Medical Disability Retirement

Military retirement pay is an important part of the benefits offered to service members. In fiscal year 2020 alone, more than $62 billion was paid to more than two million retirees and survivors of military members.

A portion of those funds are paid to those drawing medical disability retirement pay as a result of having been retired by their branch of service because of medical issues. How large a portion?

Medically retired service members were paid $1.91 billion dollars in 2020. By comparison, Reserve retirees were paid roughly $7.43 billion in 2020.

What is medical disability retirement for military members? Overall the military retirement system is set up as a government-funded program that does not require contributions to a retirement fund for qualifying active duty and reservists.

But there is also a part of the retirement system designed for those who have medical conditions deemed “medically unfit to serve” according to government literature.

In general military retirees have perks that include base access for medical, base exchange/post exchange and commissary privileges and MWR programs. The military retirement system is well documented and understood in general, but some mystery surrounds medical disability retirement even among currently serving troops.

Three Military Retirement Categories

The three basic retirement categories for military members include:

1. Active component military retirement.
2. Reserve component military retirement.
3. Disability retirement.

For this article, we focus exclusively on medical disability retirement, but there are some common issues for retirees in general. For example: Retirement eligibility. All military retirees must meet the Department of Defense-specified criteria that is applicable in their retirement category:

Active component retirement: Available to those who have completed 20 years of military service. Retirement pay in this case begins after the military member’s final out processing.

Reserve component retirement: This pay is offered after 20 years of military service, but is based on a points system which can include points for the following:

• One point for each day of active service.
• One point for each attendance at a drill period.
• One point for each day of performing funeral honors duty.
• Fifteen points for each year of membership in a Reserve component.

There are other ways of calculating retirement points for Reserve members, the above is not the only method. In any case, Reserve retirement pay does not become effective until the veteran is 60 years old.

Medical disability retirement: Twenty years of active service is not required, but you must meet a Physical Evaluation Board to determine whether a medical issue qualifies for medical retirement. Not all who qualify have conditions that are permanent; some may qualify for temporary disability (we’ll cover that below).

Who Qualifies for a Medical Disability Retirement?

There is an important difference between being medically retired and being involuntarily separated from the military because of a medical condition. “Retirement” involves retirement pay, the “separation” option does not. You may or may not be entitled to separation pay if you are separated, but not retired, because of a medical condition. Each situation is handled case-by-case.

Keep that in mind when reading how to qualify for a medical retirement below. Service members who go before the Physical Evaluation Board are not guaranteed a “retirement” classification. Depending on the nature of your condition you may be separated without the same benefits as a medically retired service member.

Meeting the Physical Evaluation Board

The evaluation board is charged with deciding whether a service member’s condition allows them to remain on active duty, be medically retired, or separated. The following conditions may apply depending on circumstances:

• Those with fewer than 20 years of active service and who have been awarded a disability rating of 30% (or higher) technically qualify for medical retirement.
• Those with a disability rating below 30% may experience medical separation instead of retirement.
• Those with 20 or more years of active service will be recommended for retirement regardless of the disability rating.
• Those who have a disability that existed before entering military service are recommended for military discharge without benefits.

Temporary or Permanent?

Not all medical conditions qualify as permanent disabilities. Some service members may be placed on a Temporary Disability Retired List (TDRL) instead of a Permanent Disability Retired List.

In cases where the classification puts the veteran on the temporary list, the following will apply:

Temporary Disability retirees are entitled to “all rights and privileges of a military retiree,” which may include

• Survivor Benefit Plans.
• Allotments from your retired pay.
• Department of Veterans Affairs disability compensation.
• Veterans who meet certain requirements may qualify for Combat-Related Special Compensation or Concurrent Retirement and Disability Pay.

Retirement Pay Calculations Under the Temporary Disability Retirement List

One of two options are used to calculate the benefit. According to the VA, the pay is calculated at whichever method provides the greater advantage for the veteran:

• Pay calculated on your disability percentage. This calculation uses “a minimum of 50%” while on the temporary list. This is known as “Method A.”
• Pay calculated on the years of active service. This is known as “Method B.”

Your pay will be determined based on whichever is more beneficial for you.

Federal guidelines state that you must have a physical every 18 months when on the TDRL. Failing to do so will result in suspended payments until the examination has been performed.

The date you were signed on to the temporary list is very important. According to the DoD, those on the temporary list prior to Jan. 1, 2017, are allowed to remain on that list for a maximum of five years, assuming there is no change in the condition.

Those who were placed on the Temporary list on or after Jan. 1, 2017, are allowed three years maximum, “providing your condition does not change during that time.” According to the DoD, those who are found fit for active duty during this time may be removed from the list and returned to active duty.

The Permanent Disability Retired List

Those who are determined to have a medical disability rated at 30% or greater, or who have served more than 20 years, are placed on the Permanent Disability Retired List. Like those on the temporary list, these retirees are given the same retirement benefits their non medically retired colleagues enjoy. For those on the permanent list, retirement pay is calculated in one of two ways:

• The disability rating percentage, or “Method A.”
• Your years of active service, or “Method B.”
• Those who were transferred from the temporary list to the permanent list have their pay recalculated using the most current disability percentage rating.

A Very Important Caveat

Military retirees may be technically eligible to draw both regular DoD retirement pay and VA disability payments. There are rules that dictate which kind of pay you can draw.

Did you know federal law requires a retired service member to waive part of their DoD retirement pay by the amount of their VA disability compensation? This dollar-for-dollar reduction is known as the VA offset, also called a VA Waiver.

There are two programs that can help certain eligible military retirees get back some of these waived funds. One is known as Concurrent Retirement and Disability Pay. Described as a payment meant “to restore retired pay for those with service-connected disabilities who waive retired pay for VA disability pay.”

This program does not require the veteran to apply; those who are eligible will have their case processed and the Concurrent Retirement and Disability Pay is added to the monthly compensation amount.

The other program is known as Combat-Related Special Compensation and is offered to those with combat-related disabilities. This program does require the veteran to apply via their branch of military service. Learn more about eligibility for this program at the Defense Finance And Accounting (DFAS) official site.

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