[Federal Register Volume 68, Number 18 (Tuesday, January 28, 2003)]
[Proposed Rules]
[Pages 4132-4141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1834]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AL37


Effective Dates of Benefits for Disability or Death Caused by 
Herbicide Exposure; Disposition of Unpaid Benefits After Death of 
Beneficiary

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
adjudication regulations concerning certain awards of disability 
compensation and dependency and indemnity compensation (DIC). Under the 
proposed amendment, certain awards of disability compensation or DIC 
made pursuant to liberalizing regulations concerning diseases 
presumptively associated with herbicide exposure may be made effective 
retroactive to the date of the claim or the date of a previously denied 
claim, even if such date is earlier than the effective date of the 
regulation establishing the presumption. The proposed rule also 
provides that VA may pay to certain individuals any amounts a deceased 
beneficiary was entitled to receive under the effective-date provisions 
of this proposed rule, but which were not paid prior to the 
beneficiary's death. This amendment appears necessary to reflect the 
requirements of court orders in a class-action case.

[[Page 4133]]


DATES: Comments must be received on or before March 31, 2003.

ADDRESSES: Mail or hand deliver written comments to: Director, Office 
of Regulatory Law (02D), Room 1154, 810 Vermont Ave., NW., Washington, 
DC 20420; or fax comments to (202) 273-9289; or e-mail comments to 
[email protected]. Comments should indicate that they are 
submitted in response to ``RIN 2900-AL37.'' All comments received will 
be available for public inspection in the Office of Regulatory Law, 
Room 1158, between the hours of 8 a.m. and 4:30 p.m., Monday through 
Friday (except holidays).

FOR FURTHER INFORMATION CONTACT: David Barrans, Staff Attorney (022), 
Office of General Counsel, Department of Veterans Affairs, 810 Vermont 
Avenue, NW., Washington, DC 20420, (202) 273-6332.

SUPPLEMENTARY INFORMATION: A series of court orders in the class-action 
litigation in Nehmer v. United States Department of Veterans Affairs, 
No. CV-86-6160 TEH (N.D. Cal.), requires VA to assign retroactive 
effective dates for certain awards of disability compensation and DIC 
in a manner not provided for in any existing statute or regulation. The 
court orders require that, when VA awards disability compensation or 
DIC pursuant to a regulatory presumption of service connection under 
the Agent Orange Act of 1991, Pub. L. 102-4, VA must in certain cases 
make the award effective retroactive to the date of the claimant's 
application or the date of a previously-denied application, even if 
such date is earlier than the effective date of the regulation 
establishing the presumption. Current regulations, however, prohibit VA 
from making a benefit award effective any earlier than the effective 
date of the regulation establishing the presumption. Because the 
conflict between current statutes and regulations and the Nehmer court 
orders may create confusion, we propose to amend our regulations to 
reflect the requirements of the Nehmer court orders.
    In 1991, Congress enacted the Agent Orange Act of 1991, Pub. L. 
102-4 (codified at 38 U.S.C. 1116 and in the notes to that section). 
That Act established presumptions for chloracne, non-Hodgkins lymphoma, 
and soft-tissue sarcoma. It further provided that VA would obtain 
reports from the National Academy of Sciences (NAS) every two years for 
a ten-year period, assessing the available scientific evidence 
regarding the association between exposure to herbicides and the 
development of diseases in humans. After receiving each report, VA must 
determine whether there is a ``positive association'' between herbicide 
exposure and any of the diseases discussed in the report. If a positive 
association exists for any such disease, VA must issue regulations to 
establish a presumption of service connection for that disease in 
veterans exposed to herbicides during service. VA has established 
presumptions of service connection for seven additional diseases or 
categories of disease, which are listed in 38 CFR 3.309(e).
    The Agent Orange Act of 1991 provides that regulations issued 
pursuant to that act shall take effect on the date they are issued. 
Under generally applicable effective-date rules in 38 U.S.C. 5110(g) 
and 38 CFR 3.114, when VA awards benefits pursuant to a liberalizing 
regulation, the award may not be made effective any earlier than the 
effective date of the liberalizing regulation. Under those provisions, 
awards based on presumptions of service connection established under 
the Agent Orange Act of 1991 can be made effective no earlier than the 
date VA issued the regulation authorizing the presumption.
    However, the district court orders in the Nehmer litigation create 
an exception to the generally applicable rules in 38 U.S.C. 5110(g) and 
38 CFR 3.114, and require VA to assign retroactive effective dates for 
certain awards of disability compensation and DIC that are based on 
VA's regulations under the Agent Orange Act of 1991, Pub. L. 102-4. 
This exception applies only to claims by members of the Nehmer class. 
VA is required to comply with the district court's orders, which have 
been affirmed by the United States Court of Appeals for the Ninth 
Circuit to the extent they were appealed. Accordingly, we propose to 
issue a regulation explaining the requirements established by those 
orders to ensure timely and consistent adjudication under those orders 
without further need for special instructions.
    The Nehmer court orders also require that, if an individual was 
entitled to retroactive benefits as a result of the court orders but 
died prior to receiving such payment, VA must pay the entire amount of 
such retroactive payments to the veteran's estate, without regard to 
statutory limits on payment of benefits following a beneficiary's 
death. Section 5121(a) of title 38, United States Code, provides that, 
when VA benefits remain due and unpaid at the time of a beneficiary's 
death, VA may pay to certain survivors only the portion of such 
benefits that accrued during the two-year period preceding death. 
Current VA regulations reflect the requirements of section 5121(a), and 
contain no exception for cases covered by the Nehmer court orders. 
Because the conflict between current regulations and the Nehmer court 
orders may create confusion, we propose to amend our regulations to 
reflect the requirements of the Nehmer court orders. Accordingly, we 
propose to issue rules reflecting the limited exception to section 
5121(a) established by the Nehmer court orders. This exception applies 
only to certain benefits for members of the Nehmer class. As stated 
above, the intent of this rule is to ensure timely and consistent 
compliance with the court's orders without the need for further special 
instructions.

