Tired of Getting VA Debt Notices?
by John Cooney on Oct 21, 2021
Are you receiving a notice from the VA that you owe back a portion of your disability pay? Going into VA Debt Collection can not only be an annoying process but it can also disrupt your monthly cash flow and create some financial uncertainty into your life. Fortunately, there is a process to try and mitigate the disruption and this article will help explain what that process is.
I Qualify For Disability Pay, Why Do I Have to Pay it Back?
The answer is short and sweet, because it is the law! The law states that you cannot receive disability pay and military pay for the same day. This creates a problem for Reservists and those serving in the National Guard who are still actively serving as well as receiving disability pay. Disability Compensation is paid out based on a 30-day month. So, if you receive $300 per month for your disability pay, that is an average of $10/day. A Reservist who attends 48 Battle Assemblies and 15 days of AT incurred 63 days where disability and military pay were both paid out. In this example, that would mean $630 of disability pay will need to be paid back to the VA. You have multiple options to pay it back; from direct payment to withholding future VA compensation until the debt is paid off. In theory, the VA should receive their report of military pay days and send you this form annually. Speaking as a Reservist, in my 9 years in the Reserves, I have received this form periodically, meaning my disability pay is withheld or changed on a haphazard schedule. This may be OK for you, but if it is not, and you would like a little more control and predictability you can make an annual election to waive your VA pay to compensate for your days receiving military pay.
How Can I Avoid This Debt?
If you are actively drilling and receiving disability pay, the VA by law has to reclaim this money. So, to me, it comes down to two options; let the payment go into VA debt collection, when you will have to pay it back at a time that you do not control nor have advance warning on; or you can submit VA Form 21-8951-2, electing to waive your disability pay for the days you received military pay. You are going to pay either way and I prefer controlling the when.
Waiving Your VA Disability Pay
What does it mean to waive your VA disability pay? Essentially, instead of waiting for the VA to come collect the debt, you file a form annually telling the VA the number of days you received military pay for the previous year. The VA then withholds payment in the current FY for the equivalent number of days. To continue with the previous example, the servicemember reports to the VA that they performed 63 days of military service in FY21. The VA processes the servicemember’s Form 21-8951-2 on 31 Dec 2021. The VA then withholds disability pay for the servicemember for the next 63 days. This would result in the servicemember receiving no VA disability pay for January (31 days), February (28 days), and the first four days of March. Monthly payments would resume in March for 27 days, meaning a total payment for March of $270. Full $300 payments would then start again in April.
How Do I Elect to Waive My VA Pay?
You can elect to waive your VA Disability Compensation by filling out and submitting to the VA Form 21-8951-2. You are required to fill in boxes 1 – 11 and have the form signed by your unit commander. Once it is signed, you can mail it in to the appropriate VA address listed on the third page of the form.
What If I Don’t Want to Waive My VA Disability Compensation?
You are required to submit the waiver form annually, but you do not have to elect to waive your disability pay. You could instead elect to waive your military pay, but in almost all cases, this will not be in your financial best interest. If you decide to waive your military pay instead of your disability pay you must be counseled by your unit. If you are going this route, understand you may be subjecting yourself to a situation where you need to pay back the military pay you received for the prior Fiscal Year and the current Fiscal Year. Your retirement points will be revoked for the previous FY (you will need to submit an application to receive points only), and you will need to pay any SGLI/FSGLI premiums out of your own pocket. Like I said, there are very few instances where this will be your better option from a financial perspective.
What Resources Can Help Me Make This Decision?
If you are unsure of which election to make, there are some resources that can assist.
- You Tube Video Comparing Disability Compensation and Military Pay
- Comparison Calculator
- Me! email@example.com
- Your Local Finance Office