Choosing DOD Retirement Benefits or VA Disability Compensation
A service member who receives military retirement based on their unfitness for service must choose between VA disability compensation and Department of Defense retirement benefits. They cannot receive a combination of these benefits. Through the VA disability offset, the DOD retirement benefits for which you are eligible may be deducted from your VA disability compensation. VA benefits are different from DOD retirement benefits because they are meant to account for a service member’s loss of civilian employment capacity and cover the functional loss caused by the disability. By contrast, DOD retirement benefits are meant to account for a service member’s loss of military employment capacity. While VA benefits are based on the VA disability rating and a service member’s dependents, DOD retirement benefits are based on their military disability rating and the length of their service.
In many cases, a service member will choose to waive DOD retirement benefits while receiving VA benefits. This is because DOD retirement benefits are subject to tax, while VA benefits are not. If you have a military disability rating of 30 percent or more, you still will be eligible for DOD medical benefits if you waive your DOD retirement benefits. Your dependents also can receive DOD medical benefits.
Choosing DOD Retirement Benefits Over VA Benefits
There are three main situations in which a service member might want to choose DOD retirement benefits over VA disability compensation. First, they might choose DOD retirement benefits if their military disability rating is higher than their VA disability rating. The other two situations involve service members who qualify for Concurrent Retirement and Disability Pay or Combat-Related Special Compensation. These programs are ways to eliminate or reduce the VA disability offset. You cannot use both CRDP and CRSC, so you will need to choose between them.
To be eligible for Concurrent Retirement and Disability Pay, you must have served in the military for more than 20 years before retirement and must have a service-related disability with a rating of at least 50 percent. The amount of CRDP benefits depends on the percentage of that disability. However, they are capped at the amount of retirement pay that the service member would have received if their retirement pay had been based on their years of service. CRDP benefits are subject to tax.
Combat-Related Special Compensation applies to service members who were injured in a combat zone while they were serving in the line of duty, or who were injured while performing duties during a combat-related operation. The Secretary of Defense will need to decide whether this designation applies. Also, the service member must have a disability rating of at least 10 percent for their combat-related disability. As with CRDP benefits, CRSC benefits are capped at the amount of retirement pay that the service member would have received if their retirement pay had been based on their years of service. A key advantage of CRSC over CRDP is that it is not taxable, and creditors do not have access to it, even for spousal or child support debts.