The VA waiver, CRDP and CRSC: why your retired pay went down

A retiree receives a VA rating decision, expects their income to rise, and instead finds their retired pay deposit has fallen by almost exactly the amount of the new compensation. It looks like a mistake, or worse, like a penalty for having claimed.

It is neither. It is a rule dating to a prohibition on receiving two federal payments for the same period of service, and understanding it matters because the arrangement is — counter-intuitively — usually to your advantage.

The waiver

The total does not fall. A dollar of retired pay is waived and a dollar of VA compensation arrives in its place. What changes is which agency pays it — and, crucially, how it is taxed.

CRDP: restoring the waiver

Concurrent Retirement and Disability Pay restores the waived retired pay, so a qualifying retiree receives both their full pension and their VA compensation.

The gates:

A combined rating of 50% or higher. Below 50%, CRDP does not apply at all — which makes the step from 40% to 50% worth considerably more than the compensation table alone suggests, because it also restores the entire waived pension amount.

Retired-pay entitlement and service test. A non-Chapter 61 retiree generally must be entitled to retired pay for the month. A Chapter 61 retiree generally needs 20 qualifying years; their concurrent retired pay is limited to the hypothetical longevity amount.

Reserve timing. A Reserve/Guard Chapter 61 retiree with immediate disability retired pay may not receive concurrent retired pay until the age at which non-regular retired pay would otherwise start. The service supplies DFAS the age and creditable service/points.

Usually automatic, but records still matter. DFAS generally receives VA information without a separate CRDP application. Reserve Chapter 61 orders and eligibility-age facts must reach DFAS from the service, and a member who believes payment is missing can pursue the DFAS claim route.

CRSC: compensation for combat-related disability

Combat-Related Special Compensation is a separate, tax-free payment for disabilities that are combat-related — which is defined more broadly than “injured in combat” and includes disabilities incurred in armed conflict, in hazardous service, under conditions simulating war, or through an instrumentality of war.

It differs from CRDP in ways that decide which is better for a given retiree:

It requires an application, to your branch of service rather than to the finance service or the Department of Veterans Affairs. Nothing happens automatically.

It has no 50% threshold. A retiree at 10% or 20% with a combat-related disability may qualify, which is exactly the population CRDP excludes.

It is itself tax-free, where restored retired pay under CRDP is taxable.

It covers only the combat-related portion of the disability, not the whole rating.

You cannot have both

The comparison is case-specific. CRDP is military retired pay and is generally taxable; CRSC is a separate, generally tax-free payment. CRSC is not divisible under the Uniformed Services Former Spouses’ Protection Act, while CRDP can increase disposable retired pay. Allotments, garnishments and SBP-premium collection can also change. A marginal-rate model shows only one part of the decision.

The CRDP against CRSC comparison therefore shows three labeled outputs: DFAS’s initial gross default when applicable, the current election entered from the account, and an optional after-tax estimate. It does not apply one output as another.

Chapter 61 retirees

A Chapter 61 retiree generally needs 20 years creditable under the applicable active or Reserve statute to receive concurrent disability retired pay and VA compensation. Even then, the concurrently payable military disability retired pay is limited to the amount the member would have received under a hypothetical longevity retirement. The disability percentage amount above that limit remains subject to the VA waiver.

A Chapter 61 retiree under 20 years is generally ineligible for CRDP, but may still qualify for CRSC if the service approves combat-related disabilities and the other CRSC rules are met. For a Reserve/Guard Chapter 61 retiree, immediate disability retired pay does not by itself start concurrent retired pay before the non-regular eligibility age. Enter no Chapter 61 result until the service/DFAS longevity amount and timing are known.

What to actually check

Read your retiree account statement and identify each line: gross retired pay, the VA waiver, any CRDP or CRSC, the survivor plan premium, and withholding. Retirees carry several of these simultaneously and frequently cannot say which is which, which makes it impossible to notice when one is wrong.

If the rating, retirement basis, Reserve eligibility age, or Chapter 61 longevity amount does not match what the account appears to pay, ask the service retirement office and DFAS to reconcile the record. CRSC requires an application through the branch of service; this site can explain the four combat-related categories but cannot decide whether a condition meets one.

When both programs are approved, keep the election letter with the Retiree Account Statement. The initial 45-day choice and later annual Open Season are different events, and a later non-response preserves the existing election.