DoD Disability

Topics:
DoD Disability
DoD Disability for Medical Separations
DoD Disability for Medical Retirements
DoD Disability and Taxes
DoD Disability with VA Disability

 


DoD Disability

The Department of Defense (DoD) gives Military Disability Benefits to all service members who leave the military with service-connected medical conditions that make the service member Unfit for Duty.

To receive DoD disability, a service member must first go through the DoD Disability Process.  

During the process, a service member’s case is reviewed by two boards: the Medical Evaluation Board (MEB) and the Physical Evaluation Board (PEB). The MEB first reviews the case and determines which of the service member’s conditions are medically unacceptable. The MEB then submits a report to the PEB. DoD disability is given to disabled veteransNext, the PEB reviews the case and officially decides which conditions qualify for DoD Disability. To qualify, each condition must meet the requirements for Service-Connection and Unfit For Duty.

Military Disability Ratings are then assigned by the VA to each of the conditions that qualify through the Integrated Disability Evaluation System. These ratings are based on the laws of the VASRD, and they determine (1) whether the service member will be Medically Separated or Medically Retired, and (2) the exact type and quantity of DoD Disability the service member will receive.

 

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DoD Disability for Medical Separations

If the service member is given a Total Combined Military Disability Rating of 0%, 10%, or 20%, he is medically separated from the military.

All medically separated service members receive a single lump-sum severance payment for their DoD Disability. This payment is equal to 2 months of basic pay for each year of military service he gave. The minimum number of years is 6, so even if he only served for 2 years, his payment would be calculated as though he had served for 6 years. The maximum number of years is 19. Before January 28, 2008, the maximum was 12 years, and the minimum 3.

So, if Bob’s basic pay is $1,000/month and he served for 10 years, then his DoD Disability Severance Pay would be $20,000 (2 months: 2 x 1,000 = $2,000; for 10 years: 2,000 x 10 = $20,000). 

Medically separated service members are not given any other benefits for their DoD Disability.

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DoD Disability for Medical Retirements

If the service member is given a Total Combined Military Disability Rating of 30% or higher, he is medically retired from the military.

When a service member is medically retired, he receives all the benefits of a service member who retired regularly from the military, including complete medical care, and a monthly disability/retirement payment for the rest of his life.

There are a few different factors used to determine the exact amount of these monthly payments. The basic formula is:

Pay Base x Disability or Retirement % = Monthly Payment

To determine your Pay Base:

If you entered the military before September 8, 1980, your pay base is equal to your salary during your final full month in the service.
If you entered the military on or after September 8, 1980, your pay base is equal to your average monthly salary for the last three years of your military career.

To determine your Disability or Retirement %:

You get to choose one of the following (preferably the one that will give you the higher monthly payment):

Your Total Combined Military Disability Rating
Your retirement percentage. This is equal to your total number of years in the military multiplied by 2.5%. So, if you were in the military for 18 years, your retirement percentage would be 45% (18 x 2.5 = 45).

For both of these options, the maximum percentage allowed is 75%. So even if you are given a 100% rating for disability, you can only calculate your pay using 75%. This is because the max you can get for regular retirement with a 30-year cap is 75%, and you can never receive more than the maximum allowed for retirement. Disabled veterans will still ultimately receive more than regular retirees, though, since they will also receive disability benefits from the VA.

Here’s a few quick examples.

Let’s say Bob entered the military in 1979, served for 6 years, and received a disability rating of 40%. His base pay would be equal to his salary during his last month on active duty. Let’s say this was $500. Since he only served for 6 years, his retirement percentage would only be 15% (6 x 2.5 = 15), so he would want to choose his disability percentage. His monthly payment would then equal $200 (500 x 40% = 200).

Let’s say Betsy entered the military in 1995, served for 18 years, and received a disability rating of 30%. Her base pay is equal to her average monthly salary for the last 3 years of her career—let’s say $1,000. Since she served for 18 years, her retirement percentage would be 45% (18 x 2.5 = 45), so she would want to choose this over her disability rating. Her monthly payment would then be $450 (1,000 x 45% = 450).

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DoD Disability and Taxes

All DoD Disability compensation is taxable unless the condition that qualifies for DoD Disability occurred in combat or combat-related activities.

So, if your condition happened while in combat or doing something directly related to combat, then the money you receive from the DoD is NOT taxable.

If your condition was not caused by combat activities, then your DoD money IS taxable.

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DoD Disability with VA Disability

Veterans generally cannot receive monthly monetary benefits for both DoD Disability and VA Disability. Instead, whatever money is received from the VA is subtracted from the monetary amount given by the DoD (for both disability retirement and regular retirement).

So, if Bart receives $300/month from the DoD and then starts receiving $200/month from the VA, the payment from the DoD would decrease to $100 (300 – 200 = 100). 

Now this may not seem very nice or fair, but there is actually a huge benefit to this: most DoD money is taxable, but VA money is NOT. So the taxable money is being replaced by non-taxable money. That’s pretty good…

There are, however, a couple of laws that have been passed that counteract this principle: Concurrent Retirement and Disability Pay (CRDP) and Combat Related Special Compensation (CRSC).    

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