Veterans: Don’t Fall for BRS Misinformation

There is an astounding amount of misinformation swirling around the internet regarding changes to military retirement and disability pay for our nation’s veterans. It’s a minefield of outdated advice and outright falsehoods, often propagated by well-meaning but ill-informed individuals. Don’t fall for it.

Myth #1: The Blended Retirement System (BRS) is a net loss for everyone.

This is a persistent myth, largely fueled by comparisons to the traditional “legacy” retirement system that offered a larger defined benefit. Many veterans believe the BRS automatically means less money in their pockets, regardless of their service. I’ve heard this from countless transitioning service members, and it’s simply not true for everyone. While the BRS does reduce the multiplier for the defined benefit (2.0% per year of service instead of 2.5%), it introduces a significant element: government matching contributions to the Thrift Savings Plan (TSP).

Here’s the reality: For service members who serve less than 20 years, the BRS is almost universally a better deal. The legacy system offered nothing to those who didn’t hit the 20-year mark. With BRS, even if you serve only two years, you get the government’s 1% automatic contribution plus up to an additional 4% matching, vested after two years. That’s free money! A recent analysis by the Congressional Budget Office (CBO) in 2024 (though referencing 2023 data) highlighted that the BRS significantly improves retirement outcomes for those separating before 20 years, stating that “over 80% of service members who separate before 20 years of service will receive some form of government-contributed retirement benefit under the BRS, compared to zero under the legacy system” [Congressional Budget Office Report on Military Personnel Costs](https://www.cbo.gov/publication/58908).

My own experience with clients confirms this. I had a client last year, a former Army Captain who separated after 12 years. Under the legacy system, he’d have walked away with nothing but his own TSP contributions. With the BRS, he had accumulated over $70,000 in his TSP, a substantial portion of which was from government contributions and earnings, which he rolled into an IRA. That’s a game-changer for mid-career transitions. The key is understanding that the BRS shifts some responsibility for retirement savings to the individual, but it also provides a powerful tool to achieve it. You absolutely must contribute to your TSP to maximize the BRS benefits. Failing to contribute at least 5% means you’re leaving free money on the table – a mistake I see far too often.

Myth #2: You can’t receive both military retired pay and VA disability pay.

This is one of the oldest and most persistent myths, rooted in historical “VA Waiver” policies. For decades, veterans were forced to choose between a dollar-for-dollar reduction in their military retired pay for every dollar of VA disability compensation received. This is largely obsolete for a significant portion of our veteran population, yet the misconception ends.

The truth is, Concurrent Receipt is very real and has been for some time. The National Defense Authorization Act (NDAA) for Fiscal Year 2003, specifically Section 641, paved the way for Concurrent Retirement and Disability Payments (CRDP). This legislation, later expanded, allows eligible veterans to receive both their full military retired pay and their full VA disability compensation without offset. Who is eligible? Generally, veterans with a VA disability rating of 50% or higher, who are retired from the military, are eligible for CRDP. This means no more “VA waiver” for them. According to the Department of Veterans Affairs (VA) [VA Benefits and Services](https://www.va.gov/disability/compensation-rates/special-monthly-compensation-smc/), the overwhelming majority of veterans with a 50% or greater service-connected disability rating are no longer subjected to the offset.

However, there’s a critical distinction to make: CRDP is different from Combat-Related Special Compensation (CRSC). CRSC is another concurrent receipt program, but it’s specifically for those whose disabilities are directly combat-related. If your disability is the result of armed conflict, hazardous duty, simulated war operations, or an instrumentality of war, you might be eligible for CRSC. The crucial difference is that CRSC payments are tax-free, unlike CRDP payments which are subject to federal income tax. You cannot receive both CRDP and CRSC for the same disability. You must choose which one benefits you more, and that often requires careful calculation. I always advise veterans to apply for both if they believe they are eligible, and then elect the one that maximizes their take-home pay. The Department of Defense (DoD) [DFAS Combat-Related Special Compensation](https://www.dfas.mil/RetiredMilitary/disability/crsc/) provides comprehensive guidance on CRSC eligibility and application.

For instance, a Navy veteran I assisted, retired at 20 years with a 70% VA disability rating for hearing loss and PTSD. His PTSD was combat-related. He initially received CRDP, but after we successfully applied for CRSC for his PTSD, he was able to switch to CRSC for that portion of his disability, resulting in a significant portion of his compensation becoming tax-free. It literally put hundreds of extra dollars in his pocket each month. This isn’t automatic; you have to apply for CRSC through your branch of service.

Myth #3: All VA disability payments are tax-free, period.

While it’s true that the vast majority of VA disability compensation is tax-free, the blanket statement that “all VA disability payments are tax-free” is a dangerous oversimplification. This myth often leads to confusion, especially when veterans try to reconcile their income with tax documents.

Let’s clarify: VA disability compensation is indeed tax-free at both the federal and state levels. This is a fundamental principle of veterans’ benefits, designed to compensate for service-connected injuries or illnesses. The Internal Revenue Service (IRS) explicitly states that “disability benefits paid by the Department of Veterans Affairs (VA) are tax-free” [IRS Taxable and Nontaxable Income](https://www.irs.gov/publications/p525). This includes basic disability compensation, Special Monthly Compensation (SMC), and other related payments.

