While everyone's watching Congress argue over veterans funding, the courts have been quietly settling a different question: what the government already owes disabled military retirees. Two decisions in the past year, and a Pentagon policy reversal that followed them, add up to real money for a specific group, medically retired veterans with combat-related disabilities. If that's you or someone in your family, here's what changed.
First, what CRSC is
Combat-Related Special Compensation exists because of the offset problem: military retired pay and VA disability compensation generally reduce each other. CRSC is the workaround Congress built for combat-related disabilities. If your disability traces to armed conflict, hazardous duty, training that simulates war, or an instrumentality of war, CRSC restores the retired pay the offset takes, tax-free. It's application-based, decided by your branch, and chronically underclaimed, partly because the rules are opaque and partly because, until recently, the government capped how far back it would pay.
Soto: the Supreme Court kills the six-year cap
For years, DoD applied a six-year limit to retroactive CRSC, so a retiree who applied late, usually because nobody told them the program existed, lost everything older than six years. In June 2025, in
Soto v. United States, a unanimous Supreme Court said no. The Court held that the CRSC statute contains its own settlement mechanism and no limitations period, which means the six-year Barring Act cap never lawfully applied. Over 9,000 class members were directly affected, and the principle reaches every retiree whose retroactive CRSC was clipped.
Implementation got bumpy. DoD issued guidance in August 2025, then narrowed it in later policies, and then, in May 2026, reversed course again with new guidance requiring the branches to follow the statute's effective dates and to review and correct the decisions of veterans shorted under the earlier policies. Translation: if your CRSC award was ever limited to six years of back pay, your file is supposed to be re-reviewed, and if it isn't happening, that's a fight worth having.
Smoke: burn pits count as instruments of war
The second case reaches the PACT Act generation. In
Smoke v. Driscoll, settled in March 2026, the Army agreed that open-air burn pits in combat zones qualify as instrumentalities of war for disability purposes. That designation is the hinge for combat-related status, which drives both CRSC eligibility and favorable tax treatment of disability severance. The Army also agreed to review the records of veterans already retired for burn pit conditions presumed service-connected under the PACT Act to determine whether their conditions merit the combat-related designation.
Put plainly: a veteran medically retired for a burn pit condition who was told it wasn't "combat-related" may have that answer changed, with money attached, and the review obligation sits on the Army, not the veteran. Veterans of other branches with parallel facts should be watching closely, because settlements like this tend to set the template.
The pattern, and who should act
Line up Soto, Smoke, and the May 2026 guidance and the through-line is the same one we've written about in
Nehmer country: when the government owes retroactive compensation, it tends to build artificial caps and narrow readings until a court strikes them down. The veterans who recover are the ones who check their files after the law moves.
Three checks worth making now. If you're a medical retiree who never applied for CRSC and your disability has any combat-related theory, hazardous duty and training accidents count more often than people think, apply; there's no longer a six-year guillotine waiting. If you received CRSC with capped back pay, confirm your re-review is actually happening under the May 2026 guidance. And if you were
medically retired or separated for a burn pit condition and combat-related status was denied or never considered, your record is in the class of files the Army agreed to look at again.
One connection to keep in view: CRSC restores offset pay for combat-related conditions under current law. The broader fix for all combat-injured medical retirees, full concurrent receipt under the Major Richard Star Act, is still pending in Congress, and we've covered that fight separately. The courts are handling the past; Congress is arguing about the future. Your file may have business with both.
Where we come in
We're a veteran-led firm, and untangling retired pay, CRSC, and VA compensation is exactly the kind of records-and-money fight we handle. If your retroactive CRSC was capped, your burn pit retirement never got a combat-related look, or you can't tell whether the new guidance reached your file,
reach out and we'll find out where your money is.
