M21-1, Part III, Subpart v, Chapter 8, Section B – Paying Benefits to the Dependent(s) of an Incarcerated Veteran

In This Section

Introduction

• right of an incarcerated Veteran’s dependent(s) to receive pension
• form claimants must submit to request payment of an incarcerated Veteran’s pension
• determining the entitlement of an incarcerated Veteran’s dependent(s) to pension
• determining the amount of pension the Department of Veterans Affairs (VA) may pay to the dependent(s) of an incarcerated Veteran
• determining the effective date of entitlement and the effective date of payment
• notice of incarceration received after incarceration has ended
• procedure for reducing/eliminating an overpayment resulting from a Veteran’s incarceration
• example of the payment of pension to the dependents of an incarcerated Veteran
• notifying dependents of the temporary nature of their entitlement
• discontinuing the payment of pension to a Veteran’s dependent(s) after incarceration ends, and
• example of adjustments to pension awards after incarceration ends.

Change Date

III.v.8.B.1.a.  Right of an Incarcerated Veteran’s Dependent(s) to Receive Pension

• the Veteran is a fugitive felon, as defined in 38 CFR 3.666 (e)(2), or
• the dependent is
  • a fugitive felon, or
  • incarcerated for conviction of a felony or misdemeanor.

• VA is responsible for notifying a Veteran of the right of his/her dependent(s) to receive pension at the same time it provides the Veteran with notice of the proposal to discontinue his/her benefits due to incarceration.  VA must concurrently notify the Veteran’s dependent(s) of his/her(their) right to receive pension if
  • the evidence of record indicates the existence of (an) eligible dependent(s), and
  • VA is able to obtain contact information for the dependent(s).
• Attach VA Form 21-0788, Information Regarding Apportionment of Beneficiary’s Award, to the Veteran’s notice and to the notice to the Veteran’s dependent(s).

III.v.8.B.1.b.  Form Claimants Must Submit to Request Payment of an Incarcerated Veteran’s Pension

• VA will accept a completed and signed VA Form 21-0788 from either the Veteran or his/her dependent(s).
• If a claimant requests payment of an incarcerated Veteran’s pension on anything other than VA Form 21-0788,
  • treat the correspondence as a request for an application, and
  • follow the instructions in M21-1, Part III, Subpart v, 3.A.1.d.

III.v.8.B.1.c.  Determining the Entitlement of an Incarcerated Veteran’s Dependent(s) to Pension

• except for the Veteran’s incarceration, the Veteran must otherwise remain eligible to receive pension, and
• the Veteran’s dependent(s) must meet the income requirements for Survivors Pension (without consideration of the Veteran’s income).

III.v.8.B.1.d.  Determining the Amount of Pension VA May Pay to the Dependent(s) of an Incarcerated Veteran

• the amount of pension to which the Veteran was entitled before VA discontinued his/her pension due to incarceration, or
• the amount of Survivors Pension to which the dependent(s) would be entitled based on current income.

• In April 2006, VA discontinued the payment of pension to a Veteran, effective January 10, 2006, due to his incarceration.  Prior to this action, VA had been paying the Veteran $1,305.00 per month, based on annual income for VA purposes (IVAP) of $1,800.00.  This amount included additional benefits for a spouse and two children.
• In May 2006, the Veteran’s spouse requested the payment of pension for herself and the two children during the Veteran’s incarceration.
• The spouse’s and children’s annual IVAP is $900.00.

