How VA Disability Compensation Affects Military Retirement Pay

VA disability and military retirement pay are separate benefits managed by the Departments of Veterans Affairs (VA) and Defense (DoD), respectively. Despite being separate benefits, VA disability compensation and military retirement pay become closely intertwined when servicemembers are eligible for both. 

In this article, we’ll cover how disability ratings determine your ability to collect VA disability compensation and military retirement pay, define the VA waiver and VA offset, and discuss the two types of concurrent receipt programs: CRDP and CRSC.

History of VA Disability and Military Retirement Pay

In 1943, U.S. Code Title 38 Section 5304 established that servicemembers could only receive one type of compensation. This code made “duplication of benefits” illegal, which, in turn, made it illegal to receive military retirement pay and VA disability compensation at the same time. 

This law received pushback. Many felt that these benefits were not similar enough to be considered as “duplication” since military retirement pay is a pension based on years of service, while VA disability compensation is a monetary award based on your decreased ability to perform work after leaving the military. 

Military retirement pay is also taxable at the federal level, while VA disability compensation is not. This has a big advantage: dollar for dollar, VA disability compensation gives veterans more spending power than military retirement pay. 

To address dissatisfaction with the existing rule, the government introduced the VA waiver, which allows servicemembers who are eligible for both types of compensation to waive some of their DoD retirement pay for the tax-free advantages of VA disability compensation. 

VA Waiver on Military Retirement Pay

The VA waiver on military retirement pay was introduced in U.S. Code Title 38 section 5305 in 1958. 

This waiver allows an exception to the law which prohibits military retirees from collecting VA disability compensation and military retirement pay at the same time. This process has also been referred to as the “VA disability offset” because retirees are offsetting some of their pay.

For example, if you are eligible for $3,000 in monthly retirement pay and $1,200 in monthly VA disability, you could waive that amount of your DoD pay to take advantage of the tax savings you would get from the disability compensation. That would mean you would receive $1,200 in tax-free disability compensation and $1,800 in taxable military retirement pay. 

However, this waiver still requires a loss in compensation. So, in 2003, the DoD introduced an additional exception to Title 38 called “concurrent receipt,” which allows some military retirees to receive their full military retirement pay and VA disability compensation amounts. 

Whether or not you are eligible for concurrent receipt is determined by your individual or combined VA disability rating and the cause of your disability. 

Can you receive 100% VA disability and military retirement pay?

Yes, if your disability rating is 100%, you can receive VA disability compensation and your full amount of military retirement pay. But you don’t have to have a rating of 100% to qualify for concurrent receipt. 

Concurrent receipt was rolled out via the Combat-Related Special Compensation (CRSC) and the Concurrent-Receipt Disability Pay (CRDP) programs in the early 2000s. Present-day retirees who are eligible for either program can receive their full military retirement pay and VA disability compensation without any offset. 

VA Concurrent Receipt Eligibility 

If you are a military retiree with a service-connected or combat-related VA disability rating of 50% or higher, you are eligible for CRDP. If you are a military retiree with a combat-related VA disability rating of 10% or higher, you are eligible for CRSC.

Let’s review how the government determines eligibility for concurrent receipt: 

Concurrent Receipt Eligibility
Individual or Combined Disability Rating	Time in Service	Disability Terms	Program Eligibility*
10% or higher	20 years or more	Combat-related	CRSC
	Less than 20 years (chapter 61 medical military retirement)	Combat-related	CRSC
50% or higher	20 years or more	Service-connected	CRDP
	20 years or more	Combat-related	CRDP & CRSC

*Full eligibility rules can be found here for CRSC and here for CRDP. 

It is possible to be eligible for both CRSC and CRDP, but you are only allowed to receive additional compensation from one of them at a time. If you are eligible for both, you have the ability to choose between the two programs. Let’s take a look at how they compare.

CRDP vs. CRSC

While the goals of CRDP and CRSC are similar, the programs have different rules. 

Retirees who are eligible for both can only receive payment from one of the programs at a time, so it’s especially important to see how they compare.  

