Order Code RS21327
October 3, 2002
CRS Report for Congress
Received through the CRS Web
Concurrent Receipt of Military Retirement and
VA Disability Benefits: Budgetary Issues
Amy Belasco
Foreign Affairs, Defense and Trade Division
Summary
House and Senate conferees on the FY2003 National Defense Authorization Act
(H.R. 4546) are currently considering provisions that would lift the longstanding
prohibition on concurrent receipt (simultaneous payment) of Department of Defense
(DoD) retired pay and Department of Veterans’ Affairs (VA) disability benefits. The
House-passed bill would phase in partial concurrent receipt by providing both retirement
and VA benefits for those with disabilities of 60 percent or above by FY2007. The
Senate-passed bill provides full concurrent receipt for military retirees with any
disability rating in FY2003.
The Administration has threatened to veto a bill that includes either the Senate or
the House version of concurrent receipt. The Administration objects to establishing a
precedent that would allow beneficiaries to receive more than one type of benefit
stemming from the same period of service. The Administration also objects to the cost.
According to Congressional Budget Office estimates, the House provisions would cost
$1.1 billion in FY2003 and $24.8 billion over the next 10 years, while the Senate
provisions would cost $4.3 billion in FY2003 and $61.2 billion over 10 years.
About 110,000 retirees could receive higher payments under the House measure
and about 700,000 under the Senate measure in FY2007 when both versions of
concurrent receipt would be fully implemented. At that time, those eligible would
receive an annual benefit increase of about $18,000 under the House provision and
$6,400 under the Senate provision. The largest individual benefits would go to those
with the highest disability levels. This report was prepared under the supervision of Gary
Pagliano, Specialist in National Defense. It will be updated as warranted.
Background
Resolving the issue of concurrent receipt may be one of the more difficult issues to
settle in the FY 2003 National Defense Authorization Act that is currently in conference.
The President has threatened to veto the entire bill if either version of concurrent receipts
Congressional Research Service ˜ The Library of Congress

---

CRS-2
included.1 The Administration opposes concurrent receipt because of the cost and
because it fears that the change could create a precedent that could lead to costly increases
in other similar federal benefit programs.2
Under current law, military retired pay is reduced or offset dollar-for-dollar for any
VA disability benefits a retiree receives.3 Proponents of concurrent receipt believe that
“retirees are entitled to receive both retired pay for which they contributed years of
faithful service and the VA compensation for a service-connected disability intended to
recognize a lifelong limitation on earning potential.”4 Opponents of concurrent receipt,
popularly referred to as “double-dipping,” describe concurrent receipt as “two pays for the
same event,” and argue that VA benefits are intended to compensate disabled veterans
who had to leave the military, and whose later earnings were affected.5
Pressure to lift this prohibition for veterans has grown in recent years. In P.L. 107-
107, the FY2002 National Defense Authorization Act, Congress approved concurrent
receipt contingent upon the President requesting the change and identifying budgetary
offsets. Since this Administration opposes concurrent receipt, the FY2003 budget did not
include any proposal. Last year’s DOD Authorization Act did, however, expand special
compensation for “severely disabled” retirees determined to have a service-related
disability within four years of leaving the military.
Budget Issues for Congress
Permitting concurrent receipt of military retirement and VA benefits raises several
important budget issues for Congress:
! the coverage and size of additional payments for military retirees;
! the effect on immediate and long-term government costs; and
! the effect of exempting DOD from carrying in its budget the accrual cost
of benefits for current personnel as provided in the House bill.
1 See “Hill, White House still fighting over retirement pay,” Army Times, Sept. 30, 2002. See
Statement of Administration Policy on FY2003 DOD Authorization bills, S. 2514, the Senate-
reported bill; see [http://www.whitehouse.gov/omb/legislative/].
2 See CRS Issue Brief IB85159, Military Retirement: Major Legislative Issues, by Robert L.
Goldich, August 29, 2002; CRS Report 95-469, Military Retirement and Veterans’
Compensation: Concurrent Receipt Issues, by Robert Goldich, April 7, 1995, and CRS Report,
Concurrent Receipt of Military Retired Pay and Veterans’ Compensation: Analogies and Issues,
by Carolyn L. Merck and Robert L. Goldich, May 5, 1993.
3 Military retirees typically accept the offset because VA benefits are tax-exempt and military
retirement is not. For example, if a retiree is eligible for $100 in retired pay and $20 in VA
disability benefits and wants to collect both benefits, he would receive a total of $100 including
$80 in taxable retired pay ($100 - $20 offset) plus $20 in untaxed VA benefits. See Title 38,
U.S. Code, Sections 5404 and 5405 for the relevant provisions.
4 H.Rept. 107-436, (May 3, 2002) p. 320.
5 Armed Forces Press Service, “Double-Dip Retirement measure May Become a Law,” American
Forces Information Service, September 25, 2002; see
[http://www.defenselink.mil/news/Sep2002/n09252002_200209253.html]

