Cover: Recouping Separation Pay from U.S. Service Members and Veterans Who Later Receive Veterans Affairs Disability Compensation

Recouping Separation Pay from U.S. Service Members and Veterans Who Later Receive Veterans Affairs Disability Compensation

Published Feb 7, 2022

by Stephanie Rennane, Beth J. Asch, Michael G. Mattock, Hannah Acheson-Field

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Research Questions

  1. How many members and veterans who received separation pay, special separation benefits (SSB), and voluntary separation incentive (VSI) payments are affected by recoupment due to receipt of VA compensation?
  2. What is the aggregated amount of additional money members and veterans would receive in the absence of recoupment?

When service members separate from the military, they may receive one of many types of separation benefits. Some of these service members later become eligible for other types of compensation, such as U.S. Department of Veterans Affairs (VA) Disability Compensation (VADC). To avoid paying more than one award of compensation to any person based on that individual's service — what is sometimes called double-dipping — VA is prohibited from paying compensation to a veteran who also received certain separation benefits from the U.S. Department of Defense until the full separation amount has been withheld, or recouped.

Recoupment of separation pay is complicated and can cause confusion and frustration among veterans. On the one hand, from a legal standpoint, veterans are not losing money, because they were paid previously in the form of separation pay, and a deduction is being made to avoid duplication of benefits. But on the other hand, veterans might not know that their VA benefits will be reduced if they received separation pay in the past, and recoupment can come as a surprise.

Because of concern about how recoupment affects veterans, Congress required that a study be conducted to determine (1) how many members and veterans who received separation pay, special separation benefits, and voluntary separation incentive payments are affected by recoupment and (2) the aggregated amount of additional money members and veterans would receive in the absence of recoupment. RAND researchers conducted analyses to respond to these questions, and this report summarizes the findings.

Key Findings

  • Just over 72,000 veterans experienced recoupment of voluntary separation pay (VSP) or involuntary separation pay (ISP) between 2013 and 2020.
  • Another 2,600 veterans experienced recoupment of SSB between 2013 and 2020, and 4,700 have experienced recoupment of VSI since the program began in 1992.
  • On average, veterans have had $19,700 or $25,700 withheld because of recoupment of ISP/VSP or SSB, respectively, but have had $53,000 withheld because of recoupment of VSI.
  • In aggregate, over the eight-year period of 2013 to 2020, a total of $1.4 billion in VADC payments were withheld because of the recoupment of VSP or ISP, a far larger figure than the $68 million withheld because of the recoupment of SSB.
  • The Defense Finance and Accounting Service has withheld a minimum of $177 million of VSI in aggregate because of the receipt of VADC.
  • Given the available data, it was not possible to determine how many veterans began and completed recoupment of VSP, ISP, or SSB prior to 2013.

This research was sponsored by the Office of the Under Secretary of Defense for Personnel and Readiness and conducted within the Forces and Resources Policy Center of the RAND National Security Research Division (NSRD).

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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