Military Involuntary Separation Pay Rules & Eligibility

With the current military drawdown, involuntary separations will be a way of life for military members for the foreseeable future. Unfortunately, being informed you will be involuntarily separated from the military usually comes with little notice. You will likely go through a range of emotions as you come to terms with the fact that your military career is ending, whether you want it to or not. We covered this topic recently in a podcast about Force Shaping and involuntary separations. The podcast covers some of your options, including the benefits that will be made available to you, the option of joining the Guard or Reserves, early retirement, or in some situations, being eligible to receive separation pay.

This article covers separation pay in more detail, including an overview of the eligibility requirements, types of separation pay, how to calculate involuntary separation pay, and more.

Involuntary Separation Pay Rules & Eligibility

Military Separation Pay Eligibility (Non-Disability)

Military separation pay is comparable to the severance pay you might find in the civilian world. However, not all servicemembers who are involuntarily separated from the military are eligible to receive separation pay benefits. There is also two types of pay, (1) Full Separation Pay, and (2) Half Separation Pay. (for the purpose of this article, we are not considering separation pay for a disability).

Full Pay Eligibility: You must have served at least 6 years on active duty, but less than 20 years* to be eligible to receive involuntary separation pay. In addition to the service time requirements, you need to be fully qualified for retention at the time you are let go, and your service must be characterized as “Honorable.”





Common reasons for being eligible to receive involuntary separation pay include separated under Force Shaping, or Reduction in Force measures, or exceeding high-year tenure for your rank.

To qualify for Full Separation Pay, the service member must agree to serve in the Ready Reserve or similar Reserve Component for a minimum of 3 years following release from active duty service.

Half Pay Eligibility: Half Pay also requires a minimum of 6 years of active service, and less than 20. However, servicemembers can get by with an “Honorable,” or “General” discharge. Some common examples include involuntary separation due to failure to meet fitness/weight standards, loss of security clearance, involuntary discharge due to parenthood, etc. Be sure to check with your personnel department to verify you will be eligible for separation pay.

*Service of more than 15 years, but less than 20: In some cases, those who have served at least 15 years on active duty may be eligible to retire under TERA rules. However, TERA is only offered on a case by case basis, and is not guaranteed to everyone with 15 years of service. You need to apply for TERA and it needs to be approved by your branch of service. Hopefully those who have served at least 15 years will be eligible to retire under TERA, as the retirement benefit is substantially more valuable than the one time, lump-sum payment that comes from involuntary separation pay.

How to Calculate Involuntary Separation Pay

Here is how to calculate full military separation pay:

  • 10% x Years of Active Duty Service x 12 x Most Recent Monthly Base Pay.
  • Months of service are counted as 1/12 of a year.

You can express this in words as, “10% of your annual base pay, multiplied by the number of years you served.”

Let’s work through an example of an E-5 receiving involuntary separation pay at 6 years:




$2,734.50 base pay x 12 = $32,814.00

$32,814.00 x 6 (number of years served) = $196,884.00

$196,884.00 x 10% = $19,688.40 = Full Separation Pay.

To determine the separation pay you may be eligible to receive, simply plug in your base pay, number of years (including fractions), and multiple by 10%. The longer you have served and the higher your rank, the greater the value of your separation payment.

Important Things to Know About Separation Pay

Taxes: Taxes will be withheld from your separation pay, usually at a rate of 20% or 25%. So far as I know, you cannot change the withholding rate. If you overpay your taxes, you will receive a refund when you file your tax return the following year. Taxes will be handled in a similar manner to taxes on a military bonus.

Separation Pay & Joining the Guard or Reserves: You may be eligible to join the Guard or Reserves after leaving active duty military service, even if you receive separation pay. However, if you go on to retire from the Guard or Reserves, you will be required to pay back your separation pay. DFAS will withhold 40% of your retirement pay until you have paid back the separation pay you received. There is no option for repaying the balance in a lump sum, but you can request that DFAS increase your withholding to speed up your repayment of the separation pay. Here is more information about paying back separation pay upon retirement.

