A federal law has compelled nearly 122,000 disabled veterans over the past 12 years to return lump-sum payouts they received upon leaving the military, according to new data obtained by NBC News. This legislation, which bars veterans from receiving both disability compensation and special separation pay, has placed many in financial hardship, prompting renewed calls for its amendment.
The affected veterans, who received one-time incentives to leave the military during downsizing periods, have faced unexpected demands to repay these amounts, often totaling tens of thousands of dollars. Vernon Reffitt, for instance, was recently ordered to return the $30,000 he received over 30 years ago to leave the Army.
“It's a severe blow,” said Reffitt, 62, from Twin City, Georgia. “It’s wrong to force veterans to give back money that they’ve long spent and depended on.”
Financial Strain and Legislative Challenges
The U.S. Department of Veterans Affairs (VA) has ramped up efforts to recover these special separation payments, affecting thousands of veterans annually. In fiscal year 2018, the VA recouped payments from over 17,000 veterans, the highest annual number recorded. The introduction of the PACT Act in August 2022, which expanded benefits for veterans exposed to toxic substances, has also coincided with an increase in recoupments, with nearly 9,300 cases in fiscal year 2023.
VA Press Secretary Terrence Hayes emphasized that the agency is legally required to recover these payments before veterans can receive disability compensation. However, the process has often led to sudden financial distress for those affected. For example, Shawn Teller, a veteran who served in operations Desert Storm and Desert Shield, was notified that his disability payments would be withheld until he repaid a $10,700 separation payment he received in 1996.
“I rely on this pay every month,” said Teller, 55, from Walnut Creek, California. “It’s not right.”
Calls for Reform and Waivers
Advocacy groups and some lawmakers argue that the law unfairly penalizes veterans by linking unrelated benefits. Special separation pay is based on years of service, whereas disability compensation addresses service-related injuries or illnesses.
“The two payments have nothing to do with each other,” said Marquis Barefield, Assistant National Legislative Director of DAV (Disabled American Veterans). “They are two separate buckets of money.”
In 2022, Rep. Ruben Gallego (D-Ariz.) introduced a bill to amend the recoupment law, but progress has been slow due to the high cost of implementation.
Errors and Exceptions
The VA has acknowledged that errors have led to some veterans receiving both benefits for extended periods. In certain cases, waivers have been granted to prevent undue hardship. For instance, the Air Force has granted at least five waivers since fiscal year 2016 for veterans affected by erroneous statements regarding recoupment. However, the process for obtaining waivers is stringent and often unclear.
The Navy, Marine Corps, and Coast Guard have not reported any waiver requests, while the Army did not respond to requests for comment.
Impact on Veterans
Veterans impacted by these recoupments face significant financial strain. According to a 2022 RAND Corporation study, the average amount withheld for recoupment ranged from $19,700 to $53,000 between 2013 and 2020. Veterans like Reffitt, who are required to repay large sums, find themselves cutting expenses and facing prolonged repayment periods.
Despite the challenges, Hayes maintains that the VA follows a legally mandated process, noting that recoupment cases constitute less than 1% of total disability compensation recipients. Nevertheless, the growing number of claims and the associated financial burden underscore the need for legislative review and potential reform.
