An Arizona lawmaker introduced a bill Thursday that would prevent veterans from being surprised when the Department of Veterans Affairs docks their disability payments to recoup military separation pay they received at the end of active duty.
Sen. Ruben Gallego, D-Ariz., has proposed barring the VA from collecting voluntary or involuntary separation pay from veterans who are approved to receive disability compensation.
The bill also would allow veterans who later qualify for military retirement pay to remit the net amount they received instead of the gross amount so they don’t end up paying more than they actually received after taxes.
Gallego, a former Marine and Iraq War veteran, and Rep. Gus Bilirakis, R-Fla, introduced a similar bill in the House when Gallego served in that chamber, but the legislation never made it out of committee.
The senator said the legislation is needed because the money is paid out for separate reasons: disability payments are akin to workman’s compensation and separation pay reflects “time served” — an incentive tool used by the Defense Department to manage force strength and design.
“It is ridiculous to claw back money from a veteran who has put life and limb on the line, just because later in life they qualify for disability benefits,” Gallego said in a statement to Military Times.
From 2013 to 2023, the VA recouped $2.44 billion in separation pay and bonuses from 112,834 veterans under a law that the department cites as prohibiting it from paying disability compensation to those who received the pay unless the money is paid back.
The VA has been required to recover the money since the 1940s, and the Defense Department is required to inform transitioning service members of the potential for recoupment. Sometimes, however, veterans are surprised when letters announcing the recoupment arrive, sometimes decades after they left military service.
In one case, an Air Force officer received $30,000 in separation pay in 1990 and received a letter in 2024 telling him his entire disability compensation check would be withheld until the money was recouped.
The situation placed the veteran at risk for losing his living quarters and vehicle, he told Military.com at the time.
“I fail to comprehend how or why they intend to cut me off for several months without even negotiating a lesser but [survivable] monthly contribution. I also fail to understand why it took 34 years for VA to come up with this [scheme]. Why now?” retired Air Force Maj. Raymond Thomas, 75, told the publication.
By law, veterans’ monthly disability compensation can be withheld if they received readjustment pay, non-disability severance pay, disability severance pay, special separation benefits or involuntary or voluntary separation pay.
According to the VA, the recoupment effort hit a peak in 2018 with 17,066 veterans paying more than $396 million.
The Restore Veterans Compensation Act would also change the recoupment rate for retired military veterans who are required to make payments to 25% of their paychecks rather than the current 40% — an alteration that would lessen the financial impact of the recoupment.
When Gallego and Bilirakis introduced their bill in 2022, it drew the support of Disabled American Veterans who said the practice of withholding VA disability compensation because a service member received a separation benefit “must end.”
Sen. James Risch, R-Id. introduced a separate bill Wednesday that would limit the amount that veterans paid each month to the VA for recoupment.
Risch’s Veterans Earned Benefits Access Act would allow the VA to collect the separation pay but limit it to no more than 25% of their monthly disability compensation checks. Currently, the VA can withhold the entire amount of checks until the veteran pays back the government.
“My [bill] ensures that veterans can receive the disability benefits they need while repaying their separation pay,” Risch said in a release.
Patricia Kime is a senior writer covering military and veterans health care, medicine and personnel issues.
