Veterans Compensation:

Offset of DOD Separation Pay and VA Disability Compensation

NSIAD-95-123: Published: Apr 3, 1995. Publicly Released: Apr 12, 1995.

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Pursuant to a legislative requirement, GAO examined the offset of Department of Defense (DOD) separation pay and Department of Veterans Affairs (VA) disability compensation, focusing on: (1) the purpose of separation pay programs; (2) the justification for offsetting pay; (3) the federal government's cost of repealing certain offsets; and (4) whether these offsets have discouraged DOD personnel from separating voluntarily.

GAO found that: (1) DOD uses separation pay as an incentive to people to serve in the military despite the risk of involuntary separation; (2) Congress authorized special separation pay to minimize the use of involuntary separations in the ongoing force drawdown; (3) pay offsets prevent service members from receiving dual compensation for a single period of service; (4) repealing offsets for separation and disability pay would cost the federal government an estimated $435 million (in 1994 dollars) for those service members who separated from fiscal years (FY) 1995 to 1999; (5) a repeal would cost about $799 million if it was made retroactive to FY 1992, when the special separation pay program began; (6) separation and disability pay offsets have not significantly undermined the voluntary separation incentive; (7) according to DOD, the bulk of the drawdown since FY 1992 has been accomplished through voluntary separations; and (8) DOD requires the services to inform separating service members of the existence of the offset.

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