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VA Retro Pay: $150 Million and Climbing
Tom Philpott | August 31, 2007
VA ‘Retro Pay’ Nears $150 Million; 33,000 Files to Go

Almost 75,000 military retirees with disabilities who were underpaid for months or even years after becoming eligible for one of two “concurrent receipt” programs have received their long-awaited retroactive payments, say officials in charge of the “Retro Pay” program.

Approximately 33,000 pay files still need to be reviewed from an original pool of 133,000 potential recipients, said Thomas J. Pamperin, deputy director of the compensation and pension service for the Department of Veterans Affairs. That review still is expected to be completed by mid-November, according to the Defense Finance and Account Service (DFAS).

The catch-up payments, which became necessary because of difficulties implementing the Combat-Related Special Compensation (CRSC) and Concurrent Retirement and Disability Pay (CRDP) programs, so far total close to $150 million. The average size of payments made by VA has climbed to $2100, up from an average of $1500 paid to the first 30,000 or so retro pay recipients last fall.

When all files have been reviewed, DFAS will turn its attention to a new pool of underpaid retirees. This second group of 12,000 to 16,000 retirees became eligible for CRSC or CRDP between the time the retro pay program began last summer and April of this year when DFAS finally had computer programs in place to make accurate and timely concurrent receipt payments as retirees become eligible.

“This has proved to be an incredibly complex process for all involved,” said Pamperin, who leads a team of VA officials that has worked closely with DFAS on the retro pay program for two years.

Until CRSC began on June 1, 2003, and CRDP on Jan. 1, 2004, all military retirees with service-related disabilities had to accept a dollar-for-dollar reduction in taxable retired pay when they began to receive tax-free VA compensation for their service-related injury or illness.

Congress enacted CRSC to allow concurrent receipt for combat-related disabilities. It approved CRDP, under a phased schedule, to benefit retirees with service-related disabilities rated at least 50 percent disabling.

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

Pay records of about half of all retirees drawing CRDP or CRSC are being reviewed but the total amount of retro payments needed is far below the $500 million figure initially projected.

The pay review process also is slower than was expected. Last year DFAS officials predicted that all back payments would be made by the end of September 2007. The target is mid-November 2007. DFAS has the lead in reviewing pay records. VA is making most of the retro payments.

Through late August, Pamperin said, VA had paid 56,140 retirees a total of $119 million in back pay. DFAS, on behalf of the Department of Defense, had paid an additional $28 million to 17,000 retirees.

The size of individual payments varies widely. For example, in August the VA paid five retirees more than $25,000 apiece, or a total of $179,000.

About one of every three pay records reviewed – 35,000 so far of nearly 100,000 files – shows no under payment. That means many more retirees than projected have been properly compensated and will be getting no retro payments afterall.

DFAS and VA officials notify retirees only if an under payment is discovered. It’s a feature of the program that frustrates many retirees. Many will never know if their pay records were even reviewed.

Though DFAS originally estimated that 133,000 retirees potentially were due back pay there was no way to be sure until files were reviewed. This is being done using a special computer program and, for more complex cases, having staff review by hand individual pay records to make necessary calculations.

“We might be getting down to the nubs here,” Pamperin said, “where an increasing percentage of these cases will not be permitted to be paid automatically but will have to be reviewed [by staff].”

The 33,000 files still to be reviewed from the original batch are considered more complex for various reasons. Some individuals have seen multiple changes to their VA rating since becoming eligible for concurrent receipt. Others are eligible for both CRSC and CRDP and have switched between the two. Retirees can’t receive both pays simultaneously.

Other retro payments are taking longer to calculate because they involve a division of retired pay with an ex-spouse. The death of a retiree can sideline a retro payment. Finally, some of the more complex retro pay cases involve higher grade individuals with severe disabilities who draw large service disability retirements which complicate the CRSC and CRDP formulas.

Most of the remaining 33,000 files are CRSC recipients. Unlike CRDP, which involves an automatic payment, CRSC is paid only to retirees who apply for it. To do so, they first must receive their VA disability rating and then show that their disabilities are combat-related.

DFAS has set up a Retro Award hotline for retirees with questions about their entitlement to a back payment. The toll free number is 1-877-327-4457. Customer service representatives are available at that number Monday through Friday from 8:00 a.m. to 4:30 p.m. (ET). Military retirees can also find periodic updates on the retro pay at DFAS web site.