VA disability compensation and your FERS pension: how they fit together

By the OnPAR Federal Retirement Education editorial team · Last updated November 2, 2026

FERS for Veterans: Hub · Military buyback · Retired pay waiver · VA disability + FERS · Supplement & MRA timing · Deposit estimator

VA disability compensation is a monthly tax-free payment from VA to veterans with service-connected conditions [1]. It is not military retired pay [2]. The FERS rule that blocks credit for military service applies to military retired pay [3][4]. So a veteran who gets VA compensation, but no military retired pay, can still pay the deposit and count those years toward FERS [3][9].

Three different benefits

Veteran feds often mix up three separate things:

If you have VA compensation but no military retirement

This is the most common case: you served a few years, separated, got a VA rating and later became a federal employee. OPM's waiver rule is about military retired pay [3]. The Defense Department's pay regulation states plainly that "disability compensation payable by the VA is not retired pay" [2]. So the main FERS question for you is the same as for any veteran: pay the post-1956 military deposit before you separate, or the years won't count [9]. See military buyback and the deposit estimator.

If you're a military retiree who also has VA compensation

Federal law generally requires a military retiree to waive retired pay to the extent they receive VA compensation [6]. Separate law allows concurrent payment of retired pay and VA compensation for many retirees with ratings of 50% or higher [7]. That creates a layered situation when you also want FERS credit:

• The part of your retired pay that's already replaced by VA compensation is a VA matter between you, VA and DFAS [2].
• To count the same military years in FERS, OPM says you must waive military retired pay (unless an exception applies) and pay the deposit [3].
• Waiving retired pay for FERS doesn't change what VA pays for your rating. We couldn't find an official page that spells out every interaction, so get DFAS and VA to confirm your figures before you file a waiver.

Our retired pay waiver guide walks through the keep-or-waive math.

VA compensation and FERS disability retirement

FERS disability retirement has its own rules [5]:

• You need at least 18 months of federal civilian service under FERS. Military time doesn't count toward this minimum [5].
• You must have become disabled for useful and efficient service in your current position while under FERS, and the disability must be expected to last at least a year [5].
• You must apply before separating or within one year afterward, and you must also apply for Social Security disability benefits [5].

A VA rating and a FERS disability retirement answer different questions. VA rates service-connected conditions [1]. OPM asks whether you can do your current federal job [5]. A VA rating doesn't automatically qualify you for FERS disability retirement, and a FERS disability retirement doesn't create a VA rating. Medical records from your VA claim may still help support an OPM application; ask OPM or HR what evidence they need.

What reduces a FERS disability annuity

If you're under 62 and your annuity is computed at 60% of high-3 (first 12 months) or 40% of high-3 (after that), OPM reduces it by 100% and then 60% of any Social Security disability benefit for the same months [5]. OPM also says you generally have to elect between a FERS disability annuity and OWCP workers' compensation, except for an OWCP scheduled award [5]. OPM's disability page doesn't list VA compensation as an offset. Confirm your own case with OPM before you rely on that.

Example (illustration only)

This uses OPM's own example numbers, not anyone's real benefit: high-3 of $90,000 and a $22,000 annual Social Security disability benefit. In year one, the FERS disability annuity is 60% × $90,000 − $22,000 = $32,000 a year. After 12 months it's 40% × $90,000 − 60% × $22,000 = $22,800 [5]. VA compensation for a service-connected condition is paid by VA on its own rate tables [8]. OPM's computation shown here doesn't include it.

Taxes

VA describes disability compensation as tax-free [1]. Your FERS annuity is a separate payment; see FERS pension and TSP taxes.

Military time inside a FERS disability annuity

Deposited military service is creditable service [9], so it can raise the "earned" annuity that OPM compares against the 60% or 40% formula. OPM pays the larger of the two [5]. At 62, OPM recomputes a disability annuity as if you had worked to 62, adding the time you were on the disability rolls [5]. If you might ever file for disability, paying the deposit while you're still employed keeps that option open.

What to do next

1. Pull your VA award letter and your DD-214s.
2. If you receive military retired pay, get your gross amount and any VA waiver amount from DFAS.
3. Ask HR for a military deposit estimate and pay it before you separate [9].
4. Check VA's current rate table for your rating rather than relying on old figures [8].

Run the numbers → open the FERS Pension Calculator

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Official sources

1. VA: Disability compensation
2. DoD Financial Management Regulation Vol. 7B, Ch. 12 (waiver of retired pay for VA compensation)
3. OPM: Military Retired Pay (crediting service and how to waive)
4. 5 U.S.C. 8411: Creditable service (military service and retired pay)
5. OPM: Types of Retirement (eligibility, MRA, disability, FERS supplement)
6. 38 U.S.C. 5305: Waiver of retired pay
7. 10 U.S.C. 1414: Concurrent retired pay and VA compensation (50% or higher ratings)
8. VA: Veterans disability compensation rates
9. OPM: Service Credit (military deposit rates and rules)

Checked against the official sources above on November 2, 2026. Education only, not legal or financial advice. Not affiliated with OPM, VA, DoD or any government agency.