How Does VA Backpay Work? A Simple Guide
If you are a veteran who was injured or disabled while serving our country, you may be entitled to retroactive benefits. These benefits are paid in a lump sum and can be used to help you cover the costs of your medical treatment and daily living expenses. In this article, we will explain how VA backpay works and how you can receive the benefits you deserve.
Backlog = Backpay
In the simplest sense, backpay is the amount you receive in retroactive pay due to the VA’s backlog.
It’s no secret that the VA takes a long time to process disability claims. At the height of the pandemic, there were 250,000 pending claims. That number is down to about 150,000 as of late 2022, but the process is not going as quickly as it should, according to some observers.
The good news is that veterans who win their claims may receive backpay for that waiting time. If the VA rejects your claim (it happens from time to time) and you decide to appeal it (which you absolutely should), you are entitled to back pay for the duration of the appeals process, no matter how long it takes.
Nine times out of ten, back pay covers the time between the date you first filed a claim — your Effective Date — and the date your claim is approved. But, like all things VA, it can get a little more complicated. What about the time before you filed your claim, when you were sick or sidelined by an injury and couldn’t work? Are veterans eligible for retroactive benefits in this situation?
The answer is usually no. However, there are special cases where you can get back pay before your claim date. We cover those exceptions further down. But first, let’s make sure we’re good on the basics of back pay as it relates to different stages of the claims process.
What is the Effective Date of a VA Disability Claim?
The Effective Date is the start date of your benefits. This date is usually the date when the VA receives your disability benefits claim. It’s not the time when a doctor first diagnosed your illness. Nor is it the date when you were discharged (unless you filed within a year of discharge).
The earlier your Effective Date, the more backpay you get. There is no limit to the amount of backpay you can receive.
Let’s look at a simple example. A retired Army combat engineer we’ll call John filed a claim for TBI and sleep apnea in November 2020. In February of 2021, John received a denial letter from the VA. With the help of an accredited and experienced claims agent, John appealed the VA decision. Finally, in November 2022, a Veterans Law Judge ruled in John’s favor. He was awarded a monthly payment as well as a lump sum amount for the benefits he would have received had he been approved right away. His backpay covers three years of benefits from the period of November 2020 to November 2022. It’s going to be a good Christmas in John’s household this year!
Q: Is VA backpay taxable?
A: No. Beneficiaries of VA backpay are not required to pay taxes. Monthly VA disability benefit payments are also tax-free.
Q: At what rate is VA backpay calculated?
A: Back pay is calculated based on the Cost of Living Adjustment for each year you waited for a final decision on your claim. Going back to the example above, John would receive two months-worth of benefits payments at the 2020 rate, 12 months at the 2021 rate, and 11 months at the 2022 rate. Learn more about recent cost of living adjustments here.
Some More VA Back Pay Terms to Know
Remember when we said things could get more complicated? Well, here are some more VA backpay terms you might run into if you need to appeal an unfavorable decision.
VA Supplemental Claim Effective Date
A VA supplement claim is a way for a veteran to challenge an unfavorable VA decision without having to go before the Board of Veterans Appeals (BVA) — a process that can take years. The VA Supplement Claim Effective Date will be the date the VA receives the request to reopen it. However, if you are providing new and relevant evidence, your Effective Date may be earlier.
A supplemental claim allows you to submit “new and relevant” evidence. For this kind of claim, the VA is duty-bound by law to assist in gathering the evidence you need (from military and VA medical records) to prove your claim. New and relevant evidence means “official records”, and can be drawn from:
- Service Records
- Medical Records – a new diagnosis or records that existed at the time but were not included in the original claim
Be sure to file your VA supplement claim within one year of a VA decision in order to preserve your earlier Effective Date. Get in touch with a highly qualified VA-accredited claims agent at the Rep For Vets to learn how you can get the earliest possible Effective Date on your va backpay claim.
