IN THE CASE OF:	  

		BOARD DATE:	  12 March 2015

		DOCKET NUMBER:  AR20140011496 


THE BOARD CONSIDERED THE FOLLOWING EVIDENCE:

1.  Application for correction of military records (with supporting documents provided, if any).

2.  Military Personnel Records and advisory opinions (if any).


THE APPLICANT'S REQUEST, STATEMENT, AND EVIDENCE:

1.  The applicant requests reinstatement of his entitlement to voluntary separation incentive (VSI) installments.

2.  The applicant states he was discharged in August 1992 under the Fiscal Year 1992 (FY92) Enlisted Voluntary Early Transition Program with entitlement to VSI payments.  He was recalled to active duty in August 2007 and served on active duty for 13 months.  He received an injury during that period and he was discharged by reason of disability with entitlement to severance pay.  His VSI payments stopped because he received disability severance pay.  He feels he should not be penalized for responding to the recall and should be able to receive both the severance pay and the VSI installments. 

3.  The applicant provides:

* Letter from the Defense Finance and Accounting Service (DFAS) to his Member of Congress
* Decision by the Board of Veterans Appeals (BVA)

CONSIDERATION OF EVIDENCE:

1.  Having had prior active service, the applicant enlisted in the Regular Army on 19 April 1983.  He held military occupational specialties 95B (Military Police) and 27E (TOW/Dragon Repairer). 

2.  He served through multiple extensions or reenlistments in a variety of assignments and he attained the rank of sergeant (SGT)/E-5. 

3.  On 8 June 1992, Headquarters, III Corps, Fort Hood, TX, published Orders 112-101 honorably discharging him from active duty effective 15 August 1992. The orders stipulated that he was approved for VSI payments and that:

Soldiers who received VSI/SSB [special separation benefits] based on service in the Armed Forces, and who subsequently qualify under [Title 10, U.S. Code (USC)] or [Title 14,] USC for retired or retainer pay shall have deducted an amount equal to the total amount of VSI/SSB pay not previously recouped.  This amount will be recouped from each payment of retired or retainer pay until the total amount deducted is equal to the total amount of VSI/SSB received. 

4.  He was honorably discharged on 15 August 1992 under the provisions of chapter 16 of Army Regulation 635-200 (Personnel Separations), FY92 Enlisted Voluntary Early Transition Program.  He was authorized VSI payments of $5,547.78 for 24 years.  He was transferred to the U.S. Army Reserve (USAR) Control Group (Reinforcement or Individual Ready Reserve (IRR)).

5.  His DD Form 214 (Certificate of Release or Discharge from Active Duty) shows he completed 12 years, 3 months, and 27 days of active service.  Item 18 (Remarks) of his DD Form 214 indicated he was authorized a VSI payment in the amount of $5,547.78 for 24 years. 

6.  He was honorably discharged from the USAR on 21 June 1994.  

7.  On 22 June 1994, as part of his separation and continuance of his VSI payments, he maintained a reserve affiliation by executing a 6-year reenlistment in the USAR.  Based on this 6-year enlistment in the IRR, the expiration of his term of service (ETS) date would have occurred on 21 June 2000. 

8.  It is unclear if he reenlisted in 2000.  However, on 15 September 2005, also as part of the continuance of his VSI payments, he maintained a reserve affiliation by executing a 6-year reenlistment in the USAR.  His ETS date was established as 15 September 2011. 

9.  He entered active duty on 26 August 2007.  He was assigned to Fort Jackson, SC.  While there, he was assigned to the Warrior Transition Unit and entered the physical disability evaluation system. 