III.v.8.B.1.e.  Determining the Effective Date of Entitlement and the Effective Date of Payment

• It is possible for some amount of time to pass between the 61^st day of incarceration and the date VA discontinues an incarcerated Veteran’s pension.  This delay may result in an overpayment of benefits to the Veteran.  Although VA may find the dependent(s) of an incarcerated Veteran entitled to pension from the 61^st day of incarceration, to avoid paying the dependent(s) benefits VA has already overpaid to the Veteran, VA must
  • ensure the effective date of payment of pension to the Veteran’s dependent(s) is no earlier than the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share, and
  • follow the instructions in M21-1, Part III, Subpart v, 8.B.1.g to apply to the Veteran’s overpayment, any pension due the Veteran’s dependent(s) for the period between the 61^st day of incarceration and the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share.
• Before applying benefits due the Veteran’s dependent(s) to the Veteran’s overpayment, ensure VA has not already recouped or waived the overpayment.
• Process the payment of pension to an incarcerated Veteran’s dependent(s) under end product 130.

III.v.8.B.1.f.  Notice of Incarceration Received After Incarceration Has Ended

III.v.8.B.1.g.  Procedure for Reducing/
Eliminating an Overpayment Resulting From a Veteran’s Incarceration

• the overpayment is the result of retroactive discontinuance of the Veteran’s pension because he/she was incarcerated, and
• the Veteran has a dependent or dependents that are entitled to the Veteran’s pension during his/her period of incarceration.

Important:

• The instructions presented in the table below are for application when a decision has been made to
  • award an incarcerated Veteran’s pension to his/her dependent(s), or
  • apportion an incarcerated Veteran’s compensation to his/her dependent(s).
• Although the payment of pension to a Veteran’s dependent(s) under 38 CFR 3.666 is notan apportionment, it is treated as such in the procedure described in the table below.

Step	Action
1	Follow the instructions in the Veterans Service Network (VETSNET) Awards User Guide or the Veterans Benefits Management System (VBMS)-Awards User Guide (whichever applies) to reflect the decision to apportion benefits to the Veteran’s dependent(s). Important:  To determine the effective date of payment of the apportionment, follow the instructions for pension in M21-1, Part III, Subpart v, 8.B.1.e, or compensation in M21-1, Part III, Subpart v, 8.B.2.d.
2	Generate the award to the apportionee(s) by clicking on the GENERATE AWARD button on the RECORD DECISIONS screen.
3	When the ADDRESS DISPLAY screen appears, confirm or, if necessary, change the address of the apportionee(s), and click on the CONTINUE GENERATION button.
4	When the CURRENT AND PROPOSED AWARD/AUTHORIZATION screen appears, manually calculate the amount due the apportionee(s) from the effective date of payment to the first day of the current month, and confirm that the net effect of the proposed award (as displayed in the title of the PROPOSED AWARD tab) matches the result of the manual calculation. Important:  If award action is taken at the end of the current month, the net effect of the proposed award will likely include benefits payable for the current month.
5	Click on the GENERATE AWARD OVERRIDE (GAO) button.
6	When the GENERATE AWARD OVERRIDE screen appears, select the first award line that falls within the period during which the overpayment resulting from the Veteran’s incarceration was created.
7	Click on the EDIT button.
8	When the OVERRIDE WORKSHEET screen appears, subtract from the amount shown in the INST ADJ field the monthly amount of the apportionment in effect as of the date of the award line that appears at the top of the screen.
9	Update the amount in the AMOUNT field (in the lower, right-hand corner of the OVERRIDE WORKSHEET screen) so that it matches the amount in the AWARD NET column in the award line that appears at the top of the same screen.
10	Follow the instructions in the Finance and Accounting Service (FAS) User’s Guide for accessing the screen in FAS that displays as a table the “receivables” (overpayments) in the Veteran’s account.
11	View the details of each row in the table in FAS (by highlighting the row and clicking on the VIEW DETAILS button) to identify the row with a Begin Date that matches the effective date of the award line at the top of the OVERRIDE WORKSHEET screen in VBMS or VETSNET.
12	Confirm that the Receivable Reason (on the DETAILS screen in FAS for the row identified in Step 11) matches the reason displayed in the SELECTED REASONS field in the bottom, left-hand side of the OVERRIDE WORKSHEET screen in VBMS or VETSNET.  If the reasons donot match, remove the current reason in the SELECTED REASON field, and select from the reasons displayed in the AVAILABLE REASONS field the reason that matches the Receivable Reason shown in FAS. Important:  If the Receivable Reason and the reason in the SELECTED REASON field donot match, the actions described in this table will not have the desired effect of reducing or eliminating the overpayment in the Veteran’s account.
13	Capture and associate with the claims folder a screenshot of the GENERATE AWARD OVERRIDE WORKSHEET screen associated with each overridden award line. Example:   Note:  When uploading the worksheet(s) to VBMS, use the following document properties: SUBJECT:  GAO Worksheet, and CATEGORY – TYPE:  Worksheet:  User Calculations (Retroactive Payment, etc.).
14	Click on the ACCEPT button.
15	Are there additional award lines on the GENERATE AWARD OVERRIDE screen that fall within the period during which the overpayment resulting from the Veteran’s incarceration was created? If yes, select the next award line on the GENERATE AWARD OVERRIDE screen, and return to Step 7. If no, proceed to the next step.
16	In the REMARKS field on the GENERATE AWARD OVERRIDE screen, add the following text:  Performed award override to offset the overpayment in the Veteran’s account that was created as a result of the Veteran’s incarceration.
17	Click on the GENERATE button.

