Medical Separation vs. Medical Retirement: Complete Guide (MEB/PEB Process)

Bottom Line Up Front: Medical Evaluation Board (MEB) determines if you're fit for duty. Physical Evaluation Board (PEB) assigns disability rating. <30% rating = Medical Separation (severance pay, no pension). 30%+ rating = Medical Retirement (immediate pension). VA disability rating is separate - file VA claim before separating. Most get higher VA rating than DoD rating.

MEB/PEB Process Overview

Medical Evaluation Board (MEB)

Purpose: Determines if your condition prevents you from performing military duties

Questions MEB answers:

• Can you deploy?
• Can you perform physical requirements of your job?
• Is condition stable or improving?

Outcome: Fit for duty OR Refer to PEB

Physical Evaluation Board (PEB)

Purpose: If MEB says unfit, PEB assigns disability percentage and determines separation type

PEB assigns:

• Disability rating (0%-100%)
• Separation type (medical separation vs. retirement)
• Severance pay amount OR retirement pay amount

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Medical Separation (<30% Rating)

What It Is

You're separated from military with severance pay (lump sum), but NO military pension

Requirements

• Disability rating: <30% (0%-20%)
• Condition prevents military service
• But not severe enough for retirement

Severance Pay Formula

Severance = Years of Service × 2 × Monthly Base Pay

Maximum: 12 years of service counted (capped)

Example: E-5 with 8 years service

• Base pay: $3,500/month
• Severance: 8 × 2 × $3,500 = $56,000
• Paid as lump sum (taxable)

Example: O-3 with 10 years service

• Base pay: $6,500/month
• Severance: 10 × 2 × $6,500 = $130,000

What You Get

• ✅ Severance pay (lump sum)
• ✅ Transition health coverage (180 days TRICARE)
• ✅ Can apply for VA disability
• ❌ NO military pension
• ❌ NO TRICARE for life
• ❌ NO commissary/exchange after 180 days

Severance Recoupment (MUST PAY BACK)

Critical rule: If you receive VA disability, you must PAY BACK severance

How it works:

• VA withholds future VA disability payments
• Until full severance amount is recouped

Example:

• You received $56,000 severance
• VA awards 50% disability: $1,075/month
• VA withholds payments until $56,000 recouped
• Takes 52 months (4.3 years) before you see VA payments

After recoupment: Full VA disability payments resume

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Medical Retirement (30%+ Rating)

What It Is

Immediate military pension, TRICARE for life, full retirement benefits

Requirements

• Disability rating: 30%+ (from PEB)
• OR 20+ years of service (regardless of rating)

Retirement Pay Options

Option 1: Disability Retirement

• Based on disability percentage
• Formula: Base Pay × Disability % × 2.5

Option 2: Longevity Retirement (if 20+ years)

• Based on years of service
• Formula: Base Pay × Years × 2.5%

You receive HIGHER of the two

Example: E-7 with 15 years, 50% Disability

Option 1 (Disability):

• Base pay: $5,000/month
• 50% × 2.5 = 125% of base pay × 50% rating
• Retirement: $2,500/month

Option 2 (Longevity):

• 15 years × 2.5% = 37.5%
• $5,000 × 37.5% = $1,875/month

You get: $2,500/month (higher amount)

What You Get

• ✅ Immediate pension for life
• ✅ TRICARE for life (retired military)
• ✅ Commissary/Exchange for life
• ✅ VA disability (can receive BOTH)
• ✅ Space-A travel
• ✅ All retirement benefits

CRDP (Concurrent Retirement & Disability Pay)

If rated 50%+ VA disability:

• Can receive BOTH military retirement AND full VA disability
• No offset (used to be dollar-for-dollar reduction)

Example: E-7 medically retired, 60% VA

• Military retirement: $2,600/month
• VA disability: $1,361/month
• Total: $3,961/month

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DoD Rating vs. VA Rating (CRITICAL DIFFERENCE)

DoD (PEB) Rating

• Based on: Fitness for MILITARY duty
• Question: Can you serve in military with this condition?
• Usually LOWER rating

VA Rating

• Based on: Impact on CIVILIAN employment and quality of life
• Question: How disabled are you in civilian life?
• Usually HIGHER rating

