Plan for getting back pay to 100,000 retirees is set

[USMCRET6391]

Defense, Veterans Affairs will share $500M burden

By Tom Philpott, Special to Stars and Stripes
Pacific edition, Thursday, August 10, 2006

The departments of Defense and Veterans Affairs have worked out a plan for sharing the cost and the task of delivering about $500 million in back pay to a total of more than 100,000 military retirees with VA-rated disabilities.

The retroactive payments are owed to nearly half of all recipients of Combat-Related Special Compensation (CRSC) and of Concurrent Retirement and Disability Pay (CRDP) since those programs began in 2003 and in 2004, respectively.

VA and DOD “are looking to make this happen as soon as possible. No one wants to delay it,” said an official who attended an Aug. 1 decision meeting among the two departments, the Defense Finance and Accounting Service (DFAS) and representatives from every branch of service.

Retirees awaiting their retroactive payments won’t have as long a wait as officials believed a few weeks ago. Even the most complex calculations of back pay involving CRSC and CRDP can be done by computer rather than by hand. This cuts down significantly on earlier projections by DFAS that the repayment process could take up to six months.

VA and DOD aren’t yet ready to announce the date that back payments will be made. Their new estimate on dollars to be distributed is about a half-billion. VA is expected to cover 60 percent of that and DOD the remainder. The size of payments, which might average between $4,000 and $5,000, will depend on rank, level of disability and the period covered by retroactivity.

Some retirees could receive payments from both VA and DOD, but officials hope to synchronize the process to minimize confusion for retirees. The back pay will be electronically deposited in whatever bank accounts the VA or DFAS, which will make payments for DOD, have on file for individuals.

A VA official said retirees will receive a letter explaining the back payments, presumably shortly before the money appears in their accounts.

No one should have to apply for the money. Also, if retirees have died before receiving their full CRSC or CRDP entitlement, the money likely will be go to surviving spouses or to the deceased retirees’ estates.

For many years, military retirees saw their annuities reduced, dollar-for-dollar, by amounts they received in tax-free VA compensation for service-related disabilities. Congress enacted CRSC and CRDP to end this so-called ban on “concurrent receipt,” but only for certain retirees who served 20 years or more: those with combat-related injuries or ailments, and those with noncombat-related conditions rated at least 50 percent disabling.

CRSC took effect June 1, 2003. Initially, payments went solely to active-duty retirees who applied and were deemed to have combat-related disabilities rated at least 60 percent disabling, or disabilities for which they received the Purple Heart. Eligibility later was expanded to any retiree having a combat-related disability to include reserve component retirees.

CRDP took effect Jan. 1, 2004. It is payable to retirees with 20 or more years of service and noncombat-related disabilities rated 50 percent or higher. CRDP payments are being phased in based on degree of disability. By 2014 it will end the retired pay reduction for all retirees rated at least 50 percent disabled.

Retirees apply for CRSC. CRDP is paid automatically. Some retirees qualify for both payments, along with their VA compensation. Add to that mix the fact that VA compensation, CRSC and CRDP all must be paid retroactively. Then consider that retroactive payments must be made back to the time retirees either asked the VA to establish or to adjust their disability rating, or to the date they applied to their branch of service for CRSC, and the complexity of calculating retroactive payments emerges.

That complexity is what VA and DFAS have been wrestling with for many months, officials suggested.

“It’s such a complicated program,” said Virginia Penrod, director of military compensation in the Office of the Secretary of Defense. “It depends on the percentage [of disability], on how many times over the years did members have a bump up in the retired disability pay, and so on.”

Between VA and DFAS, said a second Defense official, “the difficulty actually came in writing the business rules” to govern how the departments will coordinate efforts on making the retroactive payments.

“You wouldn’t want to just open up the flood gate … then find out later you’re made $100 million or $200 million of erroneous payments,” he said.

By one estimate, 120,000 retirees could be eligible for back pay but final computations are expected to trim that number at least a little.

CRSC and CRDP retirees not eligible for back pay will include those who have received one of these pays since the programs began and have had no changes to VA disability ratings since then.

DFAS officials, by law, cannot pay any retiree more than the value of their earned retired pay. Whatever other monies are owed to disabled retirees from CRSC or CRDP are the VA’s responsibility.

The number of retirees who qualify for retroactive payment rises monthly, at least by the number of retirees who apply for and begin receiving disability compensation. That will continue until VA and DOD begin their computer programs to identify and fully compensate those who have been underpaid.

The same programs should resolve the back pay issue for good by allowing VA to see what DFAS pays retirees almost immediately, so VA can adjust VA compensation or CRSC to avoid any under payments.

“It’s a very careful, time-consuming, complicated process,” said a Defense official. But VA and DFAS soon will be sharing data bases, making final calculations and distributing long-awaited back pay to a lot of retirees.