III.v.8.B.1.h.  Example:  Payment of Pension to the Dependents of an Incarcerated Veteran

• On September 1, 2015, VA receives notification of a Veteran’s incarceration for conviction of a felony.  The 61^st day of the Veteran’s incarceration was June 10, 2015.
• VA has been paying the Veteran pension, to include additional benefits for his spouse and child.
• On September 8, 2015, VA
  • sends notice of proposed adverse action to the Veteran, and
  • informs the Veteran of his dependents’ rights to receive pension while he is incarcerated.
• On November 3, 2015, VA receives a VA Form 21-0788 from the Veteran’s spouse for the payment of pension for herself and her child.
• On November 17, 2015, VA discontinues the Veteran’s pension effective June 10, 2015.  VA concurrently
  • finds the Veteran’s spouse entitled to the payment of pension while the Veteran is incarcerated
  • applies the benefits to which the Veteran’s spouse is entitled for the period June 10, 2015, to November 1, 2015, to the overpayment resulting from the retroactive adjustment to the Veteran’s award, and
  • begins paying pension to the spouse effective November 1, 2015.

III.v.8.B.1.i.  Notifying Dependents of the Temporary Nature of Their Entitlement

• entitlement to the benefit is temporary
• payments are subject to discontinuation without due process after incarceration ends, and
• the dependent may submit a claim for an apportionment of the Veteran’s pension if the dependent and Veteran do not reside together after incarceration ends.

III.v.8.B.1.j.  Discontinuing the Payment of Pension to a Veteran’s Dependent(s) After Incarceration Ends

• discontinue the payment of pension to the Veteran’s dependent(s) effective the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share
• for the period between the date incarceration ended and the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share, pay the Veteran the difference between
  • the full amount of pension to which he/she is entitled, and
  • the amount of pension VA paid to his/her dependents during the same period of time
• resume payment of the full amount of pension to which the Veteran is entitled effective the date in the LAST PAID DATE field on the AWARD INFORMATION tab in Share, and
• notify both the Veteran and his/her dependent(s) of the adjustments made to their individual awards, according to the instructions in M21-1, Part III, Subpart v, 2.B.  Inform the dependent(s) that he/she(they) may submit a claim for an apportionment of the Veteran’s benefits if, after incarceration, the Veteran no longer resides with the dependent(s).  Include a blank VA Form 21-0788 with the notification letter to the Veteran’s dependents.

