Gray Area Retiree Spotlight-How VA Disability Compensation Can Affect Your Retired Pay 

The Gray Area Spotlight in our newsletter is a special feature for Gray Area Retirees.

How VA Disability Compensation Can Affect Your Retired Pay 

Many military retirees who are eligible for Department of Defense (DoD) retired pay are also eligible for Department of Veterans Affairs (VA) disability pay. The laws and regulations that apply when a retiree is eligible for both types of pay are complex and can be confusing. 

The VA Waiver 

The law requires that a military retiree waive their gross DoD retired pay, dollar for dollar, by the amount of their VA disability compensation pay. This is known as the VA Waiver (or VA offset).  This law does NOT affect the amount of disability compensation pay you receive from the VA. It ONLY affects the amount of your DoD retired pay.  

Some retirees who receive VA disability compensation may also be eligible for the Concurrent Retirement and Disability Pay (CRDP) exemption or Combat-Related Special Compensation (CRSC) payments that make up for part or all of the DoD retired pay they must waive to receive VA disability pay. 

The Impact of VA Disability Compensation on DoD Retired Pay 

It is important to understand how receiving VA disability compensation can affect your DoD retired pay when you begin receiving it.
The VA informs DFAS about VA disability compensation and ratings. The offset will begin upon receipt of retired pay or the date of your disability rating, whichever is later.  

DoD Gross Retired Pay Minus the Amount of VA Disability Compensation =  
DoD Retired Pay after the VA Waiver 

DFAS Pays DoD Retired Pay after the VA Waiver 
VA Pays Full VA Disability Compensation 

If you are receiving VA disability compensation and you begin receiving retired pay and the VA has not yet instructed DFAS to offset, you might be overpaid. If you are receiving VA disability compensation and your retired pay does not show an offset, please contact us immediately. We must recover overpayments. 

CRDP and CRSC 

The VA Waiver is mandated by law. However, CRDP or CRSC can mitigate the effect of the VA Waiver. CRDP and CRSC are two entitlements created by Congress to allow eligible military retirees to recover some or all of the retired pay that retirees waive for VA disability compensation. 

Concurrent Retirement and Disability Pay (CRDP) 

The first entitlement, Concurrent Retirement and Disability Pay (CRDP), provides an exemption to the VA Waiver. This means it exempts some or all of your DoD retired pay from the waiver. This allows you to receive the amount of your retired pay that is exempt from the VA Waiver because of CRDP.  

Military retirees do not need to apply for CRDP. When DFAS is notified of your VA disability compensation pay, if you are eligible for CRDP, we will process and pay your retired pay with the CRDP exemption on the regular monthly pay schedule.  

If you are receiving retired pay that is offset by VA disability compensation pay and you believe you should be eligible for CRDP, please contact us.  

Combat-Related Special Compensation (CRSC) 

The second entitlement, Combat-Related Special Compensation (CRSC), is a special program for combat-related disabilities. You must apply to your Branch of Service to receive CRSC pay.  

You may qualify for both types of entitlements, but you can only receive either the CRDP exemption or CRSC payments, not both.  

If you’re eligible for both, there is an annual CRDP/CRSC Open Season (usually the month of January each year) when DFAS will send you a letter with instructions on how to change your election from one type of entitlement to the other, if you choose.  

For More Information 

We will talk more about CRSC, CRDP, and the VA Waiver in the Gray Area Retiree Spotlight of the March 2025 DFAS Retiree Newsletter. 
There is also a full explanation of the VA Waiver on the DFAS website at:  
https://www.dfas.mil/vawaiver