10.  On 30 June 2008, a physical evaluation board (PEB) convened and considered his medical condition of chronic low back pain due to lumbar degenerative disc disease and spondylolisthesis.  

	a.  The PEB noted that he underwent an MRI on 24 September 2007 and an x-ray on 21 May 2008.  He had normal gait and stance.  He had normal spinal curvature with no loss of lumbar lordosis and bilateral iliolumbar tenderness without guarding or muscle spasm.  His range of motion documented 82 degrees forward flexion and 198 degrees of motion in all planes. 

	b.  The PEB also noted he was unable to perform most common tasks and could not perform any Army Physical Fitness Test events.  He was rated for forward flexion of 82 degrees and his rating included consideration for functional loss due to factors such as pain on repeated use and painful motion, fatigability, incoordination, weakness with repetitive use and flare ups.  

	c.  The PEB rated his condition under the Department of Veterans Affairs (VA) Schedule for Rating Disabilities code 5239 at a 10 percent rating and recommended his separation with entitlement to severance pay.  It appears he concurred and waived his right to a formal hearing of his case.  

	d.  The PEB noted his disability did not result from a combat related injury as defined in Title 26, USC, section 104 and was not incurred in a combat zone or incurred during the performance of duty in a combat-related operation as designated by the Secretary of Defense (National Defense Authorization Act (NDAA) 2008, section 1646).  On 28 July 2008, an official approved his PEB Proceedings on behalf of the Secretary of the Army. 

11.  He was honorably released from active duty on 1 October 2008 by reason of disability, non-combat related, with entitlement to severance pay.  His DD Form 214 for this period of service shows he completed 1 year, 1 month, and 6 days of active service and he received $70,777.20 in of severance pay.

12.  On 28 March 2014, the BVA rendered a decision on the applicant's appeal regarding the propriety of recouping his severance pay from his VA 
service-connected disability pay.  The BVA stated: 

	a.  He served on active duty from December 1977 to December 1980, from April 1983 to August 1992, and from August 2007 to October 2008.  He accepted a VSI annuity payment upon his discharge from active service and transfer into the USAR in 1992.  He was medically disqualified from service in the USAR in 2008.  He was discharged from the Army by reason of physical disability involving his back, and he received a lump sum disability severance payment in 2008.  The BVA concluded that the recoupment of his disability severance pay, by withholding a portion of his VA disability compensation is proper.   

	b.  Historically, at the completion of his second period of service in 1992, he accepted an offer made under the Voluntary Early Transition Program and contracted to receive a VSI annuity payment of $5,547.78 for 24 years.  The Voluntary Early Transition Program was intended to allow the Department of Defense (DOD) to reduce the number of forces in a strategic way following the end of hostilities after the first Persian Gulf War.  The amount of the annual annuity payment was calculated based upon a formula which took into account his years of service, and is reflected on his DD Form 214.  A June 1992 Army document in his file reflects that he had been approved for a VSI payment.  The document also provides that Soldiers who receive VSI/SSB and who subsequently qualify for retired or retainer pay shall have deducted an amount equal to the total amount of VSI/SSB pay not previously recouped.  According to his 1992 DD Form 214, he was to be paid a VSI payment of $5,547.78 for 24 years, or until 2016.  

	c.  He remained in the USAR; however, he was called back to active service in August 2007.  He injured his back during this third period of service, and was discharged on account of disability, for which he received a lump sum disability severance payment of slightly more than $70,000 under the provisions of Title 10, USC, section 1212.  The Army orders reflecting this determination show that it was determined his back disability had not resulted from a combat-related injury as defined in Title 26, USC, section 104, and was not incurred in a combat zone or incurred during the performance of duty in combat-related operations as designated by the Secretary of Defense.

	d.  He applied for VA compensation benefits, and service-connection has been granted for multiple disabilities, to include the back disability which prompted his separation from service.  His current combined disability rating is 40 percent.  In paying him, however, the VA is withholding a portion of his compensation benefits each month for purposes of recouping his disability severance payment of approximately $70,000, less federal taxes.  Additionally, he is no longer receiving the VSI payments from DFAS; it appears his last annual payment was in 2008.  His Service explained that because he is no longer in the Army Reserve, he cannot receive any more VSI payments.  He asserts that he is not receiving the benefits which are due to him and has filed an appeal to the BVA.  In particular, he believes the VSI payments being withheld by DFAS should be used by VA in accounting repayment of his disability severance pay.  