---

CRS-3
Coverage and Size of Payments to Beneficiaries. The Senate bill would
cover over 700,000 retirees with average benefit payments of $6,400 in 2007. The House
bill would cover about 110,000 retirees with average payments of $18,000.6 Most of
those eligible are non-disabled retirees who collect regular military retirement and are
later determined by the VA to have some service-related disability (see Table 1). Neither
bill increases benefits for those who have to leave the military because of service-related
disabilities but who have fewer than twenty years of service.7
Senate bill. The Senate version of concurrent receipt covers all retirees who have
a disability rating and that coverage begins immediately.8 The broad coverage in the
Senate bill reduces average benefit payments because benefits are lower for those with
lesser disabilities. For example, a retiree with a 20% disability rating would collect an
additional $2,400 whereas a retiree with a 60% disability would collect $7,500 more a
year. (See Table 2.)9 About three-quarters of military retirees have disability ratings
below 60%.
House bill. The House version limits coverage to retirees with disability ratings
of 60 percent or above and phases in benefits over the next five years.10 By targeting those
with ratings of 60% or higher, the House bill covers fewer veterans with higher benefit
payments. Since those eligible in the House bill have higher benefit levels, the average
payment is higher (see Table 1).
Table 1. Number eligible and average payments under House and
Senate versions of Concurrent Receipt in FY2007
Senate: Full
Number eligible and
Current Payments
House: Partial
Concurrent
average annual benefit
to severely disabled
Concurrent Receipt
Receipt
Number eligible
40,300
111,000
712,000
Non-disabled retirees
Not applicable
87,000
679,000
Disabled retirees
Not applicable
24,000
33,000
Average new benefit
$1,700
$18,000
$6,400
Non-disabled retirees
Not applicable
$20,000
$5,700
Disabled retirees
Not applicable
$13,500
$8,900
6 CRS selected FY2007 to reflect full implementation of the House bill’s provisions. Both bills
cover only retirees who leave after twenty years of service.
7 See Section 641 (Title X, Section 1414 (b) (2) in H.R. 4546 as passed by the House on May
9, 2002 and as Section 641 (Title X, Section 1414 (c) as passed by the Senate on June 27, 2002.
8 See Section 641 in H.R. 4546 as passed by the Senate on June 27, 2002.
9 To be conservative, CRS calculated annual rates from VA Compensation Rate Table for
“veteran alone;” retirees with spouse and dependents collect more. Ratings reflect conditions
ranging from large hemorrhoids to heart disease. See VA Compensation Rate Table on
[http://www.vba.va.gov/bln/21/Rates/comp01.htm] and DoD, “Schedule for Veterans Affairs
System for Rating Disabilities (VASR-D).”
10 See Section 641 in H.R. 4546 as passed by the House on May 9, 2002.

