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Requesting CRSC calculation

RonG

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Good Evening Ron,

Can you help me with my CRSC math? I attempted the calculation and my understanding is that I won't receive any additional compensation from CRSC. Did I do the math right?

1. High three base pay average: $7595
2. DoD disability retirement percentage: 60%
3. Years/months of active duty: 13yr
4. VA percentage/compensation: 80%, $2060, Wife and 3 kids under 18,
5. Approved CRSC: 60%
Hello @JHedges

Estimate using the info you provided.

a. 7595 x 60% = 4557 retired pay
b. 4557 minus 2060 = 2497 residual retired pay
c. 13 x 2.5% = 32.50% longevity multiplier
d. 7595 x 32.50% = 2468.38 longevity portion of retired pay
e. The combination of residual retired pay and CRSC cannot exceed the longevity portion of retired pay
f. The residual by itself exceeds the longevity amount
g. Zero CRSC

Ron
 

JHedges

PEB Forum Regular Member
Registered Member
Hello @JHedges

Estimate using the info you provided.

a. 7595 x 60% = 4557 retired pay
b. 4557 minus 2060 = 2497 residual retired pay
c. 13 x 2.5% = 32.50% longevity multiplier
d. 7595 x 32.50% = 2468.38 longevity portion of retired pay
e. The combination of residual retired pay and CRSC cannot exceed the longevity portion of retired pay
f. The residual by itself exceeds the longevity amount
g. Zero CRSC

Ron
Thanks Ron, that’s the answer I got too.

Have a great week!
 

RonG

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Thanks Ron, that’s the answer I got too.

Have a great week!
Yes, you did a good job with your assessment of potential entitlement.

Take care,
Ron
 

Bprin10

PEB Forum Regular Member
Registered Member
Hello @Bprin10

Although I am no longer a moderator, the owner of this site apparently allowed me to keep certain tools. I found the following:

Firstly, thank you to all here that have served. I greatly appreciate all of the work done here to empower through knowledge; the IDES and VA system is...(what's the euphemism?) not perfect. Anyway, I'll get to brass-tax.
I am in the IDES system and my final VA C&P appointment (vision) is on Thursday. My C&Ps all went according to what I expected and I fully anticipate that I will have a high DoD rating and a max VA rating.

1. I am at 22 years of (all "good" AD) service
2. I am an Army MSG/1SG (11Z) and have fully actualized my "High-36" at this rank
3. I am not married and have no children
4. The condition that placed me into IDES is a back injury (surgery required) that occured in combat, but was exacerbated through life as a senior NCO in the Infantry. I have many other claims that "should" meet the criteria for combat related, or through an instrumentality of war, but are unquestionably service connected.

After many discussions with vets in a similar line of work, and who are receiving benefits from the VA ( a couple actually are medically retired as well-they are GS employees at my current assignment), I am running into what appears to be conjecture from some of them about my potential benefits moving forward. I have searched this forum a lot, but perhaps my keywords aren't taking, or I am plagued again by knuckle-dragger syndrome (which I never discount).

BLUF: If I were to meet the 75% DOD and 100% VA threshold, what is my best course of action? At this point, I am vaguely familiar (thanks to many here; a resource not easily found elsewhere on the interwebs) with how my concurrent receipt of benefits "should" work. That said, what is the maximum benefit (in regards to taxes, specifically) if a SM over 20 would get 100% DoD and VA?

I have had more than one individual tell me that they make more than what their High-36 payout would have been, due to a medical retirement (DOD % above 75%), and they stated that they only pay federal taxes on a very small portion of their retirement, due to the high DoD disability percentage (All great guys, so I assume that they are just uninformed, but it could be my inability to understand the nuance here). I am aware that the VA 100% payout is a tax-free entitlement, in addition to my DoD pension (CRDP), but I'd never be entitled to more compensation than my LOS retirement (55% LOS + VA entitlement 100%, correct?

In closing (and for clarity), can someone please explain to me if there is a scenario like the above stated...I do not want to be the one that is uninformed when it is my time to make a decision on my benefits and financial future.

I thank any of you kind enough to enlighten me in advance!