Don’t let the possibility of repaying the separation pay prevent you from joining the Guard or Reserves, as this can be a great way to continue your military career and continue earning important benefits for yourself and your family.

Additional notes: Separation pay benefits can be complicated and each situation is unique. The DoD Reg for separation pay is over 60 pages long (DoDFMR 7000.14R, Chapter 35, Section 3502, Separation Pay (Nondisability) – pdf) and includes many exclusions and other information. The goal is to give you a rough idea of how the benefit works, so you can run some calculations on your own. It’s up to you to ensure you double-check your status with your finance or personnel office to verify your situation.

You can also read the law as written in 10 U.S. Code § 1174 – Separation pay upon involuntary discharge or release from active duty.

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Date published: August 5, 2014.

Article by

Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.

Comments

  1. I was medically discharged from the Army in 2009 and received severance pay. I did physical therapy for two years and was cleared to join the Army Reserves in 2011. I am now being medboarded again for the same condition as active along with others. Is there separation pay for reservists in my situation or not?

    • Jeff, To be honest, I’m not certain. And your situation may be complicated due to the fact that you have already received severance pay once. You need to contact your personnel department and ask them to look at this for your specific situation.

  2. Involuntary separated on Oct 1 2014 and still waiting for my separation pay its been over 30 days and no pay as of yet. Who should I talk to about getting my pay as some of my friends have already been paid?

    • Casper, Thanks for contacting me. To be honest, I’m not sure how long it takes to be processed. Contact your local base finance office and see if they can tell you how long it should take. You may also try contacting DFAS.

  3. Ryan, will 1 NJP have any impact on the involuntary separation pay? How do I apply for the involuntary separation pay?

  4. Casper I also separated the same date you have and also have still not received my separation pay. I keep getting the run around. I called DFAS and they told me that my finance office has to release the “hold pay” status so the can pay me. I talked to my local finance and they tell me that DFAS has to do their audit and tell my finance they are good to go and then my finance will issue the pay. I call back to DFAS a few days later and again I get told it’s my local finance. On top of that my MPF never issued me my DD214. I went to ebenefits to try to get it but no such record exists, however everything that I gave to my separations office came up on my OMPF except my DD 214.

    • Jz17, Thanks for sharing an update on your situation. I hope it gets resolved soon.

      Regarding your DD214 – you should call your local MPF and ask them if they can send you a copy of your DD214. If they don’t have one on file, you need to ask them to issue you one. Politely take this up the chain of command if they try to give you the run around. Your DD214 is the most important military paperwork you have because it shows your proof of service, discharge type, when and where you served, and other information. It is required to get certain veterans benefits including the GI Bill and the VA Loan.

  5. Well just an update, spoke with my finance yesterday and I guess since I nagged them enough they went ahead and processed an 80/20 payout where I’d get 80% sometime next week and the rest they will hold until my audit/hold pay is released in which to me is better than finding out that I may still have to wait another 15+ days. Just thought I might let you all know to see if this result works for you guys.

  6. kingofcleveland says:

    If I am meb and I get 75% disability will I have to repay my separation pay

  7. It’s sad that my husband did 2 tours of deployment, served almost 6 years (being released end of January & his 6TH YEAR MARK IS IN APRIL) and we’re left to start from square one. I definitely feel like we been punched in the gut by the military considering my husband is being release (involuntary separation) 3 months before his 6th year of active duty. Not receiving nothing to help us get by & wish we could of get half pay at least to help us get back up. Thank goodness for family because our situation is so unfair.

  8. Dm229,

    Your husband should’ve been authorized to gain retainability up to his 6 year mark, allowing him to get separation pay. They should’ve pushed his separation date to the 6 year mark. There’s fine writing somewhere about this, the same with E-5’s and HYT.

