[House Report 107-472]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-472
======================================================================
VETERANS' AND SURVIVORS' BENEFITS EXPANSION ACT OF 2002
_______
May 16, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of New Jersey, from the Committee on Veterans' Affairs,
submitted the following
R E P O R T
[To accompany H.R. 4085]
[Including cost estimate of the Congressional Budget Office]
The Committee on Veterans' Affairs, to whom was referred the
bill (H.R. 4085) to increase, effective as of December 1, 2002,
the rates of disablity compensation for veterans with service-
connected disabilities and the rates of dependency and
indemnity compensation for survivors of certain service-
connected disabled veterans, and for other purposes, having
considered the same, reports favorably thereon with amendments
and recommends that the bill as amended do pass.
The amendments are as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Veterans' and Survivors' Benefits
Expansion Act of 2002''.
SEC. 2. INCREASE IN RATES OF DISABILITY COMPENSATION AND DEPENDENCY AND
INDEMNITY COMPENSATION.
(a) Rate Adjustment.--The Secretary of Veterans Affairs shall,
effective on December 1, 2002, increase the dollar amounts in effect
for the payment of disability compensation and dependency and indemnity
compensation by the Secretary, as specified in subsection (b).
(b) Amounts To Be Increased.--The dollar amounts to be increased
pursuant to subsection (a) are the following:
(1) Compensation.--Each of the dollar amounts in effect under
section 1114 of title 38, United States Code.
(2) Additional compensation for dependents.--Each of the
dollar amounts in effect under sections 1115(1) of such title.
(3) Clothing allowance.--The dollar amount in effect under
section 1162 of such title.
(4) New dic rates.--The dollar amounts in effect under
paragraphs (1) and (2) of section 1311(a) of such title.
(5) Old dic rates.--Each of the dollar amounts in effect
under section 1311(a)(3) of such title.
(6) Additional dic for surviving spouses with minor
children.--The dollar amount in effect under section 1311(b) of
such title.
(7) Additional dic for disability.--The dollar amounts in
effect under sections 1311(c) and 1311(d) of such title.
(8) DIC for dependent children.--The dollar amounts in effect
under sections 1313(a) and 1314 of such title.
(c) Determination of Increase.--(1) The increase under subsection (a)
shall be made in the dollar amounts specified in subsection (b) as in
effect on November 30, 2002.
(2) Except as provided in paragraph (3), each such amount shall be
increased by the same percentage as the percentage by which benefit
amounts payable under title II of the Social Security Act (42 U.S.C.
401 et seq.) are increased effective December 1, 2002, as a result of a
determination under section 215(i) of such Act (42 U.S.C. 415(i)).
(3) Each dollar amount increased pursuant to paragraph (2) shall, if
not a whole dollar amount, be rounded down to the next lower whole
dollar amount.
(d) Special Rule.--The Secretary may adjust administratively,
consistent with the increases made under subsection (a), the rates of
disability compensation payable to persons within the purview of
section 10 of Public Law 85-857 (72 Stat. 1263) who are not in receipt
of compensation payable pursuant to chapter 11 of title 38, United
States Code.
(e) Publication of Adjusted Rates.--At the same time as the matters
specified in section 215(i)(2)(D) of the Social Security Act (42 U.S.C.
415(i)(2)(D)) are required to be published by reason of a determination
made under section 215(i) of such Act during fiscal year 2003, the
Secretary of Veterans Affairs shall publish in the Federal Register the
amounts specified in subsection (b), as increased pursuant to that
section.
SEC. 3. RETENTION OF DEPENDENCY AND INDEMNITY COMPENSATION FOR
SURVIVING SPOUSES REMARRYING AFTER AGE 65.
(a) Exception to Termination of Benefits Upon Remarriage.--Paragraph
(2) of section 103(d) of title 38, United States Code, is amended by
striking ``if the remarriage'' and all that follows and inserting
``if--
``(A) the remarriage occurs after the surviving spouse
attains age 65 ;
``(B) the remarriage has been terminated by death; or
``(C) the remarriage has been terminated by divorce, unless
the Secretary determines that the divorce was secured through
fraud or collusion.''.
(b) Conforming Amendments.--Paragraph (4) of such section is
amended--
(1) by striking ``The first month'' and all the follows
through ``shall be'' and inserting the following ``When
eligibility for benefits for a surviving spouse is restored by
reason of this subsection, the first month of eligibility for
such benefits shall be''; and
(2) in subparagraph (A), by striking ``described in'' and
inserting ``with a remarriage described in subparagraph (B) or
(C) of''.
(c) Inclusion of Death Compensation Among Restored Benefits.--
Subparagraph (A) of paragraph (5) of such section is amended to read as
follows:
``(A) Sections 1121 and 1311, relating to death compensation
and dependency and indemnity compensation, respectively.''.
(d) Application for Benefits.--In the case of an individual who but
for having remarried would be eligible for dependency and indemnity
compensation under section 1311 of title 38, United States Code, or
death compensation under section 1121 of such title, and whose
remarriage was before the date of the enactment of this Act and after
the individual had attained age 65, the individual shall be eligible
for such compensation by reason of the amendments made by subsection
(a) only if the individual submits an application for such compensation
to the Secretary of Veterans Affairs not later than the end of the one-
year period beginning on the date of the enactment of this Act.
(e) Coordination of Benefits.--Section 1311 of such title is amended
by adding at the end the following new subsection:
``(e) In the case of an individual who is eligible for dependency and
indemnity compensation under this section by reason of section
103(d)(2)(A) of this title who is also eligible for benefits under
another provision of law by reason of such individual's status as the
surviving spouse of a veteran, then, notwithstanding any other
provision of law, no reduction in benefits under such other provision
of law shall be made by reason of such individual's eligibility for
benefits under this section.''.
SEC. 4. UNIFORM HOME LOAN GUARANTY FEES FOR QUALIFYING MEMBERS OF THE
SELECTED RESERVE AND ACTIVE DUTY VETERANS.
(a) In General.--Paragraph (2) of section 3729(b) of title 38, United
States Code, is amended--
(1) by inserting ``(A)'' after ``(2)'';
(2) by inserting ``for any loan closed after September 30,
2005'' after ``paragraph (1)''; and
(3) by adding at the end the following:
``(B) The loan fee table referred to in paragraph (1) for any loan
closed during the period beginning on October 1, 2002, and ending on
September 30, 2005, is as follows:
``LOAN FEE TABLE
------------------------------------------------------------------------
Type of loan Veteran Other obligor
------------------------------------------------------------------------
(A)(i) Initial loan described in 2.00 NA
section 3710(a) to purchase or
construct a dwelling with 0-down,
or any other initial loan described
in section 3710(a) other than with
5-down or 10-down (closed before
October 1, 2008)...................
------------------------------------------------------------------------
(A)(ii) Initial loan described in 1.25 NA
section 3710(a) to purchase or
construct a dwelling with 0-down,
or any other initial loan described
in section 3710(a) other than with
5-down or 10-down (closed on or
after October 1, 2008).............
------------------------------------------------------------------------
(B)(i) Subsequent loan described in 3.00 NA
section 3710(a) to purchase or
construct a dwelling with 0-down,
or any other subsequent loan
described in section 3710(a)
(closed before October 1, 2008)....
------------------------------------------------------------------------
(B)(ii) Subsequent loan described in 1.25 NA
section 3710(a) to purchase or
construct a dwelling with 0-down,
or any other subsequent loan
described in section 3710(a)
(closed on or after October 1,
2008)..............................
------------------------------------------------------------------------
(C)(i) Loan described in section 1.50 NA
3710(a) to purchase or construct a
dwelling with 5-down (closed before
October 1, 2008)...................
------------------------------------------------------------------------
(C)(ii) Loan described in section 0.75 NA
3710(a) to purchase or construct a
dwelling with 5-down (closed on or
after October 1, 2008).............
------------------------------------------------------------------------
(D)(i) Initial loan described in 1.25 NA
section 3710(a) to purchase or
construct a dwelling with 10-down
(closed before October 1, 2008)....
