Citation Nr: 21011384 Decision Date: 03/01/21 Archive Date: 03/01/21 DOCKET NO. 14-32 366A DATE: March 1, 2021 ORDER The withholding of $23,885.28 in Department of Veterans Affairs (VA) disability compensation payments to recoup military separation pay was proper; the appeal is denied. FINDING OF FACT 1. The Veteran was paid separation pay of $23,885.28 in 1994. 2. The VA has recouped $23,885.28 from the Veteran’s disability compensation benefits. CONCLUSION OF LAW The recoupment of separation pay in the amount of $23,885.28 by withholding VA disability compensation benefits was proper. 10 U.S.C. § 1174; 38 C.F.R. § 3.700. REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served honorably in the U.S. Marine Corps from August 1981 until June 1985 and from June 1985 to May 1994. The Veteran testified before the undersigned at a hearing held in August 2019; a transcript of that hearing is of record. 1. Propriety of the withholding of Department of Veterans Affairs (VA) disability compensation benefits for recoupment of separation pay in the amount of $23,885.28 The Veteran contends that an amount in excess of his separation pay of $23,885.29 has been recouped by the VA from his disability compensation benefits. Specifically, the Veteran contends that the full amount of the May 1994 separation pay was improperly withheld from his VA disability twice. He argues that the full amount was withheld from the initial VA compensation award in November 2011 and then that subsequent withholdings over the course of several months effectively required him to repay more than was originally owed. Separation pay upon involuntary discharge or release from active duty issued pursuant to 10 U.S.C.§ 1174 is subject to recoupment by VA, and a veteran who has received separation pay under this section, or severance pay or readjustment pay under any other provision of law, based on service in the armed forces shall not be deprived, by reason of his receipt of such separation pay, severance pay, or readjustment pay, of any disability compensation to which he is entitled under the laws administered by the Department of Veterans Affairs, but there shall be deducted from that disability compensation an amount equal to the total amount of separation pay, severance pay, and readjustment pay received. See 10 U.S.C. § 1174(h)(2). Where payment of separation pay was made on or before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay. See 38 C.F.R. § 3.700(a)(5). Where payment of separation pay was made after September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay less the amount of Federal income tax withheld from such pay. See id. In this case, the Veteran’s Certificate of Release or Discharge from Active Duty (Form DD 214) reflects a separation payment of $23,885.29 on May 22, 1994, the date of his discharge from service. Separation pay verification obtained from Defense Finance and Accounting Service indicates that the $23,885 separation payment included $6,687.88 in federal tax. Accordingly, as the separation payment to the Veteran was made prior to September 30, 1996, it is proper for the VA to recoup an amount equal to the total amount of the Veteran’s May 1994 separation pay, which is $23,885.29. The Veteran does not contest the validity of the amount or that the separation pay should be recouped, rather he argued that it was improperly recouped twice and more was withheld than he actually owed. The Board remanded the claim in November 2019 for a complete audit of the account. (Continued on the next page)   An audit of the Veteran’s account reflects that $17,197.41 was withheld from the Veteran’s disability compensation payments between November 1, 2010 and April 30, 2011. Additional withholding in the amount of $6,687.88, which corresponds to the amount of federal tax included in his original $23,885.29 separation pay, was withheld between June 1, 2014 and July 31, 2014. The Board notes there is no explanation in the audit of why there was a pause between the VA recouping the first $17,197.41 and the remaining $6,687.88, but that the total amount withheld equals $23,885.29. An audit of the Veteran’s account does not reflect any additional withholding in excess of $23,885.29. The laws provide that for separation pay made before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay. When pay is after September 30, 1996, VA will recoup an amount equal to the total amount of separation pay less the amount of Federal income tax withheld. Unfortunately, in this case, separation pay was made before September 30, 1996. As such As the record reflects that the total amount recouped by the VA from the Veteran’s disability compensation payments is $23,885.29, which is the proper amount for the VA to recoup, the withholding was proper. H. SEESEL Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board A. Christensen The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.