DoD pauses debt collection for retirees overpaid due to Navy error (2024)

When Capt. Mark Bailey retired in 2021 after 30 years in the Navy, he soon realized something was off with his retiree pay.

It was too high, so the pilot sent a letter to the Defense Finance Accounting Service, which oversees all of the military’s active duty and retired pay.

To his surprise, a DFAS official called him and assured him that his retiree pay was correct, based on the information the Navy provided.

But this spring, like more than 1,200 other Navy retirees, Bailey has been told the Navy did, in fact, miscalculate his retirement pay, and he could need to return that overpayment.

“Having spent 30 years in the Navy, it’s not surprising to me. This is a significant administrative error,” the 55-year-old father of three said. “I’m sure DFAS is looking at the Navy like, what the hell did you do to us? It’s a Navy mistake.”

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The Navy announced Friday that DFAS has agreed to a three-month pause in any debt collection for the 1,283 retirees who have been overpaid.

That pause aims to give impacted retirees the time to file a debt waiver application, Chief of Naval Personnel spokeswoman Capt. Jodie Cornell said in a statement.

“Further, the pause of debt collection will be extended beyond the initial three-month period for all retirees that file a waiver application within three months of the date of their DFAS debt letter,” he said. “For these retirees, the debt collection pause is extended until a final determination is made on their waiver application.”

Roughly $7 million was overpaid to retirees, with the overpayments ranging from $35 to more than $70,000, according to media reports and DFAS spokesman Steve Burghardt.

The median overpayment amount is $2,700, he said, and official debt notification letters were sent out this week.

If an agreement cannot be reached, Burghardt said DFAS can institute an involuntary reduction of a retiree’s monthly benefit, up to 15 percent of their “net disposable pay.”

“DoD also retains the right to pursue other collection methods, as necessary,” he said.

Bailey said he expects he will have to pay back about $10,000 in overpayments due to the Navy’s error.

“I’m not in any way, shape or form saying I should keep that money,” he said. “I understand I’m entitled to a certain amount of retirement and I was overpaid. The challenge is now, what options will I be given to repay that?”

The Navy pay calculation error occurred because of an issue with the Navy’s Standard Integrated Personnel System, or NSIPS, which botched some retiree pay calculations from 2019 to February.

Another NSIPS error has caused Navy doctors and dentists to see their active-duty service time miscalculated, a misstep first reported by NBC News earlier this month.

While officials have blamed a “software issue” for messed-up retiree pay for 1,283 retirees, Cornell said in an email this week that “NSIPS performed precisely as the business rules dictated.”

But those business rules were wrong, and Cornell said the Navy first discovered the pay error in November.

“A resulting internal audit identified a business rule error, which was then updated in January 2023,” she said. “NSIPS completed system changes to implement the new business rules on 2 Feb. 2023.”

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