	e.  Initially, the BVA notes that the VA has no direct jurisdiction over DFAS, which is the agency responsible for administering separation benefits for the DOD.  However, as the DFAS website (www.dfas.mil) informs, "DFAS and the VA jointly manage the programs that pay eligible military retirees disability entitlements.  Both agencies communicate with each other to establish and maintain accounts," and "your branch of service, the VA and DFAS work together to make sure you are paid accurately and on time."  Furthermore, it is the responsibility of the VA to ensure that he is receiving the correct amount of disability compensation.  Thus, the Regional Office (RO) contacted DFAS and inquired as to whether any withheld amounts were due to the applicant's receipt of disability severance pay.  DFAS indicated that it had not collected any amount of disability severance pay.  DFAS also indicated that once he accepted his disability severance pay, he was no longer a member of the Reserves and therefore no longer eligible to receive his VSI.  

	f.  The statute pertaining to the VSI provides that the incentive was set up to encourage voluntary appointment, enlistment, or transfer to a reserve component.  The financial incentive was to be paid to such a service member as an annuity for the period equal to twice the number of years the member had already served.  However, if before the expiration of this period, the member is separated from a reserve component or transferred to the Retired Reserve, the period for payment of the voluntary separation incentive to the member shall terminate on the date of the separation or transfer unless the separation or transfer is required by reason of the failure of selection for promotion or the medical disqualification of the member.  In applying the law to the facts of this case, the BVA observes that the DFAS interpretation of Title 10, USC, section 1175, as precluding VSI payments because the applicant is no longer in the Army Reserve, appears incorrect.  As set forth above, the law specifically provides that the VSI payment will terminate if the member separates from his reserve component unless the separation is required because of the medical disqualification of the member (Title 10, USC, section 1175(a)(2) (emphasis added). 

	g.  In this case, the applicant could no longer continue in the Army Reserve precisely because he was medically disqualified in 2008.  Unfortunately, however, VA has no jurisdiction over DFAS, and the BVA cannot instruct DFAS to reinstate the VSI payments.  Rather, the BVA refers him to the DFAS website and the procedures for filing a formal protest.  It does not appear from the record that DFAS is withholding VSI payments because the applicant is now receiving VA disability compensation.  In fact, the statute provides that no deduction may be made from voluntary separation incentive payments for any disability compensation received because of an earlier period of active duty if the voluntary separation incentive is received because of discharge or release from a later period of active duty (Title 10, USC, section 1175(e)(4)).  The reverse would also make sense.  In other words, because the applicant's service-connected disabilities were incurred during his third period of service, and the VA compensation associated with those disabilities is thus directly associated with his third period of service, his VA compensation benefits should not be recouped against his VSI annuity, which is based on his second period of service.  Again, the BVA has no authority over DFAS, and includes this merely to explain to him what should be occurring in his case.  

	h.  He was discharged from service on account of disability involving his back, and, as discussed above, he received disability severance pay of slightly more than $70,000.  The RO has determined that once a reduction is made for the federal taxes he paid, the amount to be recouped is slightly more than $53,000.  Although he has requested VA credit him for state taxes paid, the statute is unambiguous on this point, and only allows a deduction for federal taxes paid.  The statute authorizing disability severance pay provides that, "the amount of disability severance pay received under this section shall be deducted from any compensation for the same disability to which the former member of the armed forces or his dependents become entitled under any law administered by [VA]."  However, no deduction may be made "in case of disability severance pay received by a member for a disability incurred in line of duty in a combat zone or incurred during performance of duty in combat-related operations as designated by the Secretary of Defense."  Here, because the Army specifically determined that his back disability had not resulted from a combat-related injury as defined in Title 26, USC, section 104, and was not incurred in a combat zone or incurred during the performance of duty in combat-related operations as designated by the Secretary of Defense, the provision of Title 10, USC, section 1212(d) involving disabilities of combat origin does not apply to him.  Thus, under law, the amount of his disability severance pay must be deducted from his VA compensation for the same disability which prompted his discharge from service. 