  9. Hey Ryan,

    I just received my DD-214 I think my separation pay is wrong. I tried to contact the number they gave me on my package, stated my pay might be wrong. My base pay was a 700 dollars different, bah was 300 dollars different base on my LES. My last day of the navy was on November 22,2014. She said my separation pay is base on my last month. I work 22 day in November that’s how i get paid base on my last month. I then ask her, so if i worked 5 day in November i would have only got paid for 5 days. She couldn’t answer me, can you please give me some information what can i do to get my full pay. It’s like they’re only giving me half.

    • Trey, Are you referring to your final paycheck, or involuntary separation pay? If you are referring to your final paycheck, you would receive 1/30th of your pay for each day served (the military counts each month as 30 days). So if you served 22 days in the month, you would multiply your base pay by 22/30. The same for your BAH and BAS.

      Involuntary separation pay is based on your years of service and why you separated. There is a half separation pay – this would include if you are separated under honorable or general conditions, for some of the following reasons: failure to meet fitness/weight standards, loss of security clearance, involuntary discharge due to parenthood, etc. If none of those apply and you were separated under Honorable conditions, you may be eligible for full separation pay.

      Unfortunately, I don’t know enough about the service requirements for each of these conditions. You will need to contact your local unit and ask them to specifically outline your situation. I hope this points you in the right direction.

  10. I was hon discharged after being seperated with lump sum payment for a seizure disorder….my question..I have been rated at 50% by the va…different disability. Will I still have to payback my separation payment?

    • USMC1962, I’m sorry to hear about your medical issues. To be honest, I don’t have an answer for you here. I would contact your local base personnel office and ask them (they may have to research this question). You could try the following forums, which may be helpful: Physical Evaluation Board Forum, or the MEB Forum. Both of these forums specialize in medical evaluation boards, physical evaluation boards, and VA disability. Hopefully someone there will have the answer. Best of luck, and thanks for your service!

  11. leosindians says:

    I was discharged in 2012 under honorable conditions with the Perform To Serve program, but I was told that I did not qualify for the involuntary seperation pay because I was a FC Fire Controlman. They said that because my first two years of the navy were Navy “A” and “C” school that I did not qualify. Is this true? I found a document from my old ship saying that I was qualified for it but never given the pay. What should I do?

    • Hi leosindians, Thank you for contacting me. I’m not sure we have enough information here. Typically, you need at least 6 years of service to be eligible for involuntary separation pay. Did you have longer than 6 years of service? Also, there may be other issues that can prevent one from being eligible to receive involuntary separation pay, including type of discharge or other factors. It sounds like more information is needed in your situation, and this is something that only someone from the Navy can give you (they will need to access your personnel files to give you a full determination). I recommend you contact someone from BUPERS and ask for more information. Best of luck, and thanks for your service!

  12. dawgsfan0532 says:

    I have a question? will they hold my last paycheck as well? Or will that be included with my seperation pay?

    • dawgsfan0532, You should receive your final paycheck on your normal pay date (1st and 15th). Your separation pay may come slightly later, depending on the circumstances of your separation. You will need to contact your finance department for more information.

  13. David West says:

    Hello Ryan, I was recently notified that I am being considered for denial of continued service, under the Army’s QMP program. THe board is convening in Feburary, and from all of the research I have done, if I am considered for denial of continued service, it will automatilcally be an honorable discharge, and involuntary separation. Does QMP fall under reduction of force, and still qualify me for separation pay? I am an E-7, with over 13 1/2 years in. Thanks for the help!,

    V/R,
    David West

  14. David

    I have tons of questions..can you please give me a call. 915-261-8629..

  15. Hello due to the draw down of the army. I was an E5 with 8 Years and 6 Months time in service. My command knew about this and were targeting me on every step I took or every little mishap I had, I beat 1 Field Grade ART 15 off with a stick. with enough evidence to protect me. Now here comes another one that was total bullcrap, fought hard to prove my innocence but no avail. I lost it and i was charged with a field grade Reduction in rank to E4. My command is pushing hard to use this as a drawdown tactic to get rid of people and make room for brand new privates, Its all business of course.