The Nehmer Litigation

    The Nehmer litigation was initiated in 1986 to challenge a VA 
regulation, former 38 CFR 3.311a (which has since been rescinded) that 
stated, among other things, that chloracne was the only disease shown 
by sound medical and scientific evidence to be associated with 
herbicide exposure. In 1987, the district court certified the case as a 
class action on behalf of all Vietnam veterans and their survivors who 
had been denied VA benefits for a condition allegedly associated with 
herbicide exposure or who would be eligible to file a claim for such 
benefits in the future. In an order issued on May 3, 1989, the court 
invalidated the portion of the regulation providing that no condition 
other than chloracne was associated with herbicide exposure and voided 
all VA decisions denying benefit claims under that portion of the 
regulation. Nehmer v. United States Veterans' Admin., 712 F. Supp. 1404 
(N.D. Cal. 1989).
    After Congress enacted the Agent Orange Act of 1991, Pub. L. 102-4, 
VA and the plaintiff class in Nehmer entered into a stipulation to 
address remedial issues resulting from the May 1989 order. The 
stipulation provided that VA would not deny any claims of the Nehmer 
class members until VA had acted on the first NAS report issued under 
the Agent Orange Act of 1991, Pub. L. 102-4. The stipulation further 
stated that, once VA issued regulations establishing a presumption of 
service connection for any disease pursuant to the Act, VA would 
readjudicate all claims for any such disease in which a prior denial 
had been voided by the district court's May 3, 1989 order and would 
adjudicate all similar claims filed after May 3, 1989. The stipulation 
stated that, if benefits were granted upon readjudication of a claim 
where a prior denial was voided, the effective date of the benefit 
award would be the date VA received the claim underlying the

[[Page 4134]]

voided decision or the date the disability arose or the death occurred, 
whichever was later. In claims filed after May 3, 1989, the stipulation 
stated that the effective date of any benefits awarded would be the 
date VA received the claim or the date the disability arose or the 
death occurred, whichever was later. The district court incorporated 
the stipulation in a final order.
    On October 15, 1991, VA issued a regulation establishing a 
presumption of service connection for soft-tissue sarcomas based on 
herbicide exposure. On February 6, 1991, the Agent Orange Act of 1991, 
Pub. L. 102-4, established statutory presumptions of service connection 
for non-Hodgkin's lymphoma, soft-tissue sarcomas, and chloracne. In 
June 1993, VA received the first NAS report under the Agent Orange Act 
of 1991. Thereafter, VA issued regulations establishing presumptions of 
service connection for four additional diseases (Hodgkin's disease, 
February 3, 1994; porphyria cutanea tarda, February 3, 1994; 
respiratory cancers, June 9, 1994; multiple myeloma, June 9, 1994). In 
1994, VA began to readjudicate the claims where a prior denial had been 
voided by the 1989 court order and to adjudicate claims filed 
subsequent to that order. In cases where VA granted benefits upon such 
readjudication or adjudication, it assigned effective dates as required 
by the Nehmer stipulation and order, even though the effective dates in 
many cases were earlier than the effective dates of the statute or 
liberalizing regulations that authorized the awards.
    In 1996, VA received the second NAS report under the Agent Orange 
Act of 1991. Based on new information contained in that report, VA 
issued regulations on November 7, 1996 establishing presumptions of 
service connection for prostate cancer and acute and subacute 
peripheral neuropathy. In 2001, based on new information in a later NAS 
report, VA established a presumption of service connection for type 2 
diabetes effective July 9, 2001.
    In 2000, the parties to the Nehmer case disagreed as to whether the 
retroactive-payment provisions of the Nehmer stipulation and order 
applied to all eight diseases that were associated with herbicide 
exposure at that time (type 2 diabetes had not yet been recognized) or 
only to the seven diseases that were presumptively service connected 
based on the Agent Orange Act of 1991, Pub. L. 102-4, and the first NAS 
report under that statute. The plaintiffs argued that the stipulation 
required VA to pay retroactive benefits for all diseases that are 
service connected at any time under the Agent Orange Act of 1991, Pub. 
L. 102-4. VA argued that the stipulation required retroactive payment 
only for disease service connected based on the first NAS report, and 
that the broader interpretation urged by the plaintiffs was contrary to 
the Agent Orange Act of 1991, Pub. L. 102-4 and 38 U.S.C. 5110(g).
    In a December 12, 2000 order, the district court held that the 
stipulation and order required VA to give retroactive effect to all 
regulations issued under the Agent Orange Act of 1991, Pub. L. 102-4. 
VA appealed that order to the United States Court of Appeals for the 
Ninth Circuit. On April 1, 2002, the Court of Appeals affirmed the 
district court's order.

Purpose of This Rule

    We propose to issue a new regulation, to be codified at 38 CFR 
3.816, to explain the rules VA is required to apply as a result of the 
court orders in the Nehmer case. Those rules are complex and are not 
reflected in any current statute or regulation. Moreover, the public 
may have difficulty accessing and understanding the court orders 
establishing those rules. Accordingly, we believe a regulation 
explaining the Nehmer rules is necessary to provide guidance to VA 
personnel as well as to VA claimants and their representatives.
    To the extent the rules required by the Nehmer court orders depart 
from the generally-applicable rules in 38 U.S.C. 5110(g) and 5121(a), 
they are judicially-created exceptions to those general rules. VA is 
required to comply with the Nehmer court orders. In order to clarify 
the basis for this regulation, we propose to state, in Sec.  3.816(a), 
that these rules are required by the Nehmer court orders.

Definitions

    The effective-date rules required by the Nehmer court orders apply 
only to members of the plaintiff class certified by the district court 
in that case. In a 1987 order, the district court ruled that the Nehmer 
class would consist of all veterans and their survivors who have 
applied for VA benefits for disability or death due to exposure in 
service to an herbicide containing dioxin or who would become eligible 
in the future to apply for such benefits. Accordingly, any Vietnam 
veteran would potentially be a Nehmer class member, as would any 
survivors of such veteran who would be eligible to apply for DIC. The 
effective-date provisions of this rule would apply only to class 
members entitled to disability compensation or DIC for disability or 
death due to a disease associated with herbicide exposure. Accordingly, 
for purposes of this rule, we propose to define a ``Nehmer class 
member'' as a Vietnam veteran who has a covered herbicide disease, or a 
surviving spouse, child, or parent of a deceased Vietnam veteran who 
died from a covered herbicide disease.
    The effective-date rules required by the Nehmer court orders apply 
only to benefits for disability or death caused by a disease for which 
VA has established a presumption of service connection under the Agent 
Orange Act of 1991, Public Law 102-4. For purposes of this rule, we 
propose to use the term ``covered herbicide disease'' and to define 
that term to mean a disease for which the Secretary of Veterans Affairs 
has established a presumption of service connection before October 1, 
2002 pursuant to the Agent Orange Act of 1991, Public Law 102-4, 
excluding chloracne. As explained below in this notice, the effective-
date rules of the Nehmer stipulation and court orders apply only to 
diseases for which a presumption of service connection is established 
under the authority granted by the Agent Orange Act of 1991, Public Law 
102-4. Because the authority granted by that Act at the time the 
stipulation was entered extended only until September 30, 2002, any 
presumptions established after that date based on other legislative 
grants of rule-making authority are not within the scope of the Nehmer 
stipulation and court orders.
    Although chloracne is a presumptive herbicide disease, we propose 
to exclude it from the definition of covered herbicide disease for 
purposes of this rule because claims and awards based on chloracne were 
not affected by any of the Nehmer court orders. VA established a 
presumption of service connection for chloracne effective September 25, 
1985, and that presumption has remained in effect throughout the period 
relevant to the Nehmer litigation. In its May 3, 1989, order, the 
district court invalidated the portion of VA's regulation providing 
that conditions other than chloracne were not shown to be associated 
with herbicide exposure and it voided decisions made under that portion 
of the regulation. The court left intact the provision establishing a 
presumption of service connection for chloracne and did not void any 
decisions involving chloracne. Moreover, the Nehmer stipulation and 
order states that it applies to diseases service connected by VA ``in 
the future'' under the Agent Orange Act of 1991, Public Law 102-4. 
Because chloracne had been presumptively service connected since

[[Page 4135]]

1985, it was not affected by the stipulation and order.

Effective Date Rules

    The effective-date rules stated in the proposed regulation reflect 
paragraph 5 of the Nehmer stipulation and order. That paragraph states 
separate rules governing the effective dates of awards granted upon 
readjudication of a claim where a prior denial was voided by the May 3, 
1989 Nehmer order and the effective dates of awards granted upon 
adjudication of a claim filed after May 3, 1989.
    With respect to the voided decisions, the stipulation and order 
provides that the effective date of an award made upon readjudication 
of the claim will be the later of the date the claim giving rise to the 
voided decision was filed (provided that the basis of the award is the 
same basis upon which the original claim was filed) or the date the 
disability arose or the death occurred. The stipulation and order 
states that the ``basis'' of the original claim refers to the disease 
or condition required, under provisions of a VA procedural manual, to 
be coded in the VA rating decision on the claim. The stipulation and 
order further states that the provisions of 38 U.S.C. 5110(b)(1) and 
(d)(1) will govern when applicable. Section 5110(b)(1) provides for a 
disability compensation effective date corresponding to the day 
following the veteran's release from service if the veteran's 
application is received within one year of that date. Section 
5110(d)(1) provides for a DIC effective date corresponding to the first 
day of the month in which death occurred if the claimant's application 
is received within one year from the date of death.
    With respect to claims filed after May 3, 1989, the stipulation and 
order provides that the effective date of benefits shall be the later 
of the date VA received the claim asserting the basis upon which the 
claim was granted or the date the disability arose or the death 
occurred.
    We propose to provide paragraphs separately explaining the 
application of these rules to disability compensation awards and DIC 
awards. In view of the complexity of the Nehmer rules, we believe this 
level of detail will provide greater clarity.

