Vets appalled by VA reimbursement rules on severance pay

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Stephen, a staff sergeant in the Marine Corps, agreed to leave the service a few years ago when the Corps offered him a voluntary severance package in an effort to downsize.

They gave him around $80,000 to leave, and at the time, it seemed like a good deal. The money helped him buy a house in Texas and start a job as a financial planner.

But now the government wants that money back.

That’s because Stephen, who asked to be identified by his first name only, recently went to the Department of Veterans Affairs and was given an 80% disability rating for a combination of post-traumatic stress, tinnitus and a jaw problem. The VA said he was to receive a monthly allowance of $1,800.

But the VA won’t send him any checks until 2018 because federal law requires veterans to repay any severance pay received before they become eligible for disability benefits.

“I wasn’t aware of that, and it could have completely changed my decision” on whether or not to accept the voluntary severance package in the first place, Stephen said.

The 30-year-old former platoon sergeant, who deployed twice to Iraq, is now battling bureaucracy at the Pentagon and the VA in an effort to keep the money he has already spent.

About 17,000 soldiers received involuntary severance pay each year in 2014 and 2015, mostly soldiers and Marines, according to Pentagon data. Thousands of those veterans are likely facing severance clawbacks, though the VA was unable to say specifically how many veterans currently have benefits locked in for this reason.

And getting relief from the Pentagon or the VA will be an uphill battle because the refund requirement is enshrined in federal law.

Specifically, the law affects both voluntary and involuntary severance pay. VA payments are withheld or offset until the full amount of severance pay is refunded. In the case of voluntary severance pay, the law allows secretaries of military service to waive the debt, but such waivers are rare.

It’s a common subject of complaints, said Claire Lawless, veterans’ transition manager at the Washington-based Iraq and Afghanistan veterans advocacy group.

“I’ve certainly seen a lot of veterans in need of financial assistance, usually related to housing or school or something like that, and they’re reaching out because they’ve gotten the rate. ‘disability they expected, but then they were told you had to basically wait until you had in quotes ‘paid your severance pay,'” Lawless said.

“To be told that you won’t get the money you thought you were counting on is incredibly disheartening,” she continued. “And really debilitating because if you lose your accommodation, everything starts to fall apart.

“Most of them tell me they had no idea this was going to happen. I don’t think the DoD has communicated properly that when you separate it will impact your ability to receive benefits on the whole line.”

Some veterans have successfully appealed the debt and had it reduced after proving they were in dire financial difficulty.

But the bureaucratic process for doing so is complex and cumbersome, and veterans usually have to contact their representative in Congress to serve as an advocate, Lawless said.

“The VA, the DoD, are bureaucracies…and going in and fighting a bureaucracy on your own without a lot of understanding is a challenge and it helps to have someone in your corner,” Lawless said.

IAVA supports veterans in this process through its Rapid Response Referral Program.

The law potentially affects thousands of soldiers who have been forced to part ways recently due to their service’s “up-or-out” rules.

For example, Shane Collins, a 13-year-old Marine who was passed over to be promoted to staff sergeant last year, was involuntarily separated in March.

Collins received approximately $46,000 in involuntary severance pay, specifically a check for approximately $33,000 after taxes.

He moved back to Twin Falls, Idaho, and used the money to pay some bills, buy his wife Amanda a car, and set up a house purchased with a VA-backed loan.

Navy veteran Shane Collins and his wife Amanda, who now live in Idaho, must wait until 2017 before they can start receiving VA disability compensation, as he struggles to repay the separation payment involuntary he received when he was passed over for a promotion and forced out of the Corps in 2013.

Photo credit: Courtesy of Shane Collins

In May, the VA gave him a 70% disability rating due to post-traumatic stress and hearing loss.

This should justify a monthly benefit of $1,300. But the VA told him his payments wouldn’t start until mid-2017 because he had received military severance pay.

Collins, now 32, struggles to find work and fears falling behind on his $895 monthly mortgage payment.

He complained to the VA, but was told that receiving severance pay and disability benefits was akin to “double dipping.”

Collins strongly disagrees. “Those are completely two different areas,” he said. “Your involuntary separation, you’re given this amount of money because you were denied re-registration, and it helps you get back into civilian life.”

Collins said he did not recall anyone from the Marine Corps telling him that severance pay might have to be repaid.

Lawless said she had heard that chorus before.

“I think the term ‘pay back’ is very confusing to people because it doesn’t seem like something they should have to pay back,” she said. “They seem to be two very separate things – your disability award and your severance pay. I think that’s the frustrating thing because it doesn’t feel like it should come from the same pot.”

Andrew Tilghman is the editor of the Military Times. He is a former reporter for the Military Times Pentagon and was a Middle East correspondent for the Stars and Stripes. Before covering the military, he worked as a reporter for the Houston Chronicle in Texas, the Albany Times Union in New York, and the Associated Press in Milwaukee.

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