Comments:

1. If your DoD disability retirement is at 80% thru 100%, your disability retired pay multiplier would be 75% (the max).
2. Your retired pay in the scenario you described would be High three average base pay x 75% = retired pay under Chapter 61
3. Continuing on with that scenario: Your retired pay would be reduced by the amount of your VA compensation. If there is residual retired pay (left over from the reduction), you get to keep it.
4. Since you qualify for another type retirement (regular, 20+yrs), you will be eligible for CRDP if your VA rating is 50% or more.
5. CRDP will restore the longevity portion of the waived retired pay. In your case, that will be average high three base pay x 55% (your case) = longevity portion of retired pay
6. The combination of CRDP and residual retired pay cannot exceed the amount of the longevity retirement (if you had it).
7. Basically, you end up with all your VA compensation and the value of your longevity (22 yrs AD) retirement amount.

8. CRSC: A Supplement to CRSC Information <---see this link for a collection of CRSC info.
9. Recommendations: Take CRSC if the approved percentage by your service is the same as your VA comp percentage. If it is less than the VA comp percentage, you likely will lose money by taking CRSC; therefore in that case, CRDP is the better choice in my opinion.
10. CRSC is non-taxable and the combination of CRSC and residual retired pay cannot exceed the longevity amount computed.

Ron
Greetings, Ron! Just a thank you again and an update. I received my informal 199 this week and I was awarded 60% DOD (all combat related) and 100% from the VA. I have been reading and searching the forum for the last few days and I have discovered a lot of information in regards to similar cases, but my understanding from what I have been told is that my DOD rating of 60% will be awarded (as it is higher than my 55% LOS) and that it may be tax free, paired with my tax free VA payout, thus making my entire pension from both non-taxable.

I know you've fielded many of these questions over the years, so I apologize for the redundancy. Is this your understanding as well? I was told that DFAS will do this automatically, but I haven't reached that juncture yet.
 

RonG

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Greetings, Ron! Just a thank you again and an update. I received my informal 199 this week and I was awarded 60% DOD (all combat related) and 100% from the VA. I have been reading and searching the forum for the last few days and I have discovered a lot of information in regards to similar cases, but my understanding from what I have been told is that my DOD rating of 60% will be awarded (as it is higher than my 55% LOS) and that it may be tax free, paired with my tax free VA payout, thus making my entire pension from both non-taxable.

I know you've fielded many of these questions over the years, so I apologize for the redundancy. Is this your understanding as well? I was told that DFAS will do this automatically, but I haven't reached that juncture yet.
Hello @Bprin10

Please note that if retired pay is taxable, then CRDP (if applicable) is taxable. If retired pay is non-taxable, CRDP is non-taxable.

From DFAS:
TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

VA Compensation Deduction: For most members who retired under a non-disability law, retired pay taxable income is simply reduced by the amount of any VA compensation received. For members who retired under the Temporary Disability Retired List or the Permanent Disability Retired List, retired pay taxable income is reduced by whichever of the following is greater:
  • The amount of VA compensation received or
  • A tax-exempt amount of gross pay determined by the following formula:
Step 1:
Military (not VA) disability percentage: %
x (times) Active Duty pay at the time of retirement:
= (equals) Initial amount of tax-exempt gross pay

Step 2:
Initial amount of tax-exempt gross pay:
x (times) applicable Cost-Of-Living-Adjustment (COLA): %
= (equals) Current tax-exempt gross pay

This information is reported by DFAS on your 1099-R.

See: Defense Finance and Accounting Service > RetiredMilitary > manage > taxes > isittaxable <---LINK

========
Revision of previously furnished info:

1. If your DoD disability retirement is at 60%, your disability retired pay multiplier would be 60% (since your longevity is 55%).
2. Your retired pay will High three average base pay x 60% = retired pay under Chapter 61
3. Continuing on with that scenario: Your retired pay would be reduced by the amount of your VA compensation. If there is residual retired pay (left over from the reduction), you get to keep it.
4. Since you qualify for another type retirement (regular, 20+yrs), you will be eligible for CRDP since your VA rating is 50% or more.
5. CRDP will restore the longevity portion of the waived retired pay. In your case, that will be average high three base pay x 55% (your case) = longevity portion of retired pay
6. The combination of CRDP and residual retired pay cannot exceed the amount of the longevity retirement (if you had it).
7. Basically, you end up with all your VA compensation and the value of your longevity (22 yrs AD) retirement amount. (no change here)


Ron
 

Bprin10

PEB Forum Regular Member
Registered Member
Hello @Bprin10

Please note that if retired pay is taxable, then CRDP (if applicable) is taxable. If retired pay is non-taxable, CRDP is non-taxable.