    Now I am over my RCP date under my current rank now. I have 8 Years + in military service and have nothing against me expect this art 15 after 8 years. Am I qualified for the INV. SEPERATION, I belive i read that RCP is part of INV SEP. after the bull i had to deal with.. I said I wanted to get out within 90 days until I seperate

    And what do I need to start doing, Who does the INV SEP paperwork or who do i talk to about the SEPERATION pay? iv been looking all over for this, I did my job and well, And I belive i deserve this pay after the hard work I have put into the army.. could some one help me on this subject?

    • Eric, This is a situation where you will be best served by speaking with your unit personnel office. They will be able to look at your specific situation and give you answers based on your files and your situation. I wish you the best during your transition. Thanks for your service!

  16. Ryan, I was separated from the Army back on Dec 10, 2013 on a chapter 18 (weight control failure) with an honorable discharge at the rank of SSG w/ 8 yrs of service. My ETS was supposed to be Feb 14, 2014 but my command was rushing to get me out before I reached my ETS. Due to the chapter 18 and my time in service I received separation pay. Since I was rushed out I wasn’t able to start the process for my VA disability claims for injuries I accrued while in service until after my separation. Now that my VA disability claims are complete the VA is saying that I have to pay that separation pay back before I can start receiving the money for my disability. Now, I’ve read that if you receive severance pay instead of medical retirement your severance pay is subject to recoupment before the disability will start being paid to you. However my separation pay was for my time in service due to being chaptered for being overweight but had nothing to do with VA disability comp or does it? So from what I’m getting is that no matter what the reason you received separation pay and or severance pay (I’ve seen both separation and severance used as the term) prior to discharge from service if you qualify for disability benefits afterwards you have to pay that back is that really correct? If so that’s highway robbery in my opinion because separation/severance pay isn’t optional to receive or decline once you’ve been deemed eligible, and the fact that I’m being forced to pay it back just because I claimed injuries that were caused by my time in service is ridiculous. So instead of receiving back pay for my claim that was filed in May 2014 and completed Dec 2014 I’m being told by the VA that I wont start seeing my disability money until Sept 2015 just because I was given sep pay for being discharged on an overweight chapter.

  17. Hello Ryan, my husband’s last day as in the army was on Dec 3, 2014 and he signed his contract for the army reserve on Dec 4, 2014. We were told we would get his separation pay from the army around the middle of Dec and the enlistment bonus for the reserve by Dec 31, 2014. His first drill in the reserve was on Dec 13, 2014 and we have not gotten paid anything yet. His last check we got was on Nov 28, 2014. I know there is a glitch in the system for all reserve soldiers for Dec 15, 2014, but did the glitch effect the separation pay and the bonus for joining the reserve? We have 3 children and bills to pay with no income since the end of Nov. How much longer will we have to wait on any funds to be entered in our account. What can or should we do. Please help

  18. I am to be discharged for failure to meet the Army height and weight standards. What kind of separation pay if any, will I get. I have been in the service for 7 years? Advice.

    • Shawn, It depends on your discharge classification and if there are any other marks on your profile when you are separated. If the height/weight issue is the only factor, then it’s possible you would be eligible for Half-Separation Pay. However, this is not set in stone. You will need to verify all of this with your personnel department.

      The formula for determining full separation pay is “10% of your annual base pay, multiplied by the number of years you served.” Each month of service counts as 1/12 of a year. Half separation pay should come out to half that number. keep in mind you will have to agree to enter into a 3 year service commitment to the Individual Ready Reserve in order to receive the separation pay.

  19. Separating from Air Force due to HYTY will hit 15 years on 1 March 2015, going active reserve and then retiring in another 20 yrs, would I be able to receive any type of Tera retirement pay for hitting 15 yrs, or should I just stick with the separation pay their giving me, Also active reserve job will be paid in civilian pay( WG pay )but I will still be in uniform and receive two retirement checks after 20 yrs

    • Jeff, Thanks for sending your question. TERA is only offered on a limited basis. You would need to apply for it. If you are able to receive a retirement under TERA rules, I do not believe you would be able to serve in the Reserves, or in an AGR position, since you would then be an active duty retiree.

