A little-known federal law prevents Veterans from receiving both disability benefits and the lump-sum separation pay given during military downsizing. (Photo: U.S. Military Academy, West Point)
Over the past 12 years, nearly 122,000 disabled Veterans have been required to return payouts they received to leave the military, according to data obtained by NBC News. A little-known federal law prevents Veterans from receiving both disability benefits and special separation pay, a lump-sum incentive given to Service Members during periods when the U.S. military needed to downsize.
This law has caused severe financial difficulties for many Veterans. For instance, one Veteran faces a 15-year repayment period, while another has had to consider additional employment to manage their expenses, as reported by NBC.
The VA reported in fiscal year 2018, they had to recoup separation payments from over 17,000 Veterans, the highest annual amount to date. This figure has fluctuated over the years, with an increase in recoupments following the signing of the PACT Act in August 2022, which expanded benefits to Veterans exposed to burn pits and other toxic substances.
VA press secretary Terrence Hayes explained that the VA is legally obligated to recover these payments before Veterans can receive disability benefits. Hayes mentioned that the rise in disability claims has contributed to the variations in recoupment numbers. In fiscal year 2023, the VA processed nearly 9,300 recoupments out of 2.3 million compensation claim applications, a 42% increase over 2022.
Several Veterans have reported that errors in VA processing led to their financial woes. For example, a Veteran who accepted a separation payment in 1996 only faced recoupment in 2023 after submitting a PACT Act claim. The VA started withholding his monthly disability payments until the separation pay was fully repaid. Another Veteran began receiving disability compensation the same year he took special separation pay, but only faced recoupment after filing a PACT Act claim, which was denied.
The VA has been working to prevent future errors. Since 2021, the Veterans Benefits Administration has been scanning all Veterans’ service and medical records into electronic files, reducing the likelihood of such situations reoccurring.
Veterans can seek a waiver for their recoupment responsibilities under certain conditions. The process is complex and criteria is strict. The Air Force granted waivers to some Veterans due to erroneous statements of understanding regarding recoupment. However, such waivers are rare across other branches of the military.
Advocates argue that the law unfairly links special separation pay, based on a Service Member’s career, to disability pay, which compensates for service-related injuries or illnesses. Efforts to change the law, such as a bill introduced by Rep. Ruben Gallego, have been slow due to the high costs associated with such changes.
Author: Rikki Almanza
Rikki is a Web Content Coordinator for the American Legion, Department of California. With a deep-rooted connection to the military, a spouse who is a Navy veteran, a father who served in the Air Force for 25 years, and a grandfather who proudly served, Rikki is committed to using her skills and knowledge to provide valuable assistance and resources to servicemembers and veterans.