So your VA disability claim is settled. Now what?

As I wrote a few weeks ago my VA disability claim was finally settled.  Suddenly, after nearly two years of pushing the rope up the hill, I found myself with one less windmill at which to tilt.

Although I can now put down my lance and put my trusty steed back in the barn, I still find the whole process to be pretty confusing.  In particular, figuring out just what being identified as a disabled veteran means in real terms — meaning just what impact does my rating have on a retiree’s bank account?

It turns out that if you have incurred an injury while serving in uniform, and that injury is determined to be disabling, then you are entitled to compensation from the Veterans Administration.  That compensation is paid directly to the veteran by the VA, which is nice.  It is also tax free, which is nicer.

But, as usual, things are not as simple as they seem.  Particularly for retirees who receive a pension for their 20+ years of service to the nation.  Like me.

In that case, any remuneration that you receive from the VA is offset by an equal deduction from your pension, with the only really difference in your retirement check being the portion from the VA that is tax free.  For example (and this example is in round numbers to keep things easy), if your pension is $1500 per month, you receive a check for $1500 minus any taxes (let’s say 20%, which is $300), or $1200.

Now, let’s say that you receive a disability rating that results in a payment from the VA of $100.  That $100 is not added to your check for a total of $1600.  Instead, $100 of the $1500 that was paid by the Defense Finance and Accounting Service (DFAS) is now paid by the VA, so the total pension amount stays the same.  What changes is how the taxes are computed.

Now you have $1400 that is taxable, which results in a slightly lower tax bill.  Here is the math:

$1400 x 20% = $280 in taxes.

$1400 (from DFAS) + $100 (from the VA) = $1500 (which is your pension amount).

$1500 (pension + VA Disability) – $280 (taxes) = $1220.

Sooooo…..as a retiree you get an extra twenty bucks in your monthly check.  If you are not a retiree, however, you get the full $100.

That seems really odd.  But wait, there’s more!

The reduction of your pension by the disability payment changes at the 50% disability threshold.  If you are rated as having a disability rating of 50% or more, then the bizarre math problem that we just performed goes away.  In that case, you receive your entire pension as well as the complete VA disability amount.

Sounds bizarre, eh?  I’m not making this stuff up!  Really!

It is known as Concurrent Receipt of VA Compensation and Retired Pay.  For a more in depth explanation of the math problems above, you can read all about how it all works by following this link.

For those of you who were wondering how pensions are affected by VA disability benefits, well, now you know.  For those of you to whom this does not apply, thanks for reading anyway!

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5 responses to “So your VA disability claim is settled. Now what?

  1. Your article was really informative. My fiancé is battling for his disability, again. He had it, full coverage and medical, then lost it due to some changes in war deployment time. They did not count his reserves so after months of battling, he won it back. But with MUCH reduced coverage. The question I have is a settlement he is going to get for the year he was without his benefits, wrongfully. I am unsure if you can answer this or not or could point me in the right direction. He has a court date to see a judge and he is suppose to walk out with his settlement check, then his monthly kicks in. He has gone threw all the rigorous paperwork to settle on the amount his settlement pay is suppose to be. I guess the VA does not like double dipping so you don’t get your monthly until the settlement is paid in full. Are they going to pay him in full with one check or will it be dispersed over several months THEN he will start to receive his monthly checks?

    • Glad that the post helps.
      The way that it is supposed to work is that as soon as a veteran’s disability status is determined by the VA he or she receives disability compensation immediately (the next month) at the level commensurate with the final disability rating. For example, if a veteran is rated with a 30% disability, he or she would receive a monthly check, beginning the following month, for $395 (based on the current compensation rates for a veteran alone). The VA would then calculate how much compensation the veteran was eligible for but did not receive; in your comment you say that your fiancé did not receive any benefits for a year, so he would be eligible for a lump sum to cover that amount. Veterans are eligible for compensation from the first day after they get out of the military, so compensation amounts are backdated to that day and any money that has not been paid to the veteran is provided in a lump sum. The lump sum is paid as soon as the VA determines how much the amount is, so your fiancé should receive a check for a year’s worth of compensation. It should be a single check, and will arrive independently of the monthly check.
      Hope this helps!
      Mike

  2. I have a question. Your website says in part…” If you are rated as having a disability rating of 50% or more, then the bizarre math problem that we just performed goes away. In that case, you receive your entire pension as well as the complete VA disability amount.”
    I just today received my disability determination. It’s 50%. But if I read the accompanying info from the VA & that “link” you provided, that’s not true. it appears to me that I have to be a “disability retiree” (retired from active duty due to my disability). I’m a regular ole’ retiree who just finished battling w/ the VA for a compensation. What am I missing ?
    It’s taken my over 2 yrs to get this done. Thnx for your website & column. It’s good reading.

    • Hi Jim,
      If you are a “regular ole retiree” then you should be eligible for CRDP. The DFAS website shows that to be eligible you must be 1) a retiree and 2) have a disability rating of 50% or more. Here is a cut and paste from their website:

      Eligibility
      You must be eligible for retired pay to qualify for CRDP. If you were placed on a disability retirement, but would be eligible for military retired pay in the absence of the disability, you may be entitled to receive CRDP.

      Under these rules, you may be entitled to CRDP if…

      you are a regular retiree with a VA disability rating of 50 percent or greater…

      The veterans that I know who are retired and have a rating of 50% or greater are all receiving concurrent pay. It should be computed automatically.
      Let me know if this does not apply in your case!
      Mike

      • Ltc. M – I rec’d a msg from DFAS (hard at work in spite of the
        gvtt shutdown). They confirm that I am eligible for cdrp & it should
        All come true beginning Nov 1. Thnx again for your help, the website
        & your service.
        Jims. Ret. USAF trash hauler pilot

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