Veterans Compensation

The Defense Department (DOD) uses separation pay to induce people to serve in the military despite the risk of involuntary separation. Congress authorized special separation pay to minimize the use of involuntary separations in the ongoing force drawdown. Pay offsets prevent service members from receiving dual compensation for a single period of service. Repealing offsets for separation and disability pay would cost the federal government an estimated $435 million for those service members who separated during fiscal years 1995-99. A repeal would cost about $799 million if it was made retroactive to fiscal year 1992, when the special separation pay program began. Separation and disability pay offsets have not significantly undermined the voluntary separation incentive. According to DOD, the bulk of the drawdown since fiscal year 1992 has been accomplished through voluntary separations. DOD requires the services to inform separating service members about the offset.

GAO found that: (1) DOD uses separation pay as an incentive to people to serve in the military despite the risk of involuntary separation; (2) Congress authorized special separation pay to minimize the use of involuntary separations in the ongoing force drawdown; (3) pay offsets prevent service members from receiving dual compensation for a single period of service; (4) repealing offsets for separation and disability pay would cost the federal government an estimated $435 million (in 1994 dollars) for those service members who separated from fiscal years (FY) 1995 to 1999; (5) a repeal would cost about $799 million if it was made retroactive to FY 1992, when the special separation pay program began; (6) separation and disability pay offsets have not significantly undermined the voluntary separation incentive; (7) according to DOD, the bulk of the drawdown since FY 1992 has been accomplished through voluntary separations; and (8) DOD requires the services to inform separating service members of the existence of the offset.