------------------------------------------------------------------------
(D)(ii) Initial loan described in 0.50 NA
section 3710(a) to purchase or
construct a dwelling with 10-down
(closed on or after October 1,
2008)..............................
------------------------------------------------------------------------
(E) Interest rate reduction 0.50 NA
refinancing loan...................
------------------------------------------------------------------------
(F) Direct loan under section 3711.. 1.00 NA
------------------------------------------------------------------------
(G) Manufactured home loan under 1.00 NA
section 3712 (other than an
interest rate reduction refinancing
loan)..............................
------------------------------------------------------------------------
(H) Loan to Native American veteran 1.25 NA
under section 3762 (other than an
interest rate reduction refinancing
loan)..............................
------------------------------------------------------------------------
(I) Loan assumption under section 0.50 0.50
3714...............................
------------------------------------------------------------------------
(J) Loan under section 3733(a)...... 2.25 2.25''.
------------------------------------------------------------------------
(b) Conforming Amendment.--Paragraph (4)(A) of such section is
amended by inserting before the period at the end the following: ``,
and the term `veteran' means any veteran eligible for the benefits of
this chapter''.
SEC. 5. LIFE INSURANCE PROGRAMS.
(a) Increase of Veterans' Mortgage Life Insurance Coverage to
$150,000.--(1) Section 2106(b) of title 38, United States Code, is
amended by striking ``$90,000'' and inserting ``$150,000''.
(2) The amendment made by paragraph (1) shall apply with respect to
insurance payable under section 2106 of title 38, United States Code,
in the case of a veteran insured under that section who dies on or
after the date of enactment of this Act.
(b) Authority for Veterans' Mortgage Life Insurance To Be Carried
Beyond Age 70.--Section 2106 of such title is amended--
(1) in subsection (a), by inserting ``age 69 or younger''
after ``any eligible veteran''; and
(2) in subsection (i), by striking paragraph (2) and
redesignating paragraphs (3) and (4) as paragraphs (2) and (3),
respectively.
SEC. 6. INCREASE IN AGGREGATE ANNUAL AMOUNT AVAILABLE FOR STATE
APPROVING AGENCIES FOR ADMINISTRATIVE EXPENSES FOR
FISCAL YEARS 2003, 2004, AND 2005.
Section 3674(a)(4) of title 38, United States Code, is amended by
inserting before the period at the end of the first sentence the
following: ``, and for each of fiscal years 2003, 2004, and 2005,
$18,000,000''.
Amend the title so as to read:
A bill to amend title 38, United States Code, to provide
a cost-of-living increase in the rates of compensation for
veterans with service-connected disability and dependency and
indemnity compensation for surviving spouses of such veterans,
to expand certain benefits for veterans and their survivors,
and for other purposes.
Introduction
The reported bill reflects the Committee's consideration of
several bills introduced during the 107th Congress, to include
H.R. 1108, H.R. 2095, H.R. 2222, H.R. 3731, and H.R. 4085.
On April 11, 2002, the Subcommittee on Benefits held a
hearing and considered the following bills: H.R. 1108, to
provide that remarriage of the surviving spouse of a veteran
after age 55 shall not result in termination of dependency and
indemnity compensation; H.R. 2095, the Reservist VA Home Loan
Fairness Act of 2001; H.R. 2222, the Veterans Life Insurance
Improvement Act of 2001; and H.R. 3731, to increase amounts
available to state approving agencies to ascertain the
qualifications of educational institutions for furnishing
courses of education to veterans and eligible persons under the
Montgomery GI Bill and under other programs of education
administered by the Department of Veterans Affairs.
On May 2, 2002, the Subcommittee on Benefits met and
unanimously ordered H.R. 4085, as amended, reported favorably
to the full Committee.
On May 9, 2002, the full Committee met and ordered H.R.
4085 reported favorably, as amended, to the House by unanimous
voice vote.
Summary of the Reported Bill
H.R. 4085, as amended, would:
1. Provide, effective December 1, 2002, a cost-of-living
adjustment to the rates of disability compensation for veterans
with service-connected disabilities and to the rates of
dependency and indemnity compensation for survivors of certain
service-connected disabled veterans; the percentage amount
would be equal to the increase for benefits provided under the
Social Security Act, which is calculated based upon changes in
the Consumer Price Index.
2. Provide that remarriage of the surviving spouse of a
veteran after attaining age 65 would not result in termination
of dependency and indemnity compensation, eligibility for
CHAMPVA medical care, education, and housing loan benefits;
those surviving spouses who remarried at or after age 65 prior
to enactment of the bill would have one year from date of
enactment to reapply for benefits.
3. Provide that, through fiscal year 2005, the home loan
fees charged qualifying members of the Selected Reserve be
equal to those fees charged active duty veterans.
4. Increase Veterans' Mortgage Life Insurance coverage
from $90,000 to $150,000.
5. Allow veterans over the age of 70 to continue coverage
under Veterans' Mortgage Life Insurance.
6. Increase funding for state approving agencies in
fiscal years 2003-2005 to $18 million per year.
Background and Discussion
Increase in rates of disability compensation and dependency
and indemnity compensation. Section 2 of the bill would
increase, effective December 1, 2002, the rates of compensation
for service-connected disabilities and the rates of dependency
and indemnity compensation (DIC) for surviving spouses and
children of veterans who die of service-connected causes, as
well as the additional amounts for dependents and survivors,
and clothing allowances for certain veterans. The percentage of
increase would be the same as that received by Social Security
recipients.
The Committee annually reviews the service-connected
disability compensation and DIC programs to ensure that the
benefits provide reasonable and adequate compensation for
disabled veterans and their families. Based on this review, the
Congress acts annually to provide a cost-of-living adjustment
(COLA) in compensation and DIC benefits. The Congress has
provided annual increases in these rates for every fiscal year
since 1976.
Retention of dependency and indemnity compensation for
surviving spouses remarrying after age 65. Dependency and
indemnity compensation (DIC) is a tax-free monthly benefit paid
to the surviving spouse of a veteran who dies as a result of
military service. While current law prevents payment of DIC
during the course of a subsequent marriage, Public Law 105-178
allowed reinstatement of this benefit to the surviving spouse
if the remarriage is terminated. As the Honorable Michael
Bilirakis stated in testimony before the Subcommittee on
Benefits on April 11, 2002, ``DIC is the only federal annuity
program that does not allow a widow who is receiving
compensation to remarry at an older age and retain her
annuity.'' It is the Committee's intent that an older surviving
spouse who chooses to remarry should not be discouraged from
doing so by the loss of DIC benefits.
Section 3 would allow a surviving spouse, who remarry after
attaining age 65, to retain dependency and indemnity
compensation and related benefits. Spouses who remarried after
attaining age 65 prior to enactment of the bill would have one
year from date of enactment to apply for reinstatement of this
benefit. Health insurance, home loan, and education benefits
for these surviving spouses would also be restored. Moreover,
the Committee has included language so that this additional
amount will be paid to all remarried surviving spouses, and
that no reduction of other benefits to which the surviving
spouse may be entitled, such as Survivor Benefit Plan payments,
would occur.
The Committee has not been able to obtain accurate data
with respect to the numbers of surviving spouses likely to be
affected by this provision. However, for oversight purposes,
the Committee expects the Department of Veterans Affairs to
obtain and maintain data concerning the number and age of those
surviving spouses who apply for reinstatement of their DIC
benefits under this provision.
Uniform home loan guaranty fees for qualifying members of
the Selected Reserve and active duty veterans. Section 4 would
amend the Loan Fee Table in section 3729(b) of title 38, United
States Code, to provide for uniform funding fees charged to
members of the Selected Reserve and active duty veterans for
home loans under VA's Home Loan Guaranty Program. The fee would
be reduced for the period beginning on October 1, 2002 and
ending on September 30, 2005.
