Severance Pay and VA Disability

[DRTDEVL]

What is the name of your state (only U.S. law)? Tennessee.

Later this year, I will be separated from the Army for exceeding my RCP. I will be eligible for over $50,000 in severance pay, reduced to about $36,000 after taxes. Prior to this deployment, I was given the option of a Med Board, but I elected to remain with my Soldiers for one more deployment.

To establish the fact that I am eligible for medical retirement, I offer the following: 14.5 years service, E-5, suffering from Arthritis and Degenerative Disk Disease (3 bulging discs and one torn disc), both brought on by Lupus. The Lupus is guaranteed to be Discoid in nature at a minimum, but Systemic Lupus Erythematosis can not be ruled out. I do not produce the ANA antibody, but I present most symptoms of SLE. I *should* be eligible for a minimum rating of 50% when everything is combined.

I am pretty sure I cannot complete the Med Board process quickly enough to be granted a Medical Retirement, but I will be eligible through the VA whenever the process is completed. Through research, I was able to garner that any benefits will be withheld until the service is repaid the severance pay, but I also understand that the medical retirement is non-taxable. How would I recover the additional $14,000 withheld in taxes once my claim is approved? Will I need to file an amended 1040 for 2009?

I just need to know if this is a possible avenue of approach. I understand that when approved for disability, I will not receive a check for about 5 years as the service is repaid, but I also do not want to lose the additional taxes paid as that equates to about 5 months worth of pay. TIA.

 

[ERAUPIKE]

You'll either get medically retired OR severance pay, not both.

Although I don't agree with paying someone if they can't make rank but that's the way the Army is currently set up.

Also, if you wanted the full RCP pay, you'll need to join the reserves for 3 years.

 

[IrishLady47]

Once a medical board is initiated, you will be retained beyond your ETS (90 days at a time) until a decision is reached. If you have dependent family members w/o other health insurance coverage, it would be worthwhile to go for a medical retirement since they will then still be covered by TRICARE. If you separate and file for VA disability, only you will receive medical treatment from the VA for any service-connected injuries or diseases.

Even if you receive a disability retirement, you can still file for VA compensation. Depending on the rating from the VA, it will often be higher than the retired pay and is 100% non-taxable whereas Chap 61 retired pay is only partially non-taxable. You'll have to waive retired pay for VA compensation since under current law you are not eligible for CRDP w/less than 20 years of service. But, if you have any combat related injuries, you are now eligible to apply for CRSC (NDAA FY08).

 

[DRTDEVL]

Thank you for the information, IrishLady. The only issue I see with this is it flys directly in the face of AR 601-280, which stated I cannot be retained on Active Duty for a period greater than 28 days beyond my RCP.

My RCP is 11 Aug 09. My contractual ETS is also the same date. My "floating" ETS under the stop loss is projected on my ERB as 7 Sep 09, but will more than likely be around 28 Aug 09.

This sounds like an avenue to explore, unfortunately the Regs are contradictory in nature. I cannot be the first to be in this situation, but it is obviously an uncommon one.

 

[IrishLady47]

Please check AR 635-200, para 1-24a(2). I have extended numerous soldiers under this provision once disability proceedings have begun, even when the ETS was also the RCP. You are extended 90 days at a time until there is a decision. Since proceedings can take some time, I have had to more than one extension on a soldier--sometimes extending them up to a year.