U.S. Military (Ret.): Lump-sum repayment not an option for voluntary separation pay - Military Retirement - Navy Times

U.S. Military (Ret.): Lump-sum repayment not an option for voluntary separation pay

Our regular column on issues affecting retired military.

Q. I left active duty in 1992 and received Voluntary Separation Incentive payments. Later, I returned to active duty and served long enough to qualify for regular military retirement. The Defense Finance and Accounting Service sent me a letter to say it would start collecting 40 percent of my retirement check each month as repayment of my VSI money. I asked about making a lump-sum repayment, but was told this is not an option. DFAS keeps saying the law that covers the VSI program is so restrictive that it allows DFAS to collect only through monthly payments. I still find it hard to believe that a single payment to get rid of this debt is not an option. I think a lot of people would love to get out of this debt faster, and it seems crazy to me that the government would not prefer that I pay it off immediately.

A. Retired Army Lt. Col. John Parsley wrote in with that question recently. Unfortunately, what DFAS told him seems to be correct.

The Voluntary Separation Incentive and the Special Separation Benefit programs are downsizing tools that the Defense Department has used to reduce active-duty manpower in certain career fields, particularly during the drawdown of the 1990s.

But federal law prohibits service members from receiving both separation and retirement payments for the same period of service. So anyone like Parsley, who took a VSI or SSB payment to leave service early but later came back on active duty and served long enough to qualify for retirement pay, must repay the VSI or SSB money.

In June 2009, DFAS temporarily stopped deducting these repayments from retirement pay while DoD conducted a formal review of the recoupment process.

In August, DFAS resumed collection. The normal collection rate is now a flat 40 percent of retirement pay, but DFAS has flexibility to lower the percentage in cases of financial hardship.

According to the Frequently Asked Questions list on the DFAS website, retirees also can request to make “accelerated payments,” but the amount is limited to no more than a retiree’s gross monthly retirement pay.

But the changes in Title 10, Sections 1174(h) and 1175(e) of the U.S. Code still make no specific mention of possible lump-sum repayments.

The DFAS site goes on to state: “There is a question as to whether the law allows for a lump sum recoupment. This is currently under legal review, and we will update our website when a final determination is made.”

In the meantime, DFAS has more details on VSI and SSB recoupment on its website.

Retired Command Master Chief Alex Keenan served 28 years in the Coast Guard. Click here to email him.