Financial Frontlines®

In a previous post , I explained how concurrent receipt works and tried to dispel some of the common misconceptions.  The application of concurrent receipt for a Guard/Reserve (G/R) member who is medically retired prior to age 60 is another source of confusion.

When tallying your years of service for retirement, G/R members can have active duty years of service and drilling years of service.  The drilling years are combined with the active duty years to provide the total years of service; ‘good’ years of service vested for retirement eligibility (= or >20 years) and for retirement pay at age 60.  If medically retired, the medical retirement orders separately indicate your vested active duty and your total years of service.  Distinguishing between these two types of years of service is critical when a person is medically retired for determining eligibility for concurrent receipt.

A medical retirement is categorized as an ‘active duty’ retirement.  That’s why you don’t have to wait until age 60 for your retired pay; you get paid retired pay immediately.  Being an active duty retirement, you only get credit for your active duty time served; not your total time served.  However, for pay purposes only, your total years of service are used.

Here’s where the confusion and problems develop.  As a retired active duty member, which a medical retirement is, it takes 20 or more years of active duty service before you are eligible to receive CRDP.  Or, you’re eligible for CRDP if you have 20(+) years of total service and you are age 60 with a G/R retirement.  If you are G/R and medically retired with less than 20 years active duty service, you don’t qualify for CRDP.

The rub…“but I do have more than 20 years service!”  You have more than 20 years service vested for a G/R retirement.  Your 20+ years are a combination of drilling years and active duty years.  Active duty years count for active duty retirement and total years count for a G/R retirement.  The G/R retirement doesn’t pay retired pay until age 60 and that’s when CRDP eligibility begins.

Let’s say you’re medically retired with less than 20 years active duty time but more than 20 years total time served.  You received your retirement Notice of Eligibility letter prior to your medical retirement.  You may want to do some math to see if at age 60 you are better off with a G/R retirement since you will be CRDP qualified under a G/R retirement.  Check with your G/R Retirement office for details.

On the other hand, you can qualify for CRSC IF your disabilities are the result of combat and you have less than 20 years of active duty time served.  The combat nature of your disabilities is also noted on the medical retirement orders.

Some of you retired or separated from the Service soon after implementation of the Post 9-11 GI Bill in August 2009.  You probably didn’t realize at the time (who did?) that you had to transfer the educational benefit to dependents BEFORE you actually separated from the Service.

Maybe others of you didn’t find out about the “…before you separate policy…” until after separation.  Of course, the longer the time period after the P911GIB implementation, the less likely it is that you couldn’t have known about the policy.

If you didn’t transfer benefits but intended to, you have an option to try and fight for your transfer benefit.  The Services control the transfer benefit, not the VA.  If you were still in the Service after the Aug 2009 Post 9-11 GI Bill start date, you were eligible to transfer the benefit up until your retirement or separation date.

Your option is the Board for Correction of Military Records (BCMR) program.  Each Service has a BCMR program.  This is not an automatic approval process.  You can be turned down under this program.  If, and this is a big IF, the Board decides in your favor, your transfer benefit can be reinstated.

You have to apply to the BCMR for consideration.  The burden is on you to prove the Service neglected to provide proper management or counsel that denied you benefits you intended to exercise or tried to exercise.  Saying something was “unfair” won’t cut it.  You have to show evidence that you were wronged by the Service per laws, regs, policies, directives, deficient base-level program, etc.  Why didn’t you apply prior to you leaving the Service?  How is this the Service’s problem and not a personal problem?

Think you have a case?  Put together your BCMR package and see what happens.  See the appropriate web site for information on the process:

Army:  http://arba.army.pentagon.mil/

Navy/Marines:  http://www.donhq.navy.mil/bcnr/bcnr.htm

Air Force:  http://www.afpc.af.mil/afveteraninformation/afbcmr.asp

Post 9-11 GI Bill law: http://www.law.cornell.edu/uscode/html/uscode38/usc_sup_01_38_10_III_20_33.html

I hear it all the time.  We assume when we have several VA disabilities with their associated ratings, to come up with the combined rating, we should add the ratings together.  That’s obviously not how it works because you’ve tried this.

The VA figures your combined disability rating by calculating your non-disability rating first.  Actually, the VA calls it your “efficiency” rating.  It goes like this.  A person with a disability rating of 30% is considered 70% efficient, able to function normally so to speak.

To combine your ratings, rack and stack your disability ratings from the most severe rating to the least severe.  Let’s say you have disability ratings of 70% and a 40% rating.  That means you have efficiency ratings of 30% and 60%.

Multiply the efficiency ratings together to get an 18% efficiency rating.  Subtract this from 100% to get 82%.  Round up or down to the nearest number divisible by 10.  80% in this case.

