What are the calculation examples comparing net pay (after taxes) for CRSC versus CRDP for typical retiree scenarios?
Executive summary
Two ways to recover retired pay that was reduced because of VA disability exist: CRDP restores the withheld retired pay but is taxable, while CRSC replaces the withheld portion with a tax‑free special compensation for combat‑related disabilities and requires application and a combat‑related determination by the service [1] [2] [3]. Which yields higher net pay depends on the dollar amounts involved and how much of a VA rating is deemed combat‑related; government and veteran advocates note cases where taxable CRDP yields more after taxes and cases where tax‑free CRSC is superior [4] [3].
1. How the two benefits differ in cash and tax terms
CRDP simply restores the VA offset so a retiree receives full retired pay (taxable) plus VA disability (tax‑exempt), and it is applied automatically when eligible [1] [5]; CRSC requires an application, is limited to the portion of a disability that is combat‑related, cannot exceed the withheld amount, and is paid tax‑free as special compensation [2] [3]. The policy consequence is straightforward: both options can produce similar total gross receipts, but CRSC shifts more dollars into tax‑exempt status while CRDP increases taxable retired pay—making the after‑tax comparison personal and arithmetic‑driven [3] [6].
2. Typical calculation method and practical constraints
CRSC calculations depend on the combat‑related percentage assigned by the service and may not exceed the retired‑pay reduction due to VA compensation, which makes CRSC math more complex and individual than CRDP’s restoration mechanic [3] [7]. DFAS and other calculators exist to estimate CRSC payments because of this complexity, and retirees are advised to run both scenarios during annual open season before electing one option [6] [8]. Congressional analyses note this complexity and that retirees may change elections during open season [9] [3].
3. Example A — CRDP wins when CRSC covers less of the VA rating (illustrative numbers)
Assume a retiree’s full retired pay is $3,000/month and VA compensation is $1,200/month (these are example figures for illustration only); under CRDP the retiree receives $3,000 (taxable) + $1,200 (VA, tax‑exempt). Under CRSC, if the service determines only 30% of the disability is combat‑related and that translates to $360/month CRSC, the retiree would receive retired pay reduced by the full $1,200 offset ($1,800 taxable) plus CRSC $360 (tax‑exempt) and VA $1,200 (tax‑exempt), yielding identical gross cash to CRDP but a lower taxable base. Using an assumed federal marginal tax rate of 22% for illustration (tax rate assumed for example; not a government or source figure), CRDP taxable net = $3,000(1−0.22) + $1,200 = $2,340 + $1,200 = $3,540; CRSC taxable net = $1,800(1−0.22)