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Voluntary Separation Incentive
If you took a Voluntary Separation Incentive (VSI) you must remain in a Reserve Component for the entire time you are receiving VSI payments unless you are involuntarily transferred to another status (Standby Reserve or Retired Reserve). VSI payments will stop if you do not maintain reserve status.
If you spend enough time in the reserves to qualify for retirement pay, you reenlist, or you are recalled to active duty and qualify for retirement pay, you may choose to retire. However, you will be required to repay the full gross amount of VSI you have received. This repayment will be made via a recoupment from your monthly retired pay check.
You will still receive VSI payments annually in addition to your monthly retired pay, unless you choose to stop all future VSI payments.
Keep in mind, any payments you receive after retiring will also be subject to recoupment and may increase the amount we must deduct from your monthly retired pay. The Department of Veterans Affairs (VA) does not recoup VSI, although if a veteran is awarded VA compensation, it will be deducted from the VSI payments.
VSI termination is irrevocable. In addition, the beneficiary portion of VSI is forfeited as well. Meaning if you pass away your beneficiaries will not be eligible to receive your remaining payments.
To stop your VSI payments, send us a letter asking us to terminate your VSI account. You must also state in the request that you understand the termination is final, cannot be reversed and you are forfeiting all future rights to VSI.
Please include a phone number. We will call to confirm your intentions and to let you know your request has been processed.
What is VSI?
VSI was authorized for all branches of the armed forces to help the Department of Defense reduce the size of the armed forces while avoiding serious skill and grade imbalances, which would degrade the readiness of future forces. The program stopped taking new applicants October 1, 2001.
You must have met all of the following requirements to be eligible to receive VSI:
- six years of active duty as of December 1991
- five years of continuous active service at separation
- be in a rate or rank that has more people in it than are needed to maintain force readiness.
Your initial VSI installment was paid by your branch of service. All payments after that were made by Defense Finance and Accounting Service annually on the anniversary date of your separation.
Calculation and Payment
In the event of your death, your VSI beneficiary will continue to receive your VSI payments.
Payments are calculated by multiplying final monthly Basic Pay by 12, then by years active duty service, and multiplied again by .025.
Payments are made over a period of time that is equal to twice the number of your years of service. For instance, if you had 10 years of service at separation, you would receive a yearly VSI payment for 20 years. Partial years are prorated. If you served 18 years 4 months, your final installment would be 4 months of pay.
Page updated October 24, 2016.