---

CRS-4
Sources: CBO, Updated cost estimate for Senate-passed FY 2003 DOD Authorization bill; CBO, Cost
Estimate for H.R. 4546, May 3, 2002 , CBO, Cost Estimate for S.170, Retired Pay Restoration Act of 2001,
May 22, 2001; see cost estimates under [http://www.cbo.gov].
Notes: CRS selected FY2007 when both the House and Senate versions of concurrent receipt would be
fully implemented. Special compensation provisions would be eliminated in both bills; current levels are
shown for comparative purposes.
Effect of concurrent receipt on retired pay. The higher benefits that military
retirees would receive with concurrent receipt would increase their current retirement
income significantly. As illustrative examples, Table 2 below shows the effect on retired
pay of concurrent receipt for an O-5 and an E-7, the most common rank of those who
retire with twenty or more years of service.11
Table 2. Annual Change in Benefits with Concurrent Receipt for an
O-5 and E-7 By Disability Level
Annual
Annual
Annual
Percent
Disability
concurrent
Percent inc. in
retired pay
retired pay
inc. in E-
Level
receipt
O-5’s benefit
for O-5
for E-7
7’s benefit
benefit a
20%
$2,400
$35,600
7%
$14,900
16%
40%
$5,300
$35,600
15%
$14,900
35%
60%
$9,500
$35,600
27%
$14,900
64%
80%
$13,900
$35,600
39%
$14,900
93%
100%
$26,000
$35,600
73%
$14,900
174%
Sources: CRS calculations of annual rate from VA Compensation Rate Table; see
[http://www.vba.va.gov/bln/21/Rates/comp01.htm]
a Benefit levels for a veteran alone with no dependents.
Effect of concurrent receipt on retiree income. Because many military
personnel retire in their early to mid-forties after twenty years of service, most work after
retirement, and hence have income in addition to their retired pay. Based on a1996 DoD
survey, over three-quarters of veterans under 65 with disability ratings below 70%, and
about half of those with higher disability ratings work.
At $63,000, the average family income of those with disability levels of 60% or less
are about $1,000 below those retirees who have no disability rating. (Family income
includes retirement income.) Retirees with these disability ratings also typically earn
$33,000, or $1,000 less than the average earnings of retirees without any disability.
Those with disability ratings of 70% or higher, however, are likely to have family
incomes and earnings that are lower than retirees without disability ratings. DoD’s survey
found their average income was about $59,000 and their earnings levels was about
$26,000.12
11 About one-third of all officers retire as O-5s (lieutenant colonel or Navy commander) and about
40% of enlisted personnel retire as E-7s (sergeants, chief petty officers); see DoD, Office of the
Actuary, “Number of Military Retirees Receiving and Not Receiving Retired pay from DoD as
of Sept,. 30, 2000.”
12 DoD,” Tables 2B, 4B, and 5B, “Earnings of Disabled Veterans,” 1996 Survey of Disabled
(continued...)

---

CRS-5
Effect of Concurrent Receipt on Costs. According to CBO estimates, the
Senate version of concurrent receipt would cost $4.3 billion in FY2003 to cover
immediately all retirees with any level of disability. With its phase-in of benefits over
the next five years for those with disabilities of 60% or above, the cost of the House
version grows from $1.1 billion in FY 2003 to $2.7 billion in 2007 (see Table 3 below).13
Over ten years, the Senate bill is estimated to cost $61 billion or about two and a
half-times the House bill’s cost of $24.8 billion. Both bills provide benefits that are ten
times higher, on average, than special compensation now provided for the “severely
disabled,” those determined to have service-related disabilities of 60% or above within
four years of leaving the military. The Administration’s estimates of ten-year costs are
higher than CBO estimates: $29 billion for the House bill and $74 billion for the Senate
bill.14
Table 3. Estimates of First, Five and Ten-year costs of House and
Senate versions of concurrent receipt in H.R. 4546
(Dollars in billions)
Payments to
House:
Senate: Full
severely
Partial
Fiscal Years and Type of Spending
Concurrent
disabled
Concurrent
Receipt
retirees
Receipt
TOTAL COST, FY2003 including:
0.1
1.1
4.3
Direct spending for current retirees
0.1
0.5
3.2
Accrual payments for workforce
NA
0.6
1.1
Total Cost, FY 2007 including:
0.1
2.7
6.0
Direct spending for current retirees
0.1
2.0
4.5
Accrual payments for workforce
NA
0.7
1.5
FY 2003-2007 including:
0.3
8.8
26.0
Direct spending for current retirees
0.3
5.8
19.5
Accrual payments for workforce
NA
3.0
6.5
FY2003-FY 2012 including:
0.7
24.8
61.2
Direct spending for current retirees
0.7
17.8
45.8
Accrual payments for workforce
NA
7.0
15.4
Sources: CBO, Cost estimate, H.R. 4546, Bob Stump National Defense Authorization Act for Fiscal Year
2003, May 3, 2002; reported version is the same as House-passed; CBO, updated estimate for Senate-passed
bill.
Note: Includes beneficiaries from DoD, Coast Guard, Public Health Service and NOAA.
12 (...continued)
Military Retirees, 2002.
13 The House version of H.R. 4546 provides that VA benefits increase each year until by FY2007,
retirees receive the full amount of both benefits. For example, the annual VA benefit for a retiree
with 60% disability would rise from $1,500 in FY 2003 to $10,200 in FY 2007.
14 For example, a severely disabled retiree with a 60% disability today receives $600 a year but
would receive $9,480 under the House or Senate bills. See OMB, Statement of Administration
Policy for S. 2514 for Administration’s estimates of costs.

