Some disabled retirees to receive back pay.

The Departments of Defense and Veterans Affairs have worked out a compromise plan to pay about $500 million in back retirement pay to more than 100,000 military retirees who receive compensation for service-connected disabilities.

"This is an important first step in more fairly compensating military longevity retirees who qualify for service-connected disability compensation," said National Legislative Director Joseph A. Violante. "It may take some time to pay all 100,000 of these veterans--which shows the weakness of Congress' piecemeal approach to concurrent receipt legislation."

The retroactive payments are owed to nearly half of all recipients of Combat-Related Special Compensation (CRSC) and Concurrent Retirement and Disability Pay (CRDP).

The problem of deciding what payments veterans should receive when they qualified under the two compensation programs created a struggle for the Defense Finance and Accounting System which oversees the payments. The issue has now been cleared up, and accountants are trying to figure how much is already owed to military retirees with disabilities.

Retroactive payments would average between $4,000 and $5,000, depending on rank, level of disability and the period covered by retroactivity. Some retirees could receive payments from both departments, but officials hope to synchronize the process to limit confusion for retirees. The VA says retirees will receive a letter explaining the back payments.

A streamlined computer process making the complex calculations of back pay involving CRSC and CRDP has been developed, which will significantly reduce the six-month to one-year estimate for payments.

For nearly 100 years, military retirees saw their military longevity retirement pay reduced by the amount of tax-free VA disability compensation they received. They were the only government employees to have their retirement pay reduced by disability compensation. In an effort to grant fairness to military retirees, Congress enacted CRSC and CRDP to end the discrimination against those who served a lifetime defending their country.

However, Congress limited CRSC to active duty retirees who were deemed to have combat-related disabilities rated at least 60 percent or disabilities for which they received the Purple Heart. Eligibility was later expanded to include any retiree with a compensable combat-related disability, including reservists.

When CRDP took effect Jan. 1, 2004, it applied to retirees with 20 or more years of service and non-combat related disabilities of 50 percent or more. CRDP payments are phased in over several years, based on degree of disability. By 2014, all retirees rated at 50 percent or above will receive both their longevity retirement pay and disability compensation.

The retroactive payments will affect those retirees who qualified for payments when the laws took affect to the point their payments begin.