      You should receive separation pay when you separate. However, you would be required to repay your separation pay after you begin drawing your Reserve retirement at age 60. The military will recoup it at a rate of up to 40% of your check until the entire separation pay has been repaid. Here is more info.

      Don’t let the idea having to repay your separation pay stop you from joining the Reserves, though. Your separation pay would essentially just turn into a long-term, interest free loan. And you will still have the retirement benefits you otherwise wouldn’t have. So it’s still a great deal in the long run. Just be aware of it.

  20. I’m getting ready to get adsep from the navy for bca failures within a 4 year period.I’m geting conflicting information regarding the severance pay. I’m being told that I will receive none and all I’ll get is the GI Bill. I spoke with a friend of mine that got out January 2014 for the same thing and she told me she received 27000. Has the rules on that changed recently. I’ve been in for 12 years. Just trying o find out the right answer.

    • tracyann, Thank you for contacting me. It depends on your discharge classification and if there are any other marks on your profile when you are separated. If failing the BCA is the only factor, then it’s possible you would be eligible for Half-Separation Pay. However, this is not set in stone. You will need to verify all of this with your personnel department.

      The formula for determining full separation pay is “10% of your annual base pay, multiplied by the number of years you served.” Each month of service counts as 1/12 of a year. Half separation pay should come out to half that number. Keep in mind you will have to agree to enter into a 3 year service commitment to the Individual Ready Reserve in order to receive the separation pay. Please note each individual situation is unique, so I encourage you to verify this with your personnel section before assuming it is correct.

  21. My Grandfather was sent home in Dec. 1984 on Active Duty. From 1984 to 1990 he was at Home, but still considered Active Duty. He has paperwork that states that he will be paid, while being home. Until the Courts make their decision. They made their decision in May of 1990. To this day he hasn’t recieved any pay for those 6 years, Active Duty . Can you tell me what course of action he needs to take to recieve back pay?

  22. DeNelle Ivery says:

    I’ve tried to do my best with planning ahead falling under the early involuntary separation program but it seems there IS NO proper way to plan. I am in a family of 6 and just made E5 months before getting out. I have people telling me that I should have planned better, given my situation, but making E4 pay even after 6 years is only enough to pretty much get by. Like I said, having just made E5 allowed me to save a little the past few months. Knowing my timeline, 15 Jan 2015 ETS, I took terminal leave 17 Dec 2014 to 1. Get my future housing situated being in a family of 6.

    2. Have JPPSO perfectly timed to pack and ship my house out of state for a smooth transition.

    3. Know what to tell potential employers as far as my timeline and when and where to interview (after a few discussions with the potential employers I don’t know what to tell them or if the Army is hurting my chances because I seem unstable)

    4. Schedule when to start school, which is out of state in my hometown (from all of the horror stories I’ve come across as I read more into other peoples situations I think it’s safe to say I won’t make it on time if I sit back and wait)

    5. Live off of what savings I do have if needed.

    Well today is 27 Jan 2015 and I am all out of my savings and living in a friends basement with my family (since on post housing ended on 15 Jan) awaiting payment. I’ve called both my finance office and DFAS. Finance says wait 5-10 business days from my ETS and DFAS says it can take 60 days from 1 Jan 2015. I DON’T KNOW WHAT TO BELIEVE. I just ran across a post above that says that finance can give me a 80/20 advance on my separation pay. Well I have a 12 Feb start date for school for myself, I still need to pay for housing cost where I need to go, I need to finance the travel, and most of all my children need some sort of stability as they continue going to school. Is it in my best interest to get the 80/20 advance while the Army figures out whats going on?

  23. I separated from the navy in Dec 2014 and received half ISP. I was an E6 with just less than 12 years of service. Can I/how do I claim that on my tax return? I only received a direct deposit of the ISP into my bank account and nothing was shown on my W2.

