DoD Disability Severance Pay
Benefit Fact Sheet
The Secretary of the Army may separate, versus retire, a Soldier who is found physically unfit to perform his or her duties due to a disability. Separation may occur with entitlement to disability severance pay or without entitlement to disability benefits. Separation with disability severance pay occurs when the Soldier's unfitting disabilities are determined by the Army to be service connected, the Soldier has less than 20 years of service as computed under 10 USC 1208, and the Soldier's combined disability rating assigned to the unfitting disabilities is less than 30 percent. Separation without entitlement to disability benefits occurs when the unfitting disabilities are determined to be non-service connected without permanent aggravation or incurred due to misconduct. Soldiers of the Ready Reserve with 20 qualifying years and Soldiers of the Selected Reserve with 15 qualifying years with a disability disposition of separation with or without severance pay have an additional election in lieu of being separated. This additional election is discussed further in this paper.
To be entitled to disability severance pay, the Soldier's unfitting disability must meet the criteria below.
- The disability is permanent or may be permanent. Unlike the criteria for permanent disability retirement or placement on the Temporary Disability Retirement List (TDRL), whether the disability is stable is not a consideration.
- For Soldiers serving on active duty under an order to active duty of more than 30 days, the disability must be incurred while the Soldier was entitled to basic pay, or incurred while the Soldier was in an excess leave status due to an emergency reason, or incurred due to an authorized absence to participate in an educational program.
- The disability is not the result of the member's intentional misconduct or willful neglect and was not incurred during a period of unauthorized absence.
Eligibility for disability severance pay and pre-existing conditions
The phrase, "pre-existing condition" generally refers to a medical condition that was incurred (originated) when the Soldier was not in a duty status and was not permanently aggravated while the Soldier was in a duty status. Under the provisions of 10 USC 1207a pre-existing conditions are deemed in the line of duty when the Soldier is serving on active duty under an order to active duty of more than thirty days and will have a career total of 8 years of active duty service at the time of separation for disability.
Formula for computing
Disability Severance Pay is a one-time, lump sum payment and is computed as follows:
2 x basic pay for applicable grade x years of service (subject to minimum 3 or 6 years) not to exceed 19 years.
Applicable grade is the highest of the following:
Highest grade satisfactorily served.
Grade to which the Soldier would have been promoted had it not been for the disability for which he is being separated. This is colloquially referred to as, "promotion list grade."
Soldiers are credited with a minimum of 3 years of service as computed under 10 USC 1208 unless they qualify for the minimum 6 years of service.
To qualify for the minimum 6 years, the disability must be incurred in line of duty in a combat zone as designated by the Secretary of Defense OR incurred during the performance of duty in combat-related operations as designated by the Secretary of Defense. DoD policy for the "combat related operations" determination is that the disability must be incurred as a result of armed conflict as set forth in DoD Instruction 1332.38, paragraph E3.P5.1.2.
Exclusion from DVA Recoupment
The amount of disability severance pay received under 10 U.S.C. § 1212 may be subject to recoupment by the VA. The member should contact the applicable VA office for more information. Effective January 28, 2008 and later, no deduction is made in the case of disability severance pay received by a member for a disability incurred in the line of duty in a combat zone or incurred during performance of duty in combat-related operations as designated by the Secretary of Defense. No deduction is made from any death compensation to which the former member’s dependents become entitled after the member’s death.
Exclusion from Federal Gross Income
Disability severance pay is excluded from Federal gross income under the provisions of 26 USC 104 if the member had a military status or obligation on 24 September 1975, the severance pay is awarded for a disability to be combat related, or upon application therefore, the Soldier would be entitled to receive disability compensation from the VA.
The PEB Record of Proceedings will document determinations of Soldier's status on 24 September 1975 and combat related.
A disability is considered combat related for purposes of exclusion from Federal Gross income, if it meets one of the criteria below. For more information, see DoD Instruction 1332.38, para E3.P5.2.2.
As a direct result of armed conflict.
While engaged in hazardous service.
Under conditions simulating war.
Caused by an instrumentality of war.
Due to limits of the current Defense Finance and Accounting (DFAS) pay system, taxes will be withheld on active duty cases separating with severance pay. Procedures exist for the local servicing finance office to coordinate with DFAS-Indianapolis for refund of the taxes withheld. The request and required documentation must be received at DFAS by 31 December of the year in which the severance payment was received. In the alternative, the Soldier may seek a refund when filing their tax return. For more information on filing with the IRS contact the Servicing Finance Officer or USAPDA.
For more information, please visit the following webpage maintained by the Department of Defense:
Disability Severance Pay:
Overview of the Army Physical Disability Evaluation System:
Online Resource for Americans with Disabilities: