Overview
In This Section |
This section contains the following topics:
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1. General Information About Separation Benefits
Introduction |
This topic contains general information about separation benefits, including
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Change Date |
January 2, 2019
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III.v.4.B.1.a. Prohibition Against the Duplication of Benefits |
38 CFR 3.700 prohibits the Department of Veterans Affairs (VA) from paying compensation to a Veteran who also received certain separation benefits from the
These separation benefits include:
References: For more information about
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III.v.4.B.1.b. Determining Whether a Veteran Received Separation Benefits |
A review of one or more of the following will typically reveal whether or not a Veteran received separation benefits:
Notes:
Reference: For guidance in accessing information in VA’s systems of record, see the
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III.v.4.B.1.c. How VA Updates Its Systems of Record With a Veteran’s Service Information |
The table below describes how VA updates its systems of record with service information from a Veteran’s DD Form 214, to include the amount and type of separation benefit the Veteran received, if any.
Exception: If a Veteran received a type of separation benefit that VA is notresponsible for recouping, the Austin DPC does not enter the amount of this benefit into the VADS record.
Reference: For more information about VADS, see the Share User’s Guide.
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III.v.4.B.1.d.Determining Whether VA Has Already Recouped Separation Benefits a Veteran Received |
Before establishing a withholding to recoup a Veteran’s separation benefit, check the corporate record (by clicking on the MILITARY button in Share and selecting the MILITARY PAYMENTS tab) to ensure VA has not already completed recoupment.
If the corporate record shows recoupment is complete, claims processors must ensure the amount of benefits VA recouped matches the amount of the separation benefit the Veteran received. If they do not match, treat the separation benefit currently at issue as unrecouped.
Exception: If VA completed its recoupment of a Veteran’s separation benefit in the Benefits Delivery Network (BDN) (prior to conversion to VETSNET), such recoupment will not be evident in Share.
If a Veteran had a master record in BDN, claims processors may view data from the record by clicking on the PRECONVSN MASTER RCD button in Share. Claims processors may not rely on data displayed on the STATUS (M11) screen, however, to determine whether VA finished recouping a Veteran’s separation benefit. Instead, claims processors must review entries in the Offset – Recoupment section of BDN award prints in the claims folder to make this determination.
Notes:
Important: If a determination cannot be made as to whether VA has recouped a separation benefit, ask the local finance activity to assist in making the determination by performing a financial audit. References: For more information about using
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III.v.4.B.1.e. Readjustment Pay Under Former 10 U.S.C. 3814a |
Readjustment pay under former 10 U.S.C. 3814a was paid to regular officers below the rank of major who were discharged during a reduction in force. The authority for making these payments expired at the end of 1977.
If a Veteran received readjustment pay under former 10 U.S.C. 3814a, the date of entitlement to VA compensation dictates whether recoupment is required.
References: For information about
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III.v.4.B.1.f. Readjustment Pay Under Former 10 U.S.C. 687 |
Readjustment pay under former 10 U.S.C. 687 was paid to reserve officers who were involuntarily released after completing at least five years of active service but did not qualify for retirement. The authority for making these payments was repealed effective September 15, 1981.
If a Veteran was involuntarily released from active duty as a Reservist on or after July 9, 1956, and had completed continuous active duty of at least five but not more than 18 years, carefully review the records described in M21-1, Part III, Subpart v, 4.B.1.b to determine whether the Veteran elected
If the evidence of record does not contain the information required to make a determination, follow the instructions in M21-1, Part III, Subpart v, 4.B.2.b.
Reference: For information about the effect of PL 87-509 on readjustment pay under former 10 U.S.C. 687, see M21-1, Part III, Subpart v, 4.B.1.g.
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III.v.4.B.1.g. Effect of PL 87-509 on Readjustment Pay |
PL 87-509, enacted June 28, 1962, liberalized the former law that required Veterans to make a one-time, irrevocable election between VA compensation and readjustment pay. The prior election no longer precludes payment of compensation if a Veteran is otherwise eligible.
On or after June 28, 1962, if
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III.v.4.B.1.h. Non-Disability Severance Pay |
DoD awarded non-disability severance pay to certain individuals, under former 10 U.S.C 359, 360, 859, and 860, who involuntarily separated from service, usually due to their failure to meet standards of performance. This benefit is subject to recoupment unless the Veteran established entitlement to VA compensation beforeSeptember 15, 1981.
Note: PL 96-513 repealed former 10 U.S.C. 359, 360, 859, and 860, effective September 15, 1981.
