Congress’ disability benefit changes go a little awry

Congress often intends to do one thing, and instead does another. That seems to have occurred in October with passage of the 2005 National Defense Authorization Act. It likely reshaped benefits, in unintended ways, for two groups of disabled retirees.

One provision, which executive branch lawyers continue to study, appears to award accelerated benefits to 28,000 military retirees, those with disability ratings of less than 100 percent but who are rated unemployable by the Department of Veterans Affairs.

A final legal determination is pending. But a knowledgeable Defense Department official said the “statutory language seems to mandate” that these retirees be treated the same as 23,000 other retirees rated 100 percent disabled.

As a result, a group twice as big as expected likely will see military retired pay fully restored effective today, rather than phased in over the next nine years.

A second provision of the of the act adopts a fairer formula for calculating disability retirement for activated National Guard and reserve personnel.

In contrast to the unemployable matter, however, the initiative to benefit mobilized reservists was written in a way that helps far fewer members than lawmakers hoped. In fact, it leaves behind most Guard and reserve members who have been seriously wounded in war.

National Guard and reserve personnel injured while on active duty, and awarded disability retirement on or after Oct. 28, will have their pay calculated using a more generous formula.

The change was proposed by defense officials after seeing a disturbing disparity in disability retirements between active duty members and activated reservists injured in Iraq and Afghanistan.

The problem is linked to the High-3 retirement formula, which applies to any member who first entered service on or after Sept. 8, 1980. Those who joined earlier and serves 20 years have their annuities based on a percentage of final basic pay. Retirees under High-3 see annuities based on a percentage of average basic pay over their highest three earning years, which usually are their last three years of active service.

But three years’ active service for a mobilized Guard or reserve member, to calculate disability retirement, can mean going back to period of service when basic pay was far below current levels. This can sharply lower the value of disability retirement compared to active duty colleagues. Indeed, older, more experienced reservists wounded in Iraq can receive disability pay only half of that provided to injured active duty peers.

With the act, Congress stepped in to require that disability retirements be computed for High-3 Guard or reserve members as though they had served their last three years on active duty. The intent was to apply the change to reserve members injured since the war on terrorism began Sept. 11, 2001. But that wasn’t put in writing.

Knowing the intent, defense lawyers and policy makers reviewed the language carefully over the past two months. They found no way to interpret it more broadly. In late December, officials issued guidance to military finance centers to apply the more favorable High-3 formula only to disability retirements on or after Oct. 28, when the law was signed.

It’s too early to assure disabled reservists that Congress will vote to move the effective date back to Sept. 11, 2001. But it clearly is out of sync as written with another change, this one directing that the more favorable High-3 formula be used to recalculate survivor benefits to families of reservists who died on active after Sept. 10, 2001.

That change helps only a small number of survivors.

Unemployable retirees. As reported here a few weeks back, lawyers from the Defense Department and other agencies were studying whether the provision to restore full military retirement to 100 percent disabled retirees in January should be interpreted broadly, to apply to retirees who have lower-rated disabilities but are deemed unemployable.

At the end of December, Defense officials awaited a final legal opinion. But one senior official said, “I believe the law is clear. We pay.”

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