	i.  As outlined above, his current VA compensation payments are entirely predicated upon disability incurred during his third period of service.  He is not receiving any disability compensation based on any prior period of service.  The VA is slowly recouping his disability severance payment, less the amount of Federal income tax paid by him on the lump sum, by withholding approximately $230 from his monthly compensation payment.  This gradual recoupment thus appears proper under the law.  He has not asserted that this recoupment causes a financial hardship to him and his family.  

	j.  He has requested that withheld VSI payments be applied toward the total amount VA is withholding from his compensation.  However, the DFAS determination as to his eligibility to continue receiving VSI payments has nothing to do with recoupment of his disability severance pay; they are completely separate issues.  Again, the VA has asked DFAS if they are withholding anything to recoup the disability severance pay; they indicated that they are not.  Rather, they apparently terminated payments based on the fact that he was no longer a member of the Reserves, not to apply any withheld amounts toward recoupment of his disability severance pay.  In this case, the BVA must find against the applicant.  His VA compensation is being paid for the same disability which prompted his discharge from service with a disability severance payment.  The law requires that this severance payment be recouped.  In conclusion, recoupment of disability severance pay by withholding a portion of the applicant's VA disability compensation benefits is proper. 

13.  On 29 April 2014, by letter, an official at DFAS replied to a Member of Congress who wrote to DFAS on behalf of the applicant concerning his entitlement to receive VSI installments.  The DFAS official stated in order to maintain eligibility for VSI installments, a member must maintain a reserve affiliation in accordance with Title 10, USC, section 1175.  The applicant is not entitled to any VSI payments after the payment that was issued to him on 15 August 2008, in the amount of $5,547.78.  As the BVA has stated in the enclosure received with this inquiry, the applicant was discharged and received disability severance pay in 2008 in the amount of $70,000.  The discharge and the receipt of severance pay disqualifies him for VSI because he is no longer in a Reserve Component or the Retired Reserve. 

14.  The Fiscal Year 1992 NDAA, to assist in maximizing voluntary separation during the drawdown period of military forces, established a separation incentive called the VSI.  The VSI pays an annual annuity payment equal to 2.5 percent of the Soldier’s annual basic pay at separation from the active Army multiplied by the Soldier's number of years of service and paid for twice the number of years the Soldier had served at the time of separation.  Soldiers approved for VSI must be appointed, enlisted, or transferred to the Ready Reserve for the entire period that they receive VSI annual payments.  A VSI recipient must remain eligible for retention or reenlistment in the Ready Reserve by maintaining Army weight standards, completing a military physical examination every five years, keeping their residence address and phone number updated, and responding to all official written and telephonic correspondence.  Enlisted VSI recipients must reenlist at the end of each term of service until their mandatory removal date (MRD).

15.  If the VSI recipient fails to remain eligible or reenlist, the Soldier will be separated from the Reserve and the VSI annual payments will be discontinued.  If a VSI recipient becomes ineligible to continue to serve in the Ready Reserve, through no fault of his or her own, the Soldier will be transferred to the Retired Reserve and continue to receive annual VSI payments for the remaining period authorized for VSI.  At MRD, the VSI recipients will automatically be transferred to the Retired Reserve and continue to receive annual VSI payments for the remaining period authorized for VSI.  The following are some situations in which an enlisted Soldier would lose his/her Reserve affiliation:

* failed to maintain a valid enlistment contract
* failed to maintain a valid address
* failed to respond to official correspondence
* failed to maintain a valid physical examination
* was involuntarily separated for a reason considered to be his fault

16.  Army Regulation 601-280 (Army Retention Program), chapter 7, in effect at the time stated that Soldiers without a military service obligation enlisting or transferring from active duty into the U.S. Army Reserve may be enlisted in the IRR for 3, 4, 5, 6, 7, or 8 years.

17.  Army policy and the Department of Defense Military Pay and Allowances Entitlements Manual (DODPM), based on Public Law 102-190, 5 December 1991, as amended, prescribed the qualifications for entitlement to readjustment benefits for certain voluntarily separated members.  The VSI was one of the monetary benefits associated with that incentive program.  The voluntary incentive program was designed to support the Army's drawdown.  A Headquarters, Department of the Army message, dated 28 January 1992, clarified issues associated with the VSI program via a question and answer format.  It stated that Soldiers approved for VSI will be paid in annual installments commencing on their departure date from active duty, and on each anniversary date thereafter for twice the number of years on active duty, provided the Soldier continues to serve in the Ready Reserve.  

18.  Title 10, USC, section 1175 states in: 

	a.  Section 1175(a)(1), consistent with this section and the availability of appropriations for this purpose, the Secretary of Defense may provide a financial incentive to members of the armed forces described in subsection (b) for voluntary appointment, enlistment, or transfer to a reserve component, requested and approved under subsection (c).  

	b.  Section 1175(a)(2) (A) Except as provided in subparagraph (B), a financial incentive provided a member under this section shall be paid for the period equal to twice the number of years of service of the member, computed as provided in subsection (e)(5); and (B) If, before the expiration of the period otherwise applicable under subparagraph (A) to a member receiving a financial incentive under this section, the member is separated from a reserve component or is transferred to the Retired Reserve, the period for payment of a financial incentive to the member under this section shall terminate on the date of the separation or transfer unless:

		(i)  the separation or transfer is required by reason of the age or number of years of service of the member;

		(ii)  the separation or transfer is required by reason of the failure of selection for promotion or the medical disqualification of the member, except in a case in which the Secretary of Defense determines that the basis for the separation or transfer is a result of a deliberate action taken by the member with the intent to avoid retention in the Ready Reserve or Standby Reserve; or

		(iii)  in the case of a separation, the member is separated from the reserve component for appointment or enlistment in or transfer to another reserve component of an armed force for service in the Ready Reserve or Standby Reserve of that armed force.

	c.  Section 1175(d), A member of the armed forces described in subsection (b) may request voluntary appointment, enlistment, or transfer to a reserve component accompanied by this incentive, provided the member has completed 6 years of active service.  The Secretary, in his discretion, may approve or disapprove a request according to the needs of the armed forces.  After 31 December 2001, the Secretary may not approve a request.

	d.  Section 1175(e), states: 

		(1)  The annual payment of the incentive shall equal 2.5 percent of the monthly basic pay the member receives on the date appointed, enlisted, or transferred to the reserve component, multiplied by twelve and multiplied again by the member’s years of service.  

		(2)  A member entitled to voluntary separation incentive payments who is also entitled to basic pay for active or reserve service, or compensation for inactive duty training, may elect to have a reduction in the voluntary separation incentive payable for the same period in an amount not to exceed the amount of the basic pay or compensation received for that period.  

		(3)(A).  A member who has received the voluntary separation incentive and who later qualifies for retired or retainer pay under this title shall have deducted from each payment of such retired or retainer pay an amount, in such schedule of monthly installments as the Secretary of Defense shall specify, taking into account the financial ability of the member to pay and avoiding the imposition of undue financial hardship on the member and member’s dependents, until the total amount deducted is equal to the total amount of voluntary separation incentive so paid. If the member elected to have a reduction in voluntary separation incentive for any period pursuant to paragraph (2), the deduction required under the preceding sentence shall be reduced as the Secretary of Defense shall specify.  

		(3)(B).  If a member is receiving simultaneous VSI payments and retired or retainer pay, the member may elect to terminate the receipt of VSI payments. Any such election is permanent and irrevocable.  The rate of monthly recoupment from retired or retainer pay of voluntary separation incentive payments received after such an election shall be reduced by a percentage that is equal to a fraction with a denominator equal to the number of months that the voluntary separation incentive payments were scheduled to be paid and a numerator equal to the number of months that would not be paid as a result of the member’s decision to terminate the voluntary separation incentive.  

