Why the VA is Stopping Disability Payments for Thousands of Veterans
Thousands of service members are learning the hard way that the Department of Veterans Affairs isn’t putting veterans first when it comes to clawing back VA disability payments over what the VA terms “double-dipping”.
What does this mean? According to a Military.com report, nearly 80 thousand veterans had their VA disability pay suspended to recoup separation pay between 2013 and 2020, and more face similar problems today.
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Why the VA is Stopping Disability Payments for Thousands of Veterans
Military.com reports that approximately $1.4 billion was “withheld from disability compensation during that period” due to a federal law that bars a veteran from receiving both military separation pay and VA disability compensation for the same period of military service.
Separation pay is often issued to service members who are involuntarily transitioned out of the military during or those who do not qualify for a full twenty-year retirement.
When these veterans apply for and receive a disability rating from the VA, the agency is legally required to recoup the original separation pay, with the VA typically stopping disability payments to the veteran until the entire after-tax amount of the separation pay is recovered.
Why is this issue, which has existed for years, a headline-making concern now?
Financial Shock Related to the PACT Act
The scale of this issue changed due to the passage of the PACT Act. This 2022 legislation opened the door for millions of veterans to claim benefits related to toxic exposures, including military service in areas near burn pits in Iraq and Afghanistan or Agent Orange in Vietnam.
As veterans filed new PACT Act claims to get the healthcare and compensation they earned, the VA system checked Department of Defense records, often uncovering separation payments made 30 or 40 years earlier. Once this pay is identified, the VA can initiate the “clawback” of separation pay by withholding disability pay.
For a veteran living on a fixed income, the sudden disappearance of a disability check can be catastrophic.
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What Critics Say
Critics of the policy argue that it punishes veterans for the government’s inaction on the double-dipping policy. This allows veterans to receive disability payments for a decade before the system catches up and decides recoupment is necessary.
By the time the error is discovered, the veteran may have built a life around that monthly income. Recoupment makes that income disappear, temporarily or otherwise. And many ask the question, “Why take away separation pay in favor of disability pay? Haven’t these veterans earned both?”
Veterans often view separation pay as a severance for their years of service and disability pay as compensation for injuries sustained during that service. To the veteran, these are two distinct categories of compensation.
Running the Numbers
Reports indicate that since 2013, over 122,000 veterans have had their benefits withheld to repay separation funds. The total amount returned to the government in that period exceeds $ 2.5 billion. The average amount recouped can range from a few thousand dollars to nearly 100,000 dollars for high-ranking officers or those with long tenures who were forced out during drawdowns or reductions in force.
Because disability ratings can increase over time as health declines, a veteran who was safe from recoupment at a 10 percent rating might suddenly face a massive payback of benefits if their rating increases to 100 percent.
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A Hidden Tax?
Proponents of reform argue that the current system is a “hidden tax” on those who served. They point out that separation pay is already taxed when it is issued, and while the VA only recoups the after-tax amount, the veteran never recovers the time or the utility of that money. The lack of a statute of limitations means the government can reach back indefinitely to collect, a power rarely seen in other areas of consumer or civil law.
For veterans currently facing the loss of disability pay due to recoupment, the options include filing a VA “hardship waiver” or reduced recoupment rates in specific cases where the total loss of income would lead to homelessness or extreme deprivation.
These waivers are not granted automatically. The veteran must proactively submit a financial status report and prove that their expenses exceed their income.
Advocacy groups recommend that any veteran preparing to file a PACT Act claim or an increase in their disability rating first review their original discharge paperwork. If the words “Separation Pay,” “Severance Pay,” or “Readjustment Pay” appear on their DD-214 form, they should prepare for the possibility of a disabilty payment freeze.
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About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
