Introduction
On December 26, 2025, Joel Pettit Law published an article titled “CRSC Backpay Limits Eliminated—But New Ones Created?” At the time, the Department of Defense (DoD) had implemented the United States Supreme Court’s decision in Soto v. United States by eliminating the six-year Barring Act limitation that had historically restricted Combat-Related Special Compensation (CRSC) backpay. However, the DoD simultaneously adopted a new rule providing that many CRSC awards issued after August 20, 2025, would become effective only on the date the completed CRSC application was received.
That article concluded that military retirees had won an important victory in Soto, but that the DoD had effectively replaced one backpay limitation with another.
As of May 14, 2026, that conclusion is no longer accurate.
The DoD has now rescinded both the August 20, 2025 Interim Guidance and the January 30, 2026 Clarifying Guidance. In doing so, the DoD appears to have abandoned the application-date limitation that formed the basis for much of the concern discussed in the original article.
The Original Victory in Soto
The Supreme Court’s decision in Soto v. United States represented one of the most significant CRSC developments in decades.
Before Soto, many retirees who successfully established CRSC entitlement were nevertheless limited to six years of retroactive compensation because the government applied the Barring Act, 31 U.S.C. § 3702(b). The Supreme Court held that Congress created a separate statutory compensation scheme through 10 U.S.C. § 1413a and that the Barring Act therefore does not govern CRSC claims. In response, the DoD directed the military departments to cease applying the Barring Act to CRSC awards and to identify retirees whose prior awards had been improperly restricted.
The August 2025 memorandum further directed the military departments and DFAS to identify affected retirees, recalculate proper effective dates, and process additional retroactive payments for those whose awards had been limited by the Barring Act.
The New Limitation Created in August 2025
While the August 2025 memorandum properly implemented Soto for existing claims, it simultaneously created a new rule for future CRSC determinations.
Specifically, the memorandum provided that for CRSC eligibility determinations made on or after August 20, 2025, the effective date of CRSC payments would generally be the date on which the Secretary concerned first received the completed CRSC application. The same rule applied to additional combat-related disabilities added after an initial CRSC award.
This was a dramatic departure from traditional entitlement-based effective date principles.
Under that framework, a retiree could satisfy every substantive requirement for CRSC years before filing an application, yet still lose years of retroactive compensation merely because the application was filed later. As I noted in my earlier article, the Department had eliminated the six-year limitation only to replace it with an entirely different barrier to retroactive benefits.
The January 2026 Clarification
In January 2026, the Department partially retreated from the August rule.
The January memorandum clarified that applications submitted before August 20, 2025, as well as applications involving pending VA disability claims at that time, would continue to receive the more favorable entitlement-based effective-date analysis. For those applicants, the effective date remained the first date on which the retiree became eligible for retired pay, received VA disability compensation with a corresponding retired-pay offset, and satisfied one of the combat-related criteria in 10 U.S.C. § 1413a(e).
However, the memorandum expressly preserved the application-date rule for post-August 20, 2025 claims that did not involve a pending VA disability claim.
Although the January guidance softened the impact of the August memorandum, it did not eliminate the underlying problem.
The May 2026 Reversal
Everything changed on May 14, 2026.
The DoD issued a new memorandum entitled Combat-Related Special Compensation Effective Dates Recission. The memorandum expressly rescinded both the August 20, 2025 Interim Guidance and the January 30, 2026 Clarifying Guidance.
More importantly, the Department adopted a single uniform rule applicable to all CRSC claims regardless of filing date.
Under the new guidance, the effective date of a CRSC claim is the first date on which three requirements are satisfied:
- the member was eligible for military retired pay;
- the member was receiving VA disability compensation and had waived retired pay to receive that compensation; and
- the member satisfied at least one of the combat-related eligibility criteria contained in 10 U.S.C. § 1413a(e).
The memorandum explicitly states that this rule applies to “all CRSC claims, regardless of date filed.”
The DoD appears to have completely abandoned the application-date limitation that governed post-August 2025 claims. Instead, effective dates are once again determined by when entitlement arose rather than when paperwork happened to be submitted.
What Limits Still Exist?
The May 2026 memorandum does not create unlimited retroactive CRSC.
Certain statutory commencement dates continue to apply.
For many retirees with at least twenty years of service—or qualifying Reserve retirees—the earliest possible CRSC effective date remains June 1, 2003. For certain non-regular retirees, the earliest possible effective date remains January 1, 2004. For disability retirees and other retirees not falling within those categories, the earliest possible effective date remains January 1, 2008.
These limitations arise from the CRSC statute itself and were not altered by either Soto or the May 2026 guidance.
What Happens Next?
The May 2026 memorandum directs the military departments to review affected CRSC awards, determine the proper effective dates, revise CRSC decision documents, and provide corrected determinations to DFAS. The memorandum further directs DFAS to calculate retroactive payments, notify affected retirees, and process additional compensation owed as a result of the corrected effective dates.
As a result, many retirees may be entitled to significantly more compensation than they previously received.
This includes retirees whose awards were historically restricted by the Barring Act, as well as retirees whose effective dates may have been adversely affected by the Department’s post-Soto guidance.
Bottom Line
The Supreme Court’s decision in Soto eliminated the six-year Barring Act limitation on CRSC backpay. The Department’s August 2025 guidance initially replaced that limitation with a new application-date rule that threatened to reduce retroactive benefits for many future applicants. 20 August 2025 CRSC Guidance at 2.
The Department has now reversed course.
As of May 14, 2026, the governing guidance provides that CRSC effective dates are determined by when entitlement actually arose, not by when a retiree filed a CRSC application.
For many military retirees, that distinction may represent years of additional CRSC payments and potentially tens of thousands of dollars in retroactive compensation.
If you previously received a CRSC decision, particularly one issued after Soto, now may be the time to review that determination and ensure that the effective date complies with the Department’s current guidance.