From DFAS:
TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

VA Compensation Deduction: For most members who retired under a non-disability law, retired pay taxable income is simply reduced by the amount of any VA compensation received. For members who retired under the Temporary Disability Retired List or the Permanent Disability Retired List, retired pay taxable income is reduced by whichever of the following is greater:
  • The amount of VA compensation received or
  • A tax-exempt amount of gross pay determined by the following formula:
Step 1:
Military (not VA) disability percentage: %
x (times) Active Duty pay at the time of retirement:
= (equals) Initial amount of tax-exempt gross pay

Step 2:
Initial amount of tax-exempt gross pay:
x (times) applicable Cost-Of-Living-Adjustment (COLA): %
= (equals) Current tax-exempt gross pay

This information is reported by DFAS on your 1099-R.

See: Defense Finance and Accounting Service > RetiredMilitary > manage > taxes > isittaxable <---LINK

========
Revision of previously furnished info:

1. If your DoD disability retirement is at 60%, your disability retired pay multiplier would be 60% (since your longevity is 55%).
2. Your retired pay will High three average base pay x 60% = retired pay under Chapter 61
3. Continuing on with that scenario: Your retired pay would be reduced by the amount of your VA compensation. If there is residual retired pay (left over from the reduction), you get to keep it.
4. Since you qualify for another type retirement (regular, 20+yrs), you will be eligible for CRDP since your VA rating is 50% or more.
5. CRDP will restore the longevity portion of the waived retired pay. In your case, that will be average high three base pay x 55% (your case) = longevity portion of retired pay
6. The combination of CRDP and residual retired pay cannot exceed the amount of the longevity retirement (if you had it).
7. Basically, you end up with all your VA compensation and the value of your longevity (22 yrs AD) retirement amount. (no change here)


Ron
Ron, thank you again for your patience! You are doing heros work here. I've ran across so many threads that you've provided insight in, that I can barely comprehend it.

I am good with your breakdown so far, but I have one last point of clarification. Do you think that based on what you have researched (or know off hand) that the LOS retirement that I will receive may be tax free? I read a few blips on here where people chimed in and said that they received both their LOS retirement (as CHPT 61) and 100 % VA C&P and their LOS retirement was tax-exempt due to being medically retired from injuries that the VA/DOD rated as combat related (IAW 26 USC 104) during the PEB, that were HIGHER than their LOS multiplier. This is my situation, in a nut-shull.

So for clarity: my current 22 year LOS high 36 average is $3100 (the 60% is higher, but can never be more than my LOS at 55% with CRDP, as you've stated above, so it stays "as is") and the compensation letter from the VA states that I will receive $3200 for my 100%. If I am understanding what those other CHPT 61 posters are saying, I'll get my LOS high "3" of 3100 (tax exempt) and my VA C&P of 3200, for a monthly combined payment of $6300 tax exempt.

Is this even possible!? If I am talking crazy, please let me know!

Any and all responses very welcomed!
 

RonG

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PEB Forum Veteran
Lifetime Supporter
Registered Member
Hello,

High three is the total of the highest 36 months of pay divided by 36.

Your retired pay will be reduced by the amount of VA compensation received.
CRDP will restore the longevity portion of the retired pay which is 55% x high three.

IF retired pay is taxable, then CRDP (if applicable) is taxable. If retired pay is non-taxable, CRDP is non-taxable.

Taxes are discussed at my lengthy reply that precedes this post. However, the bottom line is:
IF the waived retired pay is taxable, then CRDP (if applicable) is taxable. If waived retired pay is non-taxable, CRDP is non-taxable.

Waived retired pay aka VA offset and the reduction of retired pay discussed here.


In addition to CRDP @ 55% x high three base pay, you will receive all your VA compensation.

Good luck,
Ron
 
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Bprin10

PEB Forum Regular Member
Registered Member
Hello,

High three is the total of the highest 36 months of pay divided by 36.

Your retired pay will be reduced by the amount of VA compensation received.
CRDP will restore the longevity portion of the retired pay which is 55% x high three.