Effective-Date Rules for Disability Compensation

1. Claims by Nehmer Class Members Denied Between September 25, 1985 and 
May 3, 1989

    Section 3.816(c)(1) states that, if a Nehmer class member is 
entitled to disability compensation for a covered herbicide disease, 
and VA previously denied service connection for the same disease in a 
decision issued between September 25, 1985, the effective date of the 
invalidated regulation, and May 3, 1989, the effective date will be the 
later of the date VA received the claim on which the prior decision was 
based or the date the disability arose. This rule governs cases where a 
prior denial was voided by the district court's May 3, 1989 order. In 
an order dated February 11, 1999, the district court in Nehmer held 
that its 1989 order had voided claims rendered while former 38 CFR 
3.311a(d) was in effect, provided that such claims denied compensation 
for a disease that VA later recognized as being associated with 
herbicide exposure. The court held that it is irrelevant whether the 
prior claim alleged that the disease was caused by herbicide exposure 
or whether the prior decision had referenced former Sec.  3.311a(d). 
Accordingly, the only requirements for retroactive payment to a class 
member under proposed Sec.  3.816(c)(1) would be that the decision have 
been rendered between September 25, 1985 and May 3, 1989--the period 
when former Sec.  3.311a(d) was in effect--and that the decision have 
denied service connection for the same covered herbicide disease for 
which compensation has now been awarded.
    Paragraph 5 of the Nehmer stipulation and order provides that the 
basis of the prior claim will be determined by reference to the 
diseases or conditions coded in the prior rating decision as required 
by provisions of a VA procedural manual. In accordance with the manual, 
VA rating decisions on claims for disability compensation ordinarily 
identify each claimed disease or injury by name and by a diagnostic 
code found in VA's Schedule for Rating Disabilities, which is located 
in 38 CFR part 4. There may be variations in both the terminology and 
diagnostic codes assigned to a particular disease depending on various 
aspects of the disease or associated conditions. For example, 
disability due to cancer of the larynx may have been rated as either a 
malignant neoplasm of the respiratory system (diagnostic code 6844) or 
residuals of a laryngectomy (diagnostic code 6819). Similarly, soft-
tissue sarcomas may be described using different terminology or 
different diagnostic codes depending upon the body part or system 
primarily involved. Additionally, some diagnostic codes refer to broad 
classes of disease that encompass both covered and non-covered 
diseases. For example, diagnostic code 6819 (Neoplasms, malignant, any 
specified part of respiratory system exclusive of skin growths) may 
refer to either a covered disease (e.g., lung cancer) or a non-covered 
disease (e.g., nasal cancer).
    We do not intend that minor, immaterial variations in terminology 
or diagnostic code would preclude application of the Nehmer rules. 
However, it must be established that the prior decision involved the 
same disease for which compensation has now been awarded, rather than a 
distinct condition arguably bearing some relation to the compensable 
disease because, for example, it involves the same body part or system. 
Accordingly, we propose to state that a prior decision will be 
construed as having denied compensation for the same disease if the 
prior decision denied compensation for a disease that reasonably may be 
construed as the same covered herbicide disease for which compensation 
has been awarded. We further propose to state that minor variations in 
the terminology used in the prior decision will not preclude a finding, 
based on the record at the time of the prior decision, that the 
decision denied service connection for the same covered herbicide 
disease.

2. Claims by Nehmer Class Members Pending on May 3, 1989, or Filed 
Between May 3, 1989 and the Effective Date of the Authorizing Statute 
or Regulation

    Proposed Sec.  3.816(c)(2) states that, if a class member is 
entitled to compensation for a covered herbicide disease and the class 
member's claim for compensation for that same disease was either 
pending on May 3, 1989 or was received by VA between that date and the 
effective date of the statute or regulation establishing a presumption 
of service connection for the disease, the effective date of 
compensation will be the later of the date VA received such claim or 
the date the disability arose. The Nehmer stipulation and order refers 
only to claims denied prior to May 3, 1989 and claims filed after that 
date. It does not expressly provide effective dates for claims that 
were filed prior to May 3, 1989 but not yet adjudicated by that date. 
Notwithstanding this apparent oversight, we propose to treat such 
claims in the same manner as claims filed after May 3, 1989, as no 
decision on a claim pending on May 3, 1989, could have been voided by 
the court order.
    We propose to state that a claim will be considered a claim for 
compensation for a particular covered herbicide disease if the 
claimant's application and

[[Page 4136]]

other supporting statements and submissions may reasonably be viewed, 
under the standards ordinarily governing compensation claims, as 
indicating an intent to apply for compensation for the covered 
herbicide disability. This will merely ensure that the generally 
applicable provisions of statute and regulation governing claims will 
apply in determining whether and at what date a particular claim was 
filed for purposes of this rule.

3. Qualifying Claims by Nehmer Class Members Filed Within 1 Year After 
Separation From Service

    We propose to state in Sec.  3.816(c)(3) that, if a claim 
referenced in paragraph (c)(1) or (c)(2) was received by VA within one 
year after the date of the veteran's separation from service, the 
effective date of compensation will be the day following such 
separation. This would ensure that the principle stated in 38 U.S.C. 
5110(b)(1) is applied, as required by the Nehmer stipulation and order. 
We note that the stipulation and order requires VA to apply section 
5110(b)(1) to awards made upon readjudication of claims where a prior 
decision was voided by the court's 1989 order, but not to awards made 
in claims pending on or filed after May 3, 1989. Nevertheless, we 
propose to apply section 5110(b)(1) to claims pending on or filed after 
May 3, 1989, in order to ensure that the generally applicable 
provisions of that statute are applied in a consistent manner.