Reference: For more information on the recoupment of non-disability severance pay, see
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III.v.4.B.1.i. Separation Pay Under 10 U.S.C. 1174 |
Separation pay under 10 U.S.C. 1174
Reference: For information on determining the amount of separation pay to recoup, see M21-1, Part III, Subpart v, 4.B.2.d.
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III.v.4.B.1.j. RISP and RSSP |
PL 102-484, Section 4418, provided for the payment of RISP to certain reservists who are involuntarily released from the Selected Reserve.
PL 102-484, Section 4416, provided for the payment of RSSP to reservists with at least 20 years of service who are not yet old enough to retire. Payments are made annually for up to five years or until the reservist turns sixty.
In VAOPGCPREC 9-1996, VA’s General Counsel held that VA is
Note: For award-processing purposes, treat RISP as separation pay.
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III.v.4.B.1.k. SSB and VSI |
PL 102-190, Sections 661 and 662, enacted December 5, 1991, added SSB under10 U.S.C. 1174a and VSI under 10 U.S.C. 1175 as separation benefits to facilitate the downsizing of the armed forces. Service departments used these two exit-bonus incentive programs through December 31, 2001, to encourage service members, who might otherwise face involuntary separation or denial of reenlistment, to separate voluntarily.
To qualify for SSB or VSI, a service member must have
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III.v.4.B.1.l. Differences Between SSB and VSI |
One of the primary differences between VSI and SSB is the manner in which DoD pays each benefit. The most important difference, however, is that VA is notresponsible for recouping VSI from a Veteran’s disability compensation.
The table below describes how DoD pays SSB and VSI.
Reference: For more information about DoD’s responsibility for reducing a Veteran’s VSI to offset the amount of VA compensation he/she is receiving, seeM21-1, Part III, Subpart v, 4.B.1.m.
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III.v.4.B.1.n. Indicators on DD Form 214 of a Veteran’s Receipt of SSB or VSI |
A Veteran’s DD Form 214 usually contains information that indicates whether he/she received SSB or VSI and, if so, the amount.
The table below shows where this information is located on the form and how it might appear.
Important:
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III.v.4.B.1.o. VSP |
10 U.S.C. 1175a provides for the payment of VSP to service members voluntarily separated from active duty due to restructuring or a reduction in force.
VA must recoup VSP from a Veteran’s disability compensation unless he/she
Exception: For exceptions to the requirement to recoup VSP from Air Force Veterans, see M21-1, Part III, Subpart v, 4.B.4.
Note: Upon receipt of a waiver for a Veteran whose disability compensation VA is already withholding for the recoupment of VSP, discontinue the withholding and release all previously withheld compensation.
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III.v.4.B.1.p. Indicators on DD Form 214 of a Veteran’s Receipt of VSP |
A Veteran’s DD Form 214 usually contains information that indicates whether he/she received VSP and, if so, the amount.
The table below shows where this information is located on the form and how it might appear.
Important:
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III.v.4.B.1.q. VRI |
VRI is a payment DoD offers to encourage voluntary retirement by officers who have served for more than 20 years.
VRI is not subject to recoupment from VA benefits.
Reference: For more information about VRI, see 10 U.S.C. 638b.
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2. Determining the Amount to Recoup and Withhold From Monthly Payments
Introduction |
This topic contains instructions for determining the amount of separation benefits to recoup and the amount to withhold from monthly compensation payments, including
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Change Date |
April 15, 2019
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III.v.4.B.2.a. General Information About Recouping Separation Benefits |
After VA determines recoupment of separation benefits is necessary and the amount that is subject to recoupment, it must withhold some or all of the Veteran’s monthly compensation until recoupment is complete.
Except as noted in M21-1, Part III, Subpart v, 4.B.2.k and M21-1, Part III, Subpart v, 4.B.3.g, the amount VA withholds each month includes any of the following to which the Veteran is entitled:
Important: VA may not
References: For more information about
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III.v.4.B.2.b. Confirming the Amount of the Separation Benefit |
The records described in M21-1, Part III, Subpart v, 4.B.1.b typically show the amount of the separation benefit a Veteran received. Because this amount is not always accurate, however, regional offices (ROs) must confirm the amount by following the instructions in the table below.
References: For information about
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III.v.4.B.2.c. Conditions Under Which Claims Processors May Not Use AskDFAS to Obtain Confirmation of the Amount of a Veteran’s Separation Benefit |
Because certain records that DFAS requires to confirm the amount of a Veteran’s separation benefit are no longer accessible, there are conditions under which the submission of a request for said confirmation through AskDFAS will always result in a negative reply. The table below describes those conditions and the actions claims processors must take instead of attempting to obtain confirmation through AskDFAS.
