May 24, 2009
As reported here last week, President Obama has asked Congress to phase in "concurrent receipt" for those who received a disability retirement from the Department of Defense.
This week we explain more details of the plan which, if enacted, would boost pay for 103,000 veterans by more than $2 billion through 2014.
Concurrent receipt means being able to receive both VA disability compensation and military retired pay earned for years served. For many decades, retired pay had been reduced by the amount of disability pay.
Gary McGee, assistant director of military compensation in the Department of Defense, explained the changes ahead for the so-called "Chapter 61" retirees if Congress agrees to the Obama plan. He also provided sample calculations to show how the impact will vary widely based on individual circumstance.
Most of the retirees were forced from service by ailments or injuries before they could serve 20 years and qualify for regular retirement.
Others retirees served at least 20 years but still qualified for a tax-exempt disability retirement for permanent medical conditions.
The administration, in effect, would expand eligibility for the Concurrent Retirement and Disability Pay program - a way of recalculating retired pay - to all Chapter 61 retirees.
The pay program started in 2004 and was applied only to nondisabled military retirees who, after leaving service, qualified for disability ratings of 50 percent or higher from the Department of Veterans Affairs. It allows them to receive earned retired pay and VA compensation.
Nondisabled retirees with VA ratings of 40 percent or lower still see retired pay offset by VA disability compensation.
Why has Obama targeted Chapter 61 retirees for concurrent receipt?
Sources on Capitol Hill said the White House's Office of Management and Budget developed the idea as an affordable compromise. It would cost $5.4 billion over 10 years versus $45 billion if Obama fulfilled a campaign pledge to extend concurrent receipt to all disabled military retirees.
"Since not everybody could be included at this time, because of cost, the idea was to look at those who might be the most deserving," said a pay official. Retirees "put out ... because of disabilities, whether in combat or just job-related - that was the group we wanted to make sure we got in."
The schedule to expand the disability pay program to Chapter 61 retirees would begin Jan. 1, 2010, for those having fewer than 20 years of service and VA ratings of 100 or 90 percent. Full retirement pay would be restored on schedule dates, rather than raised incrementally as was done after the disability pay program was launched.
On Jan. 1, 2011, those with fewer than 20 years of service and VA ratings of 80 or 70 percent would be eligible. On Jan. 1, 2012, those with fewer than 20 years' service and VA ratings of 60 or 50 percent would qualify.
On Jan. 1, 2013, all Chapter 61 retirees with VA ratings of 40 or 30 percent would be eligible to include any who served longer than 20 years. On Jan. 1, 2014, a small group of Chapter 61 retirees receiving VA disability compensation and not included earlier would become eligible.
The principle behind concurrent receipt of military retirement and VA disability compensation, said McGee, is that the Department of Defense pays retirees for years of service and VA pays for disabilities incurred.
But until a Dole-Shalala Commission recommendation to simplify the process in this way is fully adopted, the Defense Department remains in the disability retirement business.
So, McGee said, calculating concurrent receipt for Chapter 61 retirees involves three "moving parts": gross retired pay based on military disability; retired pay earned for years of service; and VA compensation.
To prevent duplicative disability pay, a Special Rule states that when the amount of disability retirement exceeds retired pay earned for total years served, that difference is subject to offset by VA disability compensation.
-Applying the precise formula here isn't possible but McGee's give examples, using rounded pay numbers, to show the practical effect: 1) An E-4 with four years of service is rated 50 percent disabled by DoD and 90 percent by VA. On base pay of $2200 a month, a 50-percent DoD rating provides disability retirement of $1100. Because a 90-percent VA rating pays $1600 a month, this E-4, under current law, would opt for the VA compensation and get nothing for his service time.
Under CRDP, however, he would receive retired pay for years served. That's four years multiplied by a 2.5 percent for 10 percent. Apply the 10 percent to base pay of $2200 for $220 a month in retired pay. This would be paid in addition to $1600 in VA compensation.
2) An E-7 with 18 years' service also is rated 50 percent disabled by DoD and 90 percent by VA. On base pay of $4000 a month, a 50-percent rating provides disability retirement of $2000 a month. That's better than $1600 in VA disability compensation.
But under CRDP, retired pay would be calculated on years served (18 x 2.5)
for a 45 percent multiple applied to base pay ($4000). The result: $1800 a month. This E-7 originally would have accepted $2000 in disability retirement, because it paid $400 more than VA compensation. With CRDP, he would get $1800 from DoD plus $1600 from VA, a total of $3400 monthly.
3) An 0-4 with 12 years of service is rated 70 percent by DoD and 90 per
cent by VA. On base pay of $6000, a 70-percent rating provides military disability retirement of $4200. This retiree now would take the $4200 rather than $1600 payable for a 90-percent VA rating.
Actual retired pay for 12 years of service would be 30 percent of $6000, or $1800 a month. Accepting this $1800, plus $1600 in VA compensation, would fail to match $4200 in disability retirement. So this retiree will not receive any additional retirement under CRDP.
To comment, e-mail firstname.lastname@example.org, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or visit: militaryupdate.com