4. Other Claims

    We propose to state in Sec.  3.816(c)(4) that, if the requirements 
of paragraph (c)(1) or (c)(2) are not met, the effective date of the 
award shall be determined in accordance with 38 CFR 3.114 and 3.400, 
the provisions generally governing the effective dates of disability 
compensation. The United States Court of Appeals for Veterans Claims 
has held that the provisions of the Nehmer stipulation and order do not 
apply where a prior claim was denied before September 25, 1985. See 
Williams v. Principi, 15 Vet. App. 189 (2001) (en banc).
    Similarly, the stipulation and order does not apply in cases where 
the veteran's initial claim for a covered herbicide disease was filed 
after the effective date of the regulations establishing a presumption 
of service connection for that disease. Further, application of the 
Nehmer stipulation to such cases would ordinarily be detrimental to 
veterans. Under 38 CFR 3.114, when disability compensation is awarded 
pursuant to a liberalizing regulation, the award may be made effective 
up to one year prior to the date of the claim, but no earlier than the 
effective date of the liberalizing regulation. In contrast, the Nehmer 
stipulation and order generally does not permit payment for any period 
prior to the date of the veteran's claim, except in the limited 
circumstances described in 38 U.S.C. 5110(b)(1) and (d)(1) involving 
claims filed within one year of the date of separation from service or 
the date of death.

Dependency and Indemnity Compensation

1. Claims by Nehmer Class Members Denied Between September 25, 1985 and 
May 3, 1989

    Section 3.816(d)(1) states that, if a Nehmer class member is 
entitled to DIC for death caused by a covered herbicide disease, and VA 
previously denied DIC for the death in a decision issued between 
September 25, 1985 and May 3, 1989, the effective date will be the 
later of the date VA received the claim on which the prior decision was 
based or the date the death occurred. This rule governs cases where a 
prior denial was voided by the district court's May 3, 1989 order. 
Because DIC claims do not require assignment of disability ratings, 
decisions on DIC claims do not assign a diagnostic code corresponding 
to VA's rating schedule and may not identify the disease causing death 
with the same specificity necessary to decisions concerning disability 
compensation. Moreover, because the cause of death is usually 
established by the death certificate and medical records existing at 
death, DIC claims filed at different times ordinarily will not involve 
different conditions, as often occurs with respect to disability 
compensation claims. Accordingly, rather than requiring a specific 
finding that the prior denial of DIC expressly referenced the same 
covered herbicide disease that provided the basis for the current DIC 
award, we propose to require only that the prior decision issued 
between September 25, 1985 and May 3, 1989, have denied DIC for the 
same death.

2. Claims By Nehmer Class Members Pending on May 3, 1985 or Filed 
Between May 3, 1989 and the Effective Date of the Authorizing Statute 
or Regulation

    Proposed Sec.  3.816(d)(2) states that, if the class member's claim 
for DIC for the death was either pending on May 3, 1989 or was received 
by VA between that date and the effective date of the statute or 
regulation establishing a presumption of service connection for the 
disease causing the death, the effective date of DIC will be the later 
of the date VA received such claim or the date the death occurred. For 
the reasons stated above with respect to disability compensation, we 
propose to include claims filed before May 3, 1989, but still pending 
on that date, even though the Nehmer stipulation and order does not 
expressly provide for such claims.
    The provisions of 38 U.S.C. 5101(b)(1) and 38 CFR 3.152(b)(1) state 
that a claim by a surviving spouse or child for death pension shall be 
considered a claim for DIC as well. We propose to reference this 
requirement in the proposed rule. Further, for the same reasons stated 
above with respect to disability compensation claims, we propose to 
state that a claim will be considered a claim for DIC if the claimant's 
application and other supporting statements and submissions may 
reasonably be viewed, under the standards ordinarily governing DIC 
claims, as indicating an intent to apply for DIC.

3. Qualifying Claims by Nehmer Class Members Filed Within 1 Year After 
Date of Death

    We propose to state in Sec.  3.816(d)(3) that, if a claim 
referenced in paragraph (d)(1) or (d)(2) was received by VA within one 
year after the date of the veteran's death, the effective date of DIC 
will be the first day of the month of death. This would ensure that the 
principle stated in 38 U.S.C. 5110(d)(1) is applied, as required by the 
Nehmer stipulation and order. We note that the stipulation and order 
requires VA to apply section 5110(d)(1) to awards made upon 
readjudication of claims where a prior decision was voided by the 
court's 1989 order, but not to awards made in claims pending on or 
filed after May 3, 1989. Nevertheless, we propose to apply section 
5110(d)(1) to claims pending on or filed after May 3, 1989, in order to 
ensure that the generally applicable provisions of that statute are 
applied in a consistent manner.

4. Other Claims

    For the reasons stated above with respect to disability 
compensation, we propose to state in Sec.  3.816(d)(4) that, if the 
requirements of paragraph (d)(1) or (d)(2) are not met, the effective 
date of DIC will be governed by 38 CFR 3.114 and 3.400.

Effect of Other Provisions

    We propose to state in Sec.  3.816(e)(1) that, if the requirements 
of paragraphs (c)(1) or (c)(2) or (d)(1) or (d)(2) are met, the 
effective date of benefits will be determined as provided by this rule, 
without regard to any contrary provision

[[Page 4137]]