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III.v.4.B.2.d. Determining Whether and How Much to Recoup |
The following factors determine whether and how much of a Veteran’s separation benefits VA must recoup from his/her disability compensation:
The table below shows how these factors affect recoupment of the various types of separation benefits.
Exceptions: For exceptions to the policies described in the table above, see M21-1, Part III, Subpart v, 4.B.2.e.
References: For more information about the recoupment of
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III.v.4.B.2.e. Exceptions to Policies for Recouping Separation Benefits |
The table below contains exceptions to the policies described in M21-1, Part III, Subpart v, 4.B.2.d regarding the recoupment of separation benefits.
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III.v.4.B.2.f. Service Departments’ Practice of Withholding Federal Income Tax |
Service departments always withhold Federal income tax from RISP, VSP, SSB, and separation pay under 10 U.S.C. 1174. Often, however, DoD’s database doesnot contain the amount of Federal income tax service departments withheld from these types of separation benefits. In these cases, VIS will show $0.00 as the Federal income tax withholding.
Follow the instructions in M21-1, Part III, Subpart v, 4.B.2.g, in the situation described in the preceding paragraph or anytime VA has verified the gross amount of a Veteran’s separation benefit but has not yet verified the amount of Federal income tax his/her service department withheld.
Important: If the separation benefit a Veteran received is disability severance pay, and VIS shows $0.00 as the Federal income tax withholding, the Veteran’s service department
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III.v.4.B.2.g. Calculating the After-Tax Amount of Separation Benefits |
To calculate the after-tax amount of a Veteran’s separation benefit,
Notes:
Reference: For up-to-date information about the flat-tax rate for supplemental wages, see the Internal Revenue Manual, Part 4, 23.8.4.
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III.v.4.B.2.h. Handling Separation Benefits When Compensation Becomes Greater Than Pension |
Follow the instructions in the table below when all four of the following conditions exist:
Note: VA must withhold the entire benefit if the Veteran elects compensation. Therefore, VA should give the Veteran the opportunity to be fully informed of all the facts before beginning a withholding.
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III.v.4.B.2.i. Recouping Separation Benefits After a Veteran Becomes Entitled to MRP |
If a Veteran becomes entitled to MRP after receiving separation benefits, the retired pay center (RPC) must recoup the gross amount of separation benefits it paid to the Veteran from his/her MRP. If these same separation benefits are subject to recoupment by VA because of the Veteran’s entitlement to disability compensation, VA and the RPC become mutually responsible for their recoupment.
Exceptions:
The table below describes how VA and the RPC work together when both departments are responsible for recouping a Veteran’s separation benefits.
Note: Upon expiration of the system diary referenced in the above table, the SOO must
References: For information about
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III.v.4.B.2.k. Recouping Separation Benefits (Other Than Disability Severance Pay) From a Veteran With Multiple Periods of Service |
Important: The information in this block applies to the recoupment of all types of separation benefits except disability severance pay.
Separation benefits are not paid for a particular period of service. Rather, the payment is for all periods of service that preceded the separation for which a separation benefit was paid.
Example:
Scenario:
Action: Withhold disability compensation payable for the knee and back disorders (subject to the limitations discussed in M21-1, Part III, Subpart v, 4.B.1.j).
Notes:
Reference: For more information about the rating activity’s responsibility to identify the period of service during which certain service-connected (SC) disabilities had their onset, see M21-1, Part III, Subpart iv, 6.E.5.c and d.
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3. Instructions Unique to the Recoupment of Disability Severance Pay
Introduction |
This topic contains instructions that are unique to the recoupment of disability severance pay, including
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Change Date |
April 15, 2019
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III.v.4.B.3.a. Identifying
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Before recouping disability severance pay, it is necessary to identify the disability(ies) for which the Veteran received this benefit. The best source for this information is the Veteran’s Physical Evaluation Board (PEB) report, which is normally included in his/her service treatment records (STRs).
If the PEB report is not included in the Veteran’s STRs, it might be located in his/her service personnel records. Use the table below to determine how to submit a request for the PEB report.
References: For more information about using
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III.v.4.B.3.b. General Policies Regarding Withholdings to Recoup Disability Severance Pay |
Generally, if a Veteran received disability severance pay, VA must withhold from his/her monthly compensation an amount equal to the monthly compensation payable for the disability(ies) for which the Veteran received disability severance pay. VA continues to withhold this amount until it has recouped the amount specified in M21-1, Part III, Subpart v, 4.B.2.d.
Important:
Exception: If VA initially assigns a severance-pay disability a temporary 100-percent rating under 38 CFR 4.28, 4.29, or 4.30,
Examples: The table below contains examples of how to apply the policies set forth in this block.
