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M21-1, Part V, Subpart iii, Chapter 1, Section H – Improved Pension – Adjustments based on Changes in Status

Overview


In This Section

This section contains the following topics:
Topic
Topic Name
1
2
 3
4

1.  Adjustments Based on Changes in Income


Introduction

This topic contains information on adjustments based on changes in income, including

Change Date

November 3, 2016

V.iii.1.H.1.a.  Counting Income

The income counting procedures apply equally to
  • running awards
  • original awards, and
  • new awards (awards granted after previous finally denied claim for pension).
Reference:  For more information about counting income, see M21-1, Part V, Subpart iii, 1.E.6.

V.iii.1.H.1.b.  Time Limit to Furnish Amended Income Information to Increase the Rate

38 CFR 3.660(b)(1) provides the time limit for submitting new evidence to get a higher rate for a particular income year.
For an original award or a new award after a period of non-entitlement, the “income year” is the initial year.  (Therefore, a claimant can have more than one “initial year.”)  Otherwise, the income year is the applicable calendar year.
38 CFR 3.660(b)(1) provides that where pension was paid at a lower rate based on anticipated income, pension may be increased in accordance with the facts found if satisfactory evidence of entitlement is received within the same or next calendar year.

V.iii.1.H.1.c.  Definition:  Same Calendar Year Under 38 CFR 3.660(b)(1)

The same calendar year under 38 CFR 3.660(b)(1) is the year in which the applicable calendar year or initial period ends.
Therefore, a claimant has the entire calendar year that follows the applicable calendar year (or that follows the year that the initial year ends) to submit satisfactory evidence of entitlement for the calendar year in question.
The table below describes the time limit for the claimant to submit satisfactory evidence of entitlement for the same calendar year.
If the same calendar year is …
Then the Department of Veterans Affairs (VA) must receive evidence of entitlement before the end of …
an initial year
the calendar year that follows the year in which the initial year ends.
a calendar year
the following calendar year
 
Reference:  For the definition of the term initial year, see M21-1, Part V, Subpart iii, 1.E.7.a.

V.iii.1.H.1.d.  Example 1: Time Limit to Furnish Amended Income Information to Increase Rate

Situation:  A Veteran’s initial year is July 12, 2006, through July 31, 2007.  The “same calendar year” refers to 2007, the calendar year during which the initial year ends.
Result:  The Veteran has up to and including December 31, 2008, to submit income information (such as unreimbursed medical expenses) to reduce income for the period July 12, 2006, through July 31, 2007.
Note:  A Veteran under the age of 65 who was not rated permanently and totally (P&T) disabled because income for VA purposes (IVAP) exceeded the maximum annual pension rate (MAPR) may be rated P&T from the original date of claim (unless the medical evidence precludes such a rating), if the Veteran submits income information within the 38 CFR 3.660(b) time limits and IVAP (and net worth) permits payment.

V.iii.1.H.1.e.  Example 2: Time Limit to Furnish Amended Income Information to Increase Rate

Situation:
  • A Veteran’s initial year is November 15, 2006, through November 30, 2007.
  • The Veteran previously reported receipt of $500 nonrecurring income on April 1, 2007.
  • The nonrecurring income was counted for a 12-month period from May 1, 2007, through May 1, 2008.
Result:  The Veteran has up to and including December 31, 2008, to submit satisfactory evidence that the amount of nonrecurring income received on April 1, 2007, was less than $500.

V.iii.1.H.1.f.  Evidence Date Stamp

38 CFR 3.660(b) speaks in terms of establishing entitlement to benefits if satisfactory evidence is received within specified time limits.  This means that evidence adequate to support award action must be date stamped into VA by the critical date, or by the next workday, if the time limit expires on a Saturday, Sunday, or legal holiday.
Reference:  For more information on computation of time limits, see 38 CFR 3.110.

V.iii.1.H.1.g.  Time Limit to Submit Amended Income Information to Reduce an Overpayment

Under 38 CFR 3.652(b), there is no time limit to submit evidence of continued entitlement, such as income evidence, for the purpose of reducing an overpayment.
However, the evidence submitted must relate to the period during which the overpayment was created, per 38 CFR 3.660(b).
Example:
  • An overpayment is created in the Veteran’s account because IVAP for 2005 was greater than anticipated.
  • On September 29, 2008, the Veteran submits VA Form 21P-8416, Medical Expense Report, showing medical expenses paid during 2005.
  • These expenses can be used to reduce the overpayment but cannot be used to pay retroactive benefits.