in 38 U.S.C. 5110(g) or 38 CFR 3.114. As noted above, the effective-
date rules required by the Nehmer court create a limited exception to 
that statute and regulation. In order to avoid confusion among VA 
personnel, claimants, and claimants' representatives regarding the 
effect of this exception, we believe it is necessary to state clearly 
that the Nehmer rules shall be applied, when they are applicable, 
without regard to 38 U.S.C. 5110(g) or 38 CFR 3.114.
    We also propose to state that the effective-date provisions in this 
rule will not apply if a statute or regulation other than 38 U.S.C. 
5110(g) or 38 CFR 3.114 would bar a retroactive payment that would 
otherwise be available under the Nehmer rules. For example, if a DIC 
claimant did not qualify as a surviving spouse at the time of the prior 
DIC claim, VA would lack authority to pay DIC to the claimant for 
periods relevant to such claim, even if the claimant later attains the 
status of a surviving spouse, based, for example, upon termination of 
remarriage. The Nehmer court orders require VA to give retroactive 
effect to its herbicide regulations, but do not purport to eradicate 
statutory bars to benefits that would preclude payment even if the 
herbicide regulations apply retroactively.
    Proposed paragraph (e)(2) would explain the effect of section 505 
of Public Law 104-275, which prohibits VA from making retroactive 
payments in certain circumstances where a benefit award is based on 
service in the Republic of Vietnam prior to August 5, 1964. Prior to 
January 1, 1997, the presumptions of service connection for diseases 
associated with herbicide exposure applied only to veterans who served 
in the Republic of Vietnam during the Vietnam era, which was then 
defined by statute and regulation to encompass the period beginning on 
August 5, 1964 and ending on May 7, 1975. In 1996, Congress enacted 
Public Law 104-275, section 505(b) of which extended those presumptions 
to veterans who served in the Republic of Vietnam during the period 
between January 9, 1962, and August 4, 1964. Congress specified, in 
section 505(d) of Public Law 104-275, that the amendment would take 
effect on January 1, 1997, and that ``[n]o benefit may be paid or 
provided by reason of such amendments for any period before such 
date.'' Accordingly, some claims may have been denied prior to January 
1, 1997, because the claimants' service did not meet the then-existing 
statutory requirement of service during the Vietnam era. Although some 
such claimants may now be entitled to presumptive service connection 
under the liberalizing 1996 statute, Congress has prohibited VA from 
paying retroactive benefits based on the amendment made by Public Law 
104-275.
    We propose to state that the retroactive payment provisions of 
these proposed rules do not apply if the veteran's Vietnam service 
ended before August 5, 1964 and the class member's prior claim for 
benefits was denied by VA before January 1, 1997. In such cases, the 
denial was required by statute and VA is prohibited from paying 
retroactive benefits based on the prior claim. We propose to state that 
the effective date of any subsequent award in such cases will be 
governed by 38 U.S.C. 5110(g). We further propose to state that, if a 
veteran's Vietnam service ended before August 5, 1964 and the class 
member's claim for benefits was pending on or was received by VA after 
January 1, 1997, the effective date shall be the later of the effective 
date provided for in the proposed rules or January 1, 1997. This would 
conform to the requirement in Public Law 104-275 that VA may not pay 
benefits in such cases for any period before January 1, 1997.

Payment of Benefits to Survivors of Deceased Beneficiaries

1. Requirements of the Nehmer Court Orders

    In its December 12, 2000 order, the district court held that, when 
a Nehmer class member entitled to retroactive benefits under the Nehmer 
stipulation and order dies prior to receiving payment of such benefits, 
VA must pay the full amount of such benefits to the class member's 
estate. Under 38 U.S.C. 5121 and 38 CFR 3.1000, when any monetary 
benefits remain due and unpaid at the time of a beneficiary's death, VA 
may pay to certain individuals only the portion of such benefits that 
accrued during the two-year period preceding death. Further, VA cannot 
pay any such accrued benefits unless the appropriate payee files a 
claim for accrued benefits within one year after the date of death. 
However, the Nehmer court held that these restrictions do not apply to 
payments of amounts payable pursuant to the Nehmer stipulation and 
order. Rather, the court held that VA must pay the entire amount of 
such retroactive payment to the class member's estate and must do so 
without requiring a claim for accrued benefits.

2. Persons Eligible for Payments

    In implementing the court's order, VA found that it was impractical 
in most cases to pay retroactive benefits to a class member's estate. 
Although VA claims files ordinarily contain information identifying 
persons who would be eligible for accrued benefits under section 5121 
of title 38, United States Code, they generally do not contain 
information concerning the estates of veterans and other class members. 
Further, in a substantial number of cases, entitlement to retroactive 
payments under the Nehmer stipulation and order is established several 
months or even years after the class member's death, at a time when the 
decedent's estate would have been finally settled. In such cases, there 
may be no existing estate to receive payment. Even if an estate exists, 
paying benefits to the estate would arguably contravene the fundamental 
purpose of the veterans' benefits laws to provide payments for the use 
of the veteran and his or her family. Section 5121 provides that 
accrued benefits shall be paid to the decedent's surviving spouse, 
children, or dependent parents (in that line of succession), but does 
not permit payment to a decedent's estate. Although this statute limits 
the amount of accrued benefits payable, it clearly indicates that the 
accrued benefits are intended for the use of the decedent's family 
rather than the decedent's estate and creditors. If benefits were paid 
to a decedent's estate, they would potentially be subject to claims of 
creditors of the estate, with the possibility that the decedent's 
family would obtain no benefit from such payments. This would 
improperly deprive the decedent's family of the benefits expressly 
authorized by section 5121(a) (to the extent the payment to the estate 
encompassed benefits due and unpaid for the two-year period preceding 
death), and would contravene the general purpose of veterans benefits 
laws to provide benefits for the personal use of the veteran and his or 
her family.
    After consulting with representatives of the Nehmer class, VA 
decided to issue payment directly to the persons who would have been 
eligible to receive accrued benefits under 38 U.S.C. 5121(a) at the 
time of the class member's death, rather than withholding all payment. 
We believe this procedure is consistent with the purpose of the Nehmer 
court orders and is more beneficial to class members, in view of the 
impracticability of locating and paying estates and the possibility 
that payments to estates may not inure to the benefit of the class 
member's survivors. We also believe that this procedure ensures that 
payments are made in the

