Introduction
For many medically retired Service members, receiving approval for Combat-Related Special Compensation (“CRSC”) appears to answer the most important question: the military has agreed that one or more of their disabilities are combat-related. The natural assumption is that a CRSC award will therefore produce an additional monthly payment.
A retiree can receive a favorable CRSC decision, including a substantial CRSC percentage, and still receive no CRSC payment at all. The reason is a statutory limitation that applies to Chapter 61 disability retirees. When enough military disability retired pay remains after the Department of Veterans Affairs (“VA”) offset, that “residual retired pay” can consume the entire amount that Congress permits the retiree to receive through CRSC.
This is what I refer to as the CRSC Dead Zone.
CRSC Is Not Simply a Payment Based on Your CRSC Percentage
CRSC is intended to restore some or all of the military retired pay a retiree gives up in order to receive VA disability compensation for combat-related disabilities. Under 10 U.S.C. § 1413a(b)(1), the starting point is generally the amount of VA compensation attributable to disabilities that the military determines are combat-related. CRSC itself is tax exempt. 10 U.S.C. § 1413a(b)(1); 26 U.S.C. § 104. But the CRSC percentage stated in an Army, Navy, Air Force, Marine Corps, Coast Guard, or other uniformed-service CRSC decision is not necessarily the amount DFAS will pay.
There are additional statutory ceilings. First, CRSC cannot exceed the amount of retired pay actually waived because of the retiree’s receipt of VA compensation. 10 U.S.C. § 1413a(b)(2). This reflects the basic structure of the VA offset. Ordinarily, a military retiree receiving VA compensation must waive an equivalent amount of military retired pay. 38 U.S.C. §§ 5304–5305. For Chapter 61 disability retirees, however, Congress imposed another limitation. That second limitation creates the Dead Zone.
The Chapter 61 CRSC Ceiling
A Service member medically retired under Chapter 61 can have military retired pay calculated using a disability percentage that is substantially greater than the retirement percentage the member earned through years of service.
Consider a member with 12 years of service who is medically retired at a 70 percent DoD disability rating. The member’s Chapter 61 retired pay may be calculated using that 70 percent disability percentage. By contrast, the member’s hypothetical longevity retirement percentage might be only 30 percent under the traditional retirement system because 12 years multiplied by 2.5 percent equals 30 percent. Congress does not permit CRSC to be used to preserve the disability portion of Chapter 61 retired pay and add CRSC on top of that amount without limit.
For a Chapter 61 retiree with fewer than 20 years of creditable service, 10 U.S.C. § 1413a(b)(3)(B) provides that the retiree’s CRSC payment, when added to the military retired pay remaining after the VA offset, cannot exceed the retirement amount attributable to the member’s years of service. The applicable longevity multiplier generally is 2.5 percent per year under the traditional retirement system and 2 percent per year for members subject to the Blended Retirement System. 10 U.S.C. §§ 1409(b), 1413a(b)(3)(B).
The Department of Defense Financial Management Regulation (“DoD FMR”) implements the same rule. For post-2013 payments, it states that a Chapter 61 retiree’s CRSC, combined with the retired pay remaining after the VA offset, cannot exceed the applicable longevity-based retired-pay amount. DoD 7000.14-R, vol. 7B, ch. 63, para. 8.5.2.2.
That is where residual retired pay becomes critical.
What Is “Residual Retired Pay”?
Residual retired pay is the military disability retired pay that remains after application of the VA waiver.
DFAS explains the basic rule this way: when a retiree elects CRSC, retired pay remains subject to the full VA offset. If military retired pay exceeds VA compensation, some military retired pay may therefore remain payable.
For example, assume:
A medically retired Service member receives $5,600 per month in Chapter 61 disability retired pay.
The member receives $3,000 per month in VA disability compensation.
The VA offset reduces the military retired pay by $3,000.
That leaves $2,600 in residual retired pay.
That $2,600 becomes crucial when DFAS calculates CRSC.
How the Dead Zone Works
Assume the same retiree had 12 years of service and a High-3 retired-pay base of $8,000.
Under the traditional 2.5-percent longevity multiplier:
12 years × 2.5% = 30%.
Thirty percent of $8,000 equals a hypothetical longevity retirement of $2,400 per month.
Now compare that $2,400 statutory CRSC ceiling to the retiree’s $2,600 in residual disability retired pay.
The retiree has already reached, and actually exceeded, the amount Congress permits to be preserved through the combination of residual retired pay and CRSC.
The equation is essentially:
Maximum payable CRSC = longevity retired pay − residual retired pay, subject also to the other CRSC limits.
Here:
$2,400 − $2,600 = less than $0.
