Two US senators have introduced separate bills aimed at changing federal rules that allow the government to withhold disability compensation from some military veterans who previously received separation pay.
The proposals, introduced by Democratic Senator Ruben Gallego of Arizona and Republican Senator Jim Risch of Idaho, take different approaches to a longstanding recoupment system affecting veterans who receive disability compensation from the Department of Veterans Affairs.
Under existing rules, some service members who receive separation pay when leaving the military and later qualify for VA disability compensation can have their disability payments withheld while the government recovers the earlier separation payment.
Gallego’s Restore Veterans’ Compensation Act would largely eliminate that recoupment from VA disability compensation, based on the argument that separation pay and disability benefits serve different purposes.
The legislation would also change the treatment of veterans who subsequently qualify for military retirement pay. According to details of the proposal, repayment would be based on the net separation payment received rather than the gross amount, while the recoupment rate from retirement pay would fall from 40 per cent to 25 per cent.
“Separation pay and disability compensation serve two entirely different purposes—one honors time served, while the other addresses workplace injuries sustained,” Gallego said in announcing the measure.
The proposal builds on legislation Gallego previously introduced while serving in the House of Representatives. Earlier versions of the Restore Veterans’ Compensation Act sought to prevent separation pay from being used to reduce subsequent VA disability compensation. Congressional records confirm that the 2023 version expressly proposed eliminating such recoupment.
Risch’s Veterans’ Earned Benefits Access Act, meanwhile, would retain the repayment requirement but restrict how quickly the government could recover the money.
Under his proposal, the VA would be limited to withholding 25 per cent of a veteran’s monthly disability compensation for repayment, allowing the veteran to continue receiving the remaining 75 per cent while the debt is recovered.
“Idaho veterans who answered the call to serve our country should not face delays in accessing their earned benefits,” Risch said.
The proposal applies to qualifying veterans who were involuntarily separated from military service, including during force reductions, but would exclude those discharged dishonorably.
VA disability compensation is a tax-free monthly benefit paid to veterans whose illnesses or injuries were caused or aggravated by military service. Payments vary according to disability ratings and, in some cases, the veteran’s dependants.
The two bills have only been introduced and have not become law. Existing recoupment rules therefore remain in effect unless Congress approves legislation and it is signed into law.