[[Page 4138]]

manner most consistent with the language and purpose of existing law.
    Consistent with this practice, we propose to state in paragraph 
3.816(f)(1) that, if a Nehmer class member dies prior to receiving 
payment of retroactive benefits due pursuant to the Nehmer stipulation 
and order, VA will pay the full amount of such unpaid benefits directly 
to the person or persons who would have been eligible to receive 
accrued benefits under 38 U.S.C. 5121(a)(2)-(a)(4) at the time of the 
class member's death (i.e., the class member's spouse, children (in 
equal shares), or dependent parents (in equal shares), in that order of 
preference). If no such survivors are in existence, VA would pay as 
much of the unpaid retroactive benefits as necessary to reimburse the 
person who bore the expense of the class member's last sickness and 
burial, in the same manner as provided in 38 U.S.C. 5121(a)(5) for 
accrued benefits.
    Paragraph (f)(1) would further provide that a person's status as 
the spouse, child, or dependent parent of the class member would be 
determined as of the date of the class member's death, rather than the 
date that payment is made under this rule. As noted above, some class 
members may have died several months or years before payment can be 
made under these rules. Due to the lapse of time, a person who 
qualified as the class member's spouse or child on the date of the 
class member's death may no longer meet the statutory or regulatory 
definition of spouse or child, due to changes in their age or marital 
status. For example, a ``child'' is generally defined in 38 U.S.C. 
101(4)(A) to refer to an unmarried child who is (with certain 
exceptions) under the age of eighteen years. A person who met this 
definition on the date of a class member's death may have married or 
attained the age of eighteen years before VA releases payment of unpaid 
retroactive benefits due to the class member. Because the Nehmer court 
orders were generally intended to correct past errors, we propose to 
authorize payment to persons who would have been eligible for payment 
as a spouse, child, or dependent parent on the date of the class 
member's death, irrespective of subsequent changes in age or marital 
status that would otherwise affect their entitlement to payment.
    In view of language in the Nehmer court's order requiring payments 
to estates, however, we believe it is necessary to seek an order from 
that court clarifying or modifying its prior order to make clear that 
VA may release payments in the manner proposed. Accordingly, we intend 
to request such an order from the district court concurrently with the 
publication of these proposed rules.

3. Inapplicability of Certain Accrued Benefit Requirements

    As stated above, the district court indicated that the statutory 
two-year limit on payment of accrued benefits and the statutory 
requirement that a qualified payee or payees file a claim for accrued 
benefits do not apply to payments of retroactive benefits due and 
unpaid to a Nehmer class member at the time of death. Accordingly, we 
propose to state, in paragraph (f)(2), that those requirements do not 
apply. We further propose to state that, if a class member dies before 
receiving payment of retroactive benefits due to him or her, VA will 
pay the amount to the known payee(s) without requiring a claim. A 
veteran's VA claim file will often contain information identifying the 
surviving spouse, children, or parents of a class member. By clarifying 
that VA will release payment based on such information without awaiting 
communication from such survivors, this provision would permit 
expeditious release of payments.

4. Identifying Payees

    We propose to state, in paragraph (f)(3), that VA shall make 
reasonable efforts to identify appropriate payees based on information 
contained in the veteran's claims file. We propose to state that, if 
further information is needed to determine whether an appropriate payee 
exists, or whether there is any person having precedence equal to or 
greater than a known survivor, VA will request such information from a 
known survivor or the class member's authorized representative if the 
claims file contains sufficient contact information. We also propose to 
state that, before releasing payment to a known survivor, VA will 
request information from the survivor concerning the possible existence 
of other survivors with equal or greater priority for payment, unless 
the circumstances clearly indicate that such a request is unnecessary. 
For example, if the claims file contained the name and address of a 
child of the deceased class member, VA would contact the child to 
inquire whether there is a surviving spouse or any other children of 
the class member in existence. In seeking to identify appropriate 
payees, VA necessarily must rely on information in the claims file. VA 
does not have the resources to conduct independent investigations of 
estate issues.
    We propose to state that, after making reasonable efforts to 
identify the appropriate payee(s), if VA releases the full amount of 
retroactive payments to a payee, VA generally may not thereafter pay 
any portion of such benefits to any other individual, unless VA is able 
to recover any payment previously released.

5. Prohibition On Duplicate Payments

    We propose to state, in paragraph (f)(4), that, payment of benefits 
pursuant to this rule shall bar a later claim by any individual for 
payment of all or any part of such benefits as accrued benefits under 
38 U.S.C. 5121 and 38 CFR 3.1000. The district court ordered VA to 
release all retroactive amounts due a class member at the time of death 
under the Nehmer stipulation and order. This would necessarily include 
amounts that otherwise would be payable as accrued benefits under 38 
U.S.C. 5121. Accordingly, once payment has been made pursuant to the 
court's order, no retroactive benefits would remain for payment to any 
person as accrued benefits. Inasmuch as this rule applies only to 
retroactive benefits payable for a covered herbicide disease pursuant 
to the 1991 stipulation and order, it would not preclude a survivor's 
right to seek accrued benefits under section 5121 in the event a 
deceased class member was entitled at death to benefits for conditions 
other than a covered herbicide disease.

