Mandatory Spending

Function 700 - Veterans' Benefits and Services

End VA’s Individual Unemployability Payments to Disabled Veterans at the Full Retirement Age for Social Security

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021–
Change in Outlays  
  End IU payments to all veterans age 67 or older 0 -3.2 -4.2 -3.9 -4.5 -4.6 -4.8 -5.4 -4.6 -5.2 -15.8 -40.4
  End IU payments to all veterans age 67 or older who would begin receiving IU after December 2021 0 * -0.3 -0.5 -0.7 -0.9 -1.1 -1.5 -1.5 -1.9 -1.6 -8.5

This option would take effect in January 2022.
IU = Individual Unemployability; * = between -$50 million and zero.

The Department of Veterans Affairs (VA) provides disability compensation to veterans with medical conditions or injuries that were incurred or worsened during active-duty service. The amount of compensation depends on the severity of their disabilities (which are rated between zero and 100 percent) and other factors. In addition, VA may increase certain veterans’ disability compensation to the 100 percent level even though the department has not rated their service-connected disabilities at that level. To receive the resulting supplemental compensation, termed Individual Unemployability (IU) payments, disabled veterans must apply for the benefit and meet two criteria. First, they generally must be rated between 60 percent and 90 percent disabled. Second, VA must determine that the veterans cannot maintain substantially gainful employment because of the severity of a service-connected disability. Receipt of IU is not based on age, voluntary withdrawal from work, or other factors.

This option consists of two alternatives. Under the first, VA would stop making IU payments to veterans age 67 or older (the full retirement age for Social Security benefits for those born after 1959). That restriction would apply to both current and prospective recipients. When veterans reach age 67, all VA disability payments would revert to the amount associated with the rated disability level; veterans age 67 or older who are already receiving IU payments would no longer receive them after the effective date of the option. Under the second alternative, veterans who begin receiving the IU supplement after December 2021 would no longer receive those payments once they reach age 67, and no new applicants age 67 or older would be eligible for IU benefits after that date. Veterans who are already receiving IU payments and are age 67 or older after the effective date of the option would continue to collect the IU supplement.