Notes:
Reference: For more information about sending notice of a proposed adverse action, see M21-1, Part I, 2.B.
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III.v.4.B.3.c. Definition: Initial, Compensable Disability Rating |
For the purpose of this section, initial, compensable disability rating means the first disability rating VA assigns to a disability that is 10 percent or higher, except100-percent ratings under 38 CFR 4.28, 4.29, or 4.30.
If VA assigns a compensable disability rating for the first time, and subsequently increases the rating effective the same date it assigned the first one, the very first rating VA assigned is still considered the “initial, compensable disability rating” for the purpose of this section.
Example: VA assigned a Veteran’s SC back disorder a 10-percent disability rating, effective April 21, 2011. The Veteran filed a legacy appeal of the decision, and VA later increased the rating to 20 percent, effective the same date it had assigned the 10-percent rating.
Result: The initial, compensable disability rating in this example is 10 percent.
Exception: If VA increases an initial, compensable disability rating from the same effective date based on clear and unmistakable error (CUE), the new rating replaces the first one and becomes the initial, compensable disability rating. When adjusting the withholding in these cases, make the adjustment prospectively, effective the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share.
References: For more information about
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III.v.4.B.3.d. Handling Reduced Disability Ratings and Disability Severance Pay |
If VA reduces the disability rating it initially assigned to a severance-pay disability, it must make a corresponding adjustment in the amount of compensation it withholds each month (to recoup disability severance pay) to reflect the new rating.
Important: The new rating does not become the initial disability rating (as defined in M21-1, Part III, Subpart v, 4.B.3.c), however, unless VA determines the initial rating was clearly and unmistakably erroneous.
Example:
Note: If, in addition to the severance-pay disability, a Veteran has at least one SC disability for which he/she did not receive severance pay (hereafter referred to as a “non-severance-pay disability”), follow the instructions in M21-1, Part III, Subpart v, 4.B.3.g–i to ensure the method chosen to calculate the withholding is most advantageous to the Veteran.
Reference: For information pertaining to the recoupment of severance pay from an incarcerated Veteran’s award, follow the instructions in M21-1, Part III, Subpart v, 8.A.4.c.
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III.v.4.B.3.e. Disability Severance Pay for Disabilities Incurred in a Combat Zone or During Combat-Related Operations |
PL 110-181, as implemented in 38 CFR 3.700(a)(3), prohibits the recoupment of disability severance pay from VA compensation if the Veteran
Exception: The provisions of this block may apply to a Veteran who separated from service prior to January 28, 2008, if
Important:
Reference: For information about determining whether DoD paid disability severance pay that is not subject to recoupment under 38 CFR 3.700(a)(3), seeM21-1, Part III, Subpart v, 4.B.3.f.
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III.v.4.B.3.h. Example: VA Assigns a 100-Percent Disability Rating to a Non-Severance-Pay Disability |
Scenario: In a decision on a Veteran’s original claim for benefits, VA awards SC for
Result: VA may not withhold any compensation to recoup the Veteran’s disability severance pay while the non-severance-pay disability is rated 100-percent disabling.
Note: The result in this example is the same, regardless of whether or not VA assigned the 100-percent rating on a temporary basis under 38 CFR 4.28, 4.29, or4.30.
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III.v.4.B.3.j. Changes in the Disability Ratings of Multiple Severance-Pay Disabilities |
If the disability ratings assigned to two or more severance-pay disabilities change, compare the combined disability rating VA initially assigned to the severance-pay disabilities with the current combined disability rating.
If the initial, combined disability rating is less than or equal to the current combined disability rating for the same disabilities, withhold compensation at the rate payable for the initial combined disability rating rather than considering the changes in the ratings assigned to each individual disability.
The table below contains two examples of situations in which VA would withhold compensation at the rate payable for the initial, combined disability rating of 40 percent.
Note: If, during a routine review of a claims folder, it is discovered that VA failed to comply with the instructions in this block and withheld compensation at a rate other than it should have been, prospectively adjust the withholding to the correct rate effective the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share. If the adjustment will reduce the amount of net compensation payable to the Veteran, follow the due process procedures found in M21-1, Part I, 2.B.
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4. Recouping VSP Awarded to Air Force Veterans
Introduction |
This topic contains information about recouping VSP awarded to Air Force Veterans, including
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Change Date |
January 2, 2019
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III.v.4.B.4.a. History Behind the Current Recoupment Schedule for VSP |
On October 17, 2007, the Secretary of the Air Force issued a blanket waiver of the requirement to recoup VSP from VA compensation for service members released from active duty on or after that date.
