Separation Pay Limits Initial Veterans Benefits

Disabled Veterans Say They Were Not Warned That Separation Pay Affects Veterans Benefits

Veterans BenefitsWhen a veteran returns from a tour of duty, he or she may have immediate needs with the Veterans Administration including treatment for lost limbs or hearing loss. In other cases, exposure to chemicals or violence may create problems for veterans, from post traumatic stress disorder to traumatic brain injury, that don’t immediately show up. Vets are entitled to veterans benefits, but  depending upon the situation, it may be difficult to determine the amount of compensation that a veteran will receive.

Many veterans may not know that if they receive payment, including separation pay, in conjunction with their separation from service, that money must be repaid before receiving veterans benefits.

For example, a Marine Corp staff sergeant who wished to be identified only as Stephen accepted separation pay on a voluntary basis when the Corp needed to trim its ranks. The Marines paid him $80,000 up front, which helped Stephen buy a house and start a business as a financial planner.

Although Stephen did not suffer from any health related problems at the time he separated from the service, he now suffers jaw problems, tinnitus, and PTSD.  The VA awarded him an 80% disability rating tied to his physical problems, entitling him to a monthly stipend and medical care for him for years to come.  To begin receiving these benefits, Stephen must pay back all of the money that he has already been awarded.  Because Stephen has to repay his separation payment, he won’t actually receive financial help through the veterans benefits program until 2018.

Another veteran, Shane Collins, was passed over for promotion to staff sergeant in the Marines last year and was given an involuntary separation payment of $46,000 – which came to $33,000 after taxes. He moved back to Idaho, bought his wife a car, paid some bills, and used the rest as a down payment on a house with a VA-backed loan.

Like many vets, Shane suffered some long-term health issues related to deployment overseas. In May, the VA awarded him a 70% disability rating, which he hoped would secure a monthly stipend so he could focus on getting better without worrying about more than part-time work. But he’s been informed that he must repay his separation payment, even though it was involuntary.

When asked, the VA stated that it does not have specific numbers on how many veterans may have their benefits blocked because of the separation pay issue, but did say that 17,000 troops have accepted voluntary and involuntary separation payments in both 2014 and 2015.

“I’ve definitely seen a slew of veterans come in in need of financial assistance, usually related to housing or school or something, and they are reaching out because they got the disability rating they were expecting, but then were told that you have to basically wait until you’ve quote-unquote ‘paid off your severance,’ ” said Claire Lawless, a veterans transition manager with the Washington-based advocacy group Iraq and Afghanistan Veterans of America.

“Being told that you won’t get the money that you thought you were relying on is incredibly disheartening,” she went on. “And really debilitating because if you lose your housing, everything starts to fall apart.

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




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