		(4).  A member who is receiving VSI payments shall not be deprived of this incentive by reason of entitlement to disability compensation under the laws administered by the VA, but there shall be deducted from VSI payments an amount equal to the amount of any such disability compensation concurrently received. Notwithstanding the preceding sentence, no deduction may be made from VSI payments for any disability compensation received because of an earlier period of active duty if the VSI is received because of discharge or release from a later period of active duty.  

19.  Army Regulation 15–185 (Army Board for Correction of Military Records (ABCMR)), paragraph 2–9 (Burden of proof) state that the ABCMR begins its consideration of each case with the presumption of administrative regularity.  The applicant has the burden of proving an error or injustice by a preponderance of the evidence.

DISCUSSION AND CONCLUSIONS:

1.  The applicant, in effect, raises two issues in his application: the discontinuation of his VSI payments and the recoupment by the VA of a portion of his disability severance pay from his VA disability compensation.  The first issue is the subject of this discussion.  The second issue is a VA issue and is not within the purview of this Board.  Although the VA has provided a detailed explanation, the applicant should address that issue with the VA, if he so desires. 


2.  The applicant was discharged from active duty on 15 August 1992 under the provisions of chapter 16 of Army Regulation 635-200, FY92 Enlisted Voluntary Early Transition Program.  He was authorized VSI payments of $5,547.78 for 24 years.  He was transferred to the USAR Control Group (IRR).  His continued receipt of the VSI installments was contingent on being affiliated with the USAR. 

3.  When he entered active duty on 26 August 2007, his VSI payments were suspended because he was on active duty.  He was discharged from active duty on 1 October 2008.  Had he been released from active duty, instead of being discharged, his payments would have restarted because he would have been transferred back to the IRR to complete his affiliation.  

4.  While on active duty, he entered the disability system due to a non-combat related illness or injury and he was considered by a PEB that rated his low back condition at 10 percent and recommended his separation with entitlement to severance pay.  He appears to have concurred and waived his right to a formal hearing of his case.  He was ultimately discharged from active duty by reason of disability with entitlement to severance pay.  He was discharged by reason of disability and he was compensated for this interruption of his service through the payment of severance pay.

5.  Once he was discharged and received his severance pay, he was completely severed from the military and had no further military service obligations, such as the obligation required to maintaining his USAR affiliation.  In other words, he was no longer a member of the USAR and he could no longer be a member of the USAR.  Therefore, he is no longer entitled to VSI payments.  

6.  It is noted here that by law, if a member is receiving simultaneous VSI payments and retired or retainer pay, in the applicant's case severance pay, the member may elect to terminate the receipt of VSI payments.  The rate of monthly recoupment from retired or retainer pay of VSI incentive payments received after such an election shall be reduced by a percentage that is equal to a fraction with a denominator equal to the number of months that the voluntary separation incentive payments were scheduled to be paid and a numerator equal to the number of months that would not be paid as a result of the member’s decision to terminate the VSI.  The BVA decision confirmed that DFAS indicated that it had not collected any amount of disability severance pay.  

7.  In view of the foregoing evidence, there is insufficient evidence to grant him the requested relief.



BOARD VOTE:

________  ________  ________  GRANT FULL RELIEF 

________  ________  ________  GRANT PARTIAL RELIEF 

________  ________  ________  GRANT FORMAL HEARING

____x___  ____x___  ____x ___  DENY APPLICATION

BOARD DETERMINATION/RECOMMENDATION:

The evidence presented does not demonstrate the existence of a probable error or injustice.  Therefore, the Board determined that the overall merits of this case are insufficient as a basis for correction of the records of the individual concerned.



      _____________x____________
                  CHAIRPERSON
      
I certify that herein is recorded the true and complete record of the proceedings of the Army Board for Correction of Military Records in this case.

ABCMR Record of Proceedings (cont)                                         AR20140011496



3


ARMY BOARD FOR CORRECTION OF MILITARY RECORDS

 RECORD OF PROCEEDINGS


1

ABCMR Record of Proceedings (cont)                                         AR20140011496



2


ARMY BOARD FOR CORRECTION OF MILITARY RECORDS

 RECORD OF PROCEEDINGS


1