---

CRS-6
Effect on the Deficit. Concurrent receipt would establish a new entitlement
program by providing higher benefits for current retirees. Those funds (direct spending)
make up most of the cost and would outlay immediately and persist over time. This could
lead to additional pressure to cut other programs that are funded annually in order to
reduce any deficit.
Potential that costs may be higher. If more military retirees apply for benefits
or disability levels grow beyond those that are assumed by either CBO and DoD, then
costs could prove to be higher than anticipated. In contrast to CBO, the Department of
Veterans Affairs expects that the number of eligible military retirees could more than
double from current levels because retirees would have a significant incentive to apply for
benefits as well as get their disability levels re-evaluated as they can do at any time. Both
DoD and CBO assume that the effect of this incentive would be more modest.15
Who Pays for the Accrual Costs of Today’s Military. The future cost of
concurrent receipt for DoD’s current military workforce - known as the accrual costs that
finance benefits as they accrue over time - could increase DoD’s budget by $0.7 billion
in the House bill and $1.7 billion in the Senate bill. Including these costs in DoD’s
budget is intended to give DoD visibility on the full cost of military personnel when
choosing between funding investments in equipment or infrastructure and increasing the
number of military personnel.16 DoD is concerned that concurrent receipt will squeeze
other military requirements.17
The Senate bill makes no changes in current statute so DoD would continue to pay
the accrual cost as part of its total budget request (see Table 3 above). The House bill,
however, reverses this precedent and requires that the Treasury Department (i.e. general
revenues) cover the additional military retirement cost of providing concurrent receipt.18
Changing this requirement that DoD carry the burden of adopting new benefits might
establish a precedent for transferring other benefit costs to the Treasury from individual
agencies. That would reduce the cost for agencies but would not reduce the cost to the
government.
15 Ibid; see Mark Dye and Patrick Mackin, SAG Corporation, Prohibition on Concurrent Receipt
of Military Retired Pay and Veterans Disability Compensation, A Review, March 25, 2002, p.
23ff. Although military retirees are evaluated for disabilities only once by DoD when they leave
military service, retirees can get additional, as well as revised evaluations, from the VA at any
time (see Ibid, p. 5).
16 For the same reason, most of the cost of benefits for civilian government employees are carried
in individual agency budgets.
17 Armed Forces Press Service, “Double-Dip Retirement Measure May Become a Law,”
American Forces Information Service, September 25, 2002; see
[http://www.defenselink.mil/news/Sep2002/n09252002_200209253.html]
18 See H.Rept. 107-436, Bob Stump National Defense Authorization Act for Fiscal Year 2003, p.
477-481. To implement this change, the House bill changes the underlying code, specifically,
Title X, sections 1414, 1465, and 1466; see also, CBO Cost Estimate, H.R. 4546, Bob Stump
National Defense Authorization Act for Fiscal Year 2003, May 3, 2002, p. 15.

---