IF retired pay is taxable, then CRDP (if applicable) is taxable. If retired pay is non-taxable, CRDP is non-taxable.

Taxes are discussed at my lengthy reply that precedes this post. However, the bottom line is:
IF the waived retired pay is taxable, then CRDP (if applicable) is taxable. If waived retired pay is non-taxable, CRDP is non-taxable.

Waived retired pay aka VA offset and the reduction of retired pay discussed here.


In addition to CRDP @ 55% x high three base pay, you will receive all your VA compensation.

Good luck,
Ron
Thank you, Ron. I very much appreciate your support. I will report back once I receive my final numbers, in hopes that it may benefit the forum.
 

RonG

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PEB Forum Veteran
Lifetime Supporter
Registered Member
Thank you, Ron. I very much appreciate your support. I will report back once I receive my final numbers, in hopes that it may benefit the forum.
Excellent.

BTW, if you take your most recent DFAS RAS and find the gross pay shown in the upper left of the document and then...divide it by 60% (i.e., 0.60 ) you will have the current value of your high three.

Ron
 

Bprin10

PEB Forum Regular Member
Registered Member
Excellent.

BTW, if you take your most recent DFAS RAS and find the gross pay shown in the upper left of the document and then...divide it by 60% (i.e., 0.60 ) you will have the current value of your high three.

Ron
Wow! That makes life a lot easier. Thanks for the tip, Ron!
 

Braindrain1234

PEB Forum Regular Member
Registered Member
Thank you, Ron. I very much appreciate your support. I will report back once I receive my final numbers, in hopes that it may benefit the forum.
Hello, LOOOOONG time lurker here. I was recently found unfit (70 TDRL/100 VA) after 22 years and 2 months of active duty service (E-7/USAF). I ran across your question in the CRSC forum regarding eligibility for tax free retirement payments. I am in the final stages of the IPEB process and my ODC lawyer explained that due to the fact that my unfitting condition was identified by the IPEB as combat related (PTSD), my retired Pay (DFAS) would not be subject to federal taxes and that this is automatically applied by DFAS upon retirement. I asked if he may have been mistaken as it sounded like he was describing CRSC benefits, but he clarified that it is not a special compensation and there was no application process. Are you able to verify the validity of this statement? The wording on the DFAS link @RonG posted in response to your question was just vague enough to leave me more confused after reading it.

TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

Eligibility appears to hinge on whether or not your retirement is calculated based on your VA rating or LOS, which is described in the welcome letter that DFAS sends after retirement. Based on my extremely limited understanding of this statement and the disability retirement rules governing active duty members who have served over 20 years and are subsequently found unfit as a result of the IPEB, I can only conclude (probably incorrectly) that the DFAS retirement could only be computed using years of service due to the LOS cap on CDRP restoration. What information is considered by DFAS to determine which calculation is used? It seems a bit backward to have to wait for the arrival of the welcome letter to find out this information. Any light shed on this subject would greatly assist in making my family's financial picture clearer. Thanks in advance for any assistance anyone can provide!
 

RonG

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PEB Forum Veteran
Lifetime Supporter
Registered Member
Hello @Braindrain1234

I will return later to address some of the issues you have mentioned. Others might have comments as well. I have only a couple of minutes now.

One item: "Eligibility appears to hinge on whether or not your retirement is calculated based on your VA rating or LOS, which is described in the welcome letter that DFAS sends after retirement." Military retired pay is never based on your VA rating; it is separate. You might be thinking about CRDP, which requires a VA rating of 50% or more for eligibility.

====
added:

Federal Taxes on Veterans' Disability or Military Retirement Pensions <---LINK Federal Taxes on Veterans' Disability or Military Retirement Pensions

https://www.irs.gov/pub/irs-pdf/p4782.pdf <---LINK to IRS Publication "Federal Income Tax Withholding after Leaving the Military"

Additionally, in a case such as yours, "22 years and 2 months of active duty service (E-7/USAF)" You are eligible for CRDP if you have a VA rating of 50% or more.

Your retired pay will be the higher of the 70% x the average base pay or the length of service percentage, which is your case is 22.166 x 2.5% = 55.42% x average high three base pay.

