Understanding Concurrent Retirement and Disability Pay
If you are currently serving in the military and receiving disability pay, you are probably familiar with the fact that you cannot receive your disability payment for time you are being paid for military service. What you may not know, is that this regulation is also applied when you receive your military pension, as the law states that you cannot receive military retired pay and VA compensation at the same time.
There is an exception to this, as in 2004, the Concurrent Retirement and Disability Program (CRDP) was put into place. In this article we will talk about what CRDP is, who qualifies, and go through some examples to help explain the program. We will also discuss Combat Related Special Compensation; what it is, how it relates to CRDP, and how to choose when you qualify for both.
Who Qualifies for CRDP?
You are eligible for CRDP if:
- You are a regular retiree, with a VA Disability rating of 50% or higher, or
- You are a Reserve retiree with 20 or more qualifying years of service, have a VA Disability rating of 50% or higher, and have reached retirement age, or
- You retired under the Temporary Early Retirement Act (TERA) with a VA Disability rating of 50% or higher, or
- You are a disability retiree who earned entitlement to retired pay under any provision of the law other than solely by disability and you have a VA Disability rating of 50% or higher.
Do I Need To Apply For CRDP?
No, no application is necessary, if you fall into one of the categories we discussed above, you will automatically be enrolled.
How Does CRDP Work?
CRDP is a restoration of your retired pay that was not paid to you because you received Disability Pay. Let’s look at an example.
SFC Smith is a retiree that receives $2,000 per month in retired pay and $142 per month in disability pay. She has a 10% disability rating from the VA. SFC Smith’s monthly payments will look like this:
- Disability pay $142 (non-taxable)
- Retirement Pay – $1,858 (taxable, her $2,000 retirement pay is reduced by the amount of her disability payment)
- Total Monthly Payment – $2,000
That is how it worked prior to CRDP, and how it still works for anyone receiving disability pay with a rating less than 50%.
Now, let’s make SFC Smith’s disability rating 60%, with a monthly disability payment of $1,131. Since SFC Smith is a regular retiree and has a disability rating greater than 50%, she will receive CRDP. SFC Smith’s payments will look like this:
- Disability pay $1,131 (non-taxable)
- Retirement Pay – $869 (taxable, her $2,000 retirement pay is reduced by the amount of her disability payment)
- CRDP – $1,131 (taxable, restores her retirement pay withheld)
- Total Monthly Payment – $3,131
As you can see, a pretty nice benefit, that can really add up over years of payments for those that qualify. For CRDP recipients, they will receive two payments per month; their retirement pay which will include the CRDP amount and the disability payment.
Is CRDP the Same Thing as Combat Related Special Compensation?
No, Combat Related Special Compensation (CRSC) is a separate program from CRDP. While CRDP is a restoration of retirement pay withheld, CRSC is an entitlement that you are paid, thus reimbursing you for all or a part of the retired pay withheld. Since it is not considered retirement pay, CRSC is non-taxable.
CRSC Eligibility
To be eligible for CRSC you must:
- Be entitled to and or receiving military retired pay
- Be rated at least 10% by the VA
- Waive your VA pay from your retired pay
- File a CRSC application with your branch of service
Some pretty big differences here between CRDP and CRSC. First, the disability rating is lowered from 50% to 10%, however, the disability must be related to combat service. Secondly, while CRDP will be automatically paid if you are eligible, you must apply for CRSC. You apply for CRSC on DD Form 2860, which is sent to the specific branch of service that you were in. Documents you will need to complete the 2860 include your DD-214, VA Determination Letter, Medical Records, and Orders.
How Does CRSC Work?
SFC Smith is a military retiree who receives $2,000/month in retired pay. As a 20% rated disability recipient, SFC Smith also receives $281 in monthly disability payments. SFC Smith applied for and receives CRSC and 100% of her disability rating is directly related to combat. Here is a breakdown of the payments SFC Smith will receive:
- Retirement Pay – $1,719 (taxable, her $2,000 retirement pay less her $281 disability pay)
- Disability Payment – $281 (non-taxable)
- CRSC Payment – $281 (non-taxable)
- Total Monthly Payment – $2,281 ($1,719 taxable and $562 non-taxable)
In this example, 100% of SFC Smith’s disability was determined to be combat-related. Let’s also look at an example where that isn’t the case.
SFC Smith is a military retiree who receives $2,000/month in retired pay. As a 20% rated disability recipient, SFC Smith also receives $281 in monthly disability payments. SFC Smith applied for and receives CRSC and 50% of her disability rating was determined to be directly related to combat. Here is a breakdown of the payments SFC Smith will receive:
- Retirement Pay – $1,719 (taxable, her $2,000 retirement pay less her $281 disability pay)
- Disability Payment – $281 (non-taxable)
- CRSC Payment – $140.50 (non-taxable)
- Total Monthly Payment – $2,140.50 ($1,719 taxable and $421.50 non-taxable)
As the example shows, CRSC will only compensate you for the portion of the retirement pay you waived in order to receive disability payments that were determined to be combat-related.
If You Qualify For Both, Which Should You Choose?
If you qualify for both CRSC and CRDP, DFAS will pay you the amount that will result in a higher monthly payment in the initial year you qualify, which will remain the case until the first CRDP/CRSC Open Season. During the Open Season, DFAS will mail you an election form where you can choose to receive either CRDP or CRSC. During subsequent years, you will not receive an election form. You can still change your choice during the Open Season, but you will need to request the change yourself.
There are two big factors you should consider when choosing whether to receive CRDP or CRSC.
What Percentage of Your Disability is Combat Related?
CRDP will pay 100% of your retirement pay withheld, while CRSC will only pay the percentage related to combat disabilities. Where this factor really comes into play is if your disability rating changes over time. For example, let’s say you are rated 50% by the VA and 100% of that rating is combat-related, CRSC will pay 100%, so you elect CRSC. Five years go by and you file a new claim with the VA for a non-combat rated disability and get assessed as 70%. Now, you may be receiving only 71% of your withheld retirement pay through CRSC, where CRDP would pay 100%. It may be more beneficial for you to elect the change.
Taxes, Taxes, Taxes
As with most financial decisions, we have to factor in the effect of taxes. CRDP is taxable, while CRSC is non-taxable. This could lead to scenarios where electing CRDP may give you a higher monthly payment, but because it adds to your taxable income, you may be better off electing to receive the non-taxable amount provided by CRSC.
Now that you have a better understanding of CRDP and CRSC, there are multiple variables at play. As you can see, the decision may not always be black and white. Working with a member of the Military Financial Advisors Association, who understands the VA and military financial system can help to walk you through your options and recommend the one best suited for you.