Separation Pay, Severance Pay, and VA Compensation
Types of lump-sum payments
- Separation pay (10 U.S.C. § 1174) — paid to some members involuntarily separated before retirement eligibility.
- Disability severance pay (10 U.S.C. § 1212) — paid when a service department separates a member found unfit with a below 30% or limited service.
- Voluntary separation pay and special separation benefits — programs used during force reductions.
How VA recoupment generally works
When VA grants compensation to a who received one of these payments, VA generally withholds monthly compensation until the recoupable amount has been recovered. For separation pay paid after September 30, 1996, the amount recouped is generally the payment less federal income tax withheld.
Disability severance pay is generally recouped only for the same disability that the service department rated. Under the 2008 NDAA, severance pay for disabilities incurred in a combat zone or during combat-related operations is not recouped.
The 's rating is still assigned during recoupment; only the cash payment is withheld. A veteran remains eligible for other benefits tied to the rating.
Where to get help with these payments
Questions about whether a payment was owed, its amount, or its tax treatment go to the military department or DFAS. Questions about how VA is withholding compensation can go to VA or a free accredited .
Frequently Asked Questions
References & sources
- 38 CFR § 3.700 — Concurrent receipt of benefits — eCFR
- 10 U.S.C. § 1174 — Separation pay — Cornell LII
- 10 U.S.C. § 1212 — Disability severance pay — Cornell LII
- DFAS — Separation pay — Defense Finance and Accounting Service
Useful Tools & Topics
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