Potential Changes to Veterans' Benefits Under the Major Richard Star Act

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Note: This publication was revised in October 2023 to correct minor factual errors related to the characterization of the DoD disability evaluation process and the amount of direct spending on military retirees.

Retired service members with a service-connected disability cannot always receive their full retirement pay and disability benefits because of rules against "double-dipping" from federal funding sources. Veterans' advocates have long argued that the current law is unfair and that it denies disabled veterans the full compensation that they have earned from their military service. New legislation would drop the offset that reduces retirement pay for some disabled veterans. If the Major Richard Star Act is signed into law, what would change for disabled veterans, and how many would actually see an increase in their compensation?

Service members who are injured in the line of duty and retire due to disability or retire after serving for 20 years could qualify for two types of payments: military retired pay from the U.S. Department of Defense (DoD) and U.S. Department of Veterans Affairs (VA) disability compensation (VADC).

However, current law generally prohibits an individual from receiving two types of government payments for the same period of service (38 U.S.C. 5304[a]). As a result, there is a dollar-for-dollar offset in place for veterans who are eligible for both military retired pay and VADC: Military retired pay is typically reduced by the amount of VADC that the veteran receives to prevent "double-dipping." Some groups of veterans are exempt from this rule or eligible for special compensation that reduces the offset. Veteran advocacy groups have expressed concerns about the offset, arguing that service members are entitled to the full retirement pay they have earned.

These concerns have garnered even more attention since the 2021 death of Major Richard Star, a U.S. Army veteran who was diagnosed with lung cancer linked to toxic burn pit exposure during military deployments (Venhuizen, 2021). Major Star was not eligible to receive his full retired pay and VADC concurrently, and his retirement compensation was reduced by the amount he received in VADC.

In 2022, Congress expanded compensation for service members who had been exposed to burn pits with the passage of the Promise to Address Comprehensive Toxics (PACT) Act, but debate on "concurrent receipt" of retired pay and disability benefits stalled. However, the Major Richard Star Act, introduced in both the House and Senate, proposes amending Title 10 to expand the number of veterans who would be exempt from the offset (H.R. 1282, 2023; S. 344, 2023).

As debate gets underway, it is important to understand the programs that are currently in place to reduce or eliminate the offset, how eligibility for these programs would change under the Major Richard Star Act, and how many veterans could see their benefits change.

How Does the Offset Currently Work for Veterans Who Receive Multiple Types of Benefits?

When veterans exit the military, they may qualify for several types of pay, depending on their circumstances. Veterans with at least 20 years of service are eligible to receive military retired pay, which compensates them based on their service career. Veterans who are medically discharged due to a disability may receive disability retirement payments, which could be based on either their service career or the degree to which they are disabled after being injured in the line of duty—their DoD disability rating. Veterans who leave the military prior to 20 years of service without a disability may receive separation pay. Finally, veterans with disabilities may receive VADC, which is based on their disability rating and intended to compensate veterans for the potential loss of civilian earnings.

Although these payments have different objectives, the Code of Federal Regulations (38 C.F.R. 3.700) indicates that multiple payments may not be made for the same period of service, regardless their intended purpose (see Rennane et al., 2022b). As a result, veterans who qualify for more than one of these benefits are subject to an offset.

Veteran advocacy groups have long maintained that the offset is unfair, and some programs have been enacted to eliminate it for selected groups of veterans. These changes have been enacted piecemeal, likely in an attempt to balance concerns from constituents against the cost of expanding benefits and legal precedent preventing concurrent receipt of benefits (Kamarck and Schwartz, 2023).

Currently, DoD administers two programs that reduce or eliminate the offset:

• Concurrent Receipt of Disability Pay (CRDP) removes the offset for some veterans, allowing them to receive full military retired pay and VADC. To be eligible, veterans must have at least 20 years of service at the time of retirement and a service-connected disability rating of at least 50 percent.
• Combat-Related Special Compensation (CRSC) reimburses some veterans for part of the offset to their retired pay. To be eligible, veterans must have at least 20 years of service at the time of retirement or be retired due to a disability (i.e., Chapter 61 retirees, many of whom have less than 20 years of service). Eligible veterans must also have a VA disability rating of 10 percent or more, with at least some portion of the rating attributable to a combat-related injury.

Table 1 summarizes the key differences in eligibility criteria between the two programs. Some veterans could qualify for both programs but must choose to participate in only one (usually the one offering the largest financial gain). For example, a veteran who retired from the military with 20 years of service and a combined VA disability rating of 50 percent or more—with at least one combat-related injury rated at 20 percent or more—would qualify for both programs.

However, there are some differences between the two programs. Veterans who are eligible for CRSC may be disability retirees, who can have disability ratings below 50 percent (but at least 30 percent). On the other hand, veterans who are eligible for concurrent receipt need to have a service-connected disability, but not necessarily one associated with combat. As another example, a disability retiree with 13 years of service and a VA disability rating of 50 percent, with at least 20 percent of that rating attributable to a combat-related injury would qualify for CRSC only. Note that, for disability retirees, CRSC is capped at the amount of military retired pay for which the veteran would have been eligible based on their years of service (Kamarck and Schwartz, 2023).

