MILITARY UPDATE
Concurrent-receipt deal boosts pay for thousands of disabled retirees

By Tom Philpott

Congress and the Bush administration have agreed to a $22.1-billion deal over 10 years that will pare back dramatically a century-old ban on concurrent receipt of both military retired pay and tax-free disability compensation for injuries or illnesses traced to time in service.

Up to 200,000 disabled retirees with 20 or more years of service, including Reserve and National Guard annuitants, will see their incomes rise, for many by hundreds or even thousands of dollars a month.

The deal, expected to be passed as part of the 2004 defense authorization bill, targets combat-related disabled and the most severely disabled with noncombat injuries or illnesses. In effect, they no longer will see retired pay reduced by amounts they receive in disability compensation from the Department of Veterans Affairs.

Congressional leaders announced the agreement Thursday at a Capitol Hill news conference after weeks of negotiations between senior House Republicans, the White House and, finally, with Senate Republican leaders.

The deal effectively divides 550,000 disabled military retirees with 20 or more years of service into three categories and boosts the monthly income of two of them. They are:

• Combat-related disabled: Retirees with combat-related disabilities, regardless of severity, would become eligible Jan. 1, 2004, for Combat-Related Special Compensation. CRSC, an income-replacement program begun in June, no longer would be limited to retirees with combat-related disabilities rated at least 60 percent.

CRSC is not retired pay but replaces retired pay lost when retirees begin drawing VA disability compensation. Unlike retired pay, however, CRSC payments are tax exempt.

Disabilities will be judged combat related if resulting from armed conflict, combat training, hazardous duties or an "instrumentality of war," which can include Gulf War illnesses and ailments from exposure to Agent Orange, radiation, mustard gas or lewisite. People suffering from posttraumatic stress disorder also can be eligible if the disorder is shown to be combat-related.

• Concurrent receipt for seriously disabled: Retirees with disabilities rated 50 percent or higher would see reductions in retired pay from accepting VA compensation restored over 10 years.

The first installment, on Jan. 1, 2004, was expected to be $750 a month for 100-percent disabled, $500 for 90 percent, $350 for 80 percent, $250 for 70 percent, $125 for 60 percent, and $100 for 50 percent. Disabilities do not have to be combat-related. Retirees with a mix of combat-related and noncombat disabilities will have to choose whether to accept tax-free CRSC for combat-related ailments alone, or allow retired pay to be restored through phase in of concurrent receipt. They will not be able to receive payments under both programs.

Steve Strobridge, director of government relations for the Military Officers Association of America, said it's too early to know how defense officials will administer the programs. Retirees certainly will get help in determining whether they are better off applying for CRSC or accepting concurrent receipt. But some having a mix of combat- and noncombat-related disabilities could see the better choice change from year to year, particularly during the 10-year phase-in, and as disabilities are re-evaluated and tax income rises or falls. Perhaps retirees will be allowed to select what program they want to be under from year to year, he said.

A rough estimate is that 200,000 disabled retirees will benefit from the deal to include Reserve and National Guard members. Under CRSC, they no longer will face a hurdle of 7,200 retirement points to qualify.

• Limited ban remains: Left out are retirees with no combat-related disabilities and their other VA disabilities below 50 percent. They will continue to see retired pay reduced by an amount to match VA disability pay.

• Presidential commission: House leaders insisted that the deal include a presidential commission next year to study VA and military disability programs and to recommend reforms. That could include tightening rules for future generations of veterans.

For eligible retirees, the agreement is a stunning victory, given last year's veto threat by the Bush administration and continued opposition to relaxing the ban on concurrent receipt from senior defense officials.

Negotiations were led Reps. Roy Blunt, R-Mo., majority whip, and Duncan Hunter, R-Calif., chairman of the House Armed Services Committee.

Factors behind the White House reversal on this issue could include Bush's recent slide in opinion polls, a veto threat judged against his request for $87 billion to rebuild Iraq and Afghanistan, and a rising tide of angry letters and e-mail from disabled retirees with an election only a year away.

Questions, comments and suggestions are welcomed. Write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, or send e-mail to: milupdate@aol.com. Or visit Tom Philpott's Web site.