Authorization Act expands the program to so-called “Chapter 61” retirees, those medically retired by the military with fewer than 20 years of service. These retirees must still meet the other qualifying criteria, including having disabilities that are the direct result of combat or combat-like training.

Qualifying Chapter 61 retirees are eligible for CRSC, effective Jan. 1, 2008.CRSC payments, which are tax-exempt, are equal to the amount of VA disability compensation offset from retired pay. Applicants must provide adequate, detailed documentation showing that their disabilities are combat-related rather than service-related. Members must apply to their own branch of service.

Retirees who are eligible for both CRDP and CRSC — mainly those whose disability ratings result from a combination of service- and nonservice-connected conditions — are allowed to choose which program to participate in, based on which one will pay them more.

The fact that CRDP is taxable, while CRSC is not, is one consideration.

• Contact: Army:  https://www.hrc.army.mil/site/crsc/index.html
• Navy and Marine Corps:  http://www.donhq.navy.mil/corb/crscb/crscmainpage.htm
• Air Force, http://ask.afpc.randolph.af.mil/crsc/

The Defense Department maintains a Web page with general information on CRDP and CRSC, including contact information for each service, at http://www.defenselink.mil/prhome/mppcrsc.html