	CRDP	CRSC
Eligibility	Military retirees who have a VA disability rating of 50% or more from a combat-related or service-connected injury (injury does not have to be sustained in combat)	Military retirees who have a VA disability rating of 10% or more with a combat-related injury.
Pay Type	Disability Pay	Special Compensation
Payment Method	Deposited into the account where you receive VA disability compensation	Deposited in the same account that you receive retired pay
State Tax Requirements*	Depends on the state	Depends on the state
Subject to federal income tax?	Yes	No
Subject to divorce pay?	Yes	No
Subject to child support garnishment?	Yes	Yes
How to Apply	Automatic enrollment upon receiving your disability rating	Apply through your branch of service
Affect to Military Retirement	Receive your full military retirement pay and VA disability pay without a reduction in either	Receive your full military retirement pay and VA disability pay without a reduction in either

*Depending on the state’s law, military retirement pay may also be subject to state income taxes. 

If you are eligible for both CRSC and CRDP, the Defense Finance and Accounting Service (DFAS) will automatically apply the pay that is most beneficial to you based on the gross amounts. After becoming eligible for both, you will receive a CRDP/CRSC Election form that you can use to switch programs. 

If you don’t want to change the program that DFAS enrolls you in, you don’t have to fill out the form at all, but if you do want to switch, you must complete and return the form within 45 days to switch. 

You can make changes outside of the initial enrollment during the CRDP/CRSC open season, which usually occurs annually from January 1 through January 31st. 

CRDP/CRSC Retroactive Pay

The rule of concurrent receipt was initially phased in over a 10-year period from 2004 to 2014. This allowed military retirees to earn CRDP and CRSC back pay, which helped restore military retirement pay to retirees who had waived their pay before the exception was created. 

All servicemembers who retire after 2014 automatically receive military retirement pay and VA disability compensation as long as they meet the eligibility requirements for CRSC or CRDP. 

For more information on how to claim retroactive pay, see our CRSC guide and CRDP guide. 

VA Disability Offset to Military Retirement Pay

Although the concurrent receipt programs have enabled many retirees to receive their rightful benefits, a significant number of servicemembers still do not qualify.

Currently, military retirees with a VA service-connected disability rating of 40% or lower are not eligible for concurrent receipt. Remember, if your disability is combat-related, you are eligible for CSRC at any rating above 10%. 

If you have a service-connected disability rating of 40% or lower, you are still subject to the rules of the VA waiver, and your DoD retired pay will be offset by your VA Disability Compensation amount. 

Let’s review an example to see how this could affect your pay. 

Let’s say our retiree earns a monthly retirement check of $2,000. Let’s also assume he has a VA service-connected disability rating of 40% and one dependent (a spouse). His VA disability compensation would be $838.28 per month according to 2024 rates. 

This retiree would receive $838.28 from the VA, which would adjust his monthly retirement pay from $2000 to $1,161.72 ($2,000 – $838.28 = $1,161.72).

So, the total amount still equals $2,000 per month, but $838.28 of that is tax-free income. 

You can also see how this uniform method for computing the VA disability offset is easier than awarding retirees a percentage of their pay as tax-free and provides more funds to veterans in the end.

Concurrent Receipt vs. VA Offset 

The main benefit of the VA disability offset is receiving tax-free pay from the VA. The final dollar amount is the same, but the tax-free portion gives veterans greater spending power.

However, the amount would be much greater if veterans received both forms of compensation under concurrent retirement disability pay laws. The increase would mean the full value of the military retirement pay plus the full value of the VA disability compensation. 

For a military retiree, going from a 40% disability rating to a 50% rating is huge. 

If we use the same scenario as above, an increase from 40% to 50% would mean that the retiree’s VA disability compensation would increase by $340.88 per month, and the increased pay would not reduce his military retirement pay. The net effect is this:

• 40% disability rating: $2,000 total ($1,161.72 taxable; $838.28 non-taxable)
• 50% disability rating: $3,179.16 total ($2,000 taxable; $1,179.16 non-taxable)

The difference is an increase of $14,149.92 per year, none of which is taxable income.

Will concurrent receipt laws be extended to everyone?

In a perfect world, all military retirees with VA service-connected disability ratings would be eligible to receive their full amounts of disability and retirement pay. Unfortunately, the government budget isn’t limitless, and the current payment methods are being used to help control budgets. 

In January 2023, a bill was introduced to the US House that would allow military retirees with a 50% service-connected disability to receive concurrent receipt. So far, this bill has not been passed.