Have more than two ratings?  Factor each additional rating by multiplying the combined ratings before it.  Example, multiply the first two efficiency ratings.  Use the result from the first two ratings to multiply by the third efficiency rating.  Use the result of the three ratings to multiply by the fourth rating and so on.

For more information and the chart used to combine ratings, click here and do your own math.

CRDP and CRSC are confusing programs. Our experience from talking regularly with uniformed members is that several misconceptions routinely pop up. We will address these common misconceptions.

But to start, a little history follows to help build a more complete understanding of the concurrent receipt programs. We take literary license with the legal references to provide a clearer illustration of how things work. This also puts the topics in the context of our discussions with service members.

Original ‘concurrent receipt’ law stipulated you cannot be paid twice for the same disability/service. This law still applies in some cases—more on this later. If you receive Service retired pay and VA comp, the VA comp is subtracted from your Service retired pay in the form of the ‘VA waiver.’ You ‘waive’ your Service retired pay to receive VA comp.

MOAA fought for legislation that would stop concurrent receipt laws from denying a Service member’s retired pay that was vested in their years of service. After all, you earned that pay through years service. VA comp should not be deducted from vested Service time since the VA pay is specifically designated as disability compensation. From this lobbying, new concurrent receipt legislation was passed and CRSC and CRDP were born. As the result, CRSC and CRDP restore the Service retired pay vested through years of service that VA comp denied you. This is a key point of concurrent receipt; concurrent receipt does not restore disability compensation from the Service. It restores longevity retired pay. Now we bust some misconceptions.

#1. There is a strong belief among people that CRSC is a new form of pay, a third paycheck if you will, above and beyond any Service retired pay and VA comp amounts. CRSC is a third form of pay but it is not an amount in addition to Service retired pay and VA disability compensation. While technically it comes to you as a third pay check, it is pay that restores your Service retired pay for all or part of the VA Waiver amount being deducted from Service pay. CRDP on the other hand is not a third form of pay. CRDP is the return of Service retired pay by decreasing the VA Waiver amount in your Service retired pay.

#2. CRSC is a “restoration” of Service retired pay. To “restore” Service retired pay implies two things. First, you were denied Service retired pay (through a VA Waiver) so it has to be “restored.” Second, the amount being restored can’t be greater than the original amount of Service retired pay denied. You can’t “restore” what was never denied in the first place. You can’t receive CRDP/CRSC retroactive pay unless you were denied Service retired pay in the past. This usually comes up as an issue when someone has been receiving CRDP for a time and later is awarded CRSC. If you were receiving CRDP, your retired pay was already being restored. The subsequent award of CRSC won’t get you back pay unless your CRSC amount restores more than you were already having restored in the past.

#3. Concurrent receipt restores Service retired pay so let’s carefully consider the phrase “Service retired pay” as it pertains to CRSC/CRDP. “Service retired pay” is pay that you earned through longevity; your time served. This is a big issue for members who were medically retired because you may have a Service retired pay amount that is more than the amount you earned based on your longevity.

Example: a person with a longevity retirement earns retired pay at:

• Years served X 2.5% X your base pay at retirement or high-3.

However, you medically retired folks may have a Service disability rating (not your VA rating) that makes your retired pay at retirement greater than the amount of pay based on the longevity formula just explained. With 20 years of service, your longevity retired pay is 50% of base pay. But a medical retirement with a Service disability rating of 60% gets a 60% pay out for retirement even if the service time is 20 years. Everything above 50% is considered a form of disability pay.

So CRSC/CRDP restores ‘Service retired pay’ which is only the retired pay that’s based on longevity. All the Service retired pay you receive above the amount due to time served is considered disability pay, not ‘Service retired pay’ and Service disability pay is not restored by any form of concurrent receipt.

In other words, the original concurrent receipt laws that state you can’t be paid twice still apply when it comes to disability pays. If the VA pays you for your disabilities, you can’t receive Service disability pay at the same time.

#4. The CRSC Glitch. For you members medically retired with less than 20 years service, you have a different issue to contend with. First, your CRSC amount is limited to your longevity portion of your retired pay. For many of you, this longevity portion is a small amount when compared to your total Service check. Next, you are limited in the amount of CRSC pay you receive to the amount of CRSC pay that is above the amount you receive for the Service disability portion of your Service retried pay. Here’s an example:

• Total Service retired pay (disability and longevity pay) $2000
• Service portion based on longevity $500
• Service portion based on disability $1500
• CRSC pay you are entitled to $800
• Actual CRSC pay (Entitled CRSC – Service disability) $0

This effect is known as the CRSC glitch. It’s a problem in how the CRSC law explains the pay formula, as shown above. Technically, everyone should get either all their entitled CRSC pay or CRSC up to the amount of Service retired pay based on their longevity. This is a problem MOAA is fighting to fix.