Your retired pay will be reduced by the amount of your VA compensation. Since 70% is the higher, there might be residual retired pay you could keep, but not enough info is available to determine that. The combination of residual retired pay and CRDP cannot exceed the lonngevity portion of retired pay (i.e, 55.42% in this case per your info. CRDP (or CRSC) does not restore or replace retired pay that is in excess of the longevity computation.

CRSC is unequivocally non-taxable. See A Supplement to CRSC Information <---LINK for collection of CRSC info.

Ron
 
Last edited:

Bprin10

PEB Forum Regular Member
Registered Member
Hello, LOOOOONG time lurker here. I was recently found unfit (70 TDRL/100 VA) after 22 years and 2 months of active duty service (E-7/USAF). I ran across your question in the CRSC forum regarding eligibility for tax free retirement payments. I am in the final stages of the IPEB process and my ODC lawyer explained that due to the fact that my unfitting condition was identified by the IPEB as combat related (PTSD), my retired Pay (DFAS) would not be subject to federal taxes and that this is automatically applied by DFAS upon retirement. I asked if he may have been mistaken as it sounded like he was describing CRSC benefits, but he clarified that it is not a special compensation and there was no application process. Are you able to verify the validity of this statement? The wording on the DFAS link @RonG posted in response to your question was just vague enough to leave me more confused after reading it.

TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

Eligibility appears to hinge on whether or not your retirement is calculated based on your VA rating or LOS, which is described in the welcome letter that DFAS sends after retirement. Based on my extremely limited understanding of this statement and the disability retirement rules governing active duty members who have served over 20 years and are subsequently found unfit as a result of the IPEB, I can only conclude (probably incorrectly) that the DFAS retirement could only be computed using years of service due to the LOS cap on CDRP restoration. What information is considered by DFAS to determine which calculation is used? It seems a bit backward to have to wait for the arrival of the welcome letter to find out this information. Any light shed on this subject would greatly assist in making my family's financial picture clearer. Thanks in advance for any assistance anyone can provide!
Well brother, this is good timing, as I am going through this mess now. Congrats on your retirement and I am sure that it has been a long process with Covid-19.

For the benefit of the forum and yourself, I’ll shoot an update.

My retirement order verbiage does not state that the disability retirement (the two lines that should state it) is combat related, but my 199 does, and I was awarded the SEA code, which also states that my injuries are combat related.

The rub is, finance says that the orders (you’ll know the two lines that I am referring to) say “combat related-no,” but I was injuries in combat for the very thing that caused my MEB…My PEBLO swears that the SEA code is what they are supposed to use in regards to taxation of the retirement, and also on your DD214 for future employment. It could be an issue with how the PDIR is written…

Honestly, I am getting a lot of mixed messages and I have taken this as far up the chain as I can, sans lawyers, which I might do next.

My question is simple: is my LOS (for pay)/Disability retirement tax exempt or not?

I am getting the run-around and I am perplexed as to why, but it could just be a simple change to the coding system

I sign out on T-leave in less than a month, but there seems to be something with these new codes that have people at MPD confused.

I am not prescribing malicious intent at all, but I don’t have a warm and fuzzy on this right now.

Any and all responses/thoughts are very welcomed!
 

Braindrain1234

PEB Forum Regular Member
Registered Member
Hello @Braindrain1234

I will return later to address some of the issues you have mentioned. Others might have comments as well. I have only a couple of minutes now.

One item: "Eligibility appears to hinge on whether or not your retirement is calculated based on your VA rating or LOS, which is described in the welcome letter that DFAS sends after retirement." Military retired pay is never based on your VA rating; it is separate. You might be thinking about CRDP, which requires a VA rating of 50% or more for eligibility.

====
added:

Federal Taxes on Veterans' Disability or Military Retirement Pensions <---LINK Federal Taxes on Veterans' Disability or Military Retirement Pensions

https://www.irs.gov/pub/irs-pdf/p4782.pdf <---LINK to IRS Publication "Federal Income Tax Withholding after Leaving the Military"

Additionally, in a case such as yours, "22 years and 2 months of active duty service (E-7/USAF)" You are eligible for CRDP if you have a VA rating of 50% or more.

Your retired pay will be the higher of the 70% x the average base pay or the length of service percentage, which is your case is 22.166 x 2.5% = 55.42% x average high three base pay.

