Separation Recoupment FAQs

I received a letter indicating that separation pay will soon be deducted from my retired pay. Why?
Congress allows DFAS to pay military members either a separation bonus or retirement pay for their period of service. If a member has received a separation payment, and then becomes eligible to receive retirement pay for the same period of service, he or she will be required to repay the separation pay before the full retirement benefit can be restored.
When will the separation pay deductions begin?
Deductions will begin on August 2, 2010. Prior to deduction, you will receive a notification letter and a Retiree Account Statement indicating the amount of the deduction.
I retired a few years ago. Why is this recoupment just starting now?
On June 1, 2009, in response to retirees' concerns, DFAS temporarily stopped deducting these repayments from retirement pay while the DoD conducted a formal review of the recoupment program. The DoD review is complete, and Congress has amended Sections 1174(h) and 1175(e) of Title 10, United States Code, to help limit the financial strain on military retirees as they repay their outstanding balances.
What does the amendment change?
Prior to the amendment, federal law did not allow the Department of Defense or DFAS to alter repayment rates or provide alternative repayment plans regardless of the financial hardships a retiree may be experiencing. The prior recoupment rate was based on a formula that sometimes resulted in a recoupment of 90 percent of a retiree's monthly pay. The new recoupment rate is a flat 40 percent. Retirees who submit a claim for financial hardship may have their recoupment rates reduced.
What if my previous repayment rate was lower than 40 percent?
If your rate of recoupment was lower than 40 percent before the recoupment was suspended, your recoupment will resume at the same lower rate you paid prior to June 2009.
Can I request a more lenient repayment schedule due to financial hardship?

Yes. Your notification letter will include a Financial Statement of Debtor and a set of instructions. Please follow the instructions and return the Financial Statement of Debtor within 30 days of receipt of the letter to the address below. You may also submit the statement any time your financial status changes and results in a hardship:

DFAS U.S. Military Retired Pay
P.O. Box 7130
London, KY 40742-7130

How do you determine if I am experiencing financial hardship?

A recoupment rate results in an undue financial hardship if the recoupment prevents you from meeting the costs necessary for essential subsistence. These essentials include food, housing, pubic utilities, clothing, transportation and medical care. In determining whether the recoupment prevents the member from meeting the essential subsistence expenses, we consider:

  • All income sources of the member, the member's spouse and dependents.
  • Whether the subsistence expenses have been minimized to the greatest extent possible.
  • The member, spouse and dependents' other exceptional expenses and whether these expenses have been minimized.
If I qualify for financial hardship, how long will my reduced recoupment rate apply?
If financial hardship is found, the recoupment rate will be reduced based on the member's financial condition and will be reviewed annually.
Can I request an accelerated repayment plan?

Yes. If you would like to request a higher rate of recoupment to accelerate repayment, please contact us at:

DFAS U.S. Military Retired Pay
P.O. Box 7130
London, KY 40742-7130
Toll-free phone: (800) 321 1080

The Department of Veterans Affairs is also recouping my separation pay. How can I make sure that too much money isn't collected?
If the VA is also collecting for separation pay, we will deduct your VA award from your gross retired pay, and then withhold 40 percent of that amount for recoupment purposes. Additionally, you may send us any documentation reflecting the amount collected from the VA. We will coordinate with them to avoid over-collection.
How do I set up a plan by which only one agency collects these funds?
Both agencies are required by law to collect. There is no option for DFAS or the DVA to suspend collection.
The amount the DVA says I owe is different from the amount DFAS states I owe. Why are they different?
DFAS is required to collect up to the gross amount of the separation payment you received. In some cases, the DVA collects up to the net amount of the payment you received.
I am a former spouse of a military retiree who received a letter saying that my Uniformed Services Former Spouse Protection Act payments may be reduced by this recoupment. How much of my payment will be reduced?
Your payment is a percentage of your former spouses' disposable pay, which is reduced by the monthly recoupment amount; therefore, the program might reduce some your payments. However, because your spouse has the right to request a higher or lower recoupment rate, we cannot predict the amount of the reduction.
Can I send in a check to pay off the recoupment?
If you would like to accelerate your repayment schedule, you may request to increase the monthly repayment amount. The monthly recoupment rate is limited to an amount no more than your gross monthly retired pay.
What is the timeframe to return the financial hardship form?
You have 30 days from the initial mailing to return the Financial Statement of Debtor in order to have (if approved) the reduced recoupment rate begin with your August 2, 2010 payment.
I am past the 30 days to return my hardship form. Can I still send it in?
Yes. However, beginning August 2, your separation payment will be recouped from your paycheck at the 40 percent recoupment rate until we are able to review your request and process the change.
Do I need to provide the supporting documents requested on the Financial Statement of Debtor?
No. However, we reserve the right to request them if further verification of the information you provide becomes necessary.
Under Section 9 on page 6 of the Financial Statement of Debtor, how do I list my retirement, as a wage or a pension?


Retired pay should be listed as a wage.

Since this is a debt, can I have a waiver letter?
This is not a debt, but rather a recoupment. DFAS is required by law to recoup these separation payments; therefore, we cannot consider waivers.
If I lost my notification letter or I did not receive a letter, can I have a new one?
Yes. To request a new letter, please call Retired and Annuitant Pay Customer Service at 1-800-321-1080.