DFAS Combines Two Pays

The Defense Finance and Accounting Service (DFAS) has sent a letter to customers who are drawing military retired pay to advise those who also are receiving Concurrent Retirement Disability Payments (CRDP) that the two payments are being combined. This will give them a single chunk of retired pay from DFAS and a second payment from the VA. Accordingly, the Retired Account Statement will show the VA Waiver reduced by the amount of CRDP received. DFAS emphasizes that the regular VA disability payment will continue and it will remain tax free. Some beneficiaries could see a reduction in net take-home pay, however, because the CRDP in the regular retired pay incurs tax withholding at the same rate as the rest of their retired pay. Before this change, it was withheld at a straight 10 percent rate for all retirees.