Whether you’re medically or physically retired for disability before 20 years of service, have you checked your eligibility for Combat Related Special Compensation?
If you’re retired with at least 20 years of service (whatever military pension you’ve earned) are you receiving Concurrent Retirement and Disability Pay? *
Here’s an example of how complicated this military retirement documentation can get. Even when you’re already financially independent, it still affects your income taxes.
And yeah, I’ve crammed a few obscure acronyms into the title of this blog post. I’ve decrypted them in the text below, but please let me know if you have questions on their details.
A reader writes:
I’m seeking clarity to ensure my SBP premium is still paid since opting to elect CRSC pay over Air Force retirement pay. (This was more beneficial financially, and tax exempt.) This was the response from Ask DFAS yesterday, are you able to help gain clarity on this? Does this mean my VA pay is diminished by the amount listed, plus some from CRSC?
“Because you are in receipt of a VA entitlement that is less than your military retired pay, we have to deduct the VA waiver which is less than your retired pay gross. The remaining amount after offset is $272.09 and that is applied to part of your SBP premium which is $280.72. So, the remaining $8.63 is withheld from your combat related special compensation.”
Mainly, I’m just trying to find out where that $280.72 is being offset from – my VA pay? My retirement pay? Or otherwise? Thank you!
—————
If it’s any consolation, DFAS’s response confused me too. It’s not my first time that’s happened, and it won’t be my last.
The Defense Finance Accounting Service is deducting your entitlements to pay the premium on your Survivor Benefit Plan, so you know that your premium is still being paid.
Screenshot of a typical eRAS.
The rest of the answers that I’m giving below should be documented in your DFAS Retiree Account Statement (on myPay) and in your bank’s monthly checking account statement. I’ll get into those statements after writing about the background.
Background:
A federal dual-compensation law from the 1950s restricts the simultaneous receipt of military pensions and VA disability compensation.
To comply with that law, vets who receive an active-duty or Reserve pension can choose to have their (taxable) military pension offset by (tax-exempt) VA disability compensation. It leaves you with the same total amount of monthly deposits, yet lower income taxes.
Congress has spent at least the last 40 years (that I’m aware of) chipping away at the dual-compensation law without actually eliminating it. Combat Related Special Compensation is one of the workarounds to “offset the offset” by restoring some of the pension that you gave up to receive VA disability compensation.
Here’s a frequent question on the DFAS website, and this is a verbatim quote:
“Q: What happens to my Retired Pay if I switch to CRSC?
A: If you elect to receive CRSC, your retired pay will be offset by the full amount of your VA disability pay. You may still receive some retired pay if your retired pay exceeds your VA disability pay.
[…]
CRSC payments are subject to deductions for monthly SBP premiums or garnishments.
Also, CRSC is non-taxable, so it is issued separately from your retired pay. You may begin to receive two separate payments from DFAS each month, one for retired pay (taxable) and one for CRSC (non-taxable).”
[Sidebar: Retirement pay is generally taxable. The VA’s CRSC and disability compensation are tax-exempt. However both DFAS and the VA frequently use the word “pay” as an equivalent term for “compensation.” This annoys tax accountants– and confuses many military families who are trying to figure out their benefits.]
Stacking up the statements:
Here’s how your CRSC was initially implemented by DFAS:
You’re receiving your pension (reduced by the offset for VA disability compensation), plus your CRSC (to compensate for the reduced pension), and plus your VA disability compensation. Your Retiree Account Statement on myPay could show:
+ Pension
– the offset VA disability compensation,
+ CRSC,
+ VA disability compensation.
This is listed in the Pay Item Description portion of the RAS with terms like “gross pay”, CRSC, and “VA waiver”. The SBP Coverage part of the RAS shows the SBP premium.
SBP premiums that are paid from your pension are also not taxed. For tax accounting purposes this is (even more) complicated by paying your SBP premiums as a deduction from your pension and compensation. SBP premiums are the very first deduction from your pension– before taxes– in order to reduce the pension’s taxable amount.
This complicates the DFAS calculation:
+ [Pension – VA disability compensation] = $272.09,
– [SBP $272.09 premium] of your total $280.72 SBP premium,
+ CRSC, then
– [SBP remaining $8.63 premium], and finally
+ VA disability compensation.
DFAS and VA deposits in a checking account.
The VA uses a different financial account than DoD for their deposits, although that deposit also comes through DFAS.
Your checking account statement should show at least two deposits each month: CRSC and VA disability compensation. If your pension was bigger than your SBP premium then you’d see three deposits.
You could track your (taxable) pension income on your Retiree Account Statement, and you’d also see that income on your annual Internal Revenue Service Form 1099-R pension distribution summary. However your pension is wiped out by your SBP premiums, so you have no net pension income. I doubt that DFAS would issue a 1099-R full of zeroes, and we already know that VA disability compensation & CRSC are never reported to the IRS.
Keep in mind that your military pension, your VA disability compensation, and your CRSC all have an annual Cost-Of-Living Adjustment. (It’s the same Consumer Price Index algorithm as the Social Security COLA.) Your SBP premium is a percentage of your pension, so it also rises each year. Your SBP annuity is paid up when you’ve reached age 70 and made at least 360 monthly payments– whichever takes longer.
* Note that the CRDP name was changed in February 2026. The July 2025 update to the Financial Management Regulation (DoD 7000.14-R) was changed to “Concurrent Military Retirement Pay and Department of Veterans Affairs (DVA) Disability Compensation”, followed by the actual change (in 2026) to Volume 7B Chapter 64. Apparently we don’t have an acronym for that yet: “CMRPD&DVADC’…?
Call To Action:
– If you’re a military retiree, then check your monthly Retiree Account Statement whenever you change something.
– It’s a good idea to check your RAS every month, but at a minimum you should check the December RAS to see how your pension & VA disability compensation will change next year.
– If you’re not retired yet, then make sure you’ve downloaded all of your Leave and Earnings Statements before you separate! Your myPay or MarineOnLine account might shut down your LES access after you leave the service.
There are no affiliate links or paid ads in this post. Try your military base library or local public library before you pay money for these books– in any format.
Military Financial Independence on Amazon:
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Raising Your Money-Savvy Family on Amazon:
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Related articles:
Why You File Your Veterans Disability Claim (Not Just How)
Family Estate Planning For Your Disability
This is why we blog: another “net disability exclusion” story
VA Disability Compensation Withholding, Offset, & Recoupment
CRDP vs CRSC: Getting Back the Retired Pay the VA Waiver Takes
How VA Disability Compensation Affects Military Retirement Pay
Why Some Disabled Veterans Can’t Get Both VA Disability and Military Retirement Pay
CRSC and CRDP Military Retirement Pays and How to Get Them
Military Financial Independence 