Separation Recoupment FAQs

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

Separation Recoupment FAQs

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.
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.
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.
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.
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.

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
8899 E. 56th Street
Indianapolis, IN 46249-1200

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 financial hardship is found, the recoupment rate will be reduced based on the member's financial condition and will be reviewed annually.

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
8899 E. 56th Street
Indianapolis, IN 46249-1200
Toll-free phone: (800) 321 1080

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.
Both agencies are required by law to collect. There is no option for DFAS or the DVA to suspend collection.
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.
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.
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.
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.
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.
No. However, we reserve the right to request them if further verification of the information you provide becomes necessary.


Retired pay should be listed as a wage.

This is not a debt, but rather a recoupment. DFAS is required by law to recoup these separation payments; therefore, we cannot consider waivers.
Yes. To request a new letter, please call Retired and Annuitant Pay Customer Service at 1-800-321-1080.