VSI, SSB Recoupment Halted

The Defense Finance and Accounting Service (DFAS) has stopped recouping Variable Separation Incentive (VSI) and Special Separation Benefit (SSB) payments, until Defense Department legal officials can review the program. During the drawdown of military forces following the Gulf war of 1991, the Defense Department offered VSI (annuity) and SSB (lump sum) payments as incentives to encourage service members with at least 15 years of service to leave the armed forces before reaching the 20-year mark and qualifying for retirement pay. Those who accepted the payments were required to maintain affiliation with the Ready Reserve. But they were also required to repay the VSI or SSB if they were to remain with the Ready Reserve and earn military retiree status. The recoupment requirement, which contains no provision to account for any financial hardships it may place upon recipients, raised hackles among military service organizations. "The entire concept is beyond the pale," wrote Franklin Dolcater on the Reserve Officers Association Web site last November. "Not only is the member penalized for electing to continue in the Reserves, the repayment formula requires repayment of the entire amount, including taxes already withheld." During the policy review, DoD and DFAS hope to determine how to meet the letter of the law while minimizing impact on retiree recipients. Those affected can expect to receive a letter from DFAS announcing the recoupment suspensions, and another once the review is concluded.