Compensation Offsets

Texas Veterans CommissionTommy Pickens

Spring 2009

Objectives

• Understand the different compensation offset types

• Understand the rules for withholding benefits depending on the type of military pay received

General Requirements

38 CFR 3.700

Prohibits duplication of payments when a veteran receives certain types of military readjustment, separation, severance or retired pay

Military Benefits

Military benefits can be paid:

• in a lump sum

• on a monthly basis

Total or partial withholdings are appropriate depending on the military payment type.

Readjustment Pay: U.S.C. 3814

• Payments expired in 1977

• Date of VA compensation entitlement determines amount of total withholding– Before 09/15/1981 –no withholding– Between 09/15/1981 and 09/30/1996 – pre-tax

amount– After 09/30/1996 – post-tax amount

Readjustment Pay: U.S.C. 687

• Payments repealed 09/15/1981

• Date of VA compensation entitlement determines amount of total withholding– Before 09/15/1981 – 75% of pre-tax amount– Between 09/15/1981 and 09/30/1996 – pre-tax

amount– After 09/30/1996 – post-tax amount

Separation Pay: U.S.C. 1174

• Replaced readjustment pay effective 09/15/1981

• The date the separation pay was paid determines amount of total withholding– Recoup pre-tax amount if paid before

10/01/1996– Recoup post-tax amount if paid on or after

10/01/1996

Reservist Involuntary Separation Pay (RISP)

• Reservist Involuntary Separation Pay (RISP), under PL 102-484, Section 4418, pays a lump sum separation pay to certain reservists who are involuntarily released from the Selected Reserve.

• VA is required to withhold RISP if the veteran receives VA compensation for a disability incurred in or aggravated by service prior to the date of receipt of RISP.

Reservist Special Separation Pay (RSSP)

• Reservist Special Separation Pay (RSSP), under PL 102-484, Section 4416, provides for a reduced annuity that is paid for 5 years or until the veteran reaches age 60.

• VA is not required to recoup the amount of RSSP.

Non-disability Severance Pay

– Do not recoup if compensation entitlement is before 09/15/1981

– Recoup pre-tax amount if entitlement is on or after 09/15/1981 and severance pay was issued on or before 09/30/1996

– Recoup post-tax amount if entitlement is after 09/15/1981 and severance pay was issued after 09/30/1996

SSB and VSI

• Always recoup post-tax amount of SSB

• Never recoup for VSI

Disability Severance Pay

• Severance pay is a lump sum benefit that can be paid for one or more service-connected disabilities

• The combined evaluation of the severance disabilities versus the non-severance disabilities determines the amount of monthly withholding

Disability Severance Pay

In all cases, severance pay will only be recouped if service-connection is granted for a condition for which severance pay was received

– Recoup pre-tax amount if severance pay was issued on or before 09/30/1996

– Recoup post-tax amount if severance pay was issued after 09/30/1996

Military Retired Pay

38 CFR 3.750(a)

Pay received by a veteran that is classified as retired pay by the service department

Can be paid based on age/length of service or based on disability

Election of Retired Pay

Veteran can elect retired pay on either one of the listed forms:

– VA form 21-526 (after November 1977)

– VA form 21-651

Where to Verify Retired Pay

• DD Form 214

• VA Form 21-526

General Rules

• Total monthly payments between the two benefits cannot exceed the greater of the two (assuming no entitlement to CDRP or CRSC)

• Withholdings are never made prospectively (in the future)

Basic rules for withholding

VA compensation• The waiver of retired pay is a

waiver of the amount equal to the amount of the veteran’s compensation/pension, and the veteran can receive any amount of retired pay beyond that. See 38 U.S.C. 5305.

CRDP

Effective January 1, 2004

Intended to phase out the offset of military retirement pay for VA disability compensation over a 10-year period

CRSC

• Effective June 1, 2003

• Requires service-connection for a combat-related disability

References

• 38 CFR 3.700

• 38 CFR 3.750

• M21-1MR, Part III.Subpart v.4.B

• M21-1MR, Part III.Subpart v.5.A

QUESTION REVIEW

1. Describe the general provisions of 38 CFR 3.700.

2. Name a type of Military Pay one might receive as a lump sum payment.

3. If a veteran received Readjustment Pay under former U.S.C. 3814 and then became entitled to VA compensation as of November 3, 2000, what amount of the Readjustment Pay would the VA keep?

4. If a veteran received Separation Pay under 10 U.S.C.1174 on February 3, 1998 and became entitled to compensation on October 7, 2005, what amount of the Separation Pay would the VA recoup?

5. Does the VA withhold for Volunteer Separation Incentive/VSI?

6. Can SMC monies be withheld to recoup Severance Pay?

Questions?