Currently, members of the Select Reserve pay a 0.75 percent
higher funding fee under the home loan program than other
eligible veterans. According to VA, the average foreclosure
rate for reservists since the start of the program in 1993 has
been 2.71 percent, a low rate compared to 3.95 percent for
other home loan beneficiaries. Thus, the additional funding fee
is not justified on the basis of an increased risk. In order to
evaluate the effect of this provision, the Committee expects VA
to continue to obtain and maintain data concerning the number
of reservists who participate in this program and to separately
identify their foreclosure rates.
Veterans' Mortgage Life Insurance coverage. Section 5(a)
would increase the amount of coverage provided under Veterans'
Mortgage Life Insurance (VMLI) from $90,000 to $150,000. VMLI
is designed to provide financial protection to cover eligible
veterans' home mortgages in the event of death. VMLI is issued
to those severely disabled veterans who have received grants
for Specially Adapted Housing from the Department of Veterans
Affairs. Section 5(a) would increase the amount of VMLI allowed
an eligible veteran to $150,000, which is payable if the
veteran dies before the mortgage is paid off.
Section 5(b) would permit service-connected veterans to
continue their VMLI coverage beyond age 70. Under current law,
the insurance is cancelled on the veteran's 70th birthday.
Although no new policies would be issued after age 70, this
section provides that the policy will not be terminated due to
age. This is consistent with insurance practice under
commercial policies.
Increase in aggregate annual amount available for state
approving agencies for administrative expenses for fiscal years
2003, 2004, and 2005. Section 6 would increase the funding
available for state approving agencies (SAAs) from $14 million
a year to $18 million a year during fiscal years 2003 through
2005.
From fiscal years 1995 to 2000, SAA funding was capped--
with no annual increase--at $13 million. Public Law 106-419
increased SAA funding to $14 million for fiscal years 2001 and
2002. Under current law, the authorization amount would be
reduced to $13 million as of October 1, 2002.
State approving agencies review and evaluate education
programs in each state, and subsequently approve or deny each
program for use of VA education benefits under the Montgomery
GI Bill and three other VA veterans' educational assistance
programs. SAAs usually operate through state departments of
education or postsecondary education commissions. SAAs also
approve employer-sponsored on-the-job training and
apprenticeship programs, some through state departments of
labor.
The need to increase funding for SAAs primarily reflects
new statutory duties, under Public Law 107-14 and Public Law
107-103, in occupational licensing and credentialing, as well
as expanded outreach to veterans, servicemembers and employers.
Section-By-Section Analysis
Section 1 would provide that this Act may be cited as the
``Veterans' and Survivors' Benefits Expansion Act of 2002''.
Section 2(a) would authorize the Secretary of Veterans
Affairs to increase, effective December 1, 2002, the dollar
amounts in effect for the payment of disability compensation
and dependency and indemnity compensation.
Section 2(b) would specify the programs to receive
increased dollar amounts as compensation, additional
compensation for dependents, clothing allowance, new DIC rates,
old DIC rates, additional DIC for surviving spouses with minor
children, additional DIC for disability, and DIC for dependent
children.
Section 2(c)(1) would increase the dollar amounts for those
programs specified in subsection (b) based on the amount in
effect on November 30, 2002.
Section 2(c)(2) would specify that each amount shall be
increased by the same percentage by which benefits are
increased under title II of the Social Security Act (42 U.S.C.
415(i)).
Section 2(c)(3) would round down to the next lower dollar
amount all compensation and DIC benefits, when the amount is
not a whole dollar amount.
Section 2(d) would provide a special rule authorizing the
Secretary of Veterans Affairs to adjust administratively,
consistent with the increases made under subsection (a), the
rates of disability compensation payable to persons within the
purview of section 10 of Public Law 85-857, who are not in
receipt of compensation payable pursuant to chapter 11 of title
38, United States Code.
Section 2(e) would require the Secretary of Veterans
Affairs to publish in the Federal Register the amounts
specified in subsection (b), as increased pursuant to that
section.
Section 3(a) would amend paragraph 2 of section 103(d) of
title 38, United States Code, to provide in subparagraph (A)
that remarriage of a surviving spouse after attaining age 65
shall not bar the furnishing of dependency and indemnity
compensation, death compensation, medical care for survivors
and dependents of certain veterans, educational assistance, and
housing loan benefits. Subparagraphs (B) and (C) of paragraph
(2) of section 103(d) are restatements of current law.
Section 3(b) would provide that when eligibility for
benefits is restored under subparagraph (B) or (C) of paragraph
(2) of section 103(d), the first month of eligibility shall be
the month after the remarriage has been terminated by death or
divorce.
Section 3(c) would amend subparagraph (A) of section
103(d)(5) of title 38, United States Code, to add section 1121
of title 38, United States Code, relating to death
compensation, to section 1311 on dependency and indemnity
compensation.
Section 3(d) would provide that a surviving spouse who
would have been eligible for dependency and indemnity
compensation but for having remarried, would be eligible to
have benefits reinstated if the remarriage took place after the
surviving spouse attained 65 years of age before enactment of
this Act, if application for such compensation is made not
later than the end of the one year period beginning on the date
of enactment of this Act.
Section 3(e) would provide that in the case of an
individual who is eligible for dependency and indemnity
compensation under section 3(a) of the bill, and who is also
entitled to benefits under any other provision of law, there
shall be no reduction in benefits under such other provision of
law, by reason of eligibility for dependency and indemnity
compensation.
Section 4(a) would amend paragraph (2) of section 3729(b)
of title 38, United States Code, to eliminate the additional
0.75 percent funding fee charged to members of the Select
Reserve for the period beginning on October 1, 2002 and ending
on September 30, 2005, and establish a separate loan fee table
for VA home loans guaranteed between October 1, 2002 and
September 30, 2005.
Section 4(b) would amend section 3729(b)(4) of title 38,
United States Code, by adding the definition of ``veteran'' for
purposes of the loan table in effect between October 1, 2002
and September 30, 2005 as any veteran eligible for the benefits
of this chapter.
Section 5(a)(1) would amend section 2106(b) of title 38,
United States Code, by increasing coverage under the Veterans'
Mortgage Life Insurance program from $90,000 to $150,000.
Section 5(a)(2) would provide that amendments made by this
section shall apply to deaths occurring on or after the date of
enactment of this Act.
Section 5(b) would amend section 2106 of title 38, United
States Code, to provide that Veterans' Mortgage Life Insurance
may be issued only to eligible veterans who are age 69 or
younger.
Section 6 would amend section 3674(a)(4) of title 38,
United States Code, to provide $18 million for each of fiscal
years 2003, 2004, and 2005.
Performance Goals and Objectives
The reported bill would authorize veteran and survivor
benefits enhancements and program improvements under laws
administered by the Secretary of Veterans Affairs. Their
performance goals and objectives are established in annual
performance plans and are subject to the Committee's regular
oversight.
Statement of the Views of the Administration
Statement of Daniel L. Cooper, Under Secretary for Benefits, Department
of Veterans Affairs Before the House Veterans' Affairs, Subcommittee
on Benefits, Thursday, April 11, 2002
Mr. Chairman and Members of the Subcommittee, thank you for
the opportunity to testify today on several legislative items
of interest to the Department of Veterans Affairs (VA).
Accompanying me today are Robert Epley, Associate Deputy Under
Secretary for Policy and Program Management, and John Thompson,
Deputy General Counsel.
Before I discuss the bills the Subcommittee is considering
today, I would like to note that, as you know, these measures
would affect direct spending and receipts and, therefore, would
be subject to pay-as-you-go (PAYGO) rules. Accordingly, the
support VA expresses here for the subject bill provisions is
contingent on accommodating the provisions within the budget
submitted by the President.
H.R. 1108
First, Mr. Chairman, I would like to provide VA's views on
H.R. 1108. This bill would amend 38 U.S.C. Sec. 103(d), to
remove the bar on the payment of Dependency and Indemnity
Compensation (DIC) benefits to surviving spouses who remarry
after age 55. VA supports enactment of this legislation.
