Traditionally, federal law prohibited "concurrent receipt" of both VA Disability and military retirement, which meant a retiree had to "waive" military retirement, dollar for dollar, for VA Disability.  So while an E-6 at 20 years of service might have waived virtually the entire military retirement with the 70% disability rating mentioned above, it would be a much smaller of the retirement for an O-6 with 30 years of service.

Federal law still requires a servicemember to waive military retirement dollar-for-dollar to receive VA disability payments for retirees with a non-combat-related disability rating below 50%.  10 U.S. Code §5304, and 10 U.S. Code §5305.

Concurrent Retirement & Disability Pay (CRDP)

In 2003, Congress modified 10 U.S. Code §1414, and finally relaxed the concurrent receipt prohibition for many retirees. Starting in 2004, the VA waiver is being phased out over a 10-year period for retirees with at least a 50% disability rating.  Formerly a separate payment to retirees, CRDP is now an accounting mechanism by which the VA waiver is being phased out.  The higher the CRDP, the lower the waiver, until the waiver disappears entirely.

What does this mean for Colorado divorce cases? It means that in a few more years (by January 2014) a military retiree with a 50% or higher disability rating will receive VA disability payments, which are not divisible by the family law court, plus a full retirement, which would remain divisible.

Military retirees with a disability rating below 50% will still have to waive, dollar for dollar, their retired pay to receive VA disability payments.  And this means divorce courts will still have to deal with the indemnity issue, even after the phaseout is completed.

More Information

Combat-Related Special Compensation (CRSC), a Military Divorce Guide article on CRSC, which is an alternative means of offsetting the VA waiver.