Congressional researchers say that eliminating the ability of nearly 600,000 military veterans to collect retirement pay and disability compensation simultaneously could save billions and contribute to deficit reduction.
The Congressional Budget Office, a federal agency that provides lawmakers with budgetary and economic information, says doing so could save the government $139 billion between 2018 and 2026. The CBO's report was published online Dec. 8 as part of a series of options for reducing the federal deficit from 2017 and 2026.
The practice is called "concurrent receipt." By law, veterans are eligible to collect both sets of pay if they meet specific criteria.
Vets who sustained career-ending combat injuries are eligible for combat-related special compensation, while those veterans who received a disability rating of 50 percent or more after at least 20 years of service are eligible for what is termed concurrent retirement and disability pay.
Until 2003, disabled veterans had to select either their full retirement compensation from the Department of Defense or their disability benefit from Veterans Affairs with a reduced retirement annuity. This penalty became known as the "VA offset."
In its argument for eliminating concurrent receipt, the GAO states, "Disabled veterans would no longer be compensated twice for their service, reflecting the reasoning underlying the creation of the VA offset. However, military retirees who receive VA disability payments would still receive higher after-tax payments than would non-disabled retirees who have the same retirement annuity because VA disability benefits are not taxed."
But many veterans groups have long argued that the two payments should be completely uncoupled.
"For decades, [the Military Officers Association of America] has sought legislation providing full relief from the 19th-century law that required a dollar-for-dollar offset of military retired pay for VA disability compensation," wrote retired Air Force Col. Mike Hayden, then MOAA's director of government relations, in 2015.
"MOAA's position is that career service members earn their retired pay by service alone and those unfortunate enough to suffer a service-caused disability in the process should have any VA disability compensation from the VA added to, not subtracted from, their service-earned military retired pay."
Congress authorized some veterans to take both as military personnel began to sustain grievous wounds in Afghanistan and Iraq. Since then the number of veterans receiving both retirement pay and disability compensation has risen drastically — from 33 percent in 2005 to more than 50 percent in 2015. Last year, about 55 percent of the 2 million or so military retirees were subject to the VA offset penalty. Of those, about half — 575,000 retirees — took both payments totaling $10 billion, according to CBO estimates.
Not all military retirees who also earn VA disability compensation benefits, and thus have a VA offset, are eligible for concurrent receipt, the CBO explains.
Rising personnel costs continue to concern members of Congress and the Pentagon. In 2012, the last year CBO studied the expense, the Defense Department spent $150 billion on compensation, including $90 billion for food, housing and pay plus another $16 billion set aside for future retirement annuities.
The new CBO report cites a common argument suggesting the VA's retirement and disability system has a dual purpose, to reward those who spend their careers in uniform while recognizing the impact of military service on the human body.
It remains to be seen how the next Congress and the incoming administration will respond to CBO's recommendation. President-elect Donald Trump has promised to bring the U.S. debt to zero in eight years, although he also touts a massive — and potentially costly — military expansion.