Your retired pay will be reduced by the amount of your VA compensation. Since 70% is the higher, there might be residual retired pay you could keep, but not enough info is available to determine that. The combination of residual retired pay and CRDP cannot exceed the lonngevity portion of retired pay (i.e, 55.42% in this case per your info. CRDP (or CRSC) does not restore or replace retired pay that is in excess of the longevity computation.

CRSC is unequivocally non-taxable. See A Supplement to CRSC Information <---LINK for collection of CRSC info.

Ron
Ron,

Thank you for your quick response and thorough explanation. The work you do here is valuable and greatly appreciated. It appears that I was confusing CDRP with VA retirement. For the sake clarity, My high 36 is $4,792.

70% calculation (using DOD rating) $4,792 X 0.70= $3,354

55.42% Calculation (Longevity) $4,792 X 0.55= $2,655

My proposed VA compensation is $3,732 for a married veteran with 2 children (1 over 18 attending school and 1 under 18). For either of the above scenarios, there is no residual retired pay remaining after the VA reduction. According to the ODC lawyer, the pay restored under CDRP would be completely tax free ($6,387 by my calculation)? Does this sound accurate? I apologize if the cumulative effect of all the bad information that I have received over the last 22 years from those advising in an "Official" capacity is taking over. Thanks!
 

Braindrain1234

PEB Forum Regular Member
Registered Member
Well brother, this is good timing, as I am going through this mess now. Congrats on your retirement and I am sure that it has been a long process with Covid-19.

For the benefit of the forum and yourself, I’ll shoot an update.

My retirement order verbiage does not state that the disability retirement (the two lines that should state it) is combat related, but my 199 does, and I was awarded the SEA code, which also states that my injuries are combat related.

The rub is, finance says that the orders (you’ll know the two lines that I am referring to) say “combat related-no,” but I was injuries in combat for the very thing that caused my MEB…My PEBLO swears that the SEA code is what they are supposed to use in regards to taxation of the retirement, and also on your DD214 for future employment. It could be an issue with how the PDIR is written…

Honestly, I am getting a lot of mixed messages and I have taken this as far up the chain as I can, sans lawyers, which I might do next.

My question is simple: is my LOS (for pay)/Disability retirement tax exempt or not?

I am getting the run-around and I am perplexed as to why, but it could just be a simple change to the coding system

I sign out on T-leave in less than a month, but there seems to be something with these new codes that have people at MPD confused.

I am not prescribing malicious intent at all, but I don’t have a warm and fuzzy on this right now.

Any and all responses/thoughts are very welcomed!
Thank you for the update. I will continue to follow your situation as it appears that we will be in the same boat in regarding this pay issue. My 356 (equivalent to 199) mirrors yours. I have a sneaking suspicion that all the combat related disability identifiers that are used in-service will not mean a whole at the end of the day. I will try to remain optimistic and hopefully this is not the case but at the very least I have to admit, that the process (as explained by ODC) just seemed too good to be true. Thanks again for the update. I will be watching intently for any updates you can provide.
 

RonG

PEB Forum Regular Member
PEB Forum Veteran
Lifetime Supporter
Registered Member
Ron,

Thank you for your quick response and thorough explanation. The work you do here is valuable and greatly appreciated. It appears that I was confusing CDRP with VA retirement. For the sake clarity, My high 36 is $4,792.

70% calculation (using DOD rating) $4,792 X 0.70= $3,354

55.42% Calculation (Longevity) $4,792 X 0.55= $2,655

My proposed VA compensation is $3,732 for a married veteran with 2 children (1 over 18 attending school and 1 under 18). For either of the above scenarios, there is no residual retired pay remaining after the VA reduction. According to the ODC lawyer, the pay restored under CDRP would be completely tax free ($6,387 by my calculation)? Does this sound accurate? I apologize if the cumulative effect of all the bad information that I have received over the last 22 years from those advising in an "Official" capacity is taking over. Thanks!
Hello @Braindrain1234

Re: "According to the ODC lawyer, the pay restored under CDRP would be completely tax free ($6,387 by my calculation)"

You will not have "pay restored" under CRDP at 6387.

You will have VA compensation at 3354 (which is not retired pay) and it appears you will receive 2655 in CRDP. CRDP is a restoration of waived retired pay...it is retired pay itself.

I suspect I know where this confusion comes from...the ODC lawyer and it is understandable.