The DIC program provides tax-free monthly benefits to the
surviving spouses of veterans who die in or as a result of
military service. Current law denies DIC during periods of
surviving spouses' subsequent marriages or (in cases not
involving remarriage) during periods when they live with
another person and hold themselves out openly to the public to
be that persons' spouses.
DIC was created for two purposes: to replace family income
lost due to the servicemember's or veteran's death and to serve
as reparation for the death. In 1956, the Servicemen's and
Veterans' Survivor Benefits Act replaced the preexisting death
compensation program and the $10,000 Servicemen's Indemnity Act
payment with DIC. The House Select Committee on Survivor
Benefits explained, in a 1955 report, H.R. Rep. No. 84-993,
that, ``these two separate and distinct survivor benefit
programs . . . would become one. To this limited extent one of
the objectives of the committee, greater simplicity, would be
accomplished and the long-term interest and equity of survivors
protected.'' This Act established a monthly DIC rate for widows
consisting of a fixed rate plus a percentage of the basic pay
prescribed for the deceased servicemember's pay grade and
length of service. It is apparent from this Committee Report
that the fixed rate represented the ``indemnity'' or reparation
element of the compensation and the percentage of the deceased
servicemember's basic pay represented the ``dependency'' or
income-replacement element. In this manner, DIC was intended to
meet, at least in part, the Government's obligation to those
who died in the defense of our country. An expansion of
eligibility for DIC would well serve this purpose for the
following reasons.
Marital decisions often involve consideration of economic
consequences, and often those consequences are different for
older surviving spouses, who may no longer be in the job market
and who may have insufficient income apart from DIC to maintain
a basic standard of living regardless of whether they remarry.
The beneficiaries targeted by this proposal are particularly
disadvantaged by loss of DIC upon remarriage because they are
often retired or contemplating retirement, may be disabled, and
may be living on a fixed income. Those whose deceased-veteran
spouses had been severely disabled may have foregone careers of
their own in order to care for them. Thus, they are often
unable to offset lost DIC by earnings or other income.
Furthermore, when a surviving spouse of advanced age remarries,
termination of DIC may impose severe financial hardship because
the new spouse, similarly advanced in age, is generally
preparing for retirement or is already retired, may be
disabled, and may be living on a fixed income. In other words,
the new spouse also may have limited income and may be unable,
because of age or disablement, to augment it. To the extent the
DIC program was intended to provide a replacement for a
veteran's contribution to household support, this contribution
is still necessary for a surviving spouse of advanced age even
if the surviving spouse remarries, because remarriage often
does not adequately provide for his or her subsistence needs.
Further, to the extent that DIC provides indemnification for
the veteran's death, the basis for compensation is not
eliminated by the surviving spouse's remarriage.
The new provision would assist surviving spouses by
allowing those over age 55 to maintain their standards of
living, thus removing any economic disincentive to remarriage.
A veteran's surviving spouse would be able to enter into a
second marriage without fear of economic deprivation, and the
elderly couple would be permitted to live together in comfort
and dignity--legally married.
Benefits for surviving spouses of military retirees through
the Department of Defense's (DoD) Survivor Benefit Plan do not
terminate if remarriage takes place at age 55 or thereafter. In
addition, we note that Social Security survivors' benefits do
not terminate if remarriage takes place at age 60 or
thereafter. The proposed amendment would thus better align DIC
benefits with benefits provided to surviving spouses of
military retirees under DoD's Survivor Benefit Plan and to
surviving spouses under the Social Security program.
This amendment is subject to the PAYGO limitations of the
Omnibus Budget Reconciliation Act of 1990. If enacted, it would
increase direct spending in VA benefits programs. VA estimates
that enactment of this provision would result in benefit costs
of $269 million for the five-year period Fiscal Year (FY) 2003
through FY 2007 and $749 million for the ten-year period FY
2003 through FY 2012.
H.R. 2095
The next bill I will discuss, Mr. Chairman, is H.R. 2095.
This measure would reduce the VA home loan funding fee paid by
Reservists to the same level at most other veterans. VA
supports this proposal to eliminate the additional 0.75 percent
of the loan amount currently imposed on Reservists to obtain VA
housing loan benefits.
In 1992, the Congress granted VA housing loan entitlement
to persons whose only military service was in the Selected
Reserve (including the National Guard). To be eligible for
these benefits, Reservists must have completed 6 years of
honorable service in the Selected Reserve, or have been
released earlier for a service-connected disability.
Entitlement for Reservists sunsets September 30, 2009. In most
cases, Reservists pay a funding fee that is 0.75 percent higher
than the fee charged veterans who served on extended active
duty. For example, Reservists who have never used VA housing
benefits before would pay a 2.75 percent fee to obtain a no-
downpayment loan to purchase a home. Generally, veterans with
qualifying active duty would pay a 2 percent fee to obtain the
same loan. Veterans entitled to compensation for service-
connected disabilities are exempt from the fee.
Under H.R. 2095, Reservists would pay the same fee
currently charged other veterans.
In recent years, there has been an increased emphasis on
the use of Reservists as part of the Armed Forces actively
employed for national defense. Many members of the Reserves and
National Guard were activated following the terrorist attacks
of September 11, 2001. They have played and continue to play a
vital role in support of our active forces and in homeland
security. In addition, Reservists have been deployed to other
trouble spots around the world such as Bosnia, Kosovo, and the
Persian Gulf. In recognition of the importance of the Selected
Reserve to our current defense efforts, VA supports this
measure.
VA estimates that enactment of H.R. 2095 would result in
PAYGO costs of approximately $3.27 million in the first year
and approximately $32.66 million through FY 2009.
H.R. 2222
Mr. Chairman, VA supports the enactment of H.R. 2222. This
bill would make improvements to various life insurance programs
for veterans. The bill's estimated PAYGO costs are $93.9
million over five years.
Section 2 of H.R. 2222 would authorize the payment of
unclaimed National Service Life Insurance (NSLI) and United
States Government Life Insurance (USGLI) proceeds to an
alternate beneficiary.
Under current law, there is no time limitation under which
a named beneficiary of an NSLI or USGLI policy is required to
file a claim for proceeds. Consequently, when the insured dies
and the beneficiary does not file a claim for the proceeds, VA
is required to hold the unclaimed funds indefinitely in order
to honor any possible future claims by the beneficiary. VA
holds the proceeds as a liability. While extensive efforts are
made to locate and pay these individuals, there are cases where
the beneficiary simply cannot be found. Under current law, we
are not permitted to pay the proceeds to a contingent or
alternate beneficiary unless we can determine that the
principal beneficiary predeceased the policyholder.
Consequently, payment of the proceeds to other beneficiaries is
withheld.
A majority of the existing liabilities of unclaimed
proceeds were established over ten years ago. As time passes,
the likelihood of locating and paying the principal beneficiary
becomes more remote. In fact, the older the liability becomes,
the more unlikely it is that it will ever be paid even though
other legitimate heirs of the insured have been located.
Section 2 of H.R. 2222 would grant the Secretary authority
to authorize payment of NSLI and USGLI proceeds to an alternate
beneficiary when the proceeds have not been claimed by the
named beneficiary within two years following the death of the
policyholder or within two years of this bill's enactment,
whichever is later. The principal beneficiary would have two
years following the death of the insured to file a claim.
Afterwards, a contingent beneficiary would then have two years
to file a claim. Payment would be made as if the principal
beneficiary had predeceased the insured. If there were no
contingent beneficiary to receive the proceeds, payment would
be made to those equitably entitled, as determined by the
Secretary. As occurs under current law, no payment would be
made if payment would escheat to a State. Such payment would be
a bar to recovery of the proceeds by any other individual.
Section 2 of the bill would apply retroactively as well as
prospectively, and is similar to the time-limitation provisions
of the Servicemembers' and Veterans' Group Life Insurance
programs and the Federal Employees Group Life Insurance
program.
Insofar as payment to beneficiaries is made from the
insurance trust funds, there are no direct appropriated benefit
costs associated with this section of the bill. The liabilities
are already set aside and would eventually be paid, either as
payment to beneficiaries that eventually claim the proceeds, or
released from liability reserves and paid as dividends.