• VA does not require the submission of a specific form to
  • report that incarceration has ended, or
  • request a resumption of benefits after incarceration has ended.
• If VA was paying a Veteran either Section 306 or Old Law Pension prior to incarceration, resume payment of the same benefit after incarceration ends if entitlement still exists.  Do not switch the Veteran to current-law pension unless he/she specifically elects this benefit.
• Because a Veteran’s dependent(s) has(have) already been notified of the temporary nature of their entitlement (in accordance with the instructions in M21-1, Part III, Subpart v, 8.B.1.i), there is no need to provide notice of proposed adverse action to the dependent(s) before making the adjustments described in this block.

III.v.8.B.1.k.  Example:  Adjustments to Pension Awards After Incarceration Ends

• In May 2001, VA discontinued the payment of pension to a Veteran due to his incarceration for conviction of a felony.
• The Veteran has a spouse and one child.  VA has been paying pension to the Veteran’s spouse for herself and the child since shortly after the Veteran’s incarceration.
• On February 3, 2007, VA received notice the Veteran had been released from prison on January 21, 2007.  The full amount of pension payable to the Veteran at this time, based on the annual IVAP of his household and the number of dependents he has, is $775.00.
• VA last paid pension to the Veteran’s spouse in the amount of $450.00 for the month of January 2007.

• Discontinue the payment of pension to the Veteran’s spouse effective February 1, 2007.
• Resume the payment of pension to the Veteran in the amounts and from the dates shown below.
  • $325.00 from January 21, 2007 (This represents the difference between the full rate of pension payable to the Veteran on this date and the amount of pension VA had been paying to the Veteran’s spouse each month.), and
  • $775.00 from February 1, 2007.
• Notify the Veteran and his spouse (in separate letters) of the adjustments made to their individual awards.

Introduction

• right of an incarcerated Veteran’s dependent(s) to an apportionment
• form claimants must submit to request apportionment of an incarcerated Veteran’s disability compensation
• avoiding unnecessary apportionment development
• determining the effective date of entitlement and the effective date of payment
• notice of incarceration received after incarceration has ended
• example of the apportionment of an incarcerated Veteran’s compensation
• notifying dependents of the temporary nature of the apportionment
• determining the amount of compensation to apportion to an incarcerated Veteran’s dependent
• handling apportioned awards when the Veteran is reunited with his/her dependent(s) after incarceration ends
• example of award adjustments when a Veteran is reunited with his/her dependent(s)
• handling apportioned awards when the Veteran is not reunited with his/her dependent(s) after incarceration ends
• deciding whether continuation of the apportionment is appropriate
• handling responses that VA receives after discontinuing an apportionment, and
• example of award adjustments when a Veteran is not reunited with his/her dependents.

Change Date

III.v.8.B.2.a.  Right of an Incarcerated Veteran’s Dependent(s) to an Apportionment

• spouse
• child(ren), and/or
• dependent parent(s).

• a Veteran’s dependent(s) if the Veteran is a fugitive felon, as defined in 38 CFR 3.665(n)(2), or
• any dependent who is
  • a fugitive felon, or
  • incarcerated for conviction of a felony.

III.v.8.B.2.b.  Form Claimants Must Submit to Request Apportionment of an Incarcerated Veteran’s Disability Compensation

• VA will accept a completed and signed VA Form 21-0788 from either the Veteran or his/her dependent(s).
• If a claimant requests apportionment of an incarcerated Veteran’s disability compensation on anything other than a VA Form 21-0788,
  • treat the correspondence as a request for an application, and
  • follow the instructions in M21-1, Part III, Subpart v, 3.A.1.d.

III.v.8.B.2.c.  Avoiding Unnecessary Apportionment Development 

• notice of proposed adverse action issued to the Veteran in accordance with M21-1, Part III, Subpart v, 8.A.3.f will have informed him/her of eligible family members’ rights to an apportionment of benefits withheld due to incarceration
• Veteran’s monthly rate of payment will not be adversely impacted by any apportionment authorized to his/her dependent(s), and
• VA Form 21-0788 required to request an apportionment will adequately portray factors material to apportionment consideration, including the income and living expenses of the dependent(s) at issue.