Considerations:
--CRDP (Concurrent Disability and Retired Pay) allows military retirees to receive both military retired pay and Veterans Affairs (VA) compensation. This was prohibited until the CRDP program began on January 1, 2004.. In this context, it is a PROGRAM, involving both the VA and DFAS.

---Restored pay by DFAS is termed CRDP. It is retired pay itself.
--The VA often pays retroactive VA compensation. They confusingly call it CRDP in their notification letter. I agree that it is payable in some cases because of CRDP, but it is actually VA compensation.
--The lack of imagination and creativity (by the authors of the laws and regulations) pertaining to the names of payments to retirees has been confusing folks for more than a decade. Your remarks are the first time I have seen it on this forum. I belong to another board that has a lot of pay activity and it used to show up from time to time.

Here is a nice summary of the history of Concurrent Receipt: https://fas.org/sgp/crs/misc/R40589.pdf <---LINK

You probably noticed that I have not addressed "what is taxable?" in a direct manner. I diid not receive a medical retirement so I do not have first hand experience.

I provided these two resources that I thought would answer your question:

Federal Taxes on Veterans' Disability or Military Retirement Pensions <---LINK Federal Taxes on Veterans' Disability or Military Retirement Pensions

https://www.irs.gov/pub/irs-pdf/p4782.pdf <---LINK to IRS Publication "Federal Income Tax Withholding after Leaving the Military"

I will look at the actual laws tomorrow.

Ron
 
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RonG

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From DFAS: IS IT TAXABLE?
Ref: Defense Finance and Accounting Service > RetiredMilitary > manage > taxes > isittaxable <---LINK


For many military retirees, the pay they receive each year is taxable. But, like everything in life, there are always exceptions.

The following list of deductions and exemptions are some of the more common concerns among military retirees:

Survivor Benefit Plan and Retired Serviceman's Family Protection Plan Premium Deductions: Premiums paid to fund survivors’ benefits under these plans are treated as deductions from your taxable income.

Debt Deductions: Amounts collected to recoup overpayments of retired pay, retroactive Survivor Benefit Plan premium adjustments and some retroactive Department of Veterans Affairs payments are treated as deductions from your taxable income.

Upon completion of debt repayments, DFAS will mail you a tax certificate stating that you have repaid a valid debt over a specific period and stating the amount repaid. You can then use that certificate to adjust tax returns filed during the repayment period by claiming a deduction for the amount paid.

TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

VA Compensation Deduction: For most members who retired under a non-disability law, retired pay taxable income is simply reduced by the amount of any VA compensation received. For members who retired under the Temporary Disability Retired List or the Permanent Disability Retired List, retired pay taxable income is reduced by whichever of the following is greater:
  • The amount of VA compensation received or
  • A tax-exempt amount of gross pay determined by the following formula:
Step 1:
Military (not VA) disability percentage: %
x (times) Active Duty pay at the time of retirement:
= (equals) Initial amount of tax-exempt gross pay

Step 2:
Initial amount of tax-exempt gross pay:
x (times) applicable Cost-Of-Living-Adjustment (COLA): %
= (equals) Current tax-exempt gross pay

This information is reported by DFAS on your 1099-R.

Combat Related Special Compensation (CRSC): These payments are non-taxable.

Concurrent Retirement Disability Payments (CRDP): CRDP is a restoration of your retired pay, not a separate entitlement. Therefore, if your retired pay is taxable so is any CRDP payments you receive. If your retired pay is non-taxable, your CRDP is also non-taxable.

Former Spouse Deductions: The retiree is not liable for taxes on payments made to their former spouse. The Uniformed Services Former Spouse Protection Act defines community property payments established in accordance with a court order and approved by the DFAS legal department as pre-tax deductions.

=======
Ron
 

Braindrain1234

PEB Forum Regular Member
Registered Member
Hello @Braindrain1234

Re: "According to the ODC lawyer, the pay restored under CDRP would be completely tax free ($6,387 by my calculation)"

You will not have "pay restored" under CRDP at 6387.

You will have VA compensation at 3354 (which is not retired pay) and it appears you will receive 2655 in CRDP. CRDP is a restoration of waived retired pay...it is retired pay itself.

I suspect I know where this confusion comes from...the ODC lawyer and it is understandable.