There are approximately 4,000 existing policies in which
payment has not been made due to the fact that we cannot locate
the primary beneficiary, despite extensive efforts. Over the
years, the sum of moneys held has aggregated to approximately
$23 million. On a yearly basis, about 200 additional policies
(with an average face value of $9600, or approximately $1.9
million annually) are placed into this liability because the
law prohibits payment to a contingent beneficiary or to the
veteran's heirs. It is estimated that approximately two-thirds
of the 4,000 policies will eventually be paid as a result of
this legislation. Additionally, in anticipation of the fact
that VA will not be able to pay about one-third of these
policies, nearly $7 million has already been released to
surplus and made available for dividend distribution.
VA estimates that the enactment of this section would
result in PAYGO costs of $15 million during FYs 2003-2007 and a
total of $25 million during FYs 2003-2012.
Adjudication of these 4,000 policies would entail
administrative costs of approximately $154,000, representing
two full-time employee equivalence (FTE) in claims processing
and support. Approximately 94 percent of this cost would be
reimbursed to the Veterans Benefits Administration's General
Operating Expense (GOE) account from the surplus of the trust
funds, leaving about $9,000 in government costs (which assumes
that about six percent of the policies are Service-Disabled
Veterans Insurance, which has no surplus and for which
appropriated funds are used to cover administrative costs).
Section 3 of H.R. 2222 would reduce the premium rates for
Service-Disabled Veterans Insurance (S-DVI) by prospectively
changing the mortality table upon which premiums are based. The
S-DVI program was intended to provide service-disabled veterans
with the ability to purchase insurance coverage at ``standard''
premium rates. S-DVI premiums are currently based on an old
mortality table, i.e., the 1941 Commissioners Standard Ordinary
(CSO) Mortality Table with 2.25 percent interest. In 1951, when
this program began, these premium rates were competitive with
commercial insurance policy rates. Insofar as life expectancy
has significantly improved over the past fifty years, a more
recent mortality table would reflect lower mortality and,
hence, lower premium rates. Section 3 would provide that S-DVI
premiums be based on the 1980 CSO Basic Mortality Table with an
interest rate of five percent. While just changing to a more
recent mortality table would assist new entrants into the
program, it would not render any assistance to those already
insured under the program unless the new mortality table, with
its inherent lower premiums, was made available to them also.
Section 3 of this bill would provide service-connected
disabled veterans parity with the average American's ability to
purchase adequate amounts of life insurance at competitive
rates. This section of H.R. 2222 would ensure that service-
connected disabled veterans have the ability to obtain life
insurance at standard premium rates without regard to their
physical disabilities. Our goal is to provide insurance
protection to veterans who have lost their ability to purchase
commercial insurance at standard (healthy) rates because of
their service-connected disabilities. Participants receive a
subsidy equal to the difference between the premiums they pay--
which account for age but not disabilities--and the actual cost
of coverage.
VA estimates that the enactment of section 3 of H.R. 2222
would result in PAYGO costs of $66 million during FY 2003-2007
and a total of $150.7 million during FYs 2003-2012.
Section 4 of H.R. 2222 would increase the maximum coverage
under the Veterans' Mortgage Life Insurance (VMLI) program to
$200,000. VMLI provides mortgage life insurance coverage to
certain severely service-disabled veterans who have received
specially-adapted housing grants from VA. The insurance is
intended to pay off the outstanding balance of the mortgage in
the event of the veteran's death. The current maximum amount of
VMLI allowed an eligible veteran is $90,000.
The maximum amount of mortgage life insurance was last
increased on December 1, 1992, when it was raised from $40,000
to $90,000. This resulted in the VMLI program covering a high
percentage (91 percent) of the total mortgage balances that
these severely disabled veterans held. With the increase in
housing costs over the past nine years, the percentage of total
mortgage balances covered has decreased significantly.
As of the start of this fiscal year, the VMLI program was
providing $201 million of coverage while the outstanding
mortgage balances for these veterans totaled $255 million. The
coverage percentage has declined from 91 percent to 79 percent.
This points to the inadequacy of the VMLI current maximum of
$90,000. If the maximum coverage amount were increased to
$200,000, the program would cover 98 percent of the total
mortgage balances outstanding. The need for the increase is
even more compelling if viewed from the perspective of the
number of veterans in the VMLI program who have their entire
mortgage balances insured. At the current level of $90,000,
only 62 percent of participants have their entire mortgage
balance covered. This means that in 38 percent of the cases, if
the veteran died, the survivors would still have mortgages
remaining on their homes. If the maximum were raised to
$200,000, 98 percent of participants would be able to have
their mortgages fully covered.
The VMLI program is subsidized with appropriated funds
since these veterans are charged standard premium rates. An
increase in the maximum coverage amount to $200,000 would
affect 1,286 of the 3,385 veterans covered by the program.
While the premiums charged these veterans would increase, the
subsidy required from the government would also rise. A
consulting team of Systems Flow, Economic Systems, Macro
International, and Hay Group recently completed a Program
Evaluation of Benefits for Survivors of Veterans with Service-
Connected Disabilities, and many of the provisions of the
proposed bill, including the provisions of this section, are
consistent with the recommendations of that evaluation.
VA estimates that the enactment of section 4 of H.R. 2222
would result in PAYGO costs of $10.8 million during FYs 2003-
2007 and a total of $28.4 million during FYs 2003-2012.
Section 5 of H.R. 2222 would provide that Veterans'
Mortgage Life Insurance (VMLI) may be carried by the insured
beyond age 70, but would limit new issues to ages 69 and below.
These policy provisions are fairly comparable to those of
commercial life insurance policies, except for the VMLI
provision that coverage terminates at age 70. As part of the
Program Evaluation of Benefits for Survivors of Veterans with
Service-Connected Disabilities, the contracting company,
Systems Flow, compiled a report, ``VA Insurance and DIC
Programs--Profile of Users and Non-Users and Beneficiaries,''
of the VA insurance and DIC programs. This report included a
finding that, among users whose VMLI insurance was terminated,
12 percent of them had their insurance terminated due to their
reaching age 70. Because of such terminations, VA is not
providing financial security to the veterans' families.
Insofar as premium income for the VMLI program only covers
about 25 percent of claims costs, this is a relatively heavily
subsidized program. However, since it is only open to a small
group of veterans (those eligible for specially-adapted
housing), the increase in the subsidy to allow coverage past
age 70 is relatively nominal. The provisions of this section
are consistent with the recommendations of the before-mentioned
Program Evaluation Report.
VA estimates that the enactment of section 5 of H.R. 2222
would result in PAYGO costs of $2.1 million during FYs 2003-
2007 and a total of $5.3 million during FYs 2003-2012.
H.R. 3731
The final bill I will be discussing today, Mr. Chairman, is
H.R. 3731. This bill provides for an increase in the annual
limit on funds available to compensate State approving agencies
(SAA's) for work undertaken on behalf of VA, including
approving educational institutions and programs for which
veterans and other entitled participants receive VA-
administered education benefits. VA supports this bill.
H.R. 3731 would increase the annual limit on funds
available to compensate SAA's from $14,000,000 in FY 2002 to
$18,000,000 in FY 2003. The amounts for FYs 2004 and 2005 would
increase by 3 percent each year ($18,540,000 in 2004,
$19,096,000 in 2005). Funding for FY 2006 and each succeeding
fiscal year would remain fixed at the FY 2005 level. (If there
is no change to the current law, the $14,000,000 level of
funding will revert to $13,000,000 for FY 2003 and thereafter.)
This bill also specifies that the various SAAs would receive
the same proportion of payments under the newly allocated
funding limits as they would receive if those funding limits
did not exist.
Because of the cost-of-living pay increases mandated by
State law, salaries for State employees have gone up since the
last SAA funding increase in 1994. Additionally, over the last
two years, the SAAs have been called upon to perform new and
time-consuming duties as part of their mission. For example,
Public Law 106-419, enacted on November 1, 2000, initiated the
licensing and certification test payment program and allowed VA
to delegate the approval responsibility under the program to
the SAAs. The SAAs accepted this additional responsibility even
though it was not covered in their contracts.
