The process of receiving both military retired pay and VA disability compensation benefits, known as “concurrent receipt,” is often misunderstood. Before diving into some of the more common misconceptions brought to MOAA, here are some basics about the program:

• For most retirees, Concurrent Retirement and Disability Pay (CRDP) is straightforward: If you have 20 or more years of service and a VA disability rating of 50% or higher, you are eligible for CRDP. If you have 20-plus years and a VA disability rating of 40% or less, you are not eligible for CRDP; your tax-free VA disability compensation will be deducted from your federally taxable retired pay. This is called the “VA Waiver.”
  
  
• Every individual agreed to “waive” retired pay for VA disability compensation when they submitted a claim; otherwise, the VA would adjudicate the claim but not pay the individual. It is up to the pay center (the Defense Finance and Accounting Service or the Coast Guard Pay and Personnel Center) to determine CRDP eligibility and whether the VA Waiver is applied.
  
  
• Medical retirees with less than 20 years of service, regardless of their VA disability rating, are not eligible for CRDP. However, any retiree (regular or medical), regardless of years of service, with any disabilities determined by their service to be combat-related would be eligible for the other CR program, Combat-Related Special Compensation (CRSC).

[TAKE ACTION: Urge Your Lawmakers to Pass the Major Richard Star Act to Help Combat-Injured Retirees]

The decades-long campaign to secure concurrent receipt for some retirees succeeded in the 2004 National Defense Authorization Act, which created CRDP as a phased-in benefit that took full effect in 2014. This was a compromise designed to take care of the most seriously disabled retired veterans.

Here’s the short version:

• No Concurrent Receipt: VA Waiver is subtracted from military retirement pay. Retiree receives adjusted military retirement pay and full VA compensation. This applies to retirees with disability rating under 50% or those with less than 20 years of service.
  
  
• CRDP: VA Waiver is not subtracted from military retirement pay. Retiree receives full military retired pay and full VA compensation. Retirees with 20 or more years of service and a VA disability rating of 50% or higher can receive CRDP.
  
  
• CRSC: VA Waiver is subtracted from military retirement pay. Retiree receives adjusted military retirement pay and full VA compensation, plus a CRSC check. Retirees with combat-related disabilities can receive CRSC.

Myths and Facts: CRDP

First, two fallacies MOAA hears all the time:

Myth: “I was medically retired, therefore my retirement pay is tax-free!”

Fact: The only military retirements that are tax free are those specifically delineated as such in the retirement paperwork by the military service, typically due to combat disabilities.

[CONCURRENT RECEIPT: Your Guide to CRDP and CRSC (Premium/Life Member Download)]

Myth: “Your VA disability rating exempts that same percentage of your taxable retired pay!”

Fact: Your disability rating has no impact on the taxability of your retired pay, except as outlined above. The amount in box 2a (Taxable amount) of your 1099-R is what the IRS expects you to pay taxes upon.  

Myths and Facts: CRSC

CRSC comes with its own set of misconceptions.

Myth: “I served in Desert Storm I, therefore my disabilities are combat-related!”

Fact: You must apply to your specific military service for a ruling on whether each of your VA service-connected disabilities is combat-related.

[RELATED: Concurrent Receipt Resources From MOAA]

Myth: “I’m eligible for both concurrent receipt programs, but CRSC is always best!”

Fact: Every veteran eligible for both programs must evaluate the specifics of each program to determine which one will put more money in their pockets each month.

When the pay center receives the CRSC notification from your service, they will make an evaluation of which CR program they believe is most beneficial for you. However, they will give you the option (by sending you an Open Season letter) of switching to the other CR program. They do this because they only know how much they are paying you, not whether any other income you may be receiving would make the other CR program more beneficial.

The CRSC Math

The VA Waiver is applied under CRSC, but a tax-free check is sent in return … that makes CRSC better, doesn’t it? Not necessarily.

Generally, when the VA rating and the combat rating are the same, CRSC is most beneficial – you have the same amount deducted from your taxable retired pay returned to you via a tax-free CRSC check.

However, when there is a split (or difference) between the ratings, you must determine whether the amount you save in taxes on your remaining retired pay (after the VA waiver) overcomes the difference between the VA disability rating payment and the combat rating payment (the CRSC check).

Take a retiree with a 100% VA rating and a 50% combat rating, for example. Does the difference between the ratings (almost $3,000) overcome the federal income tax savings? Not even in the highest tax bracket (37% for married couples filing jointly with an income over $750,000) does the tax break make CRSC a better choice than CRDP.