Department of Defense – Fit for Duty by Compensation of Disabilities

Employees may become injured or ill in the performance of their duties so that they are unable to perform their duties. In these situations, the hired person may be referred for a disability evaluation to determine whether his or her condition is such that he or she can return to work or whether it is severe enough to warrant termination and payment of a disability benefit.

Over the years, the disability evaluation process has been reformed in several ways to make it more effective. Less attention has been paid to the method of calculating the disability benefit. Although previous proposals have proposed alternative approaches to compensating service personnel for disability, there has not yet been a comprehensive assessment of what these options might be and their potential impact on service personnel benefits and cost to the MOD.

Disability assessment system

The current disability evaluation system is a joint program of the Ministry of Defense and the Department of Veterans Affairs, known as the Integrated Disability Evaluation System (IDES), which evaluates eligibility for service and awards disability compensation to those who are deemed unable to continue in service and are therefore medically retired from service.

The processes for determining disability and disability awards are complex and involve multiple stakeholders within DOD and VA. This complexity stems from the desire to ensure that service members can benefit from a complete and thorough evaluation of their disability.

At the same time, however, the complexity can also have negative consequences, as it can result in a longer evaluation process for service members and additional costs in terms of time and resources for the defense forces.

IDES continues to involve thousands of service members. During the evaluation process, these soldiers will not be able to deploy, which will impact the ability of the armed forces to carry out their missions. Maintaining a state of readiness is conducive to the most effective operation of the system.

Through a series of reforms, the Department of Defense, VA and the services have made significant progress in reducing processing times for service members in the system, with processing times dropping from an average of 400 days in 2012 to 248 days in 2018. With new initiatives to be implemented in 2020, DoD, VA and the services are close to the 180-day goal.

DoD’s priority is to ensure that service members receive adequate and equitable disability compensation and that the Defense Disability Compensation System operates effectively and in a manner consistent with IDES. Because the characteristics and needs of the defense forces and their personnel change over time, it is important to periodically review the current disability compensation system to ensure that it continues to meet this objective.

RAND researchers evaluated disability compensation options for the military based on a simplified disability assessment methodology called the Fitness for Duty System (FES). The FES system reduces the use of military disability ratings to determine military disability compensation.

Instead, it focuses primarily on a single determination, namely whether or not a service member can perform his or her duties. The work described in this brief is based on the IDES process as it operated in 2019. In 2020, DoD implemented parallel processing in IDES. These processes are shown on the left and middle sides of the figure. The right side of the figure shows a hypothetical evaluation process that would be consistent with FES.

This approach would save some time by reducing the number of steps, but the question was how to modify the disability benefit system to support the FES. How to develop alternative disability benefits without relying on a disability rating?

Main results

  • The Fitness for Duty (FES) system reduces the use of Department of Defense (DoD) disability ratings to determine disability awards for the military and relies primarily on a single determination of a service member’s fitness for duty.
  • With one exception, none of the FES options evaluated ensures that all service members receive at least the same compensation to which they are entitled under the current system.
  • Eliminating or delaying the assessment phase would reduce FES processing time by an average of 29 days compared to the current sequential process.
  • The estimated time savings from the introduction of an alternative system would mean that the final number of active members would decrease by at most 0.2% compared to the current system.
  • In addition to the direct costs and benefits, the alternative scheme should also be evaluated in terms of its compatibility with the broader objective of disability benefits.

Disability Compensation Today

Currently, military disability benefits are determined on the basis of complex formulas. The degree of disability defined in the IDES is directly related to the disability compensation a soldier receives from the military. Depending on the degree of disability, the soldier receives either a military disability allowance or a disability pension. The primary designation is as follows:

  • If a serviceman is declared disabled, if his degree of disability is less than 30% and if he has less than 20 years of service, he is separated from service and receives a lump-sum disability allowance. The severance indemnity is calculated based on the current base salary and years of service. The employee will also receive 180 days of sick pay.
  • If a member declared unfit for service receives a disability rating of 30% or more from the defense forces, or has 20 years or more of service, he or she is medically retired and receives a disability pension for the remainder of his or her life. The soldier is also entitled to lifetime health benefits.

There are two different ways of calculating the disability pension for the defense forces. The rating-based formula uses the percentage of the defense forces disability rating (up to 75%) to calculate the benefit. Under the pension formula, the benefit is calculated using a pension multiplier based on years of service instead of a disability rating.