Six months later, on April 30, 2008, the Department of the Air Force replaced the blanket waiver with a recoupment schedule for service members released from active duty on or after the latter date.
Follow the instructions in the table below upon receipt of a claim for VA compensation from an Air Force Veteran who received VSP.
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III.v.4.B.4.b. Instructions for Preparing an Award That Recoups VSP |
Follow the instructions in the VETSNET Awards User Guide for preparing an award that recoups separation benefits if a Veteran
Follow the instructions in the table below if
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III.v.4.B.4.c. Recoupment of VSP From an Incarcerated Air Force Veteran’s Compensation |
If VA is recouping an Air Force Veteran’s VSP from his/her disability compensation, using the recoupment schedule in the third row of the table under M21-1, Part III, Subpart v, 4.B.4.a, and that Veteran’s disability compensation becomes subject to reduction due to incarceration,
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5. Taking Award Action to Withhold Compensation
Introduction |
This topic contains information on taking award action to withhold compensation, including
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Change Date |
January 2, 2019
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III.v.4.B.5.a. Determining the Appropriate Effective Date for Commencing the Recoupment of Separation Benefits |
Use the table below to determine the appropriate effective date for commencing the recoupment of separation benefits from a Veteran’s disability compensation.
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III.v.4.B.5.b. Instructions for Preparing an Award That Withholds Compensation to Recoup SeparationBenefits |
To prepare an award that withholds compensation to recoup separation benefits in
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III.v.4.B.5.c. Preparing a Decision Notice After Commencing the Recoupment of Separation Benefits |
After taking award action to begin recouping a Veteran’s separation benefits, prepare a decision notice that informs the Veteran
Important:
Reference: For more information on decision notice requirements, see M21-1, Part III, Subpart v, 2.B.1.
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6. Adjusting an Award From Which VA Withheld or Is Withholding Compensation
Introduction |
This topic contains information on adjusting an award from which VA is withholding compensation, including
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Change Date |
March 25, 2013
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III.v.4.B.6.a. Retroactive Adjustments That Require Special Handling |
Follow the instructions in the user guide titled Priors Screen and Audit Error Worksheets (AEWs) if
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III.v.4.B.6.b. Adjusting an Award Based on a Reduction in the Combined Disability Rating |
If, while VA is withholding all of a Veteran’s compensation to recoup separation benefits he/she received, VA decides a decrease in the Veteran’s combined disability rating is in order, the provisions of 38 CFR 3.105(e) still apply.
Even though the Veteran is not receiving compensation, VA must
Reference: For more information about notifying a Veteran of a proposed adverse action under 38 CFR 3.105(e), see M21-1, Part IV, Subpart ii, 3.A.3.
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III.v.4.B.6.c. Status of a Recoupment Balance When VA Stops Paying Compensation |
When VA stops paying a Veteran compensation from which it had been recouping separation benefits, any amount VA has not yet recouped
Exception: The principle set forth in this block does not apply when the Veteran dies before VA finishes recouping his/her separation benefit. The recoupment balance does not remain as a charge against survivors benefits VA subsequently pays based on the Veteran’s service.
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7. Processing Requests for Adjustment of a Withholding Because of Extreme Financial Hardship
Change Date |
April 15, 2019
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III.v.4.B.7.a. Processing Requests for Adjustment of a Withhholding Because of Extreme Financial Hardship |
The table below contains instructions for processing a request that VA adjust the amount of a withholding (that is in place to recoup separation benefits) because of extreme financial hardship.
Notes:
Reference: For more information about notifying beneficiaries of a VA decision, see M21-1, Part III, Subpart v, 2.B.
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1-2-19_Key-Changes_M21-1III_v_4_SecB.docx | May 16, 2019 | 125 KB |
Historical_M21-1III_v_4_secB_6-12-15.doc | May 16, 2019 | 445 KB |
Historical_M21-1III_v_4_SecB_1-2-19.docx | May 16, 2019 | 151 KB |
9-29-16_Key-Changes_M21-1III_v_4_SecB.docx | May 16, 2019 | 109 KB |
4-15-19_Key-Changes_M21-1III_v_4_SecB.docx | May 16, 2019 | 103 KB |
Change-June-12-2015-Transmittal-Sheet-M21-1III_v_4_SecB_TS.docx | May 16, 2019 | 41 KB |
Transmittal-Sheet-M21-1MRIII_v_4_SecB_TS.doc | May 16, 2019 | 134 KB |
Transmittal-Sheet-M21-1MRIII_v_4_SecB_TS.docx | May 16, 2019 | 38 KB |
in Chapter 4 Elections, Waivers, and Recoupments, Part III General Claims Process, Subpart v General Authorization Issues and Claimant Notification
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