scope:

General

A. Retired pay is a statutory right and, as such, cannot be waived except as authorized by law. These two laws authorize a member to waive entitlement to retired pay:

1. Title 38, United States Code (U.S.C.), section 5305 permits a member to receive compensation or pension from the Department of Veterans Affairs (VA).

2. Title 5, U.S.C., sections 8332(c) and 8411 and Title 5, Code of Federal Regulations, section 831.301 permit a member to include creditable military service in computing a civil service retirement annuity.

B. A member may not waive his or her right to retired pay. Even if retired pay is not being sent to a member on a monthly basis (for example, the member's whereabouts are unknown), the retired pay continues to accrue. Since, for income tax purposes, such retired pay is deemed to have been constructively received by the member once it is made available and can be drawn upon, it is subject to the withholding and reporting requirements of ordinary wages.

C. A member who waives his or her retired pay in order to receive VA compensation may benefit for these reasons:

1. VA benefits are nontaxable income for Federal, state, and local income taxation. See Chapter 24 for computation of taxable pay and Chapter 25 for Federal income tax withholding.

2. VA benefits may exceed the retired pay entitlement.