• determining the amount of compensation to apportion to an incarcerated Veteran’s dependent, see M21-1, Part III, Subpart v, 8.B.2.h, and
• the regulatory authority for apportioning incarceration withholdings, see 38 CFR 3.665(e).

III.v.8.B.2.d.  Determining the Effective Date of Entitlement and the Effective Date of Payment

III.v.8.B.2.e.  Notice of Incarceration Received After Incarceration Has Ended

III.v.8.B.2.f.  Example:  Apportionment of an Incarcerated Veteran’s Compensation

• On September 1, 2015, VA receives notification of a Veteran’s incarceration in a federal prison for conviction of a felony.  The 61^st day of incarceration was June 10, 2015.
• The Veteran has multiple service-connected (SC) disabilities with a combined disability rating of 50 percent.  He also has a wife and one child for whom he has been receiving additional compensation.
• On September 8, 2015, VA sends notice of proposed adverse action to the Veteran and informs him of his dependents’ rights to an apportionment of his compensation.
• On November 3, 2015, VA receives a VA Form 21-0788 from the Veteran’s spouse for an apportionment of the Veteran’s compensation.
• On November 17, 2015, VA reduces the Veteran’s compensation to the rate payable for a disability rated 10-percent disabling, effective June 10, 2015.  VA concurrently
  • finds the Veteran’s spouse entitled to an apportionment of the remaining amount of compensation to which the Veteran is not entitled due to his incarceration
  • applies the apportionment to which the Veteran’s spouse is entitled for the period June 10, 2015, to November 1, 2015, to the overpayment resulting from the retroactive adjustment to the Veteran’s award, and
  • processes an award to the Veteran’s spouse with an effective date of payment of November 1, 2015 (the first day of the month following the month for which VA last paid the Veteran his full rate of compensation).

• the effective date of payment of the apportionment (November 1, 2015) would remain the same, as long as VA received the claim before September 8, 2016, and
• procedures outlined in M21-1, Part III, Subpart v, 8.B.1.g would be used to reduce or eliminate any remaining overpayment resulting from the Veteran’s incarceration.

III.v.8.B.2.g.  Notifying Dependents of the Temporary Nature of the Apportionment

• the apportionment is temporary and subject to discontinuation without due process after incarceration ends, and
• the dependent may submit a new claim for an apportionment if the dependent and Veteran do not reside together after incarceration ends.

III.v.8.B.2.h.  Determining the Amount of Compensation to Apportion to an Incarcerated Veteran’s Dependent

• Consider the following when evaluating individual need
  • dependent’s income and living expenses
  • the amount of compensation available for apportionment
  • needs and expenses of other dependents, and
  • special needs of any dependent.
• Follow the instructions in M21-1, Part III, Subpart v, 3.A.3.d for proper documentation and approval of the apportionment decision.

• To determine the amount of compensation that VA may apportion to the dependent(s) of an incarcerated Veteran, subtract the rate payable for a disability rating of 10 percent from the rate payable to the Veteran if he/she were not incarcerated.
• If the Veteran’s compensation is subject to withholding for the recoupment of separation benefits, see the notes in M21-1, Part III, Subpart v, 8.A.4.cto determine the amount of compensation VA may apportion to the dependent(s) of an incarcerated Veteran.

III.v.8.B.2.i.  Handling Apportioned Awards When the Veteran Is Reunited With His/Her Dependent(s) After Incarceration Ends

III.v.8.B.2.j.  Example:  Award Adjustments When a Veteran Is Reunited With His/Her Dependent(s)

• VA has been paying disability compensation to an incarcerated Veteran at the rate payable under 38 CFR 3.665(d)(1) for several years, based on an SC disability VA rated 50-percent disabling.
• The Veteran has a spouse and one child to whom VA granted an apportionment in the amount of $500.00 per month as a result of the Veteran’s incarceration.
• On February 3, 2007, VA received notice the Veteran had been released from prison on January 21, 2007.
• The Veteran was reunited with his spouse and child, and they reside at the same address.
• VA last paid the apportionment to the Veteran’s spouse for the month of January 2007.