In recent years, a number of SAAs have worked closely with
private industry and State and local governments to encourage
placement of veterans in apprenticeship and on-job training
programs. However, many other SAAs that wanted to do more
outreach could not do so due to a lack of resources. Now,
newly-enacted Public Law 107-103 requires SAAs, in addition to
VA, to actively promote the development of VA programs of on-
job training (including apprenticeship programs). Furthermore,
that law requires SAAs to conduct outreach programs and provide
outreach services to eligible persons and veterans about
education and training benefits available under applicable
Federal and State laws. Clearly, increased funding is needed to
enable the SAAs to carry out these additional duties
effectively.
VA estimates that enactment of this provision would result
in PAYGO costs of $5 million for FY 2003, $29 million for the
five-year period FY 2003 through FY 2007, and $59 million for
the ten-year period FY 2003 through FY 2012.
Thank you, Mr. Chairman. I will be pleased to answer any
questions you or other members of the Subcommittee may have.
Congressional Budget Office Cost Estimate
The following letter was received from the Congressional
Budget Office concerning the cost of the reported bill:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 13, 2002.
Hon. Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4085, the
Veterans' and Survivors' Benefits Expansion Act of 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Michelle S.
Patterson, who can be reached at 226-2840.
Sincerely,
Dan L. Crippen,
Director.
Enclosure.
Congressional Budget Office Cost Estimate May 13, 2002
H.R. 4085, Veterans' and Survivors' Benefits Expansion Act of 2002, As
ordered reported by the House Committee on Veterans' Affairs on May 9,
2002
Summary
H.R. 4085 contains provisions that would affect a range of
veterans' programs, including disability compensation,
dependency and indemnity compensation (DIC), housing,
insurance, and readjustment benefits. CBO estimates that
enacting this bill would increase direct spending by $25
million in 2003, $123 million over the 2003-2007 period, and
$260 million over the 2003-2012 period. Direct spending could
also increase in fiscal year 2002 should the bill be enacted
before the end of this fiscal year, but CBO estimates that any
such outlays would be insignificant because it takes the
Department of Veterans Affairs (VA) several months to process
most benefit claims.
H.R. 4085 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of state, local, or tribal
governments.
Estimated Cost to the Federal Government
The estimated budgetary impact of H.R. 4085 is shown in the
following table. This estimate assumes the legislation will be
enacted by October 1, 2002. The costs of this legislation fall
within budget function 700 (veterans benefits and services).
----------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars
-------------------------------------------------
2003 2004 2005 2006 2007
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Dependency and Indemnity Compensationa
Estimated Budget Authority.................................. 13 15 16 18 19
Estimated Outlays........................................... 13 15 16 18 19
Housing Loan Guaranty Fees
Estimated Budget Authority.................................. 6 6 6 0 0
Estimated Outlays........................................... 6 6 6 0 0
Veterans Mortgage Life Insurance
Estimated Budget Authority.................................. 1 2 2 2 3
Estimated Outlays........................................... 1 2 2 2 3
State Approving Agencies
Estimated Budget Authority.................................. 5 5 5 0 0
Estimated Outlays........................................... 5 5 5 0 0
Total Changes
Estimated Budget Authority................................ 25 28 29 20 22
Estimated Outlays......................................... 25 28 29 20 22
----------------------------------------------------------------------------------------------------------------
a H.R. 4085 also would increase DIC payments by the same COLA payable to Social Security recipients. That change
would have a cost, relative to current law, but the effect is already assumed in CBO's baseline.
Basis of Estimate
The bill would affect direct spending in several veterans'
programs, including disability compensation, DIC, housing,
insurance, and readjustment benefits.
Dependency and Indemnity Compensation
Section 3 would allow a surviving spouse who remarries
after age 65 to continue receiving DIC payments. The provision
would apply retroactively, allowing surviving spouses who have
already remarried after age 65 to resume receiving DIC payments
but only if they apply for the benefit within one year after
this bill is enacted. CBO estimates that the total cost to
provide DIC payments to surviving spouses who remarry over age
65 would be $13 million in 2003, $81 million over the 2003-2007
period, and $203 million over the 2003-2012 period.
Under current law, VA provides DIC payments to the
surviving spouse of certain deceased veterans. If a surviving
spouse remarries, DIC payments cease. Should the subsequent
marriage end, either because of divorce or death of the new
spouse, DIC payments can resume. In fiscal year 2001, about
300,000 surviving spouses received such payments. CBO estimates
that in that year, about 180 surviving spouses over age 65 (or
about 0.06 percent of all surviving spouses receiving DIC)
remarried and stopped receiving DIC payments as a result. CBO
projects that, under current law, the number of remarriages
would gradually increase each year as the overall population of
DIC recipients increases and would exceed 260 a year by 2012.
CBO estimated the costs for three groups of surviving
spouses-those over age 65 who would remarry under current law,
those over age 65 who would choose not to remarry under current
law but would remarry if H.R. 4085 were enacted, and those who
remarried after age 65 before enactment of this bill.
Surviving Spouses Over Age 65 Who Would Remarry Under
Current Law. CBO estimates that over the 2003-2012 period, 245
surviving spouses over age 65 would remarry each year on
average under current law. Under this bill, federal spending
for DIC would increase because those surviving spouses would
now receive DIC payments that would have stopped under current
law. The average DIC payment in fiscal year 2001 was $11,942.
Such payments are adjusted annually for increases in the cost
of living. After accounting for expected mortality of the
remarried surviving spouses as well as their new spouses, CBO
estimates that the additional cost to provide DIC payments to
surviving spouses over age 65 who would remarry under current
law would be $3 million in 2002, $42 million over the 2003-2007
period, and $145 million over the 2003-2012 period.
Surviving Spouses Over Age 65 Who Would Choose Not to
Remarry Under Current Law. Under this bill, some surviving
spouses over age 65 might choose to remarry who would not have
done so under current law. CBO estimates there would be no
additional cost to provide DIC payments to those individuals.
Because those surviving spouses would choose to remain
unmarried and receive DIC payments continuously under current
law, providing DIC payments if they remarry would result in no
additional costs to the program.
Surviving Spouses Who Remarried After Age 65 Before
Enactment of the Bill. Section 3 also would apply
retroactively, allowing surviving spouses who remarried after
age 65 before enactment of this legislation to resume receiving
DIC once this legislation was enacted. The bill institutes a
deadline, however, that requires all those eligible to apply
for this benefit within one year after the enactment date.
After accounting for expected mortality of the remarried
surviving spouses as well as their new spouses, CBO estimates
that about 800 surviving spouses who remarried after age 65
would apply within the time limit and resume receiving DIC
payments. That number represents about 30 percent of the total
number of retroactive cases that CBO estimates would be
eligible to reapply for DIC payments. CBO estimates that the
additional cost to provide DIC payments to this population
would be $10 million in 2003, $39 million over the 2003-2007
period, and $58 million over the 2003-2012 period. Such costs
could obviously be much higher or lower, depending on the
portion of eligible people that apply for this retroactive
benefit. Based on data provided by VA about the number of
claims a full-time employee can process in a year, CBO
estimates that no additional personnel would need to be hired
to handle the added applications for benefits expected under
this section.
Cost-of-Living Adjustment (COLA)
Section 2 would increase the amounts paid to veterans for
disability compensation and to their survivors for DIC by the
same COLA payable to Social Security recipients. The increase
would take effect on December 1, 2002, and the results of the
adjustment would be rounded to the next lower dollar.