    • B-man7, That’s a great question, and to be honest, I don’t have a specific answer for you. I believe the military withholds 25% to cover taxes, but you would still need to know those amounts to file your taxes. My recommendation is to contact the finance or personnel office at your former base and explain that you need that information in order to file your taxes. Hopefully they will be able to look it up and send it to you. It’s also possible that the information may be in myPay if you still have access to your account. Sorry I don’t have a better answer for you. Please let me know if you find out how to get this info, and I can update the site with this information. Best of luck with your transition, and thank you for your service!

  24. Im a 13 yr E5 with a code 11 on my erb and I will be getting involuntart seprated, my question is will I be getting a severance pay ?

  25. I am being discharged from the guard for vission requirements, I have only been in almost two years would I be eligible to receive any pay?

  26. Isaiah Powell says:

    Hey Ryan,
    I get out the Marine Corps in August that will put me at 8 years i have 1 NJP on contract back in 2011, would i still qualify for separations pay i know i don’t qualify for the full amount.

    • Isaiah, Thank you for contacting me.

      Are you getting out voluntarily (end of your contract), or are you being involuntarily separated? The answer to that question will go a long way in determining your separation pay eligibility.

      The NJP in 2011 is probably not going to factor into this, unless that is a core reason for not being eligible to reenlist. In that case, you could possibly receive half separation pay.

      Here are some general rules of thumb about separation pay:

      – If you are being involuntarily separated due to force shaping, or something similar, then yes, you should be eligible for full separation pay.
      – If you are being kicked out due to failure to meet standards, then you may be eligible for the partial payment, depending on the circumstances.
      – If you are being kicked out due to misconduct, then you probably will not be eligible for separation pay.
      – If you have simply finished your contract at that time and elect to not renew, then you won’t receive anything.
      – If you are not allowed to reenlist, then it’s possible you may receive partial separation pay.

      This is a rough overview, based on common circumstances. So the best thing to do is see your personnel department for a final determination.

      I hope this help. Best of luck, and thanks for your service!

  27. amy downing says:

    My husband received separation pay but decided not to join the reserve, because he found a great career job. Will he have to pay back the money he received?

    • Amy, He will have to join the Inactive Ready Reserve (IRR), which is not the same thing as the regular Reserves. He is not required to repay the Separation Pay so long as he fulfills his IRR requirement. I hope this helps!

  28. Hi Ryan,

    I got out last year and received separation pay. I have been waiting to hear back from the VA regarding my disability compensation. I found out today that i am 30% disabled but that my monthly allowable is 0$. I called benefits to find out why and OF COURSE their computers were down but they guy told me that it is because i got separation pay when I got out and that I will not receive my disability compensation until my severance is paid back.

    This makes no sense to me considering I was involuntary separated. I had an Honorable discharge… can you explain this???

  29. Nick Coooer says:

    I reached high year tenure and received non-disability severance pay. I also filed a claim with VA for disability. Does the non-disability pay affect the VA benefit? If someone can also give me the regulation reference that would be awesome (have the feeling I will need it to deal with the va)

  30. Ryan,

    I have two questions. First, after April 2015 I will be in the Army for 16yrs as an E5 but my ETS date is November 2015. I received a reenlistment code (9G) meaning ineligible to reenlist. Am I entitled to severance pay under RCP rules? Second, I plan to take 60 days terminal leave. If I am entitled to severance pay will I receive it during my terminal leave or after my actual ETS date? Thank you

    • Anthony, Thank you for contacting me. I’m sorry to hear about your impending separation. I believe you will be eligible for separation benefits, provided there are no negative items on your profile (for example, you aren’t being separated due to failure to meet standards, non-judicial punishment, etc.).

      As for severance pay, that is typically paid out after you have completely separated from the military (usually 1-3 months after separating). It is not usually paid while you are on terminal leave. Hopefully that will help you plan accordingly.

