In the Past Decade, VA Has Recouped $2.4 Billion in Separation Pay, Bonuses from Disabled Vets

In the past decade, the Department of Veterans Affairs has recouped more than $2 billion from veterans who received separation pay from the Defense Department and later filed for disability compensation, an effort that has resulted in financial hardship for some former service members.

According to data provided by the VA, the department has collected $2.44 billion from 112,834 veterans since 2013 under a law that department officials say prohibits it from paying disability compensation to those who received voluntary or involuntary separation pay or bonuses until the money has been recouped.

While the VA has been required to recover the money since the 1940s – and the Defense Department is required to inform transitioning service members of this potential transaction – veterans have been surprised when the recoupment letters arrive, in some cases decades after they received the money.

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Former Air Force officer Raymond Thomas received $30,000 in separation pay in 1990 and, following a series of government administrative missteps, was told earlier this year his monthly disability compensation, which he uses to cover his vehicle and living quarters, would be withheld completely until the money was returned.

Thomas reached a payment agreement with the VA after he told his story to Military.com, but he still feels like the problem should have been resolved in the years following his release from military duty.

Vernon Reffitt, who served as a dog handler in the Army for more than 13 years, was awarded a $38,000 incentive to leave the service in 1992 as part of the drawdown following the 1991 Persian Gulf War. At the same time, he received a 10% disability rating from the VA and has been getting a small check for more than 30 years.

When he applied for benefits under the PACT Act, his claim was denied, but the VA noticed he had received a separation bonus and started recoupment efforts.

"It's not the VA's money," Reffitt said Monday during an interview with Military.com. "It was given to me by the Army as part of a drawdown situation, so that I would not stay in the military. ... I got my VA disability rating the same day and collected both. Why would the Army give me $30,000 [after taxes] that the VA could just take back the next day? It's stupid."

According to VA data, the recoupment effort hit a peak in 2018 with the department collecting more than $396 million from 17,066 veterans. Last year, it collected nearly $148 million from more than 9,000 former service members.

VA spokesman Gary Kunich said the department tries to identify those who are required to repay "as early as possible" and understands that the effort may present a hardship to some veterans.

He added that, since September 2021, the VA has taken steps to resolve recoupment cases more efficiently and is making an effort to ensure that veterans understand the process when they file a disability compensation claim.

For those already receiving benefits, the VA will "work with them every step of the way to minimize any impact this may have on them," Kunich said.

A bill was introduced last year, the Restore Veterans' Compensation Act, by Reps. Ruben Gallego, D-Ariz., and Gus Bilirakis, R-Fla., that would eliminate the requirement for VA to recoup separation pay and incentive payments for veterans who receive disability compensation, but it has not been considered by either the House Armed Services or Veterans Affairs committees.

Reffitt said he'd like to see the legislation passed because the recoupment effort is "just wrong."

"The No. 1 thing I'd like to see happen is for the recoupment to stop. There's no reason to give somebody money just to take it back 30 years later. Either stop giving bonuses or stop the recoupment. And the other thing is, if you are wrong, pay for it."

He said when he accepted the separation pay, he knew that he would have to pay it back if he returned to military service and eventually retired. He had no idea that the VA had any authority over collecting money from disability pay.

"If the Army's wrong for putting this out under false pretenses, then they need to pay. If the VA is wrong in missing me for 30 years, then they need to just suffer the loss. It shouldn't be me all stressed out and anxious because they made a mistake," Reffitt said.

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