BNUMBER: B-266193
DATE: February 23, 1996
TITLE: Isaac L. Tillman-Separation Pay-Waiver Request
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Matter of:Isaac L. Tillman-Separation Pay-Waiver Request
File: B-266193
Date:February 23, 1996
DIGEST
An Army member separating from the service properly was paid
separation pay upon separation. Subsequently, he was granted monthly
disability compensation by the Department of Veterans Affairs
retroactive to his separation from the Army. In this situation, the
separation pay statute (10 U.S.C. sec. 1174) requires that there be
deducted from the disability compensation an amount equal to the
separation pay the former member received. A subsequent disability
award does not render the separation pay payment "erroneous" and
subject to waiver under 10 U.S.C. sec. 2774. Therefore, action by the
General Accounting Office Claims Group waiving the separation pay was
incorrect, and it is rescinded.
DECISION
This decision is in response to a request from the Department of
Veterans Affairs (VA) that we reconsider the action of our Claims
Group in waiving collection of separation pay Mr. Isaac L. Tillman
received upon separation from the Army, which subsequently became
collectible when VA awarded him disability compensation.[1] We
rescind the Claims Group's waiver action because the separation pay
Mr. Tillman received was not an "erroneous" payment to which our
waiver authority (10 U.S.C. sec. 2774) applies.
BACKGROUND
In January 1993, Mr. Tillman, then a Warrant Officer with insufficient
service to qualify for retirement, was involuntarily separated from
the Army, pursuant to which he was properly determined to be entitled
to separation pay under 10 U.S.C. sec. 1174, which the Army paid him in
the amount of $52,822.80. In September 1993, the VA awarded Mr.
Tillman monthly disability compensation payments effective February 1,
1993. Upon doing so, VA notified Mr. Tillman that his disability
compensation payments were subject to withholding until the amount
withheld equaled the amount of separation pay he had received from the
Army, as required by 10 U.S.C. sec. 1174(h)(2). VA accordingly began
withholding payment of the disability compensation payments.
Subsequently, apparently upon Mr. Tillman's inquiry, the Defense
Finance and Accounting Service (DFAS) referred the matter to our
Claims Group, recommending that collection of Mr. Tillman's separation
pay be waived pursuant to our authority under 10 U.S.C. sec. 2774. In
support of this request, DFAS cited our decision Henry B. Jenkins, 64
Comp. Gen. 15 (1994), in which we had waived an erroneous payment of
severance pay made to a civilian employee upon his separation from
federal service. Our Claims Group accepted the DFAS request and
granted the waiver.
VA, however, disagrees with the waiver action and continues to
withhold the disability compensation. VA states that it is aware of
our authority under 10 U.S.C. sec. 2774 to waive a claim of the United
States "arising out of an erroneous payment" of any pay or allowances
to or on behalf of a member or former member of the uniformed
services, if collection would be against equity and good conscience
and not in the best interest of the United States. It is VA's
position, however, that collection of the severance pay in this case
by withholding the disability compensation is not subject to our
waiver authority under 10 U.S.C. sec. 2774 because the amount subject to
collection does not arise out of an "erroneous payment."
VA notes that the separation pay statute, 10 U.S.C. sec. 1174, does not
condition payment of separation pay upon VA compensation not being
awarded. Instead, the statute recognizes that VA compensation may be
awarded subsequent to payment of separation pay and requires that in
such a case, payment of the compensation is to be withheld in an
amount equal to the separation pay received by the former member. In
VA's view, this does not render the payment of the separation pay
"erroneous."
VA distinguishes 64 Comp. Gen. 15, supra, the decision cited by DFAS,
from the current case. VA notes that the former case involved a
civilian employee who was paid severance pay incident to his
involuntary separation and who was later determined by the Merit
Systems Protection Board to have been erroneously denied retirement
for disability. The retroactive correction to disability retirement
status rendered the severance pay he had received an "erroneous
payment" because the severance pay statute (5 U.S.C. sec. 5595(a)(2))
specifically precludes payment of severance pay to an employee
eligible for a retirement annuity. Thus, in that case we could
properly exercise our authority to waive the debt as one arising out
of an "erroneous payment."
ANALYSIS
Separation pay under 10 U.S.C. sec. 1174 is a contingency payment to ease
the re-entry into civilian life of members of the armed services
involuntarily separated from active duty prior to becoming entitled to
retired pay. See 62 Comp. Gen. 174 (1983). The statute requires
"coordination" when a member who has received a separation pay payment
later qualifies for retired or retainer pay or VA disability
compensation. 10 U.S.C. sec. 1174(h). Regarding coordination with
disability compensation, the statute provides in pertinent part as
follows:
A member who has received separation pay . . . based on service
in the armed forces shall not be deprived, by reason of his
receipt of such separation pay . . . of any disability
compensation to which he is entitled under the laws administered
by the Department of Veterans Affairs, but there shall be
deducted from that disability compensation an amount equal to the
total amount of separation pay . . . received. 10 U.S.C. sec.
1174(h)(2). [Emphasis added.]
Clearly the statute contemplates the not uncommon situation found in
Mr. Tillman's case where a member is paid separation pay upon release
from the service and is later determined by VA to be entitled to
disability compensation. Congress did not intend that the member
receive both separation pay and disability compensation, so it
provided that an amount equal to the separation pay would be withheld
from the disability compensation.[2] In such a case, the member's
separation was not erroneous and the payment to him of separation pay
was not erroneous when it was made. Thus, we agree with VA that this
situation substantially differs from the situation in 64 Comp. Gen.
15, described above, where it was determined that the employee's
separation was erroneous and the severance pay thus should not have
been paid. As noted, in Mr. Tillman's case, the fact that
subsequently VA determined him to be entitled to disability
compensation did not convert the separation pay to an erroneous
payment. That payment was proper when made and it does not become
improper because the statute requires that an amount equal to it be
deducted from the disability compensation.[3] In such a situation,
there is no debt "arising out of an erroneous payment" and, therefore,
the waiver statute, 10 U.S.C. sec. 2774, is inapplicable. See Eugene M.
Edynak, B-200113, Feb. 13, 1981; and Charles E. Raiford, Jr.,
B-254196, Dec. 23, 1993.[4]
In view of the above, the waiver should not have been granted and it
is of no effect. Accordingly, the Claims Group's waiver action is
rescinded.
/s/Seymour Efros
for Robert P. Murphy
General Counsel
1. The request for reconsideration was presented on behalf of VA by
their Assistant General Counsel and concerns the Claims Group's
Settlement Z-2927061, June 7, 1994. We have also received a
submission from James W. Stanley, Jr., of the law firm of Pierce,
Stanley & Robinson, on behalf of Mr. Tillman.
2. We lack jurisdiction over the issues of the correctness of the
amount of VA's award of disability compensation and the timing of its
commencement. See 38 U.S.C. sec. 511(a), and 56 Comp. Gen. 591 (1977).
3. Compare 56 Comp. Gen. 587, 592 (1977), where the opposite
conclusion was reached concerning officers who received readjustment
pay (similar to severance pay) upon separation, were later determined
by a correction board to have been improperly separated, and the
separations were retroactively expunged. The correction action was
deemed to have rendered the readjustment payments erroneous, making
them subject to waiver under 10 U.S.C. sec. 2774.
4. These cases concerned requests for waiver by two former members who
had received variable incentive pay or a selective reenlistment bonus,
respectively, for committing themselves to specified terms of service,
but who did not complete the terms of service and, therefore, were
required, under the statutes applicable to the payments, to refund a
portion of the amounts received. The waiver statute was determined to
be inapplicable to the debts because the payments were proper when
made.