      As a side note, you might want to consider joining the National Guard or the Army Reserves. This can help you bridge the transition into the civilian sector – there is decent pay and nice benefits, including inexpensive health care. With 16 years, you are also close to qualifying for retirement benefits. The high-year tenure rules are also very different in the Guard/Reserves, so that shouldn’t be an issue.

      You may have to repay any separation pay if you eventually qualify for retirement benefits, but that wouldn’t happen until you reach age 60 and begin receiving a pension (they would take 40% of your pension until any separation pay has been recouped). But you could look at it as a long-term, interest free loan. With 16 years of good service, I would take a long look at the Guard or Reserves as an option.

      Here are two podcasts we recorded about Guard/Reserves that you may find helpful: (1) Should you join the Guard / Reserves? (2) Guard / Reserve Retirement Benefits.

      I hope this information is helpful, and I wish you the best during your transition.

  31. Ryan,
    If a Soldier gets involuntary separation pay and then comes back on active duty and gets to or beyond 20 years and then gets medically (force retired) retired (does not retire normally), does he/she have to pay back the separation pay. Also if a Soldier before his 20 year mark gets medically retired will he/she have to pay back the separation pay? I have found nothing in the regulation about this and am looking to find something in writing if so. Have a lot of people saying different things. Thank you much.
    Dave

    • Hi Dave, Servicemembers are typically required to repay and separation payment they received if they become eligible for retirement benefits. DFAS has an entire FAQ section on recouping separation pay, which can be found here: Separation Recoupment FAQs. I don’t have details for every possible scenario, so I recommend contacting DFAS about a particular situation that isn’t covered in the FAQ section. Best of luck, and thanks for your service!

  32. I am about to be involuntarily separated in the next 4-6 weeks. I spoke with base finance and they said they don’t have anything to do with separation pay and to call DFAS. Is this the rule across installations or is it just this one finance office. If I call DFAS, will they have everything on file or will I have to do a back and forth with documentation sending and verification. Do I wait until I receive my DD214 to start this process? Thank you very much!

    • Dan, Thank you for contacting me. I’m not 100% certain. But my guess is this is the process across all installations. All payments are made by DFAS, and not the installation, so it makes sense that separation payments are made by DFAS as well. I don’t know if they will have your separation information on file or when they receive that information. But you can give them your expected separation dates and they should be able to give you a good idea of when you should receive your separation payments. Your separation pay should be automatic. I do not believe it is something you have to apply for. My recommendation is to call DFAS and have them walk you through the process.

  33. Hello,
    I am hoping you could answer a question concerning involuntary separation pay. I am hoping that others will benefit from an answer on here. I was involuntarily separated (honorably), and received a lump-sum payment. I was not discharged for medical reasons. During my outprocessing, I submitted a VA claim. My claim was approved about 9 months after being discharged, and my payments were offset by the separation pay, minus the taxes withheld. Now, my question is this. I understand the whole concurrent receipt thing, and am not arguing that the current law dictates that a disability compensation has to repay an involuntary separation pays at the time of discharge.

    My question is, at the end of the year, I am required to claim my involuntary separation payment from the Army as taxable income. VA disability compensation is non-taxable, and thus, does not have any federal taxes taken from it. Since the off-set does not allow for me to receive any payment stating that the involuntary separation pay was an advance of sorts, shouldn’t my wages for the year that I was discharged be off-set with the back-dated VA payments for the purposes of federal filing? The way I see it, I received advanced disability payments that should have been “tax-free”, but was taxed at the 28% rate when I left the service. I believe that my W-2 for the year of my discharge should be off-set by the amount identified on the VA award letter which in most cases changes the tax landscape for the person receiving the involuntary separation pay.

    • JeffW, that is a great question, and one I honestly don’t have an answer for. I would contact DFAS and ask if they issue any kind of corrected W2, or if they have a policy in place or this. I would hesitate to take any actions on when filing your taxes without some formal guidance. So it may be helpful to dive into the regs to see if there is an official policy in place. You could also try contacting a CPA or other tax professional such as a Registered Agent. They may have more insight into how this works. Sorry I don’t have a better answer at this time.

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