#5. Your CRSC check will equal your VA comp amount. Not necessarily so. VA comp is based on your total disabilities regardless of whether the disabilities were the result of combat. CRSC pays only the portion of your total disabilities that were directly related to combat. It is not unusual for a CRSC rating and the resulting payment to be smaller than the VA comp amount. This means you will continue to have a VA waiver amount in your Service retired pay.

#6. CRSC is always a better payment than CRDP. Not so. As stated in #5, CRSC is limited to combat injuries and as such that can be a significant limiting factor on the amount paid. CRDP is not limited to combat related disabilities so the amount is based on your total VA comp (plus the issue raised in #3). The combat related nature of CRSC is a basis behind its tax-free status while CRDP is taxable. Your CRDP amount may be larger to the point that even though it’s taxable, it still leaves more money in your pocket.

There may be times the amount of pay under CRDP is large enough that even after taxes it could be greater than a limited CRSC tax-free check. This is why your pay agency allows you a chance to select which version of pay you want during the ‘open season’ each December. As CRDP continues to phase-in over the years (until 2014), one year your CRDP amount may provide you the greatest take-home pay.

#7. “I get CRSC but a VA waiver is still deducted from my Service retired pay. Where is my concurrent receipt?” This misunderstanding is partially based in #1. Some folks think CRSC is a payment above and beyond all other pays. CRSC and CRDP are both forms of ‘concurrent receipt’ (used in the context of the phone calls). As such, a member can only receive one form of concurrent receipt or the other but not both simultaneously. The confusion seems to also originate in the manner in which the CRDP or CRSC is paid.

CRDP is paid by being reinserted back into your Service retired pay. You’ll note this in your Retiree Account Statement (pay stub) from your pay agency. With CRDP, your VA waiver disappears or gets smaller as CRDP is phased-in. Eventually, most of you will receive full Service retired pay and full VA comp (medically retired over 20 years of service may not see full Service retired pay). You won’t actually see a CRDP payment because the fact that you’ll receive full Service retired pay IS CRDP at work.

You CRSC folks receive a separate payment outside your Service retired pay and VA comp. CRSC is your form of concurrent receipt. Your Service retired pay stub will continue to indicate a full VA waiver amount as long as you receive CRSC.

I hope these explanations help clear the air on the major myths behind CRDP and CRSC. As other myths pop-up in future discussions, I’ll add to this post. Thank all of you for your service and sacrifices.

It’s getting worse. Commercial financial firms are now phone soliciting for business using the VA’s survivor benefit to get their foot in the door with you. Be warned.

Originally, we heard about commercial financial firms presenting the VA’s survivor benefit to residents of retirement communities and assisted living facilities. Now these firms are directly contacting people over the phones.

Yes, the VA has a survivor benefit but there are conditions for eligibility. First off, the military member has to be deceased. I mention this because some firms try to get you to apply before the member has passed. This indicates some firms don’t even know how the VA programs work; a clear sign that the firm’s objective is not helping you with VA benefits but getting into your pocket. Eligibility for the VA’s Dependency and Indemnity Compensation (DIC) is:

• The military member’s death must be Service-connected, or,
• Immediately preceding death, the member was VA rated totally disabled for a period of least 10 years, or,
• From the date of discharge from the Service, the member was rated totally disabled for at least 5 years preceding death, or,
• Former POWs who died after 30 Sept 1999, and were totally disabled for at least 1 years preceding death.

DIC is not based on financial need. There are other VA programs for survivors that are based on financial need and by that I mean very low income—poverty level. DIC provides $1154 a month and the other programs vary but are around $650 a month. All VA benefits are tax-free.

The objective behind these financial firms is to get access to your financial data and sale you other financial products. Some of these VA programs require you to submit a financial report and that is the point of the solicitations. These firms gain your financial info in order to apply for the VA benefit and the sales pitches follow.

Some of these firms also pitch legal products like trusts to hide your assets so you appear low-income to qualify for a VA program. They will also pitch insurance, annuity and investment products. All products that produce large commissions for the firms.

These organizations are not authorized Veteran Service Organizations (VSO) yet they may lead you to believe they are. A real VSO is chartered by the VA to help people apply and follow-up on VA claims. The VSO service is free. Go to a VSO if you have questions or need help. Here’s where to find a VSO in your area:

Search for the County Veteran Service Office in your state at http://www.va.gov/statedva.htm.

A complete list of all VSOs is at http://www1.va.gov/vso/index.cfm

The VA does not solicit for your business. If you are approached to conduct business with the VA, either walk away or proceed carefully.