The COLA that would be authorized by this bill is assumed
in the baseline, pursuant to section 257 of the Balanced Budget
and Emergency Deficit Control Act, and savings from rounding it
down were achieved by the Balanced Budget Act of 1997 (Public
Law 105-33). The authority to round down the COLA increase was
extended to 2011 by the Veterans Education and Benefits
Expansion Act of 2001 (Public Law 107-103). Because the COLA is
assumed in the baseline, the COLA provision would have no
budgetary effect relative to the baseline. Relative to current
law, CBO estimates that enacting this provision would increase
spending for these programs by about $295 million in 2003. (The
annualized cost would be about $400 million in subsequent
years.) This estimate assumes that the COLA effective on
December 1, 2001, would be 1.9 percent.
Home Loan Guaranty Fees
Section 4 would lower certain fees paid by members of the
selected reserves who use the VA home loan program for the
first time over the 2003-2005 period. Under current law,
reservists pay fees ranging from 2.75 percent to 2 percent of
the loan amount, depending on the down payment made. The bill
would lower these fees by 75 basis points to the same range
used for active-duty veterans-a range of 2 percent to 1.25
percent. Based on an average loan amount of $131,000, a
caseload of 6,000 loans a year, and a fee cut of 75 basis
points, CBO estimates that under the bill, VA would lose
collections of about $6 million a year over the 2003-2005
period. Lowering the fees would also save an average borrower
roughly $980, but CBO estimates these savings would not be
significant enough to encourage additional loans or larger loan
amounts.
Life Insurance Program
Veterans Mortgage Life Insurance (VMLI) provides coverage
to certain severely disabled veterans who have received grants
for specially adapted housing from VA. VMLI pays off the
outstanding balance of the mortgage upon the veteran's death.
Under current law, the maximum coverage allowed under VMLI is
$90,000. Section 5 would increase this amount to $150,000. By
doing so, this provision would increase the number of veterans
who have their entire mortgage balance covered by insurance
from 62 percent to 90 percent. According to VA, about 3,000
veterans participate in the program. Since the premiums charged
to these veterans are based on the mortality rates of
comparable nondisabled individuals, the program requires a
subsidy from VA to cover the costs of the claims. While the
proposed change in coverage would increase the premiums paid by
the policyholders, it would also increase the amount of the
subsidy required from VA. CBO used data provided by VA that
compared the projected subsidies to the VMLI program if the
current coverage level was maintained against the estimated
subsidies needed if the coverage was expanded to $150,000. The
difference represents the additional subsidy that would be
required from VA. CBO estimates that enacting this provision
would cost about $1 million in 2003, $8 million over the 2003-
2007 period, and $19 million over the 2003-2012 period.
Section 5 also would allow veterans who already have VMLI
to maintain coverage regardless of age. Under current law, VMLI
coverage terminates at age 70. A recent survey conducted for VA
found that 12 percent of veterans whose VMLI was terminated had
their coverage terminated due to the age restriction. Based on
data from VA, CBO estimates that the increased subsidy required
under this provision would cost less than $1 million a year.
State Approving Agencies
Section 6 would increase the amount available to state
approving agencies by $5 million each year in 2003, 2004, and
2005. CBO expects this change would increase direct spending by
$15 million over the 2003-2005 period.
Pay-as-you-go Considerations
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts. The net changes in outlays that are
subject to pay-as-you-go procedures are shown in the following
table. For the purposes of enforcing pay-as-you-go procedures,
only the effects through fiscal year 2006 are counted.
----------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
----------------------------------------------------------------------------------------------------------------
Changes in outlays................. 0 25 27 29 20 22 24 25 27 29 32
Changes in receipts................ Not Applicable
----------------------------------------------------------------------------------------------------------------
Intergovernmental and Private-sector Impact
H.R. 4085 contains no intergovernmental or private-sector
mandates as defined in UMRA and would not affect the budgets of
state, local, or tribal governments.
Previous CBO Estimates
On August 14, 2001, CBO transmitted a cost estimate for
H.R. 2095, the Reservist VA Home Loan Fairness Act of 2001, as
introduced on June 7, 2001. Section 4 of H.R. 4085 is similar
to H.R. 2095, but H.R. 2095 would permanently lower fees paid
by reservists and would have higher costs.
On February 28, 2002, CBO transmitted a cost estimate for
H.R. 2222, the Veterans Life Insurance Improvement Act of 2001,
as introduced on June 19, 2001. Section 5 of H.R. 4085 is
similar to sections 4 and 5 of H.R. 2222, but H.R. 2222 would
increase the maximum coverage of VMLI to $200,000 and thus
would have higher costs.
On April 19, 2002, CBO transmitted a cost estimate for H.R.
1108, as introduced on March 20, 2001. Section 3 of H.R. 4085
is similar H.R. 1108, except that the latter would provide DIC
to surviving spouses who remarry after age 55. H.R. 4085 also
would put a time limit on applications from surviving spouses
who remarried before enactment of the bill; H.R. 1108 would
not.
Estimate prepared by:
Federal Costs:
Veterans Compensation, DIC, and Insurance: Michelle S.
Patterson
Veterans Housing: Sunita D'Monte
State Approving Agencies: Sarah Jennings
Impact on State, Local, and Tribal Governments: Elyse Goldman
Impact on the Private Sector: Sally Maxwell
Estimate approved by:
Peter H. Fontaine
Deputy Assistant Director for Budget Analysis
Statement of Federal Mandates
The preceding Congressional Budget Office cost estimate
states that the bill contains no intergovernmental or private
sector mandates as defined in the Unfunded Mandates Reform Act.
Statement of Constitutional Authority
Pursuant to Article I, section 8 of the United States
Constitution, the reported bill is authorized by Congress'
power to ``provide for the common Defense and general Welfare
of the United States.''
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 38, UNITED STATES CODE
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
CHAPTER 1--GENERAL
* * * * * * *
Sec. 103. Special provisions relating to marriages
(a) * * *
* * * * * * *
(d)(1) * * *
(2) The remarriage of the surviving spouse of a veteran shall
not bar the furnishing of benefits specified in paragraph (5)
to such person as the surviving spouse of the veteran [if the
remarriage has been terminated by death or divorce unless the
Secretary determines that the divorce was secured through fraud
or collusion.] if--
(A) the remarriage occurs after the surviving spouse
attains age 65 ;
(B) the remarriage has been terminated by death; or
(C) the remarriage has been terminated by divorce,
unless the Secretary determines that the divorce was
secured through fraud or collusion.
* * * * * * *
(4) [The first month of eligibility for benefits for a
surviving spouse by reason of this subsection shall be] When
eligibility for benefits for a surviving spouse is restored by
reason of this subsection, the first month of eligibility for
such benefits shall be the month after--
(A) the month of the termination of such remarriage,
in the case of a surviving spouse [described in] with a
remarriage described in subparagraph (B) or (C) of
paragraph (2); or
* * * * * * *
(5) Paragraphs (2) and (3) apply with respect to benefits
under the following provisions of this title:
[(A) Section 1311, relating to dependency and
indemnity compensation.]
(A) Sections 1121 and 1311, relating to death
compensation and dependency and indemnity compensation,
respectively.
* * * * * * *
PART II--GENERAL BENEFITS
* * * * * * *
CHAPTER 13--DEPENDENCY AND INDEMNITY COMPENSATION FOR SERVICE-CONNECTED
DEATHS
* * * * * * *
SUBCHAPTER II--DEPENDENCY AND INDEMNITY COMPENSATION
* * * * * * *
Sec. 1311. Dependency and indemnity compensation to a surviving spouse
(a) * * *
* * * * * * *
(e) In the case of an individual who is eligible for
dependency and indemnity compensation under this section by
reason of section 103(d)(2)(A) of this title who is also
eligible for benefits under another provision of law by reason
of such individual's status as the surviving spouse of a
veteran, then, notwithstanding any other provision of law, no
reduction in benefits under such other provision of law shall
be made by reason of such individual's eligibility for benefits
under this section.
* * * * * * *
CHAPTER 21--SPECIALLY ADAPTED HOUSING FOR DISABLED VETERANS
* * * * * * *
Sec. 2106. Veterans' mortgage life insurance
(a) The United States shall automatically insure any eligible
veteran age 69 or younger who is or has been granted assistance
in securing a suitable housing unit under this chapter against
the death of the veteran unless the veteran (1) submits to the
Secretary in writing the veterans' election not to be insured
under this section, or (2) fails to respond in a timely manner
to a request from the Secretary for information on which the
premium for such insurance can be based.
