The Defense Finance and Accounting will resume recoupment of military retirees' Voluntary Separation Incentive, Special Separation Benefit and other separation payments in August, the organization announced recently.

VSI, SSB and certain other separation payments, such as severance pay, were offered to active duty military members in an effort to reduce manpower in certain career fields, primarily during the 1990s. Because federal law prohibits military members from receiving both separation and retirement payments for the same period of service, provisions of these programs included repayment should an individual join the Ready Reserve or return to active duty and earn status as a military retiree.

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.

Prior to the review, the federal statutes governing these programs 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 DoD review is complete, and Congress has amended two sections of Title 10, United States Code, to help limit the financial strain on military retirees as they repay their outstanding balances. The new statutes allow DFAS more flexibility to accommodate for financial hardship and modify payment plans, DFAS said. As a result, DFAS has reduced the maximum recoupment rate from 90 percent to 40 percent. DFAS also will consider more lenient repayment plans for retirees who are experiencing financial hardship.

The resumption of all separation pay recoupments currently affects about 2,800 people; DFAS expects to handle about 50 new cases per month, a DFAS spokeswoman told Army Times.

Affected retirees will receive notification letters at least 90 days before recoupments resume. If they feel the rate of recoupment will create a financial hardship, they may request a more lenient repayment plan by providing financial information on the Financial Statement of Debtor form enclosed with the notification letter, DFAS said.