200501-81501, 200501-81501

Veteran served active duty Oct 1988–Oct 1992 and Dec 1992–Dec 1995; separated Dec 1995 for reduction in force.
DD Form 214 and multiple VA forms reflect separation/readjustment pay of $7,997.88 (before tax).
DFAS later reported a gross separation payment of $11,373.17 with $3,184.48 federal tax withholding; VA relied on DFAS and proposed recoupment.
VA began withholding the Veteran’s monthly disability compensation (he had received benefits since Sept 3, 2013) to recoup the separation pay; AOJ withheld $11,373.17 beginning April 2020.
Board found the DD214 and Veteran’s statements credible, concluded the correct separation pay was $7,997.88, that recoupment was legally required for payments before Oct 1, 1996, but VA withheld an excess $3,375.29 and must repay that amount.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether VA may recoup separation/readjustment pay from VA disability compensation	Veteran argued law changing withholding should not apply retroactively and/or withholding was improper	VA argued statute/regulation requires recoupment of separation pay from compensation	Recoupment is lawful; for separation pay paid before Oct 1, 1996 the entire separation amount is subject to recoupment
Whether AOJ withheld the correct amount to recoup separation pay	Veteran argued he received $7,997.88 (per DD214) and VA miscalculated; requested return of excess withholding	AOJ relied on DFAS figure of $11,373.17 and withheld that total	Board found DD214 controlling, DFAS unsupported, AOJ withheld $3,375.29 more than proper amount and must pay that excess back to Veteran

Owings v. Brown, 8 Vet. App. 17 (1995) (court must apply law as written and cannot extend benefits out of sympathy)
Kelly v. Derwinski, 3 Vet. App. 171 (1992) (same principle that benefits cannot be granted on equitable grounds)