Citation Nr: A25035111 Decision Date: 04/16/25 Archive Date: 04/16/25 DOCKET NO. 190401-10339 DATE: April 16, 2025 REMANDED The appeal of whether the withholding of Department of Veterans Affairs (VA) disability compensation benefits to recoup separation pay in the amount of $12,814.20 was proper is remanded. REASONS FOR REMAND The Veteran served on active duty from July 2001 to December 2010. This appeal to the Board of Veterans' Appeals (Board) is from a March 2019 decision by a VA Agency of Original Jurisdiction (AOJ) to withhold VA disability compensation benefits to recoup separation pay in the amount of $12,814.20. The Veteran testified at a virtual hearing in July 2023 before the undersigned Veterans Law Judge. A transcript of the hearing is of record. In November 2023, the Board found that the withholding of VA disability compensation benefits to recoup separation pay in the amount of $12,814.20 was proper and denied the claim on appeal. The Veteran appealed this decision to the United States Court of Appeals for Veterans Claims (Court). In September 2024, the Court granted the parties joint motion for remand (JMR), vacated the Board's November 2023 decision, and remanded the claim for readjudication. The parties agreed that remand was necessary because, in determining the withholding of VA disability compensation benefits to recoup separation pay in the amount of $12,814.20 was proper, the Board did not adequately address the Veteran's assertion that she did not receive separation pay or the documents she submitted in support of that assertion. 1. Whether the withholding of VA disability compensation benefits to recoup separation pay in the amount of $12,814.20 was proper is remanded. The recoupment of a veteran's separation pay from his or her monetary VA disability compensation benefits is required by 10 U.S.C. § 1174. If a service member who has received separation pay under 10 U.S.C. § 1174, or separation pay, severance pay or readjustment pay under other provisions of law, based on service in the armed forces, becomes entitled to disability compensation administered by VA, the total amount of the separation pay paid to the service member shall be deducted from that disability compensation, less the amount of federal income tax withheld from the separation pay. 10 U.S.C. § 1174 (h)(2), (i); 38 C.F.R. § 3.700 (a)(5)(i). The implementing VA regulation, 38 C.F.R. § 3.700 (a)(5)(i), likewise provides that, where payment of separation pay under § 1174 was made after September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay paid to the servicemember, less the amount of Federal income tax withheld from separation pay. The governing statutes allow limited exceptions to such recoupment, such as a sole survivorship discharge or where disability severance pay was received for disability incurred in line of duty in a combat zone. See 10 U.S.C. §§ 1174 (i), 1212(d). An October 2018 letter notified the Veteran that a review of her file led to the determination that VA did not recoup separation pay. VA proposed to withhold her compensation benefits to recoup her separation pay in the amount of $12,814.20 (after taxes). The March 2019 letter notified the Veteran that VA would enact the proposed action and would withhold her compensation benefits to recoup her separation pay in the amount of $12,814.20 (after taxes). The Veteran disputes that she received separation pay in the pre-tax amount of $17,085.60 ($12,814.20 after taxes were withheld). She asserts that she was advised by her service department that she was not entitled to separation pay because it was withheld to offset a reenlistment bonus that she was not entitled to receive because she did not serve the length of time she agreed upon at enlistment. However, she explained that she served all required time. She reiterated that she never received any separation pay and no assignee received any separation pay on her behalf. Leave and Earning Statements (LES) obtained by Defense Finance and Accounting Service (DFAS) reflect, in pertinent part, that the Veteran received readjustment pay (separation pay) in the amount of $17,085.60 (pre-tax). After other entitlements and deductions were calculated, she received a net payment of $189.60 at separation. However, the after-tax separation pay benefit the Veteran was entitled to receive was $12,814.20 ($17,085.60 - $4,271.40) and the Board cannot decipher the entitlements and deduction documented on the LES and the discrepancy in the net separation payment she was entitled to receive ($12,814.20) and the net amount received by the Veteran at separation ($189.60). Here, considering the parties September 2024 JMR, clarification on the amount of separation pay received by the Veteran is warranted. On remand, the AOJ must obtain clarification on the amount of separation pay received by the Veteran. The matter is REMANDED for the following action: 1. Contact DFAS and any other relevant agency and obtain an audit of payments made to the Veteran at the time of her separation from service from DFAS and/or any other appropriate resource. This should address her LES for the period from January 1-31, 2011, which documents, in pertinent part the Veteran was entitled to receive readjustment pay in the amount of $17,085.60, had federal taxes in the amount of $4,398.53 and separation pay in the amount of $1,309.61 deducted, and ultimately received net payment amount of $189.60. 2. Perform an audit of the Veteran's account to determine the correct amount of separation pay she was entitled to receive and the amount she actually received. 3. Reconcile all the amounts and send the Veteran a copy of all audit reports, outside agency documents, and an explanatory summary of the findings. The Veteran MUST be sent a copy explaining the findings, not just copies of the relevant documents. Cynthia M. Bruce Veterans Law Judge Board of Veterans' Appeals Attorney for the Board Jackson, Graig 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.