OTTAWA -- The federal government has confirmed that upwards of 270,000 veterans, RCMP officers, and their surviving family members are owed a total of $165 million as the result of what Veterans Affairs is calling a years-long calculation "error."

In a statement, Veterans Affairs Minister Seamus O’Regan admitted that, between 2003 and 2010, an error had occurred when calculating disability pension adjustment rates. The adjustment calculations "didn't accurately reflect a change to personal tax exemptions," and now some individuals are owed thousands.

The Veterans Ombudsman's office brought the discrepancy to the attention of the minister. Ombudsman Guy Parent found that during those years, more than 270,000 veterans were given lower monthly payments than they were entitled to.

O'Regan said the calculation error has been fixed, and the impacted service men and women will be retroactively compensated.

"The Department has secured a source of funds of up to $165 million for retroactive payments. Most individuals will receive a few hundred dollars, while the maximum amount to be paid would be a couple of thousand dollars," O'Regan said in a statement.

Given the number of veterans short-changed by this mistake, however, it could be 2020 before the payments are issued in full.

As The Canadian Press has reported, as many as 120,000 of the affected veterans, including those who served in the Second World War and in Korea, have since died, meaning their estates will be the benefactor of these corrective payments.

In a statement, the ombudsman’s office said that the error was uncovered when scrutinizing Veterans Affairs Canada worksheets to look into the math behind a change to the department’s program for immediate financial support for injured and disabled veterans.

That’s when it became clear that for several years, the provincial basic tax credit was not factored into the calculation of provincial income tax as it should have been, and this resulted in lower payments for veterans.

O'Regan thanked the veterans’ watchdog for bringing the years-long mistake to his attention.

"We will ensure those affected receive the compensation to which they are entitled," O'Regan said.

Parent said he's "pleased" the department is now working on a plan to re-pay those who are owed, noting in a statement that this money should be in veterans’ pockets.

In an interview on CTV’s Power Play, Parent said he hopes the reimbursements are distributed on a priority basis, with low-income veterans receiving what they are owed as quickly as possible.

"They're alive and they are in need, so hopefully their plan of action will include some kind of a priority for those people," he said.

Conservative defence critic James Bezan said he spoke with some of his colleagues who were ministers during some of the time in which this miscalculation was occurring and none of them were aware of it.

"It is something that is very disconcerting; we want this to be corrected. We thank the ombudsman for all the great work that he's done here, and let's make sure that all veterans get reimbursed with money that they deserve," Bezan said.

In an emailed statement, the Royal Canadian Legion told CTV News it is glad the error was found and steps are being taken to rectify the situation.

"We urge government to expedite any payments due to the thousands of aging veterans, to help improve their lives before it’s too late," communications manager Nujma Bond said.

Sign up for our political newsletter