In a perfect world, all veterans with a service-connected disability rating could receive their full military retirement pay and VA compensation simultaneously. However, the government budget isn’t limitless and to control costs, the government offsets the two benefits.
Until recently, this meant that retirees had to waive part of their military pay in order to receive the VA disability compensation. This was stopped by a new law known as CRDP.
How it works
Prior to 2004, it was illegal to receive both a military retirement and VA disability compensation. However, the military created a program called Concurrent Retirement and Disability Pay (CRDP) or Combat Related Special Compensation (CRSC).
CRDP is an offset to your military retirement check to allow you to receive both your pension and VA disability benefits. Your CRDP is determined by multiplying your years of service and your retirement rate at the time you reach retirement age.
It is important to remember that your CRDP is taxable income. You should be receiving a letter from DFAS each December that provides information on how your CRDP could impact your taxes.
Keep in mind that you can reopen your disability claim to seek a higher rating percentage if you believe that the VA made a mistake. This can help you get more of your CRDP and can also increase your VA pension. However, it is important to note that the reopening process is not automatic.
Calculation method
Traditionally, veterans who received disability compensation from the VA had their military retired pay offset by that amount. Those who qualify for CRDP have their disability compensation paid directly to them without the corresponding reduction in their retirement pay.
To determine a person’s CRDP, the calculation starts with figuring out how much the veteran would have received had they not been disabled. This number is determined by multiplying the years of service in effect at the time they reached retirement age (normally 60) by 2.5%.
The figure is then multiplied by the base pay in effect at the time of retirement. This number is then added to the amount of the VA disability rating to determine a person’s CRDP. It should be noted that a person does not need to apply for CRDP, and they will be automatically enrolled in the program if they meet all the other requirements. However, if they are owed a higher CRDP rate, they can file a request for reconsideration by submitting evidence of their medical records and service record.
Taxes
Up until 2004, it was illegal for a veteran to receive both military retirement pay and VA disability compensation. This was because a portion of your military retirement annuity is reduced by the amount you receive in disability compensation, and this is considered taxable income.
But there are programs that allow you to get your full military retirement pay and all of your VA disability compensation together, without a reduction. These are known as concurrent receipt programs.
CRDP is available to all Chapter 61 retirees who meet certain qualifications. You can apply for CRDP during the open season, which runs from December through January. You can also change your election between CRDP and Combat Related Special Compensation (CRSC) each year.
The Congressional Budget Office (CBO) has proposed changing the concurrent receipt law to tax your VA disability payments like military retirement annuities are. But there are some ways to protect yourself from this change, such as by claiming a higher disability rating or reopening your claim for a better rating.