V.iii.1.H.1.h.  Time Limit to Submit Amended Income Information When a Pension Award Is Discontinued Because IVAP Exceeds the MAPR

When a pension award is discontinued because IVAP exceeds the MAPR, 38 CFR 3.660(b) determines the time limit to submit new income information.
Note that the 38 CFR 3.660(b) time limits cannot be extended because of a delay in notifying the beneficiary of the discontinuance.

V.iii.1.H.1.i.  Continuing Entitlement Established

A pensioner has up to and including the last day of the calendar year that follows the end of the initial year or calendar year period to establish continuing entitlement for the income counting period during which the discontinuance occurred.
Situation:
  • A Veteran has a running award.
  • The Veteran reports winning $15,000 in the lottery on August 7, 2006.
  • The award is discontinued September 1, 2006, because projected IVAP exceeds the MAPR.
Result:  The Veteran has through the end of 2007 to submit evidence of continuing entitlement (for example, deductible expenses) from September 1, 2006.
 
Note:  In this example, if the Veteran responded before January 1, 2008, with information establishing uninterrupted entitlement for the 2006 calendar year, the amount of time the Veteran has to establish entitlement for the following calendar year (2007), is determined by whether the Veteran had previously submitted income information for that year.
If the Veteran had not previously submitted income information for 2007, the Veteran has 12 months from the date of request by VA to furnish the required evidence.
However, if income evidence for 2007 had previously been submitted but benefits were not awarded because it appeared IVAP would exceed the MAPR for 2007, then
  • apply 38 CFR 3.660(b)(1), and
  • the pensioner has until the end of 2008 to submit evidence establishing entitlement for 2007.

V.iii.1.H.1.j.  Payment of Pension After a Break in the Entitlement

The time limit to submit evidence establishing entitlement after a break in entitlement is determined by 38 CFR 3.660(b)(2).  That is, the claimant has two years from the date of discontinuance to submit evidence establishing entitlement from 12 months after the date of discontinuance.
If the claimant re-establishes entitlement from a date that is 12 months from the date of discontinuance, 38 CFR 3.31 applies in determining the proper payment date.

V.iii.1.H.1.k.  Example 1:  Payment of Pension After a Break in Entitlement

Situation:  The Veteran has a running award.
  • August 7, 2006:  The Veteran wins the lottery, and the nonrecurring income causes projected IVAP to exceed MAPR
  • September 1, 2006:  Date of award discontinuance per the end-of-the-month rule.
  • December 15, 2006:  The Veteran is notified of the discontinuance.
Result:  The Veteran has until September 1, 2008, to submit evidence establishing entitlement from September 1, 2007, with an October 1, 2007, payment date.
 
Note:  Before resuming the award from September 1, 2007 (with an October 1, 2007, payment date), develop for necessary income and expenses information for the new initial year of September 1, 2007, through September 30, 2008.  If continuous entitlement
  • is possible, also develop for 2006 and 2007 income and expense information, or
  • is not possible, but an overpayment still exists, notify the claimant that there is no time limit to reduce an overpayment, if he/she has not already been so informed.

V.iii.1.H.1.l.  Example 2:  Payment of Pension After a Break in Entitlement

Situation:
  • May 5, 2005:  Surviving spouse wins the lottery, and the nonrecurring income causes projected IVAP to exceed MAPR.
  • June 1, 2005:  Date of award discontinuance per the end-of-the-month rule.
  • August 7, 2005:  Surviving spouse is notified of the award discontinuance.
  • March 14, 2006:  Surviving spouse submits 2005 unreimbursed medical expenses.  These bring calendar-year 2005 IVAP below the MAPR and permit the award to resume from June 1, 2005.  However, 2006 IVAP still exceeds the MAPR.
Result:  If the surviving spouse cannot establish entitlement for the 2006 calendar year, the surviving spouse has until June 1, 2007, to submit satisfactory evidence of entitlement from June 1, 2006, and permit resumption of payments from July 1, 2006.

V.iii.1.H.1.m.  Example 3:  Payment of Pension After a Break in Entitlement

Situation:  A Veteran has a running pension award.
  • May 5, 2005:  The Veteran wins the lottery, and the nonrecurring income causes projected IVAP to exceed MAPR.
  • June 1, 2005:  Date of award discontinuance per the end-of-the-month rule.
  • July 3, 2005:  The Veteran is notified of the award discontinuance.
  • August 7, 2007:  The Veteran files a new pension claim.
  • September 1, 2007:  Payment date of new award (effective date August 7, 2007).
Result:  The Veteran’s new initial year is August 7, 2007, through August 31, 2008.  Income received before August 7, 2007, is not countable.

 

2.  COLAs

 


Introduction

This topic contains information on COLAs, including

Change Date

March 13, 2019

V.iii.1.H.2.a.  Effect of COLA Adjustments

Cost-of-living adjustments (COLAs) in other benefits affect the rate of current-law pension payable.

V.iii.1.H.2.b.  Normal Impact of Social Security COLA on the Current-Law Pension Rate

Normally, a Social Security COLA adjustment will not reduce the rate of current-law pension because the current-law pension MAPR always increases at the same time and by the same percentage as the rate of Social Security, per 38 CFR 3.27.
If the Social Security COLA does not reduce the rate of current-law pension, count the increased rate of Social Security from the effective date of the COLA (generally December 1).  This is an exception to the general end-of-the-month rule that increased income is counted from the first day of the month after the month during which it is received.
 
Example:  A Veteran is receiving current-law pension based on Social Security of $5,000 per year.  Effective December 1, 2005, the rate of Social Security goes up to $5,205 as a result of the COLA.  Pay $447 per month based on IVAP of $5,205 from December 1, 2005.

V.iii.1.H.2.c.  Reduction in Rate of Current-Law Pension Due to Social Security’s COLA

If deductible expenses are a factor, a beneficiary’s rate of  current-law pension may go down as the result of an Social Security COLA.  This happens most often when a beneficiary’s annual rate of Social Security approaches or exceeds the applicable MAPR.
If an Social Security COLA adjustment results in a decrease in the rate of current-law pension, decrease the pension rate effective the first of the month after the effective date of the COLA/MAPR increase.
However, if deductible expenses for the calendar year associated with the COLA are projected to increase, then carry forward the previous year’s pension payment rate until February 1.
Notes:
  • If the adjustment will result in reduction of a running award, it is necessary to furnish notice of proposed adverse action for the reduction.
  • Do not adjust the award until at least 60 days after the notice of proposed adverse action is sent to the beneficiary, unless the beneficiary requests the reduction.
  • Effective November 18, 2017, Pension and Parents’ Dependency and Indemnity Compensation (DIC) beneficiaries will be mailed a notice of adverse action automatically at the time of COLA Batch processing, if their award requires due process prior to adjustment. In addition, an EP 600 will be automatically established to control the action with a suspense date 65 days from the date of the letter.  The EPs will be assigned to the appropriate pension management center (PMC) based on geography.  These cases must be manually adjusted at the end of the suspense period or when the claimant responds to the notice.
Reference:  For more information on adjusting an award to reflect a COLA, seeM21-1, Part III, Subpart v, 10.A.3.a.

V.iii.1.H.2.d.  Example:  Adjusting the Rate of Current-Law Pension When Calendar-Year Medical Expenses Are Projected to Remain Constant

Situation:
  • A Veteran is receiving current-law pension of $599 per month based on IVAP of $9,319.
  • The Veteran receives Social Security of $16,555 per year and has continuing medical expenses of $7,730 per year.
  • Effective December 1, 2004, the annual rate of Social Security goes up to $16,994 because of the COLA.  This increases IVAP to $9,772 and reduces the  monthly rate of pension to $598.
Result:  Adjust the award to pay at the rate of $599 per month through December 31, 2004, and furnish notice of a proposed reduction to $598 from January 1, 2005.

V.iii.1.H.2.e.  Example:  Adjusting the Rate of Current-Law Pension When Calendar-Year Medical Expenses Are Projected to Increase

Situation:
  • A Veteran is receiving current-law pension of $599 per month based on IVAP of $9,319.
  • The Veteran receives Social Security of $16,555 per year and has continuing medical expenses of $7,730 per year.
  • Effective December 1, 2004, the annual rate of Social Security goes up to $16,994 because of the COLA.  This increases IVAP to $9,772 and reduces the monthly rate of pension to $598.
  • The Veteran has continuing medical expenses of $8,500 for calendar year 2005.  This decreases IVAP to $9,002 and increases the monthly rate of pension to $666.
Result:  Adjust the award to pay at the rate of $599 per month through January 31, 2005, and $666 from February 1, 2005 (38 CFR 3.31).

V.iii.1.H.2.f.  Reduction in Rate of Current-Law Pension Due to Other Benefit Program’s COLA

If a VA beneficiary receives additional income because of a COLA in a benefit program other than Social Security, then the general rule for counting recurring income applies.  Count the additional income from the first of the month after the month during which it is received.
Reference:  For more information on counting recurring income, see M21-1, Part V, Subpart iii, 1.E.6.d.

V.iii.1.H.2.g.  Original, New, or Suspended Awards

If the Social Security or other benefit program COLA occurs before an original or new award is processed or when an award is in suspense, no notice of proposed adverse action for a reduction is required.

V.iii.1.H.2.h.  Example:  Original, New, or Suspended Awards

Situation:
  • A Veteran’s award is effective March 14, 2004, with a payment date of April 1, 2004.
  • The original award is not authorized until February 13, 2005.
  • From April 1, 2004, the Veteran is entitled to a current-law pension rate of $599 per month, based on IVAP of $9,319.
  • The Veteran receives Social Security of $16,555 per year and has continuing medical expenses of $7,730 per year.
  • Effective December 1, 2004, the annual rate of Social Security goes up to $16,994 because of the COLA.  This increases IVAP to $9,772 and reduces the Veteran’s monthly rate of pension to $598.
Result:  Adjust the award to pay at the rate of $599 per month through December 31, 2004, and $598 from January 1, 2005.

V.iii.1.H.2.i.  Retroactive Increases

Apply the principles in this topic even if the beneficiary subsequently establishes entitlement to a retroactive increase because of a reduction in countable income.

V.iii.1.H.2.j.  Example 1:  Retroactive Increases

Situation:
  • A Veteran is receiving current-law pension of $599 per month based on IVAP of $9,319.
  • The Veteran receives Social Security of $16,555 per year, but has continuing medical expenses of $7,730 per year.
  • Effective December 1, 2004, the annual rate of Social Security goes up to $16,994 because of the COLA.  This increases IVAP to $9,773 and reduces the Veteran’s monthly rate of pension to $598 from January 1, 2005.
  • The Veteran’s initial year is May 15, 2004, through May 30, 2005.
  • In July 2005 the Veteran reports having paid medical expenses of $7,850.  The Veteran is now entitled to $609 per month based on IVAP of $9,200 from May 15, 2004, with a payment date of June 1, 2004.
  • The rate goes down to $608 per month based on IVAP of $9,652 after the Social Security COLA.  The reduction is still effective January 1, 2005.
Result:  Adjust the award to pay at the rate of $609 per month from June 1, 2004 through December 31, 2004, and $608 from January 1, 2005.

V.iii.1.H.2.k.  Example 2:  Retroactive Increases

Situation:
  • A Veteran is receiving current-law pension of $408 per month based on Railroad Retirement (RR) benefits of $5,000 per year.
  • The December 1, 2004, RR COLA increases the Veteran’s IVAP to $5,135.  The RR COLA is received during January 2005 and should be counted from February 1, 2005.
  • The Veteran subsequently reports medical expenses of $1,200 for the initial year May 15, 2004, through May 31, 2005.
 
Result:  Adjust the award to pay
  • $467 per month based on IVAP of $4,295 from June 1, 2004
  • $488 per month based on IVAP of $4,308 from December 1, 2004
  • $477 based on IVAP of $4,443 from February 1, 2005, and
  • $419 based on IVAP of $5,135 from June 1, 2005 (to remove the $1,200 medical expenses).

V.iii.1.H.2.l.   COLA Transfers From Fiduciary Hubs  

PMCs are responsible for working COLA claims transferred from fiduciary hubs.  PMCs should work both the fiduciary claim and the COLA claim together.
The PMC must complete all actions to finalize both claims and provide the claimant notification of all decisions to include the fiduciary issues.
The PMC is entitled to both the COLA end product (EP) and the fiduciary action EP.
References:  For additional information on

3.  Adjustments for the Loss of Disability Social Security

 


Introduction

This topic contains information on adjustments for the loss of disability Social Security, including

Change Date

September 12, 2016

V.iii.1.H.3.a.Beneficiary’s Right to Social Security Benefits During Appeal

If the Social Security Administration (SSA) determines that a beneficiary receiving disability benefits is no longer disabled, the beneficiary may appeal the determination and may elect to have Social Security benefits continue during the SSA appeal process.
This election is made on the condition that Social Security payments issued after the initial Social Security termination date will have to be repaid if the SSA’s decision is upheld on appeal.

V.iii.1.H.3.b.  Social Security Rate During Appeal

The beneficiary may not elect to receive a reduced rate of Social Security disability benefits during the appeal, but may elect to have the basic benefit continue while payments for eligible dependents in the household are stopped.
Alternatively, the beneficiary may elect to have the basic benefit terminated and have payments for one or more dependents in the household continue.
The beneficiary’s election does not control a dependent outside the household whose payments are contingent on the beneficiary’s entitlement.  Such a dependent, however, is given the right to elect to have benefits continue during the appeal by accepting responsibility for the overpayment if the appeal is unsuccessful.
A Social Security beneficiary who is 62 years old or older may elect to receive Social Security retirement benefits in lieu of disability benefits while the appeal of the disability determination is pending.

V.iii.1.H.3.c.  Report of Terminated Disability Social Security Received

If a pension (or Parents’ DIC) beneficiary reports that disability Social Security benefits have been terminated, do not increase VA pension benefits unless there is a statement from the beneficiary on file to the effect that the beneficiary and any dependents
  • no longer receive Social Security, and
  • will not appeal the SSA’s decision or have elected to receive no benefits while the appeal is pending.
Note:  If the beneficiary has elected to receive benefits for certain dependents, the statement must specify the dependents for which payments will continue.

V.iii.1.H.3.d.  Determining Whether Additional Development Is Needed

If the SSA determines that a Veteran is no longer eligible for Social Security disability benefits, and the Veteran is under age 65, determine if additional development is necessary to ascertain whether the Veteran continues to have a P&T disability for pension purposes.
Note:  Request medical records from SSA while developing for records from other sources.

V.iii.1.H.3.e.  EP Control for Development

If development is required, control the issue under EP code 150 until such time as
  • the award can be adjusted for reduced income, or
  • a determination is made that no adjustment is in order.
The beneficiary continues to receive unreduced Social Security during the appeal.
If the income issue is resolved before the case is referred to the rating activity, take the EP 150 and establish a separate EP code 310 for the rating activity’s  review of the Veteran’s disabilities.

4.  Effect of Discontinued Survivors Pension Award on Other Beneficiaries

 


Introduction

This topic contains information on the effect of a discontinued Survivors Pension award on other beneficiaries, including

Change Date

September 12, 2016

V.iii.1.H.4.a.Entitlement of In-Custody Children

If the surviving spouse’s entitlement to pension ceases because IVAP exceeds the MAPR, or net worth is shown to bar pension entitlement, the entitlement of all children in the surviving spouse’s legal custody for current-law pension purposes also ceases.  The children can become entitled in their own right only if

  • the surviving spouse dies or remarries, or
  • the children are removed from the surviving spouse’s legal custody.

Reference:  For information about determining the legal custody of a child for current-law pension purposes, see


V.iii.1.H.4.b.  Entitlement of Out-of-Custody Children

The discontinuance of an award to a surviving spouse has no impact on any award being made to children who are not in the surviving spouse’s legal custody for current-law pension purposes.

V.iii.1.H.4.c.  Remarriage of the Surviving Spouse

If a surviving spouse remarries, current-law pension eligibility is lost as described in38 CFR 3.500(n)(1).  A remarried surviving spouse whose subsequent marriage is annulled or declared void can reestablish eligibility as a surviving spouse.
This applies to both pension and DIC recipients.
If it appears that a child may be entitled to a pension in his/her own right, initiate development to determine the income of the child, parent and stepparent or other custodian of the child with whom the child resides.
Reference:  For more information on reestablishing eligibility to benefits, see 38 CFR 3.55.

V.iii.1.H.4.d.  Discontinuance of a Child’s Award

If there is no surviving spouse, or if a child is out of the surviving spouse’s legal custody for current-law pension purposes, the child’s entitlement is completely independent of any benefits paid to any other beneficiary.

The adjustment or discontinuance of such an award has no impact on any other beneficiaries, unless the other beneficiaries are receiving Section 306 Pension or Old-Law Pension.

Reference:  For more information on handling another beneficiary’s Section 306 Pension or Old-Law Pension award when a surviving spouse’s or child’s Section 306 Pension or Old-Law Pension award is discontinued, see M21-1, Part V, Subpart iii, 1.C.6.

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