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VA 'Retro Pay' Update
Tom Philpott | December 01, 2006

‘Retro Pay’ So Far Reaches 31,000, Averages $1500

Two months into a year-long review of pay records and disability compensation histories for 140,000 military retirees have produced a total of $45 million in back pay to 31,000 disabled retirees, say officials in charge.

The lump-sum payments average out to about $1500 apiece. Ten retirees have received more than $25,000 each, a sign that back payments will vary widely based on individual circumstance.

The retroactive payments mostly involve VA dollars withheld because of start-up difficulties with two “concurrent receipt” programs for military retirees: Combat-Related Special Compensation (CRSC) and Concurrent Retirement and Disability Pay (CRDP).

Cases settled so far are the low-hanging fruit for accountants and computer programmers involved in what the departments of Defense and Veterans Affairs call their “Retro Pay” project. Next up are cases requiring an extra data run to add missing information, to be followed by the most complex cases requiring individual file reviews to calculate overdue pay.

Through November, records of 42,000 retirees, all of them CRDP recipients, had been reviewed. Nearly 11,000 were up to date and required no action, said Pat Shine, deputy director for operations with the Defense Accounting and Finance Service (DFAS) in Indianapolis. But the same computer data runs led to retroactive payments for almost 30,000 retirees at the end of October and another 1,100 at the end of November.

The Department of Veterans Affairs is making most of the payments. But 4,500 retirees have received money from both VA and DFAS and 500 were owed money solely from DFAS, Shine said.

Letters of explanation are mailed to arrive a few days before the direct-deposit payments. They include a month-to-month “payment due statement” to show how retro pay was calculated.

Officials estimate that half of all retirees drawing CRDP or CRSC will have their files reviewed. Total retro payments are likely to fall short of the $500 million estimate used last summer. An analysis of 5000 payments led VA to revise its estimate to below $300 million, said Thomas J. Pamperin, assistant director for policy with VA’s Compensation and Pension Service. But he also noted that those cases all involved CRDP which could be smaller payments, on average, than for the CRSC-eligible retirees still to come.

The sharp drop from October to November in files reviewed by DFAS had VA officials reconsidering their own estimates of when most eligible retirees will see their compensation caught up.

“We’ve been saying that we’d have 90 percent of the cases done by April,” said Pamperin. “It ain’t gonna happen, not at this rate.”

Shine at DFAS, which has the lead in screening retiree files for back payment, said the plan always has been to have a majority of files reviewed within six months, which means by the end of March 2007, and to have all payments made by September. DFAS remains confident it will meet those goals, Shine said. However, the promised review of a “majority” of cases by March will be nearer to 50 percent than to the 90 percent that VA officials had expected.

No month will match the volume of payments made at the end of October, he said. The next big one will be January, perhaps 20,000.

Before CRSC began June 1, 2003, and CRDP on Jan. 1, 2004, every military retiree who accepted tax-free VA compensation for service-related injuries or illnesses saw their taxable retired pay reduced dollar-for-dollar due to the long standing ban on “concurrent receipt.”

Congress has eased that ban in stages. CRSC ended the cut in retired pay cut for disabilities tied to combat or combat training. CRDP ended the offset for retirees with disability ratings of 100 percent and the offset is being phased out over several years for disabilities rated 50 to 90 percent. Neither program helps retirees with non-combat disabilities rated 40 percent or lower, or veterans retired on disability before completing 20 years of service.

Most of the underpayments being corrected now occurred when retirees eligible for CRDP or CRSC saw their VA disability rating raised. A higher rating means more VA compensation, payable back to the date that the retiree applied for reconsideration of physical or mental condition.

The VA compensation system, however, continued to handle retirees as if, in all cases, any boost in VA compensation created a matching drop in retired pay. That assumption doesn’t hold for retirees under CRDP or CRSC.

Yet VA did what it always had done when a retiree became eligible for more VA compensation. Rather than make a retroactive payment, it withheld the money, assumed the retiree continued to draw full retired pay from DFAS and then directed the retiree to claim an appropriate portion of retired pay as tax-exempt, like the withheld VA compensation, on their next tax return.

“All we really did was just move the money from the left pocket to the right pocket,” said Shine. But the tried-and-true process for handling retroactive entitlement to VA compensation creates an underpayment for retirees under CRSC or CRDP because they can receive both payments.

Even as work on the retro pay backlog continues, 2,500 CRSC- and CRDP-eligible retirees each month get word of a change to their VA disability rating, thus creating a potential retroactive pay obligation. In time, said Shine, “we’ll be able to handle those on a real time basis.” 

A retro pay hotline set up by DFAS in September so far has received 24,000 calls. That toll free number is 1-877-327-4457.

To comment on this column, e-mail milupdate@aol.com or write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111

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Copyright 2013 Tom Philpott. All opinions expressed in this article are the author's and do not necessarily reflect those of Military.com.

About Tom Philpott

Tom Philpott has been breaking news for and about military people since 1977. After service in the Coast Guard, and 17 years as a reporter and senior editor with Army Times Publishing Company, Tom launched "Military Update," his syndicated weekly news column, in 1994. "Military Update" features timely news and analysis on issues affecting active duty members, reservists, retirees and their families. Tom also edits a reader reaction column, "Military Forum." The online "home" for both features is Military.com.

Tom's freelance articles have appeared in numerous magazines including The New Yorker, Reader's Digest and Washingtonian. His critically-acclaimed book, Glory Denied, on the extraordinary ordeal and heroism of Col. Floyd "Jim" Thompson, the longest-held prisoner of war in American history, is available in hardcover and paperback.