Pay Issues

Once a servicemember becomes a retiree, the Defense Finance and Accounting Service (DFAS) provides military retired pay services to retirees. Retirees can access monthly pay statements on the DFAS-managed MyPay website.

Disability compensation programs are provided to servicemembers who were wounded, injured, or became ill as result of their military service. Both DoD and the VA have disability compensation programs in which payments in some cases are made from both departments but in other cases are not.

DoD’s programs include disability severance pay and disability retired pay. The VA’s programs include disability compensation and disability pension.

Payments under these programs depend upon the level of the veteran’s disability, whether he or she was evaluated as “unfitting” during the Physical Evaluation Board (PEB) process, years of service, base pay, and other variables.

Disabled servicemembers medically retired by a PEB generally will be eligible to receive VA disability compensation.

When a servicemember is medically retired following a PEB, the servicemember’s active duty pay stops when released from service. The veteran’s retired pay starts one month later because retired pay is paid in arrears (after the fact).

VA’s disability compensation is similar. The VA will establish an effective date for compensation (the date the VA determines the veteran was disabled and eligible to receive compensation from the VA). This date usually coincides with the servicemember’s last day on active duty for a disability retirement. However, servicemembers will not receive VA compensation for the first month because VA compensation also is paid in arrears.

While waiting for disability compensation or retired pay to start, service relief societies or nonprofits might be able to assist in short term loans or grants.

To understand concurrent receipt, it is necessary to provide some history behind it.

Prior to 2003, if a servicemember had earned both retired pay from the service and VA compensation for a disability or illness, the VA compensation was subtracted from the servicemember’s retired pay. This was because of a law that stated the servicemember could not receive pay from two government agencies for the same service.

The VA compensation was subtracted from the service retired pay in the form of what is called a VA waiver since the servicemember agreed to waive retired pay to receive the VA compensation. If your servicemember has a VA waiver, it can be found on the retired pay stub (or commonly referred as the Retiree Account Statement by DFAS).

Many retirees now receive both earned retired pay and VA compensation for service-connected disabilities. The process to restore pay is not complete, but Congress has made significant progress since 2003 to eliminate the withholding of service retired pay that had been earned through years of military service because of a disability or illness that was caused by the duty performed.

Currently, there are two distinct programs under concurrent receipt (pay received both from DoD and VA for the same disability): Concurrent Retirement and Disability Pay (CRDP) and Combat-Related Special Compensation (CRSC).

CRDP was established in January 2004 and eliminates the offset of retired pay for VA disability compensation (also known as the VA waiver) for those with 50-percent to 100-percent disabilities, regardless of the nature of the disabilities (combat vs. non-combat). January 2014 marked the completion of the 10-year period that phased out the offset. Currently all 20-year-plus retirees with VA disability ratings of 50 percent or higher receive all of their military retired pay and all of their VA disability compensation.

Retirees with fewer than 20 years are not eligible for CRDP (Temporary Early Retirement Authority, or TERA, retirees are the only exception). CRDP can be retroactive to Jan. 1, 2004, if applicable.

CRSC provides a special compensation to those who have military retired pay offset by VA compensation because of combat-related disabilities, regardless of years of service. The program became effective May 31, 2003.

To receive CRSC, the servicemember must apply to his or her service and provide specific source documents. One key document is the servicemember’s finalized VA rating. Your servicemember cannot apply for CRSC with only the Integrated Disability Evaluation System rating.

CRDP is for any VA-rated disability or illness while CRSC is for combat-related disabilities and illnesses. CRDP replaces a servicemember’s retired pay (usually taxable) where CRSC is tax-free because of its combat-related nature.

CRDP automatically is calculated when a 20-year-plus retiree gets a VA rating where the servicemember must apply to his or her service to receive CRSC.

For CRDP, the VA notifies the branch of service pay agency of the VA rating and the service pay agency establishes the CRDP as appropriate. CRDP is based on the VA rating.

For CRSC, the services determine what proportion of the VA disability rating is specifically combat-related. CRSC uses a separate rating based on the combat-related disabilities within a VA rating. The service will notify your veteran’s pay agency of its CRSC ruling and rating.

If a servicemember is eligible for both CRDP and CRSC payments, upon CRSC notification by the service, the pay agency will make the initial determination of which form of pay is most advantageous to the servicemember and establish either a CRDP or CRSC payment. After this initial decision, the servicemember must decide each year during the open season described below.

Concurrent Receipt Eligibility

Combat Related Disability

Non-Combat Related Disability

20+ years of service and 10-40% disabled

Yes

No

20+ years of service and 50% or greater disabled

Yes

Yes

Less than 20 years of service with any disability rating

Yes

No (unless TERA retiree)

If your veteran receives CRDP, he or she receives two separate payments. One is the VA compensation and one is the service retired pay. The CRDP is incorporated in the service retired pay. The CRDP amount is phased-in each year, so as CRDP rises, the VA waiver amount will decrease. In 2014, when CRDP is fully phased-in, the VA waiver will go away. CRDP is the elimination of the VA waiver from service retired pay.

Veterans with CRSC receive three separate payments a month. One is the service retirement pay with the full VA waiver deducted. One is full VA compensation. And the third is the CRSC tax-free payment. The separate tax-free CRSC payment reimburses the veteran for the VA waiver amount offsetting the service retired pay.

Retirees eligible for both CRDP and CRSC may choose between the two forms of compensation each year under the open season process. Each December, eligible retirees receive an open season letter from their branch of service pay agency to make their election.

As the CRDP program for those with a 50 percent or higher VA disability rating is fully phased-in as of January 2014, veterans might find the CRSC rating is not high enough to make the tax-free CRSC check better than the higher amount of taxable pay available from CRDP’s elimination of the VA waiver from the retired pay.

If a member qualifies for both programs, the member must choose one or the other; he or she may not have both.

Someone who qualifies for both programs might take CRDP instead of the tax-free CRSC because it is not unusual for the combat-related rating to be lower than the VA rating. The service might determine, for example, only 30 percent of the disabilities in the 70-percent VA rating are combat-related. A 70-percent CRDP payment might put more money in the servicemember’s pocket, even with taxes, than a 30-percent tax-free CRSC payment.

CRDP-CRSC Contact Links

Army CRSC Air Force CRSC Navy/USMC CRSC
DoD CRDP-CRSC DFAS CRDP-CRSC Coast Guard/NOAA CRSC

USPHS CRSC: Compensation Branch of Commissioned Personnel at (800) 638-8744.


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