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Eliminate Receipt of Retirement and Disability Pay for Disabled Veterans

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Congressional Budget OfficeOptions For Reducing The Deficit: 2017 to 2026

December 8, 2016 – OPTION #11: Eliminate Concurrent Receipt of Retirement Pay
and Disability Compensation for Disabled Veterans.

Military service members who retire—either after at least 20 years of military service
under the longevity-based retirement program or early because of a disability—are
eligible for retirement annuities from the Department of Defense (DoD). In addition,
veterans with medical conditions or injuries incurred or that worsened during active
duty military service may be eligible for disability compensation from the Department
of Veterans Affairs (VA).

Beginning in 2018, this option would eliminate concurrent receipt of retirement pay
and disability compensation: Military retirees now drawing CRSC or CRDP would no
longer receive those payments, nor would future retirees. As a result, the option would
reduce federal spending by $139 billion between 2018 and 2026, the Congressional
Budget Office estimates.

In 2015, of the roughly 2 million military retirees, about 55 percent were subject to the
VA offset; about 50 percent of that latter group—or 575,000 retirees—got concurrent
receipt payments totaling $10 billion. Spending for concurrent receipt—just over $1
billion in 2005—has climbed sharply because of both an expansion in the program’s
parameters and an increase in the share of military retirees receiving disability
compensation. In particular, the share of military retirees receiving a longevity-based
retirement annuity who also receive disability compensation rose from 33 percent in
2005 to just over 50 percent in 2015.

One argument for this option is that disabled veterans would no longer be
compensated twice for their service, reflecting the reasoning underlying the creation
of the VA offset. However, military retirees who receive VA disability payments would
still receive higher after-tax payments than would nondisabled retirees who have the
same retirement annuity because VA disability benefits are not taxed.

An argument against this option is that DoD’s retirement system and VA’s disability
program compensate for different characteristics of military service: rewarding
longevity in the former case and remunerating for pain and suffering in the latter.

In addition, if fewer retirees applied for VA disability compensation because concurrent
receipt was no longer available—since some consider the application process
onerous—some veterans might bypass other VA services such as health care or
vocational training. Moreover, some retirees would find the loss of income financially

Read full story from the Congressional Budget Office ->