VA Higher-Level Review Effective Date
If you believe a mistake was made by the VA when they rejected your claim, you can pursue a Higher-Level Review. Like the supplemental claim, this method of appeal saves you from the lengthy process of appealing to the BVA.
It differs from the supplemental claim in that you don’t provide new evidence to support your claim. Rather, with the help of an experienced claims agent, you dispute an error made by the VA. (If you simply forgot to include something in your initial application, the supplemental claim would be the better way to go.)
VA’s current goal for completing Higher-Level Reviews is an average of 125 days, according to their website. If the more experienced adjudicator who reviews your case decides in your favor, you VA Higher-Level Review Effective Date will be the date VA received your initial claim.
Can I Get Backpay for the Time Before I Filed a Claim?
Most veterans are not eligible for benefits for the time before they submitted a claim. However, there are a few important exceptions.
1. You Were Recently Discharged
Recently discharged service members who file a claim within a year of discharge will have their claim backdated to their discharge date. This is the only case where the Effective Date is the discharge date. We repeat, this only applies to veterans who apply for benefits within a year of military discharge.
2. VA Made a “Clear and Unmistakable Error”
We all makes mistakes. If the VA acknowledges a “clear and unmistakable error”, as they call it, your new Effective Date is the date when you would have started receiving benefits, had the error not been made.
This is basically VA saying, Hey, we made an error, and we’re going to make up for it by giving you an earlier Effective Date. At the end of the day (and with the right advocate in your corner), the VA is on your side.
Clear and Unmistakable Error, or CUE claims, may also apply in situations where the veteran should have had a service connection for a chronic disability, which manifested some years after the veteran parted from the military, such as PTSD or multiple sclerosis. There are different time limits for various conditions, so it’s best to consult with an expert on these types of claims.
3. Your Disability Rating Increased
If your disability worsens to the point where you want to appeal for an increased rating, the Effective Date is handled a bit differently. In these cases, VA generally goes with the date your condition increased in severity, according to medical records or a C&P exam. Lay statement may also be considered.
If a disability worsens while you have an active appeal, VA will give you a staged rating. The appeals process can take years, so VA will take into account how your condition worsened over time when determining your backpay.
Did your disability worse? If you are already receiving compensation for a service-connected disability, remember that you can always pursue a claim to increase your rating percentage if your disability worsens. This is especially true if you are no longer able to work as a result of your service-connected disability. You may also be entitled to back pay. See our resource on Increasing Your Disability Rating to learn more.
Special Conditions Related to Agent Orange
The rules regarding retroactive benefits for Agent Orange exposure are complicated and have changed recently. The PACT Act of 2022 expanded presumption of service-connected Agent Orange exposure to countries and waterways other than Vietnam. In 2019, a Congressional act made Blue Water Navy veterans who never stepped foot on land eligible for presumptive benefits they’d previously been denied.
The elimination of the boots on the ground requirement made tens of thousands of Vietnam-era veterans eligible for presumptive benefits connected to herbicide exposure. Learn more
With Agent Orange presumptive conditions, the Effective Date is usually the date when these laws were passed. However, if you made a claim that VA previously denied before the law came into effect, your Effective Date could be earlier. It’s best to consult with a veterans advocate of VA-accredited claims agent for accurate up to date advice.
Contact the Rep For Vets
Here at the Rep For Vets we see to it that veterans get the benefits they earned when they signed up to serve. A national veterans advocacy firm with a local presence in all 50 states and U.S. territories, our job is to fix the VA’s mistakes and make sure you’re getting all the back pay and benefits to which you are entitled. We represent veterans in Clear and Unmistakable Errors claims, Agent Orange claims, PTSD claims, and much more.
If you’re ready to get the benefits you deserve, whether that means appealing a rejected claim or reopening a claim because your conditions have worsened, we’re here to help. Take a look at our Top 10 VA Disability Payouts page to see what a six-figure award letter looks like, and then give us a call at (888) 573-7838 for a free consultation. We look forward to learning about your unique situation and helping out in any way we can.