Which specific retiree groups remain subject to the VA offset and why?
Executive summary
The VA offset (often called the retired-pay offset or “VA disability offset”) still reduces military retired pay dollar-for-dollar by the amount of VA disability compensation for certain categories of retirees unless they qualify for specific concurrent-receipt authorities; these distinctions flow from a patchwork of statutes, Department of Defense rules, and subsequent Congressional fixes [1] [2]. Advocates and analysts note the offset’s contours are complex and politically contested—legislation such as the proposed Major Richard Star Act aims to erase or narrow the offset for additional groups, highlighting ongoing disagreement about who should get “concurrent receipt” [3].
1. Who the law generally targets: retirees without concurrent‑receipt entitlement
Under longstanding statute, a retiree who is eligible for both military retired pay and VA disability compensation faces a dollar-for-dollar reduction of retired pay by the amount of VA compensation unless an exception applies, so many retirees remain subject to the offset when they do not meet the narrow eligibility rules for restored or special compensation programs [1].
2. Specific retiree groups that still face the offset today
Key groups that continue to be subject to the basic VA offset include retiree categories that have not been covered by CRDP (Concurrent Retirement and Disability Pay) restoration and who do not receive CRSC (Combat-Related Special Compensation) as reimbursement: notably, certain disability (Chapter 61) retirees with service‑connected disabilities and fewer than 20 years of service remain within the offset regime unless they receive CRSC that compensates for some or all of the offset [1].
3. How CRDP and CRSC carveouts change the picture
Congress created two distinct remedies: CRDP restores retired pay for many retired members so they are exempt from the dollar‑for‑dollar offset, and CRSC provides special compensation that reimburses service members for combat-related disabilities—CRSC is treated as special compensation (not restored retired pay) and thus operates differently, reimbursing some or all of the offset rather than eliminating it per se [1]. Where CRDP applies, the offset no longer reduces retired pay; where only CRSC is payable, the retiree may effectively be made whole through CRSC payments even while the statutory offset framework technically remains [1].
4. Administrative mechanisms and the “VA waiver” complication
Defense Finance and Accounting Service guidance and practitioner reporting describe a “VA waiver” process and administrative rules that govern the calculation and application of the offset: historically a retiree was required to waive retired pay in the amount of VA compensation they claimed, and DFAS publishes rules explaining how those waivers, CRDP, and CRSC interact with retired‑pay crediting and net deposit calculations [4] [2]. Reporting explains the waiver and offset are reasons some veterans accept tax‑free VA compensation in lieu of an equivalent taxed portion of retired pay, producing nuanced net‑income outcomes [2].
5. Policy fights, exceptions, and recent clarifications
Policy debates and proposed statutes show the offset is politically contested: RAND and advocacy groups highlight cases like Major Richard Star to argue current offset rules unfairly reduce pay for service‑connected sickened veterans and to press Congress to expand concurrent receipt; proposed changes would phase out or eliminate the offset for more retirees [3]. At the same time, related offsets—such as the SBP‑DIC reduction that once clipped survivor annuities—have been legislatively phased out (fully eliminated in 2023), underscoring that Congress can and does narrow offsets selectively when it chooses [5].
6. Bottom line: who remains subject and why
In sum, retirees who do not qualify for CRDP and who are not fully reimbursed by CRSC (notably some Chapter 61 disability retirees with fewer than 20 years’ service and other categories not covered by statutory concurrent‑receipt rules) remain subject to the VA offset because current statutes still bar dual payment for the same period of service and provide only narrow exceptions—policy choices that Congress has amended piecemeal rather than erasing the offset entirely [1] [3].