Concurrent receipt is automatic, while veterans must apply to participate in CRSC. Another key difference is that special compensation payments under CRSC are not taxable (see Kamarck, 2022, Table 1).

What Would Change Under the Major Richard Star Act?

The Major Richard Star Act proposes eliminating the offset between DoD retired pay and VADC, essentially extending eligibility for concurrent receipt to another subgroup of veterans: those with a combat-related rating of at least 10 percent (i.e., who qualify for CRSC) but have fewer than 20 years of service.

Table 2 assesses eligibility for concurrent receipt in eight example retirement scenarios with varying years of service, combined VA disability ratings, and combat-related disability ratings. The columns "Eligible for Concurrent Receipt" and "Eligible for CRSC" highlight whether a veteran with the given set of characteristics would be eligible for concurrent receipt or CRSC under current law. The rightmost column indicates whether each veteran's eligibility would change under the Major Richard Star Act.

As the table shows, the Major Richard Star Act would change a veteran's eligibility in two of the eight example cases (retirement scenarios 6 and 7). In scenario 3, a veteran with 20 years of service at retirement and a disability rating under 50 percent but a combat rating over 10 percent is not eligible for concurrent receipt under current law and would remain ineligible under the Major Richard Star Act. This veteran's eligibility status would not change because, as currently written, the legislation proposes changing eligibility for veterans with fewer than 20 years of service only. Furthermore, veterans with ratings below 50 percent who are eligible for both military retired pay and VADC but do not have a combat-related injury (retirement scenarios 4 and 6) would remain ineligible for both programs.

How Many Veterans Would Benefit?

DoD's Office of the Actuary reported that, in fiscal year (FY) 2021, a total of 95,001 retirees were receiving CRSC, of whom 50,302 were disability retirees (DoD, 2022). Assuming these retirees had less than 20 years of service, all 50,302 veterans would become eligible for concurrent receipt under the Major Richard Star Act. More than 99 percent of this group is reported to have a VA combined disability rating 50 percent or more (DoD, 2022). Prior analyses found that veterans who received CRSC were predominantly midcareer enlisted service members at the time of their retirement: In 2015, more than 95 percent of disability retirees receiving CRSC were enlisted, with 85 percent in paygrades between E-4 and E-6 (Rennane et al., 2022a).

Overall, veterans who receive CRSC make up a relatively small share of all military retirees. Approximately 130,000 disability retirees were receiving military retirement payments in FY 2021 (DoD, 2022). Therefore, the approximately 50,000 veterans who could be affected by this change represent approximately 38 percent of all disability retirees. The DoD Actuary's report indicates that, of approximately 2 million military retirees in FY 2021, more than 751,000 received their full military retired pay and VADC (DoD 2022).

Other groups of veterans would remain unaffected if the Major Richard Star Act is signed into law. Veterans with disability ratings below 50 percent but no combat-related disabilities would still be subject to the offset. Similarly, veterans who face offsets to other types of pay, such as separation pay and VADC (e.g., Rennane et al. 2022b), would also not be affected.

What Can Veterans and the Country Expect if the Major Richard Star Act Becomes Law?

As written, the Major Richard Star act would eliminate the offset only for veterans who are already eligible for CRSC. How these payments are determined is complex, and the potential change in benefits depends on many factors including the following:

• the difference between the combined disability rating and the combat-related disability rating
• eligible veterans' family composition (which determines the size of VA benefits)
• eligible veterans' marginal tax bracket
• eligible veterans' monthly military retired pay.

See Asch, Hosek, and Mattock (2014), Kamarck and Schwartz (2023), and Rennane et al. (2022a) for detailed explanations of how benefits are determined under CRSC.

The Congressional Budget Office (CBO) score of the House bill (H.R. 1282) estimated that affected veterans could receive approximately $1,200 more each month on average (CBO, 2023). Over the next ten years, this change could result in an additional $9.75 billion in direct spending on military retirees (CBO, 2023).

In summary, the Major Richard Star Act could remove the offset between military retired pay and VA disability benefits for approximately 50,000 veterans with combat-related disabilities who do not currently meet the criteria for concurrent receipt. While the act would meet advocates' specific goal of eliminating the offset in benefits for this particular group of veterans, other groups of veterans would still be subject to the offset. Furthermore, the bill does not address the root of the concerns about concurrent receipt and offsets between other types of government benefits. Therefore, long-standing debates surrounding these issues will likely continue even if the bill is signed into law.

Prior proposals to reform VA benefits have suggested that there are more-comprehensive ways to address this issue (see President's Commission on Care for America's Returning Wounded Warriors, 2007). A full solution to the problem will require a systematic approach, evaluating the objectives of various types of compensation, assessing the implications for equity, and considering how compensation may be better aligned to efficiently and fairly meet the needs of disabled veterans.

References

Topics

• Military Compensation
• Military Health and Health Care
• Retirement and Retirement Benefits
• Veterans Health Care