Military retirement and VA disability

Federal law under [src] historically prohibited collecting both military retired pay and VA disability compensation for the same period of service — the two offset each other dollar for dollar. To receive tax-free VA compensation, a retiree had to formally waive an equal amount of retired pay. Congress partially remedied this through Combat-Related Special Compensation (CRSC), created in 2002 and expanded in 2008, and Concurrent Retirement and Disability Pay (CRDP), created in 2004 and fully phased in by 2014. Today most longer-career retirees with a 50%+ VA rating do not experience the full offset, but they must still know which program applies and, where both are available, which one results in more after-tax income.

Who this applies to

Concurrent-receipt rules only engage when a veteran is already receiving, or is eligible for, military retired pay. The groups most often affected:

• Regular (Chapter 71) retirees — 20+ years of active service, retired under 10 U.S.C. Chapter 71, with a VA disability rating.
• Chapter 61 medical retirees — medically retired under 10 U.S.C. Chapter 61, often with fewer than 20 years and a DoD disability rating of 30% or higher. Concurrent-receipt rules apply differently here (see below).
• Reserve and National Guard retirees — non-regular retired pay under 10 U.S.C. Chapter 1223 (20 qualifying years, generally payable at age 60 or earlier under certain mobilization provisions).

Veterans who separated without retired pay — for example, who left active duty at the end of a single contract — are not affected by CRSC or CRDP. They receive VA disability compensation without an offset.

The VA waiver — what used to happen

Before 2004, a retiree with a VA rating traded dollar-for-dollar between the two systems. If VA compensation was $1,500 per month, $1,500 of taxable DFAS retired pay was withheld; the total was the same, but a portion shifted into the non-taxable VA bucket. The tax treatment was often favorable, but the structure meant that the years of service behind the retirement check effectively went uncompensated once disability entered the picture. CRDP and CRSC exist to restore some or all of that offset.

CRDP — Concurrent Retirement and Disability Pay

CRDP, authorized by [src], restores full retired pay alongside VA disability compensation for retirees who meet both of the following:

• 20+ years of creditable service (Chapter 71 retirees or qualifying Reserve / Guard retirees drawing non-regular retired pay).
• A VA disability rating of 50% or higher.

Enrollment is automatic — no separate application. DFAS and VA coordinate the offset reversal once both payments are in place. The restored portion is treated as military retired pay, so it is taxable; CRDP replaces previously waived retired pay rather than adding a new benefit. CRDP applies to the full VA rating once the 50% threshold is met, regardless of whether conditions are combat-related.

CRSC — Combat-Related Special Compensation

CRSC, authorized by [src], is a separate, tax-free payment for the combat-related portion of a disability rating. Eligibility is broader than CRDP in one way and narrower in another:

• Any length of service qualifies, including Chapter 61 medical retirees, provided the branch recognizes at least one combat-related disability.
• CRSC is not automatic. The retiree applies to their branch, which decides which VA-rated conditions qualify as combat-related.
• “Combat-related” under § 1413a covers conditions incurred as a direct result of armed conflict, in hazardous service, in the performance of duty under war-simulating conditions (including training), or through an instrumentality of war. Broader than “combat injury,” narrower than any service connection.
• CRSC is tax-free and paid as a separate monthly benefit; it does not replace retired pay.

Because CRSC compensates only the combat-related portion of a rating, a retiree with a high overall rating but a small combat-related share may receive a smaller CRSC payment than the retired-pay restoration available under CRDP.

CRSC vs CRDP — which to choose

Some retirees qualify for both programs. Federal law does not allow simultaneous collection — a retiree must elect one. DFAS runs an annual open season when retirees eligible for both may switch. Key considerations:

• If the VA rating is under 50%, CRDP is not available — CRSC is the only concurrent-receipt option, and only on the combat-related portion of the rating.
• If the rating is 50% or higher and no conditions are combat-related, CRDP applies automatically and CRSC is not available.
• If the rating is 50%+ and most of the rating is combat-related, CRSC may produce more after-tax income because it is tax-free while CRDP is taxed as retired pay.
• If the rating is 50%+ and most of the rating is not combat-related, CRDP may produce more because it restores the offset across the full VA rating, not just the combat-related slice.

The right election depends on the retired-pay amount, how the VA rating splits between combat and non-combat conditions, and the retiree’s marginal tax rate. DFAS publishes a CRSC/CRDP comparison page with worked examples, and each branch CRSC office can model a specific case before the open-season deadline.

How to apply for CRSC

CRSC requires a separate application to the branch of service on DD Form 2860. The branch reviews each VA-rated condition and decides which qualify as combat-related. Typical documentation:

• VA rating decision letters, which list each service-connected condition and the basis for service connection.
• Service treatment records or line-of-duty determinations that tie a condition to combat, hazardous duty, an instrumentality of war, or war-simulating training.
• Deployment records, award citations, and after-action reports where relevant.

Processing timelines vary by branch and typically run several months. A denial on one condition does not block approval on another, and retirees may reapply as new evidence becomes available or the VA service-connects additional combat-related conditions.

Chapter 61 medical retirees — different rules

Chapter 61 medical retirees face a more complex version of these rules. A Chapter 61 retiree with fewer than 20 years of service generally cannot receive full CRDP; § 1414 ties CRDP to 20 years. CRSC is available to Chapter 61 retirees with a combat-related disability regardless of years served, but the CRSC payment is capped at the retired pay that would have been earned for years of service alone — not the disability-percentage formula. Because Chapter 61 retired pay itself is computed under whichever of those two formulas produces the higher figure, the interaction with CRSC is not intuitive. Chapter 61 retirees should work directly with their branch CRSC office and DFAS before electing.

Where to get help

Concurrent-receipt math is an area where generalist resources often fall short. Three specialized contacts worth knowing:

• Service branch CRSC office. Each branch runs its own CRSC analyst team. They review applications, answer combat-relatedness questions, and can model CRSC-versus-CRDP scenarios before an open-season switch. Contacts are listed on the DFAS CRSC page.
• DFAS Retired Pay. For questions about how retired pay, CRDP restoration, and a VA waiver appear on a monthly statement: reach DFAS at retiredpay@dfas.mil or through myPay.
• CVSO or accredited VSO.Some County Veterans Service Officers handle retiree claims routinely; others refer to a state or national VSO with retiree specialization. Either way, help is free under 38 U.S.C. § 5904.

A note on conservatism. This page is educational. CRSC-versus-CRDP math depends on the retired-pay amount, how the VA rating is split across combat and non-combat conditions, and the retiree’s marginal tax rate. No general rule replaces a worked calculation. Before an open-season election or a first CRSC application, a CVSO, a DFAS CRSC analyst, or a VA-accredited attorney can model a specific situation.