By Tom Philpott
Though unseen by an anxious population of disabled retirees, work proceeds at the Pentagon and the Defense Finance and Accounting Service to implement a multi-billion-dollar upgrade in retirement benefits. The effort soon will deliver bigger paychecks to 200,000 or more annuitants.
Here is how the two new programs — limited Concurrent Receipt (CR) and expanded Combat-Related Special Compensation (CRSC) — likely will operate. Details are not final.
Congress approved, and President Bush signed into law Nov. 24, the 2004 Defense Authorization Act, with its provisions on CR and CRSC. Both take effect Jan. 1
The CR initiative is for retirees with disability ratings of 50 percent or higher. It will phase out the dollar-for-dollar reduction in retired pay that occurs when they elect to draw tax-exempt VA disability compensation. An estimated 100,000 will see retired pay fully restored, within 10 years, starting with a fixed-dollar add back in 2004.
As military retired pay is restored, CR recipients will see no drop in VA compensation. So the potential income gain is great, in excess of $6,000 a month for seriously disabled retirees of high rank, once phase-in is complete.
To qualify, retirees must have 20 or more years of service, or have retired under Temporary Early Retirement Authority (TERA) used by the services to make early retirement offers during the post-Cold War drawdown.
Retired pay offsets will remain for 300,000 retirees with disabilities of less than 50 percent. Also left out of the CR deal are more than 100,000 veterans forced by disabilities to retire with fewer than 20 years served.
The CRSC provision will expand eligibility for a tax-exempt payment to replace retired pay lost to the concurrent receipt ban. It is open to retirees with 20 or more years of service and disabilities tied to combat or combat-related training. Reserve retirees are included; TERA retirees are not.
When CRSC first took effect last June, it was limited to retirees with “combat-related” disabilities of 60 percent or higher, or disabilities tied to the award of the Purple Heart. The new threshold will be combat-related disabilities as low as 10 percent. Roughly 100,000 retirees are expected to qualify on top of 35,000 expected to be eligible under the first set of rules.
Here’s how the provisions will take effect:
LIMITED CR: Retirees need not apply. Payment will be automatic based on military and VA data of current disability ratings and direct deposit account information. The first-year CR payments are fixed amounts: $750 a month in retired pay restored for 100-percent disabled, $500 for 90 percent, $350 for 80, $250 for 70, $125 for 60 and $100 for 50 percent.
In 2005, the remaining retired pay offset will be cut by 10 percent, followed by 20 percent in 2006, 30 percent in 2007 and so on, until the offset is gone and retired pay is fully restored in 2013.
EXPANDED CRSC: Retirees must apply, and the key will be patience.
The services already have a backlog of thousands of CRSC applications from the 60-percent program that began in June. Review and approval of new CRSC applications could take at least several months.
Applications pending under the 60-percent program still are being reviewed and, if approved, made payable back to June 1. Applications previously denied for missing the 60-percent, combat-related threshold, or because reserve retirees didn’t have 7,200 retirement points, will be reactivated and reviewed under new criteria. Retirees need not reapply.
Retirees with serious combat-related disabilities already will be drawing CR when their CRSC applications are approved. Finance centers will select the most favorable option and give retirees 45 days to elect the other option.
Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at: