Why Some Veterans Cannot Receive Full VA Disability and Military Retirement Pay

When military retirement and VA disability intersect, the 20-year mark can be one of the most financially significant milestones of a military career.

Historically, military retirees who received VA disability compensation had their military retirement reduced by the amount of their VA payment. In other words, receiving $1,500 from the VA could mean losing $1,500 from military retirement.

Concurrent Retirement and Disability Pay (CRDP) has changed that, generally allowing eligible military retirees to receive full military retirement pay + full VA disability compensation.

For a regular active-duty retiree, CRDP is normally applied automatically. The key requirements are generally:

• At least 20 years of qualifying service

• A VA disability rating of 50% or higher

• Eligibility for military retired pay

The rules become significantly more complicated for service members medically retired under Chapter 61. A service member medically retired with fewer than 20 years generally does not qualify for CRDP, regardless of how high their VA disability rating may be.

Reaching 20 years does not necessarily mean that every dollar of Chapter 61 disability retirement becomes protected from the VA offset. For medical retirees, CRDP generally restores retirement based on years of service, rather than the potentially higher retirement amount calculated from the member's disability percentage.

For example, if longevity would produce retirement equal to 50% of base pay but a medical disability calculation produces 60%, CRDP generally protects the longevity-based portion. The additional disability-based amount can remain subject to the VA offset.

Reserve and National Guard retirement presents another complication. Having 20 calendar years associated with the military does not necessarily mean someone qualifies. Members generally need 20 qualifying retirement years, based on the military retirement point system. Additionally, Reserve retirement normally does not begin until the member reaches the applicable retirement age.

Combat-Related Special Compensation (CRSC) can provide additional tax-free compensation when qualifying disabilities resulted from circumstances such as:

• Armed conflict

• Hazardous service

• Training that simulates war

• An instrumentality of war

Certain Chapter 61 medical retirees with fewer than 20 years can qualify for CRSC. Unlike CRDP, CRSC requires the veteran to apply through their branch of service and demonstrate that the disabilities meet the combat-related requirements. Veterans eligible for both CRDP and CRSC cannot receive both simultaneously and generally must determine which program provides the greater benefit.

The current system creates an uncomfortable situation for service members who develop serious medical conditions late in their careers. Someone medically unable to continue serving at 18 or 19 years may lose access to a benefit that another service member receives simply because that individual was able to reach the 20-year threshold.

Anyone entering the medical retirement process between roughly 15 and 20 years of service should understand the financial consequences before making decisions about retirement. That doesn't mean someone should remain in uniform when doing so would seriously harm their health, but the difference between medical retirement before and after 20 qualifying years can potentially represent hundreds of thousands of dollars in lifetime benefits.

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