articles - MILITARY RETIREES

PROHIBITION AGAINST DUAL RECEIPT OF VA COMPENSATION & FULL MILITARY RETIREMENT BENEFITS

This article is excerpted from the 2003 edition of NVLSP's Veterans Benefits Manual.

Veterans are not permitted to receive full military retirement pay and VA compensation benefits at the same time.[19] Veterans entitled to both must either elect one of the benefits or waive the amount of retirement pay, which equals the amount of VA disability compensation to which they are entitled. There is often a tax advantage in receiving VA disability compensation, which is tax free, rather than military retirement pay. Thus, most disabled military retirees choose to have a $1 reduction in their retired pay for each $1 of VA disability compensation they receive.

Many individuals and veterans service organizations view the prohibition against dual receipt of disability compensation and military retirement benefits as inequitable and unfair discrimination against disabled military retirees. The rule against concurrent receipt does not apply to any other group of federal or state retirees. Several veterans service organizations have been lobbying Congress to eliminate the bar on concurrent receipt and intend to continue their efforts until the law prohibiting concurrent receipt is eliminated. A major obstacle to allowing concurrent receipt has been the cost of paying both benefits to every potentially eligible veteran. For this and other reasons, as of the date of publication of the 2003 edition of this Manual, the Bush administration and the Department of Defense strongly oppose allowing concurrent receipt.

As of the date of publication of the 2003 edition of this Manual, the legal bar against concurrent receipt of disability compensation and full military retirement benefits is still in place, but there have been several promising developments toward its eventual elimination. In December 2001, Congress voted in principle to end the ban on concurrent receipt. However, that legislation would authorize concurrent receipt in a future year only if Congress can find the money in the federal budget. There is other legislation pending before Congress that proposes to completely or partially eliminate the dollar-for-dollar offset, if it is enacted. National Veterans Legal Services Program will announce any major changes in this area on its website.

Although Congress and the President have not yet authorized funding for concurrent receipt, they have authorized the military departments to pay “special compensation” for certain disabled veterans. “Special compensation” has a financial effect similar to allowing concurrent receipt of military retired pay and VA disability compensation, but it is not technically or legally the same as concurrent receipt. “Special compensation” has been directed to those veterans with the most public support and political sympathy – veterans with combat-related disabilities or severe service-connected disabilities. By enacting “special compensation,” Congress has given piecemeal relief to some but not all disabled military retirees without the full financial cost of concurrent receipt to the federal government. The authors of this Manual expect that the number of veterans entitled to some form of “special compensation” will continue to expand, but do not expect full authorization of concurrent receipt to all disabled military retirees in the immediate future.

"Special compensation” originated in 1999, when, as a partial remedy to the perceived unfairness of the prohibition on concurrent receipt, Congress enacted 10 U.S.C.S. § 1413 which provided a "special compensation" from $100 to $300 per month for severely disabled persons who retired from a uniformed service. To be eligible for this “special compensation,” a person must have retired after at least 20 years of service and become severely disabled (70 percent or more) from a service-connected disability within four years of retirement. Certain persons who retired for disability later also became eligible. [20]

Congress increased this “special compensation” by $25 a month beginning January 1, 2003 for retirees rated 80 percent or higher, and by another $25 a month beginning October 1, 2004, for those rated 70 percent or higher. [21] “Special compensation” of $50 a month became available beginning February 1, 2002 to retirees who served at least 20 years on active duty and who were awarded VA disabilities of 60 percent within 4 years of retiring.[22]

Congress then expanded “special compensation” in December 2002, by enacting 10 U.S.C.S. § 1413a, which creates a new category of “special compensation” for military retirees who have combat-related disabilities.[23] A large number of veterans are potentially entitled to this new compensation. To qualify for combat-related special compensation (CRSC) under Section 1413a, a veteran must have at least twenty years of service in the Uniformed Services, be in retired status, be entitled to receive retired pay, and have a qualifying disability rating. The veteran must have either a disability rating of at least 10% from an injury associated with the award of the Purple Heart, or a disability rating of at least 60% incurred “as a direct result of armed conflict,” “while engaged in hazardous service,” “in the performance of duty under conditions simulating war,” or “through an instrumentality of war.”[24] These phrases are defined in program guidelines issued by the Department of Defense in May 2003.[25] A qualifying disability rating can be assigned by either the military department or the VA.[26]

The May 2003 guidelines include the “Application for Combat-Related Special Compensation (CRSC)” which is DD Form 2860.[27] The application is included in the Forms Appendix in NVLSP's Veterans Benefits Manual. The five-page application form contains instructions on where it should be filed and what information must be provided by the veteran. An application can be filed at any time. Eligible veterans will be paid benefits retroactive to June 1, 2003 — the earliest date allowed by law.

A veteran cannot receive special compensation under both Section 1413 and Section 1413a, but can elect the higher benefit.

“Special compensation” is paid by the Department of Defense and is computed with retired pay but is not considered retired pay. Eligible retirees who are receiving VA disability compensation may receive “special compensation” from the Department of Defense in addition to their VA disability compensation. It is considered taxable income.[28]

[19] See 38 U.S.C.S. § 5305; 38 C.F.R. § 3.750 (2003).
[20] See Act Oct. 30, 2000, Pub. L. No. 106-398, § 1,114 Stat.1654 (enacting into law § 657 of Subtitle D of Title VI of Division A of H.R. 5408 (114 Stat.1654A)).
[21] 10 U.S.C.S. § 1413 (2002).
[22] Id.
[23] National Defense Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, § 636,116 Stat. 2458, 2574 (Dec. 2, 2002).
[24] See generally, VBA Fast Letter 20-02-51(Dec. 23, 2002).
[25] The guidelines for combat related special compensation can be found at https://www.dndc.osd.mil/crsc/.
[26] 38 U.S.C.S. §§ 1413(d)(2),1413a (e)(2)(B).
[27] See https://www.dndc.osd.mil/crsc/.
[28] See VBA Fast Letter 99 124 (Dec.17, 1999).