(b) The amount of insurance provided a veteran under this
section may not exceed the lesser of [$90,000] $150,000 or the
amount of the loan outstanding on the housing unit. The amount
of such insurance shall be reduced according to the
amortization schedule of the loan and may not at any time
exceed the amount of the outstanding loan with interest. If
there is no outstanding loan on the housing unit, insurance is
not payable under this section. If an eligible veteran elects
not to be insured under this section, the veteran may
thereafter be insured under this section, but only upon
submission of an application, payment of required premiums, and
compliance with such health requirements and other terms and
conditions as may be prescribed by the Secretary.
* * * * * * *
(i) Insurance under this section shall terminate upon
whichever of the following events first occurs:
(1) * * *
[(2) The veteran's seventieth birthday.]
[(3)] (2) Termination of the veteran's ownership of
the property securing the loan.
[(4)] (3) Discontinuance of payment of premiums by
the veteran.
* * * * * * *
PART III--READJUSTMENT AND RELATED BENEFITS
* * * * * * *
CHAPTER 36--ADMINISTRATION OF EDUCATIONAL BENEFITS
* * * * * * *
SUBCHAPTER I--STATE APPROVING AGENCIES
* * * * * * *
Sec. 3674. Reimbursement of expenses
(a)(1) * * *
* * * * * * *
(4) The total amount made available under this section for
any fiscal year may not exceed $13,000,000 or, for each of
fiscal years 2001 and 2002, $14,000,000, and for each of fiscal
years 2003, 2004, and 2005, $18,000,000. For any fiscal year in
which the total amount that would be made available under this
section would exceed the amount applicable to that fiscal year
under the preceding sentence except for the provisions of this
paragraph, the Secretary shall provide that each agency shall
receive the same percentage of the amount applicable to that
fiscal year under the preceding sentence as the agency would
have received of the total amount that would have been made
available without the limitation of this paragraph.
* * * * * * *
CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
* * * * * * *
SUBCHAPTER III--ADMINISTRATIVE PROVISIONS
* * * * * * *
Sec. 3729. Loan fee
(a) * * *
(b) Determination of Fee.--(1) * * *
(2)(A) The loan fee table referred to in paragraph (1) for
any loan closed after September 30, 2005 is as follows:
LOAN FEE TABLE
------------------------------------------------------------------------
Active duty Other
Type of loan veteran Reservist obligor
------------------------------------------------------------------------
(A)(i) Initial loan described 2.00 2.75 NA
in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other initial loan described
in section 3710(a) other than
with 5-down or 10-down
(closed before October 1,
2011)........................
------------------------------------------------------------------------
(A)(ii) Initial loan described 1.25 2.00 NA
in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other initial loan described
in section 3710(a) other than
with 5-down or 10-down
(closed on or after October
1, 2011).....................
------------------------------------------------------------------------
(B)(i) Subsequent loan 3.00 3.00 NA
described in section 3710(a)
to purchase or construct a
dwelling with 0-down, or any
other subsequent loan
described in section 3710(a)
(closed before October 1,
2011)........................
------------------------------------------------------------------------
(B)(ii) Subsequent loan 1.25 2.00 NA
described in section 3710(a)
to purchase or construct a
dwelling with 0-down, or any
other subsequent loan
described in section 3710(a)
(closed on or after October
1, 2011).....................
------------------------------------------------------------------------
(C)(i) Loan described in 1.50 2.25 NA
section 3710(a) to purchase
or construct a dwelling with
5-down (closed before October
1, 2011).....................
------------------------------------------------------------------------
(C)(ii) Loan described in 0.75 1.50 NA
section 3710(a) to purchase
or construct a dwelling with
5-down (closed on or after
October 1, 2011).............
------------------------------------------------------------------------
(D)(i) Initial loan described 1.25 2.00 NA
in section 3710(a) to
purchase or construct a
dwelling with 10-down (closed
before October 1, 2011)......
------------------------------------------------------------------------
(D)(ii) Initial loan described 0.50 1.25 NA
in section 3710(a) to
purchase or construct a
dwelling with 10-down (closed
on or after October 1, 2011).
------------------------------------------------------------------------
(E) Interest rate reduction 0.50 0.50 NA
refinancing loan.............
------------------------------------------------------------------------
(F) Direct loan under section 1.00 1.00 NA
3711.........................
------------------------------------------------------------------------
(G) Manufactured home loan 1.00 1.00 NA
under section 3712 (other
than an interest rate
reduction refinancing loan)..
------------------------------------------------------------------------
(H) Loan to Native American 1.25 1.25 NA
veteran under section 3762
(other than an interest rate
reduction refinancing loan)..
------------------------------------------------------------------------
(I) Loan assumption under 0.50 0.50 0.50
section 3714.................
------------------------------------------------------------------------
(J) Loan under section 3733(a) 2.25 2.25 2.25
------------------------------------------------------------------------
(B) The loan fee table referred to in paragraph (1) for any
loan closed during the period beginning on October 1, 2002, and
ending on September 30, 2005, is as follows:
LOAN FEE TABLE
------------------------------------------------------------------------
Other
Type of loan Veteran obligor
------------------------------------------------------------------------
(A)(i) Initial loan described in section 2.00 NA
3710(a) to purchase or construct a dwelling
with 0-down, or any other initial loan
described in section 3710(a) other than
with 5-down or 10-down (closed before
October 1, 2008)...........................
------------------------------------------------------------------------
(A)(ii) Initial loan described in section 1.25 NA
3710(a) to purchase or construct a dwelling
with 0-down, or any other initial loan
described in section 3710(a) other than
with 5-down or 10-down (closed on or after
October 1, 2008)...........................
------------------------------------------------------------------------
(B)(i) Subsequent loan described in section 3.00 NA
3710(a) to purchase or construct a dwelling
with 0-down, or any other subsequent loan
described in section 3710(a) (closed before
October 1, 2008)...........................
------------------------------------------------------------------------
(B)(ii) Subsequent loan described in section 1.25 NA
3710(a) to purchase or construct a dwelling
with 0-down, or any other subsequent loan
described in section 3710(a) (closed on or
after October 1, 2008).....................
------------------------------------------------------------------------
(C)(i) Loan described in section 3710(a) to 1.50 NA
purchase or construct a dwelling with 5-
down (closed before October 1, 2008).......
------------------------------------------------------------------------
(C)(ii) Loan described in section 3710(a) to 0.75 NA
purchase or construct a dwelling with 5-
down (closed on or after October 1, 2008)..
------------------------------------------------------------------------
(D)(i) Initial loan described in section 1.25 NA
3710(a) to purchase or construct a dwelling
with 10-down (closed before October 1,
2008)......................................
------------------------------------------------------------------------
(D)(ii) Initial loan described in section 0.50 NA
3710(a) to purchase or construct a dwelling
with 10-down (closed on or after October 1,
2008)......................................
------------------------------------------------------------------------
(E) Interest rate reduction refinancing loan 0.50 NA
------------------------------------------------------------------------
(F) Direct loan under section 3711.......... 1.00 NA
------------------------------------------------------------------------
(G) Manufactured home loan under section 1.00 NA
3712 (other than an interest rate reduction
refinancing loan)..........................
------------------------------------------------------------------------
(H) Loan to Native American veteran under 1.25 NA
section 3762 (other than an interest rate
reduction refinancing loan)................
------------------------------------------------------------------------
(I) Loan assumption under section 3714...... 0.50 0.50
------------------------------------------------------------------------
(J) Loan under section 3733(a).............. 2.25 2.25
------------------------------------------------------------------------
* * * * * * *
(4) For the purposes of paragraph (2):
(A) The term ``active duty veteran'' means any
veteran eligible for the benefits of this chapter other
than a Reservist, and the term ``veteran'' means any
veteran eligible for the benefits of this chapter.
* * * * * * *