Because CRSC cannot be negative, the payable amount becomes $0.
The result does not change merely because the military approved substantial combat-related disabilities. The Service could determine that every VA-rated condition is combat-related. The retiree could receive a CRSC award letter reflecting a very high combined percentage. Nevertheless, DFAS could correctly calculate the monthly CRSC payment as zero because the retiree’s residual retired pay has already exhausted the Chapter 61 ceiling.
That is the CRSC Dead Zone.
A CRSC Award and a CRSC Payment Are Two Different Things
This distinction frequently causes confusion. The military department determines whether particular VA-rated disabilities qualify as combat-related under 10 U.S.C. § 1413a. Once the Service issues a favorable CRSC determination, DFAS performs the payment calculation. DFAS expressly explains that it uses the Service’s CRSC award information to determine the amount actually payable.
Consequently, two questions must be kept separate:
- Did the Service recognize the disability as combat-related?
- How much CRSC may DFAS legally pay?
A favorable answer to the first question does not guarantee a positive answer to the second.
Why This Produces Counterintuitive Results
The Dead Zone can produce outcomes that initially seem backward.
Suppose our hypothetical retiree’s VA compensation later increases from $3,000 to $3,400 per month while Chapter 61 retired pay remains $5,600.
The residual retired pay would fall:
$5,600 − $3,400 = $2,200.
Because the hypothetical longevity ceiling remains $2,400, there is now $200 of space below that ceiling:
$2,400 − $2,200 = $200.
Assuming the retiree otherwise has at least $200 in payable combat-related compensation, CRSC could now become payable up to $200.
Thus, paradoxically, an increase in VA compensation can sometimes create CRSC entitlement where none previously existed because the increased VA offset reduces residual military retired pay and opens room beneath the longevity ceiling. The DoD FMR illustrates the same principle from the opposite direction. Its Chapter 61 example explains that where VA compensation completely offsets disability retired pay, leaving no residual retired pay, the retiree may receive CRSC up to the applicable statutory limit. DoD 7000.14-R, vol. 7B, ch. 63, para. 8.5.2.1.
In other words, residual retired pay can be either beneficial or destructive to CRSC eligibility depending upon where it falls relative to the longevity ceiling.
Scenarios Compared
Who Is Most Vulnerable to the CRSC Dead Zone?
The problem is particularly significant for Chapter 61 retirees with relatively few years of service and high military disability percentages. Their Chapter 61 disability retirement calculation can be comparatively large because it is based on the DoD disability percentage, while their CRSC ceiling can remain comparatively small because it is tied to years of service. A Service member medically retired at 70 or 80 percent after only eight, ten, or twelve years may therefore have a substantial gap between disability retired pay and hypothetical longevity retired pay.
The Blended Retirement System can make the longevity side of that calculation smaller still because the applicable multiplier generally falls from 2.5 percent to 2 percent per year. 10 U.S.C. § 1409(b)(4). Accordingly, younger Chapter 61 retirees can encounter the Dead Zone even when the underlying CRSC case is exceptionally strong.
The Dead Zone Does Not Mean the CRSC Award Is Worthless
A zero-dollar CRSC payment today does not necessarily mean the CRSC determination has no value. As noted previously, VA compensation can change. Dependency status can change. VA ratings can increase. Retired-pay and compensation amounts receive cost-of-living adjustments. Other aspects of the retiree’s pay account can change. Because the payable CRSC calculation depends upon several moving numbers, a retiree who is presently inside the Dead Zone may not remain there forever.
Moreover, the favorable combat-related determination itself has been established. If subsequent changes create room beneath the applicable CRSC ceiling, that prior award can become financially significant. Therefore, a Chapter 61 retiree should not assume that pursuing CRSC is pointless merely because preliminary calculations suggest that residual retired pay may currently eliminate payment.
Conclusion: CRSC Cases Require Both Legal and Financial Analysis
CRSC applications are usually discussed as evidentiary cases: Was the disability caused by armed conflict, hazardous service, an instrumentality of war, or conditions simulating war?
Those questions remain critical. But for Chapter 61 retirees, winning the combat-relatedness issue is only part of the analysis. A complete CRSC assessment also requires examining the member’s retirement authority, years of creditable service, retirement system, retired-pay base, Chapter 61 disability percentage, gross disability retired pay, VA compensation, residual retired pay, and the amount of VA compensation attributable to combat-related disabilities. Otherwise, a Service member can spend months obtaining what appears to be an excellent CRSC award only to discover that DFAS has calculated the payment at zero. That outcome is not necessarily a mistake.
Sometimes, the retiree has simply landed in the CRSC Dead Zone.