However, the confusion arises when veterans receive other forms of income or benefits that are related to their service but are not strictly VA disability compensation. For example, as I mentioned previously, Concurrent Retirement and Disability Payments (CRDP), while allowing you to receive both retired pay and disability, does not make the retired pay portion tax-free. Only the VA disability portion remains tax-free. If you are receiving CRDP, your retired pay component is still subject to federal income tax (and potentially state income tax, depending on your state of residence – Georgia, for example, offers an exclusion for military retirement income, but it’s not universally true across all states).

Another common point of confusion is the Survivor Benefit Plan (SBP). If a veteran passes away and their spouse receives SBP payments, these payments are generally taxable. They are treated as an annuity and are subject to federal income tax, though there are specific rules and exclusions that can apply based on the beneficiary’s age and other income. This is a critical distinction that I have to explain repeatedly to surviving spouses who are often caught off guard during tax season. “But my husband’s VA benefits were tax-free!” they’ll exclaim. Yes, his disability benefits were, but SBP is a different animal entirely.

Myth #4: Once you get a VA disability rating, it’s set in stone and can never change.

This myth creates a lot of anxiety and often discourages veterans from seeking re-evaluations, even when their conditions worsen. The idea that a VA disability rating is a permanent, immutable fixture is simply not true. While some ratings are indeed considered “permanent and total,” meaning they are unlikely to improve, many are not.

The VA regularly reviews disability ratings, especially for conditions that are known to fluctuate or improve over time. This is why veterans often receive Compensation and Pension (C&P) exams years after their initial rating. The VA’s goal is to ensure that the rating accurately reflects the current severity of the service-connected condition. According to the VA’s own regulations, ratings can be increased, decreased, or even terminated if there’s a significant change in the veteran’s condition [38 CFR § 3.343 – Continuance of disability evaluations](https://www.ecfr.gov/current/title-38/chapter-I/part-3/subpart-A/section-3.343).

However, there are protections in place. For instance, if your rating has been in effect for 5 years or more, the VA generally needs to show sustained improvement in your condition before reducing it. If it’s been 10 years, it’s even harder for the VA to reduce it, and if it’s been 20 years, your rating becomes “protected” and can only be reduced under very specific and rare circumstances, such as fraud. For veterans with a Permanent and Total (P&T) rating, indicated by a “P&T” designation on their award letter, the VA acknowledges that their condition is not expected to improve, making reductions highly unlikely.

I counsel veterans daily at the Atlanta VA Regional Office in Decatur. I often see veterans who are struggling with worsening conditions but are hesitant to file for an increase because they fear losing what they already have. I always tell them: if your condition has worsened, you have every right to file for an increase. We just need to gather the proper medical evidence. Just last month, I helped a Marine Corps veteran, rated 30% for knee issues for 15 years, finally get an increase to 60% after his condition deteriorated significantly and he required total knee replacement surgery at the Atlanta VA Medical Center. He had been holding off for years, scared they’d reduce his existing rating. We filed the claim, provided compelling medical evidence from his orthopedic surgeon, and he received the increase he deserved. The fear of reduction should not deter you from seeking the benefits you’re entitled to when your health declines. For more details on understanding and maximizing your VA benefits, it’s crucial to stay informed.

Myth #5: Once you retire from the military, your healthcare is fully covered by TRICARE for life.

This is another common misunderstanding, particularly for those who anticipate a seamless transition from active duty healthcare to retirement. While TRICARE does offer excellent healthcare options for retired service members, the phrase “TRICARE for life” isn’t a universal descriptor for all retirees, and it certainly isn’t “free.”

Here’s the breakdown: TRICARE Prime and TRICARE Select are the primary options for retirees under 65. These plans require enrollment fees (for TRICARE Select, there are also deductibles and cost-shares) and are not “free.” You choose your plan, and depending on your location and preferences, you’ll have specific costs. For instance, a retired E-7 with dependents enrolled in TRICARE Prime might pay an annual enrollment fee, but their out-of-pocket costs for medical care are typically very low.

The term “TRICARE For Life (TFL)” specifically refers to the program that becomes primary payer for military retirees (and their eligible family members) once they become eligible for Medicare Part A and Part B. This usually happens at age 65. At that point, Medicare becomes your primary insurance, and TFL acts as your secondary payer, covering most of what Medicare doesn’t. This significantly reduces out-of-pocket costs, but it absolutely requires enrollment in both Medicare Part A and Part B. If you opt out of Medicare Part B, TFL will not cover you, and you’ll be left with significantly higher healthcare expenses.

I’ve seen several cases where retirees, upon turning 65, mistakenly believe TFL automatically kicks in without any action on their part regarding Medicare. We ran into this exact issue at my previous firm with a retired Air Force Colonel who had neglected to sign up for Medicare Part B. He was hit with substantial medical bills for a routine hospitalization because TFL couldn’t act as a secondary payer. It was a costly lesson for him. The Department of Defense (DoD) [TRICARE For Life](https://www.tricare.mil/tfl) website clearly states the requirement for Medicare Part A and Part B enrollment. Don’t assume; verify your eligibility and enrollment requirements well in advance of your 65th birthday. This is not a “set it and forget it” situation.

In summary, navigating the complexities of military retirement and disability pay requires diligence and accurate information. Don’t rely on anecdotes or outdated advice; seek out official sources and professional guidance to secure the benefits you’ve earned.