Separation Recoupment Modified

Officer, The, Sep 2009 by Hanson, Marshall A

Grassroots

Pressure from individuals led to change in Pentagon policy.

It took grassroots activity to gain a foothold on the issue of recoupment of Voluntary Separation Incentive/Special Separation Bonuses ( VSI/SSB).

When ROA national headquarters approached congressional offices about eliminating the payback requirement, the staffs focused on the lost revenue. But when individuals shared their stories about the hardships created by the recoupment demands made by the Defense Finance and Accounting Service (DFAS), Congress listened. While recoupment isn't being waived, legislation is being introduced in Congress to modify the repayment schedule, and the Pentagon has felt the pressure.

Recoupment of military retirees' VSI/SSB and separation payments by DFAS has been temporarily suspended pending a formal policy and legal review by the Department of Defense (DoD).

VSI/SSB and certain other separation pay- ments, such as severance pay, were offered to Ac- tive Duty and full-time Reserve and Guard military members in an effort to reduce man- power in certain career fields during the 1990s. Those receiving these payments were also required to maintain an affiliation with the Ready Reserve. These programs required repayment if an individual remained in the Reserve Component long enough to qualify for a military retirement.

Repayment ratios were set at 5 percent for every year on active duty, with money being withheld until the bonus is paid back. Some military retirees were having up to 75 percent of the annuity pay withheld. There was some additional confusion that affected members were being double taxed, but DFAS assured ROA that withholdings were pretax dollars. But for many, income taxes paid in the 1 99Os were at different tax brackets than they pay today.

Rep. Carol Shea-Porter (D-N.H.) introduced the Military Pay Fairness Act, H.R.2302, in May to limit recoupment of separation pay, special separation benefits, and voluntary separation incentive from members of the armed forces subsequently receiving retired or retainer pay. A companion bill, S. 1008, was introduced by Sen. Jeanne Shaheen (D-N.H.). Sen. Shaheen and Rep. Shea-Porter advocated a suspension of recoupment pending the outcome of their legislation. The legislation is credited to a request by retired Air Force Sgt Wayne Merritt of Dover, N.H., who lost more than half his monthly retirement pension.

The legislation would reform an unfair formula that requires DoD to aggressively recoup separation benefits previously paid to servicemembers. DoD would not be allowed to recoup more than 25 percent of a retiree's pension each month, and would have to notify servicemembers of impending withholding no less than 90 days before recoupment starts.

Sen. Shaheen and Rep. Shea-Porter applauded the decision by the Pentagon to review its policy. "We appreciate the Department of Defense's willingness to work with us to fix this problem," they said in a statement.

An active group of ROA members has been working this issue. They have contacted numerous offices on Capitol Hill, and have asked the office of Sen. Edward Kennedy (DMass.) for a Government Accountability Office study on inconsistencies with DoDs policy among the services. Not content with merely changes to repayment schedules, they set as their goal to get the recoupment eUminated. "This is a start, but I am not in favor of this bill in its current form. This is a misguided attempt to 'help' without really helping," said Col Frank Dolcater, USAFR (Ret.), an ROA Life Member who maintains an independent blog on the issue on ROAs website.

Indications are that DoD is not the only organization that seeks recoupment of these separation bonuses. Apparently, for Reservists with a disability, the Veterans Administration begins to withhold recoupment against disability payments rather than waiting until the individual turns 60 and qualifies for retirement pay. ROA is expanding discussions with Senate offices to include this issue.

CAPT MARSHALL A. HANSON, USNR (RET.) * ROA DIRECTOR OF LEGISLATION