Refund of Variable Incentive Pay

The issue of this decision was whether a commissioned officer in the Public Health Service (PHS) who executed a 1-year variable incentive pay (VIP) agreement and voluntarily terminated the agreement before completion of the 1-year agreement should be required to refund the entire VIP payment or should any refund be based on a pro rata basis. After serving 6 months, the officer requested to be released from active duty with PHS, and he accepted employment with the Department of Labor. Since the officer separated before the required time, thus failing to complete his contractural obligation to remain on active duty for 1 year after the effective date of the VIP agreement, he was required under PHS regulations to refund the entire amount of his VIP agreement. Under the applicable statute, a medical officer of PHS who is otherwise eligible and executes a written active duty agreement will receive incentive pay for completing a specified number of years of continuous active duty. When an officer voluntarily fails to complete a 1-year contract, refund of the entire amount of VIP paid is required. A VIP agreement is not renegotiable to a lesser commitment. Terms of a VIP agreement are binding on the parties, and an officer who does not complete the active service agreed to is subject to the refund provisions of the agreement and the regulations requiring repayment of amounts received. Accordingly, the actions of PHS were proper and the denial of the claim was sustained.