It is assumed that the member chooses the option that results in a higher benefit. Members medically discharged from service by IDES may also receive disability benefits from the veterans’ organization. The amount the member receives from the VA is deducted from his or her VA disability benefits.

In practice, the pension system favors older workers; younger workers tend to receive higher benefits when a rating-based formula is used. Since most IDES employees are relatively young (E-4 to E-6), their disability benefits are more likely to change (increase or decrease) if the use of VA ratings is modified or eliminated.

These differences should be taken into account when considering alternative options for providing benefits to participants under the ESF. These differences also make it difficult to develop alternatives that have the same impact on all IDES employees.

Alternative approaches to disability compensation in the Department of Defense

RAND researchers developed four options for redesigning Defense Force disability compensation under the ESF. To develop alternative approaches, they examined previous proposals to reform the defense disability compensation system, the U.S. civilian disability compensation system, and how some U.S. allies compensate military personnel for disabling diseases. The objectives of the four options are as follows:

  • Compensation based on recent objectives. This option retains the current system’s objectives, which compensate for the disabling condition, severity of disability, and military career to date, but in most cases the degree of disability is determined after release from service.
  • Compensation for military service. This option is based on career indicators and takes into account prior military service or expected loss of military career.
  • To compensate for adverse circumstances. This option is based on disability due to a service-connected condition.
  • Compensation under the U.S. Allied model. This option takes into account both the severity of the disability and the loss of military career.

FES Impacts

The value of disability benefits is only one of the dimensions against which the ESF should be assessed. It is also important to understand the impact of declassification on the timing of the process itself, final costs, human capital, policy and legislation.

IDES Working time

The IDES process (prior to the use of the parallel classification process) is estimated to take an average of 29 days, which is about 13% of the average IDES process time in 2018. This may also reduce some of the variation in the process. The actual time savings may be greater, as the elimination of ratings may result in greater efficiency in other phases of the process, such as medical review or claims.

Preliminary DoD estimates for FY 2020 indicate that introducing parallel grading into the IDES process would save 36 days, which is consistent with the alternatives discussed here in the sequencing process.

Change in final strength

The majority of IDES enrollees are military. The FES would reduce the final number of active military by up to 0.2% (compared to a system without parallel classification), due to the reduction in processing time resulting from deletions or delays in classification.

For other units, the reduction in end strength would be similar, although slightly less. This reduction would apply to those who are not deployable, so units could choose to maintain end strength with deployable members (joining or increasing retention) and thus increase readiness.

Loss of human capital

The loss of demobilized personnel due to disability means a loss of skills and experience. An option procedure would not change the number of active duty members who are declared unfit for duty and are discharged or retired. However, they would be laid off more quickly, which would accelerate the loss of human capital.

Ninety percent of soldiers deployed through IDES are enlisted, 78% of whom are in grades E-4 through E-6. The most common occupations for these members are general infantry, medical, maintenance, law enforcement, and automotive. Training for these occupations is relatively modest on average, although the training and experience of officers leaving the military on disability is important.

Policy and legislation

The policies and legislation that underpin the current system are complex and interrelated, and many are based directly on or reference disability ratings. For example, U.S. legislation and the military’s IDES guidelines repeatedly mention the terms disability and evaluation.

Almost all of these references are substantive in nature, as they define how compensation is awarded and what appeal rights are available to service members who are found disabled. Therefore, it is likely that many sections of the applicable U.S. Code will have to be repealed or amended if the FES is introduced, and the associated mandates would then have to be repealed, amended and/or reissued.


While these alternative approaches to compensation under the FES are feasible, their implementation would require a number of procedural, legislative and compensation changes. In addition, any disability compensation system used under the FES would need to be evaluated not only in terms of direct costs and benefits, but also in terms of what policymakers want the military disability compensation system to achieve.

For example, if the MoD were to decide that MoD disability awards should be based solely on job performance, this would justify the implementation of a special option. Similar arguments could be made for other options if broader policy objectives are best achieved by disability compensation based on hardship, injustice, or the U.S. Allied approach.

The end result could be a simpler and more rational disability benefit system. The analysis summarized here provides a framework for policymakers to consider if the Department considers a transition to an FES system in the future.

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