VSI/SSB Recoupment

Defense Finance
and Accounting Service
Providing payment services of the U.S. Department of Defense

VSI/SSB Recoupment

If you receive Voluntary Separation Incentive (VSI) or Special Separation Bonus (SSB) and later qualify for retired or retainer pay, you will be required to repay the full gross VSI/SSB paid to date. You will receive a notification letter 90 days before your recoupment begins.

Repayment will be made through monthly deductions from your retired pay at a rate of 40 percent of your monthly pay.  Lump sum repayments are not allowed, but you can request that we increase your monthly payment amount by sending us a signed written request.

The Department of Veterans Affairs (VA) does not recoup VSI, but will recoup SSB. Additionally, VA compensation is deducted from VSI. If the VA is also recouping SSB payments, we will coordinate with them to avoid over-collection.  We deduct your VA award from your gross retired pay, and then withhold 40 percent of that amount for recoupment purposes. You may send us any documentation you have showing the amount the VA collected.


We cannot change previously issued 1099R forms, nor can we recover any funds sent to the Internal Revenue Service to cover the taxes on the payments already made to you.

When we recoup VSI/SSB payments, we treat it like a pre-tax deduction. That is, we reduce your taxable income by the amount we deduct for the recoupment each month.

For Example:  If you received a gross separation payment for $60,000 less Federal Income Tax Withholding of $12,000, you would have received a net check for $48,000. We will recoup the gross amount of $60,000.

If you become eligible for $2,500 per month from retired pay, less a VA waiver of $200 you would have an adjusted gross taxable income of $2,300. We recoup at the rate of 40% of gross income, which would be $920.

Your adjusted gross taxable income will be reduced by the amount being recouped ($2,300 less $920) leaving a new taxable income amount of $1380.


This is not a debt, but rather a recoupment. We are required by law to recoup these separation payments; therefore, we cannot consider waivers.


This is not a debt, but rather a recoupment. We are required by law to recoup these separation payments; therefore, we cannot consider waivers.


You can request a more lenient repayment plan if you are experiencing financial hardship. We will consider your application for hardship if the recoupment prevents you from meeting the costs necessary for essential subsistence. These essentials include food, housing, public utilities, clothing, transportation, and medical care.

Your notification letter will include a link to the Financial Statement of Debtor and a set of instructions. Please follow the instructions and return the completed Financial Statement of Debtor within 45 days of receipt of the letter to the address below.


U.S. Military Retired Pay

P.O. Box 7130

London, KY 40742-7130

You can submit the statement any time your financial status changes and results in a hardship.

If financial hardship is found, the recoupment rate will be reduced based on your financial condition. The minimum approved financial hardship recoupment rate is 10 percent. Please note that you are required to submit a renewal financial hardship application annually. Your application must be received within 45 days prior to the 1 year expiration date of your previous application  or deductions will automatically revert to the standards 40 percent recoupment rate.

Page updated October 24, 2016.