• Discontinue the apportionment effective February 1, 2007.
• Amend the Veteran’s award to pay
  • $332.00 from January 21, 2007 (This represents the difference between the rate payable for a 50-percent disabled Veteran with a spouse and one child ($832.00) and the amount of the apportionment.), and
  • $832.00 from February 1, 2007.
• Notify the Veteran and his spouse of the adjustments made to their individual awards.

III.v.8.B.2.k.  Handling Apportioned Awards When the Veteran Is Not Reunited With His/Her Dependent(s) After Incarceration Ends

• VA apportioned a Veteran’s compensation to his/her dependent(s) as a result of the Veteran’s incarceration, and
• the Veteran is not reunited with all of the same dependents when incarceration ends.

• Do not continue an apportionment that VA initially granted based solely on the policy expressed in the notes in M21-1, Part III, Subpart v, 8.A.4.c.
• Do not continue an apportionment to a dependent parent after incarceration ends unless the award was apportioned under the provisions of 38 CFR 3.452(c).

III.v.8.B.2.l.  Deciding Whether Continuation of the Apportionment Is Appropriate

• follow the instructions in M21-1, Part III, Subpart v, 3.A.2 for undertaking development to determine whether continuation of the apportionment at the present rate is appropriate, and
• allow the apportionee 60 days to respond with testimony and/or evidence.

• the apportionment VA granted based on the Veteran’s incarceration was temporary and subject to discontinuance when incarceration ended, and
• VA will continue the apportionment only upon receipt of evidence/information showing an apportionment is still warranted.

III.v.8.B.2.m.  Handling Responses That VA Receives After Discontinuing an Apportionment

• VA receives a response to the development letter referenced in M21-1, Part III, Subpart v, 8.B.2.l after it has taken action to discontinue the apportionment, and
• VA decides an apportionment is in order.

III.v.8.B.2.n.  Example:  Award Adjustments When a Veteran Is Not Reunited With His/Her Dependent(s)

• VA has been paying disability compensation to an incarcerated Veteran at the rate payable under 38 CFR 3.665(d)(1) for several years, based on an SC disability VA rated 50-percent disabling.
• The Veteran has a spouse and one child to whom VA granted an apportionment in the amount of $500.00 per month as a result of the Veteran’s incarceration.
• On February 3, 2007, VA received notice the Veteran had been released from prison on January 21, 2007.
• The Veteran did not reunite with his spouse and child, and they reside at separate addresses.
• VA last paid the apportionment to the Veteran’s spouse for the month of January 2007.

• Reduce the apportionment to $120.00, effective February 1, 2007.  (This amount represents the difference between the rate payable for a 50-percent-disabled Veteran with no dependents ($712.00) and the rate payable for the same Veteran with a spouse and one child ($832.00).)
• Amend the Veteran’s award to pay
  • $332.00 from January 21, 2007 (This amount represents the difference between the $500.00 apportionment and the rate payable for a 50-percent-disabled Veteran with a spouse and child.), and
  • $712.00 from February 1, 2007.
• Notify the Veteran and his spouse of the adjustments made to their individual awards.
• Take the actions described in M21-1, Part III, Subpart v, 8.B.2.l to determine whether continuation of the apportionment at the present rate is in order.

Introduction

• paying compensation in lieu of pension during incarceration, and
• resuming the benefits of a Veteran entitled to both compensation and pension when incarceration ends.

Change Date

III.v.8.B.3.a.  Paying Compensation in Lieu of Pension During Incarceration

• discontinuation of a Veteran’s pension due to incarceration is in order, and
• the Veteran is entitled to both compensation and pension.

III.v.8.B.3.b.  Resuming the Benefits of a Veteran Entitled to Both Compensation and Pension When Incarceration Ends