An Arizona senator is renewing a push to stop the Department of Veterans Affairs from clawing back military separation pay from disabled veterans, sometimes decades after they left active duty.
The proposal targets a practice that can suddenly wipe out disability checks veterans rely upon for housing, transportation, food, and medical expenses.
Sen. Ruben Gallego, an Arizona Democrat, introduced legislation Thursday that would bar the VA from collecting voluntary or involuntary separation pay from veterans approved for disability compensation. Gallego is a former Marine who served in the Iraq War.
The bill would also protect veterans who later qualify for military retirement pay from being forced to repay more money than they actually received.
Those veterans would remit the net separation payment placed in their pockets, rather than the larger gross amount calculated before taxes.
Gallego previously introduced similar legislation in the House alongside Rep. Gus Bilirakis, a Florida Republican. That proposal stalled in committee, leaving the government’s collection machinery running while veterans continued receiving unpleasant notices.
The senator argues that disability compensation and separation payments exist for fundamentally different purposes. Disability compensation functions much like workers compensation, while separation pay recognizes “time served” and serves as a force management tool for the War Department.
“It is ridiculous to claw back money from a veteran who has put life and limb on the line, just because later in life they qualify for disability benefits,” Gallego said in a statement.
For veterans blindsided years later, ridiculous may be putting it politely.
Between 2013 and 2023, the VA recovered $2.44 billion in separation payments and bonuses from 112,834 veterans. The department points to federal law prohibiting disability compensation for veterans who received covered separation payments unless that money is repaid.
The VA has been required to recover these funds since the 1940s, while the War Department must warn departing service members that future recoupment is possible. Yet veterans still report receiving surprise collection letters many years, and occasionally several decades, after leaving uniform.
One retired Air Force officer received $30,000 in separation pay in 1990, only to receive a VA letter in 2024 announcing that his entire disability check would be withheld until repayment was complete.
The sudden action placed him at risk of losing both his living quarters and his vehicle.
“I fail to comprehend how or why they intend to cut me off for several months without even negotiating a lesser but [survivable] monthly contribution. I also fail to understand why it took 34 years for VA to come up with this [scheme]. Why now?” retired Air Force Maj. Raymond Thomas, 75, told Military.com.
Current law permits the VA to withhold monthly disability compensation from veterans who previously received readjustment pay, severance payments, special separation benefits, or voluntary or involuntary separation pay. In some cases, the government can seize the entire disability check until the claimed balance is satisfied.
The recoupment campaign reached its recent peak in 2018, when 17,066 veterans repaid more than $396 million.
Those numbers illustrate how an obscure policy can produce a very real financial hammer for military families already managing service connected disabilities.
Gallego’s Restore Veterans Compensation Act would also reduce the collection rate for military retirees who remain subject to repayment. Instead of taking 40% of their checks, the VA would be limited to collecting 25%, easing the monthly financial blow.
Disabled American Veterans supported the earlier Gallego and Bilirakis proposal in 2022.
The organization said withholding disability compensation because a former service member received a separation benefit “must end.”
Sen. James Risch, an Idaho Republican, introduced a separate measure Wednesday called the Veterans Earned Benefits Access Act.
His bill would preserve the VA’s ability to collect separation pay but cap monthly withholding at 25% of a veteran’s disability compensation.
“My [bill] ensures that veterans can receive the disability benefits they need while repaying their separation pay,” Risch said in a release. Either proposal would offer more predictability than the current system, which can take every dollar from a veteran’s disability check with little regard for immediate consequences.
The competing bills take different approaches, but both recognize that disabled veterans should not be financially ambushed by Washington’s decades old bookkeeping.
Congress now has another opportunity to replace bureaucratic shock treatment with a policy that respects service, disability, and basic fairness.
