Introduction
Military life is structured and demanding—and sometimes, it ends earlier than expected. If you left the service under a program called TERA, or Temporary Early Retirement Authority, you might have some questions. One of the most common is: how does TERA affect my VA disability claim?
Though TERA and VA claims are separate processes, they often overlap in meaningful ways, especially when it comes to retirement pay, disability compensation, and eligibility for benefits.
In this blog, we’ll break down everything veterans need to know about TERA—what it is, how it works, what it means for your VA claim, and what benefits you’re still entitled to receive in 2025 and beyond.
What Is TERA?
Temporary Early Retirement Authority (TERA) was enacted by Congress in the early 1990s as a force-shaping tool. It allowed the military to offer early retirement options to service members with at least 15 but fewer than 20 years of service.
It was primarily used:
During drawdowns after the Gulf War
Again in the early 2010s due to budget constraints
For selected service members in overstaffed roles or grades
Unlike regular military retirement, which typically requires 20 years of service, TERA let eligible individuals retire early while still receiving prorated military retired pay.
Although the original TERA authority expired in 2025, thousands of veterans who retired under this program remain active in the VA system—and many are still unsure how TERA interacts with VA disability benefits.
Key Differences Between TERA and VA Disability Benefits
Before we dive into how TERA impacts your VA claim, let’s clear up a major point:
TERA retirement is administered by the Department of Defense (DoD), while VA disability compensation is managed by the Department of Veterans Affairs.
These are two separate systems, with different rules, calculations, and purposes:
| TERA (DoD) | VA Disability (VA) |
|---|---|
| Based on years of service | Based on severity of service-connected disabilities |
| Provides monthly retired pay | Provides tax-free monthly compensation |
| Subject to federal income tax | Not taxable |
| Reduces if combined with VA pay (unless CRDP/CRSC eligible) | May offset retired pay unless eligible for concurrent receipt |
Knowing this distinction is key when navigating early retirement and compensation claims.
How Is TERA Pay Calculated?
If you retired under TERA, your pension is calculated using the standard formula:
Retired Pay = Retired Base Pay × Multiplier
But with TERA, the multiplier is reduced:
Multiplier = 2.5% × Years of Service
For example, 17 years of service × 2.5% = 42.5% of your base pay
So if your base pay was $5,000/month:
42.5% × $5,000 = $2,125/month (gross retirement pay)
This reduced retirement pay often motivates veterans to explore VA disability compensation to supplement their income—and rightly so.
How TERA Affects Your VA Disability Claim
Retiring under TERA does not disqualify you from filing or receiving VA disability benefits.
In fact, many TERA retirees are eligible for the same VA benefits as 20-year retirees, including:
VA disability compensation
VA health care
Education (if eligible for Post-9/11 GI Bill or Montgomery GI Bill)
Home loan benefits
Vocational rehabilitation
However, the interaction between TERA pay and VA compensation can affect your monthly income due to what’s called the VA offset.
Understanding the VA Offset
Unless you qualify for Concurrent Retirement and Disability Pay (CRDP) or Combat-Related Special Compensation (CRSC), your VA disability pay will reduce your DoD retirement pay dollar-for-dollar. This is often referred to as the “VA offset.”
Here’s how it works:
You receive $2,125 in TERA retired pay
You are granted 50% VA disability, which equals around $1,100/month (as of 2025 rates)
That $1,100 is deducted from your retired pay
You now receive $1,025 in taxable retired pay and $1,100 in tax-free VA pay
The total is the same—or slightly better due to the tax-free nature of VA pay—but the source and taxability of the income changes.
🔔 Important: Many veterans mistakenly believe the VA “takes away” their retired pay. In truth, it’s a federal law that prevents “double-dipping” unless CRDP or CRSC applies.
What Is CRDP and Can TERA Retirees Get It?
Concurrent Retirement and Disability Pay (CRDP) allows eligible retirees to receive both VA compensation and military retirement pay without reduction. However, it’s only available to veterans who:
Retired with 20 years or more of service, and
Have a VA disability rating of 50% or higher
Since TERA retirees do not meet the 20-year minimum, they are not eligible for CRDP. This is one of the major differences between TERA and standard retirement when it comes to VA interaction.
What About CRSC?
There is a potential workaround: Combat-Related Special Compensation (CRSC).
CRSC is tax-free pay for veterans whose disabilities are combat-related, and it allows you to receive both VA and DoD pay.
To qualify, you must:
Be receiving military retirement pay
Have a combat-related disability
Apply and be approved by your service branch
CRSC is more flexible in terms of service length and may be an option for TERA retirees if their disabilities meet combat criteria. However, the approval process is strict and requires substantial evidence.
Filing a VA Claim After TERA: What to Expect
If you retired under TERA and are filing a VA claim for the first time, here’s what you should do:
✔️ Step 1: Gather Service Treatment Records
Make sure your STRs are complete and reflect the conditions you’re claiming.
✔️ Step 2: File Early—Even Before Retiring
You can file through the Benefits Delivery at Discharge (BDD) program if you’re within 180–90 days of retirement. This helps reduce delays in compensation.
✔️ Step 3: Document All Service-Connected Conditions
Even if they seem minor, document everything. Ratings can accumulate and increase your compensation.
✔️ Step 4: Understand You May Face a VA Offset
Prepare yourself financially for the offset if your VA pay is deducted from your TERA pension. Knowing this helps avoid shock when benefits begin.
✔️ Step 5: Consider Speaking With a VSO
Veterans Service Officers can help you understand the TERA-VA dynamic and maximize your benefits.
FAQs: TERA and VA Claims
Q: Does TERA make me ineligible for VA benefits?
No. You are eligible for VA disability benefits just like any other retiree.
Q: Can I receive full VA and TERA pay?
Only if you qualify for CRSC. CRDP is not available for TERA retirees.
Q: Will the VA consider my reduced TERA status when rating my claim?
No. Your rating is based solely on medical evidence and severity—not your retirement status.
Q: Should I still file a claim even with only 15–19 years of service?
Absolutely. You earned these benefits, and the earlier you file, the sooner you’ll receive tax-free compensation.
Final Thoughts
Retiring early under TERA doesn’t mean leaving your benefits behind. While you may not be eligible for concurrent receipt like 20-year retirees, you’re still entitled to VA disability compensation, health care, and other key services.
The key is understanding how your TERA pension and VA compensation work together—and building your claim smartly from the start. With proper planning, documentation, and persistence, you can navigate this process and receive the full benefits you’ve earned.
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