Considerations:
--CRDP (Concurrent Disability and Retired Pay) allows military retirees to receive both military retired pay and Veterans Affairs (VA) compensation. This was prohibited until the CRDP program began on January 1, 2004.. In this context, it is a PROGRAM, involving both the VA and DFAS.

---Restored pay by DFAS is termed CRDP. It is retired pay itself.
--The VA often pays retroactive VA compensation. They confusingly call it CRDP in their notification letter. I agree that it is payable in some cases because of CRDP, but it is actually VA compensation.
--The lack of imagination and creativity (by the authors of the laws and regulations) pertaining to the names of payments to retirees has been confusing folks for more than a decade. Your remarks are the first time I have seen it on this forum. I belong to another board that has a lot of pay activity and it used to show up from time to time.

Here is a nice summary of the history of Concurrent Receipt: https://fas.org/sgp/crs/misc/R40589.pdf <---LINK

You probably noticed that I have not addressed "what is taxable?" in a direct manner. I diid not receive a medical retirement so I do not have first hand experience.

I provided these two resources that I thought would answer your question:

Federal Taxes on Veterans' Disability or Military Retirement Pensions <---LINK Federal Taxes on Veterans' Disability or Military Retirement Pensions

https://www.irs.gov/pub/irs-pdf/p4782.pdf <---LINK to IRS Publication "Federal Income Tax Withholding after Leaving the Military"

I will look at the actual laws tomorrow.

Ron
Yup, you said it brother! Granted, I am not the sharpest tool in the shed by a long shot, but this process has been confusing and frustrating to say the least. Thank you for taking the additional time to point me in the right direction. I can appreciate your reluctance to answer questions in which you do not have first hand experience. Thanks again for your help.
 

Braindrain1234

PEB Forum Regular Member
Registered Member
@RonG I found this excerpt from DoDI 1332.18 Disability Evaluation System (DES). I think this is what I the ODC attorney explained. Curious to see your take. Either way, we will see what happens. Thanks again!


2. DETERMINATIONS FOR FEDERAL TAX BENEFITS. Disability evaluation includes a determination and supporting documentation on whether the Service member’s disability compensation is excluded from federal gross income in accordance with Reference (e). For compensation to be excluded, the Service member must meet the criteria in either paragraph 2a or 2b of this appendix.

a. Status. On September 24, 1975, the individual was a military Service member, including the RC, or was under binding written agreement to become a Service member.

(1) A Service member who was a member of an armed force of another country on that date is entitled to the exclusion.

(2) A Service member who was a contracted cadet of the Reserve Officers Training Corps on that date is entitled to the exclusion.

(3) A Service member who separates from the Military Service after that date and incurs a disability during a subsequent enlistment is entitled to the exclusion.

b. Combat Related. This standard covers injuries and diseases attributable to the special dangers associated with armed conflict or the preparation or training for armed conflict. A disability is considered combat-related if it makes the Service member unfit or contributes to unfitness and the preponderance of evidence shows it was incurred under any of the following circumstances.

(1) As a Direct Result of Armed Conflict. The criteria are the same as those in paragraph 1b of this appendix.

(2) While Engaged in Hazardous Service. Such service includes, but is not limited to, aerial flight duty, parachute duty, demolition duty, experimental stress duty, and diving duty.

(3) Under Conditions Simulating War. In general, this covers disabilities resulting from military training, such as war games, practice alerts, tactical exercises, airborne operations, and leadership reaction courses; grenade and live fire weapons practice; bayonet training; hand-to- hand combat training; rappelling; and negotiation of combat confidence and obstacle courses. It does not include physical training activities, such as calisthenics and jogging or formation running and supervised sports.

(4) Caused by an Instrumentality of War. Occurrence during a period of war is not a requirement to qualify. If the disability was incurred during any period of service as a result of wounds caused by a military weapon, accidents involving a military combat vehicle, injury or sickness caused by fumes, gases, or explosion of military ordnance, vehicles, or material, the criteria are met. However, there must be a direct causal relationship between the instrumentalityof war and the disability. For example, an injury resulting from a Service member falling on the deck of a ship while participating in a sports activity would not normally be considered an injury caused by an instrumentality of war (the ship) since the sports activity and not the ship caused the fall. The exception occurs if the operation of the ship caused the fall.
 
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