Though unseen by an anxious population of disabled retirees, work proceeds at the Pentagon and the Defense Finance and Accounting Service to implement a multibillion-dollar upgrade in retirement benefits.

The effort soon will deliver bigger paychecks to 200,000 or more retirees.

What follows is a preview of how the two new programs — limited receipt of disability and retirement pay, and expanded combat-related special compensation — likely will operate. Details are not final.

First, some background. Congress approved, and President Bush signed into law on Nov. 24, the 2004 Defense Authorization Act, which included the disability and combat pay changes. Both take effect Jan. 1.

The disability initiative is for retirees with ratings of 50 percent or higher. It will phase out the dollar-for-dollar reduction in retired pay that occurs when they elect to draw tax-exempt VA disability compensation. An estimated 100,000 will see retired pay fully restored within 10 years.

As military retired pay is restored, disability recipients will see no drop in VA compensation. So the potential income gain is great — in excess of $6,000 a month for seriously disabled retirees of high rank once the phase-in is complete.

To qualify, retirees must have 20 or more years of service, or have retired under Temporary Early Retirement Authority used by the services to make early retirement offers during the post-Cold War drawdown.

The combat-related provision is open to retirees with 20 or more years of service and disabilities tied to combat or combat-related training. Reserve retirees are included; Temporary Early Retirement Authority retirees are not.

When combat-related compensation first took effect in June, it was limited to retirees with combat-related disabilities of 60 percent or higher, or disabilities tied to the award of a Purple Heart. The new threshold will be combat-related disabilities as low as 10 percent. About 100,000 retirees are expected to qualify in addition to the 35,000 expected to be eligible under the first set of rules.

Here’s how the provisions will take effect:

Disability. Retirees will not need to apply for benefits. Payment will be automatic based on military and VA data of current disability ratings and direct deposit account information. The first-year disability payments are fixed amounts: $750 a month in retired pay restored for 100 percent disabled, $500 for 90 percent, $350 for 80 percent, $250 for 70 percent, $125 for 60 percent and $100 for 50 percent.

In 2005, the remaining retired pay offset will be cut by 10 percent, followed by 20 percent in 2006, 30 percent in 2007 and so on, until the offset is gone and retired pay is fully restored in 2013.

Not all 100,000 eligible retirees will see the extra pay on schedule with their Feb. 2 paychecks. At a minimum, finance centers hope to provide disability payment by that date to 30,000 retirees now drawing special compensation of $50 to $350 a month for disabilities of 60 percent or higher. The special disability compensation is to end as soon as payments begin.

Perhaps by March, almost certainly by April, all disability-eligible retirees should see a portion of retired pay restored, and made retroactive to Jan. 1.

Combat-related compensation. Retirees must apply, and the key will be patience.

The services already have a backlog of thousands of combat-related special compensation applications from the 60 percent program that began in June. Review and approval of new applications could take at least several months.

Applications pending under the 60 percent program still are being reviewed and, if approved, made payable back to June 1. Applications previously denied for missing the 60 percent, combat-related threshold, or because reserve retirees didn’t have 7,200 retirement points, will be reactivated and reviewed under new criteria. Retirees need not reapply.

Retirees applying for special compensation the first time should use a newly revised application form to be posted sometime before Christmas at www.dod.mil/prhome/crsc.html.

Retirees with serious combat-related disabilities already will be drawing disability pay when their combat compensation is approved. By law, they can’t receive both payments. Finance centers, therefore, will select the most favorable option and give retirees 45 days to elect the other option. Whatever payment is selected will be retroactive to Jan. 1, if qualified.

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