Example: Knee Injury

DoD PEB: 10% (can walk, can work, just can't run/ruck in military)
VA: 30% (chronic pain, limits civilian work, affects daily activities)

Result:

• Medical separation (10% DoD)
• Severance: $56,000
• But VA awards 30%: $524/month for life
• Must repay severance (takes 107 months)
• After recoupment: Receive full VA for life

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The MEB/PEB Process (Step-by-Step)

Step 1: Medical Condition Identified

• Diagnosed with condition that limits duty performance
• Provider says: "You may be non-deployable" or "Can't perform full duties"
• Provider initiates MEB referral

Step 2: MEB Review (2-3 Months)

• Medical records reviewed
• Specialists evaluate you
• MEB decides: Fit for duty OR unfit (refer to PEB)

If fit for duty: Return to unit
If unfit: Move to PEB

Step 3: Informal PEB (IPEB)

• Board reviews medical evidence
• Assigns disability rating
• Recommends: Separation OR Retirement

You can:

• Accept findings (move to separation/retirement)
• Request Formal PEB (if you disagree)

Step 4: Formal PEB (If Requested)

• In-person hearing (like court)
• You can bring lawyer (free military attorney or paid civilian)
• Present evidence, witnesses
• Board reconsiders rating

Step 5: Final Decision

• PEB issues final rating
• You have 10 days to appeal to Secretary of Service
• If no appeal: Separation/retirement proceeds

Step 6: VA Claim Filing (CRITICAL)

File VA claim BEFORE separating

• BDD (Benefits Delivery at Discharge) program
• Allows VA to process claim while you're still active
• Results in VA rating within 60-90 days of separation

Timeline:

• File: 90-180 days before separation
• Attend C&P exam
• VA rating issued near separation date
• Start receiving VA payments immediately after separation

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Common MEB/PEB Mistakes

❌ Mistake #1: Not Getting Civilian Lawyer for Formal PEB

Reality: Military lawyer is free but may not be aggressive. You get 10% rating instead of 30%. Lose retirement.

Fix: Hire experienced PEB lawyer ($2,000-$5,000) if your case is borderline 30%. Can be difference between separation and retirement.

❌ Mistake #2: Not Filing VA Claim via BDD

Reality: You separate. File VA claim after. Takes 6-12 months. No income during that time.

Fix: File BDD claim 90-180 days before separation. Get VA rating immediately.

❌ Mistake #3: Accepting IPEB Without Review

Reality: IPEB gives you 20%. You accept. Later realize evidence supported 30%+. Too late to appeal.

Fix: Review findings with lawyer BEFORE accepting. If borderline, request Formal PEB.

❌ Mistake #4: Spending Severance Pay Immediately

Reality: You get $60,000 severance. Buy truck, take vacation. VA recoupment starts. Now you owe $60,000 back with no cash.

Fix: Save severance in HYSA. Don't touch it until you know your VA rating.

❌ Mistake #5: Not Understanding Severance Recoupment

Reality: You think severance is "free money." Get VA disability. Confused why you're not receiving payments.

Fix: Know the rule: VA withholds until severance recouped. Plan accordingly.

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Action Steps

If Facing MEB/PEB:

1. ✅ Get copies of ALL medical records
2. ✅ Request PEB lawyer (free from JAG)
3. ✅ Consider civilian PEB lawyer (if borderline case)
4. ✅ File VA BDD claim immediately

If Medically Separated:

1. ✅ Save severance pay (don't spend)
2. ✅ File VA claim ASAP
3. ✅ Enroll in VA healthcare
4. ✅ Plan for severance recoupment (no VA payments for months/years)

If Medically Retired:

1. ✅ File VA claim for same conditions (can get both)
2. ✅ Enroll in TRICARE Retired
3. ✅ Set up retiree pay (DFAS)

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Verification & Sources

Official Sources:

• DoD Disability Evaluation System (DES)
• VA Benefits Delivery at Discharge (BDD)
• CRDP: 10 USC § 1414

Last Updated: October 31, 2025

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Related Guides

• VA Disability Claims Complete Guide
• TRICARE After Separation
• Severance Pay Tax Strategy

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Remember: MEB/PEB is stressful and confusing. Get help from PEBLO (Physical Evaluation Board Liaison Officer), lawyer, and VSO. Don't rush decisions. File VA claim early. This process determines your financial security for life - take it seriously.