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Disability Pay: DoD vs. VA

The Defense Department and the Department of Veterans Affairs have separate systems for awarding disability pay.

The Defense Department policy has two facets:

• Disability severance is paid to members who have less than 20 years of service and disabilities rated less than 30 percent. Disability severance pay equals two months of a member’s basic pay for each year of service, up to 12 years (a maximum of 24 months of basic pay). These members also may be eligible for monthly disability compensation from the Department of Veterans Affairs if the VA rules that the disability is “service-connected.”

• Permanent/temporary disability retirement is paid to members who have 20 or more years of service or disabilities rated 30 percent or more. For reserve component members, at least 7,200 retirement points are required to qualify for 20 years of creditable service.

The payment rate is the higher of two computations: multiplying the retired pay base either by the percentage of the disability rating or by 2.5 percent of the number of years of service, up to a 75 percent ceiling. The retired pay base is final basic pay for those who entered service before Sept. 8, 1980, and average basic pay over the three highest earning years for those who entered service on or after that date.

The Defense Department and VA disability retirement systems have important differences, chief among them the fact that the services assign ratings only to medical deemed “physically unfitting,” with the intent of compensating for the loss of a military career. The VA may rate any service-connected condition to compensate for the loss of civilian employability.

Also, military disability retirement ratings are final upon disposition, while VA ratings can vary over time, depending on how the condition progresses.

Finally, military disability compensation varies only by the percentage disability rating, but also by a member’s years of service and basic pay, while VA payments are based on the percentage rating of the disability and the veteran’s family status.