Awards Not Covered by the Nehmer Rules

    We propose to state, in Sec.  3.816(g), that the provisions of this 
rule do not apply to awards of disability compensation or DIC for 
disability or death due to a disease for which the Secretary of 
Veterans Affairs establishes a presumption of service connection after 
September 30, 2002. The Nehmer stipulation and order applies to awards 
based on diseases for which the Secretary establishes a presumption of 
service connection pursuant to the Agent Orange Act of 1991, Public Law 
102-4. The Act established a sunset date of September 30, 2002, for the 
Secretary to establish such presumptions. Accordingly, the Nehmer 
stipulation and order applies only to awards based on presumptions 
established within the time frame specified in the Agent Orange Act of 
1991, Public Law 102-4.
    The Agent Orange Act of 1991, Public Law 102-4, added section 1116 
to title 38, United States Code. Section 1116(b) authorized the 
Secretary of Veterans Affairs to issue regulatory presumptions of 
service connection for diseases associated with herbicide exposure. 
Section 1116(e), as added by the Act, stated that section 1116(b) would 
cease

[[Page 4139]]

to be effective 10 years after the first day of the fiscal year in 
which the NAS transmitted its first report to VA. The first NAS report 
was transmitted in June 1993, during the fiscal year that began on 
October 1, 1992. Accordingly, under the Act, VA's authority to issue 
regulatory presumptions as specified in section 1116(b) would have 
expired on September 30, 2002.
    In December 2001, Congress enacted the Veterans Education and 
Benefits Expansion Act of 2001 (Benefits Expansion Act), Public Law 
107-103, section 201(d) of which extended VA's authority under section 
1116(b) through September 30, 2015. Pursuant to this statute, VA may 
issue new regulations between October 1, 2002 and September 30, 2015 
establishing additional presumptions of service connection for diseases 
that are found to be associated with herbicide exposure based on 
evidence contained in future NAS reports. Because presumptions 
established pursuant to the authority of the Benefits Expansion Act 
would be beyond the scope of the Nehmer stipulation and order, the 
effective-date provisions of the stipulation and order, as stated in 
this proposed rule, would not apply to claims based on diseases 
service-connected pursuant to the Benefits Expansion Act of 2001.
    Both the district court and the Court of Appeals for the Ninth 
Circuit stated that the Nehmer stipulation and order applies only to 
awards based on presumptions issued within the time period established 
by the Agent Orange Act of 1991, Public Law 102-4. The district court 
noted that the retroactive payment provisions of the stipulation and 
order are ``expressly tied'' to the Agent Orange Act of 1991, Public 
Law 102-4, and that ``the Stip. & Order is not therefore boundless.'' 
Nehmer v. United States Department of Veterans Affairs, No. CV-86-6160 
TEH (N.D. Cal. Dec. 12, 2000). In a decision issued April 1, 2002, the 
Ninth Circuit stated that, ``the district court was careful to 
prescribe temporal limits on the effect of the consent decree, with 
which we agree.'' Nehmer v. Veterans' Administration, 284 F.3d 1158, 
1162 n.3. (9th Cir. 2002), reh'g denied.
    In its December 12, 2000, order, the district court held that the 
1991 stipulation and order must be interpreted in accordance with 
general principles of contract law. It is well established that, unless 
the parties provide otherwise, a contract is presumed to incorporate 
the law that existed at the time the contract was made. See Norfolk & 
Western Ry. Co. v. American Train Dispatchers' Ass'n, 499 U.S. 117, 
129-30 (1991). A subsequent change in the law cannot retrospectively 
alter the terms of the agreement. See Florida East Coast Ry. Co. v. CSX 
Transportation, Inc., 42 F.3d 1125, 1129-30 (7th Cir. 1994). 
Accordingly, the enactment of the Benefits Expansion Act of 2001 does 
not alter the scope of the 1991 stipulation and order.
    Because the Benefits Expansion Act of 2001, Public Law 107-103, 
established rights and duties that did not exist under the Agent Orange 
Act of 1991, Public Law 102-4, any regulations issued pursuant to the 
authority of the Benefits Expansion Act of 2001 are beyond the express 
scope of the Nehmer stipulation and order. Accordingly, the stipulation 
and order provides no authority for VA to pay retroactive benefits 
under such regulations in a manner contrary to the governing statutes 
and regulations concerning the effective dates of awards. Proposed 
paragraph 3.406(g) would reflect this fact. This provision would make 
clear that awards based on regulations issued pursuant to the Benefits 
Expansion Act of 2001 would be governed by the generally applicable 
provisions governing the effective dates of benefit awards.

Executive Order 12866

    This regulatory amendment has been reviewed by the Office of 
Management and Budget under the provisions of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

Unfunded Mandates

    The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that 
agencies prepare an assessment of anticipated costs and benefits before 
developing any rule that may result in an expenditure by State, local, 
or tribal governments, in the aggregate, or by the private sector of 
$100 million or more in any given year. This rule would have no 
consequential effect on State, local, or tribal governments.

Regulatory Flexibility Act

    The Secretary hereby certifies that this regulatory amendment will 
not have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (RFA), 5 
U.S.C. 601-612. The reason for this certification is that these 
amendments would not directly affect any small entities. Only VA 
beneficiaries and their survivors could be directly affected. 
Therefore, pursuant to 5 U.S.C. 605(b), these amendments are exempt 
from the initial and final regulatory flexibility analysis requirements 
of sections 603 and 604.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance program numbers are 
64.109, and 64.110.

List of Subjects in 38 CFR Part 3

    Administrative practice and procedure, Claims, Disability benefits, 
Herbicides, Veterans, Vietnam.

    Approved: November 4, 2002.
Anthony J. Principi,
Secretary of Veterans Affairs.

    For the reasons set forth in the preamble, 38 CFR part 3 is 
proposed to be amended as follows:

PART 3--ADJUDICATION

Subpart A--Pension, Compensation, and Dependency and Indemnity 
Compensation

    1. The authority citation for part 3, subpart A continues to read 
as follows:

    Authority: 38 U.S.C. 501(a), unless otherwise noted.

    2. Section 3.816 is added to read as follows:


Sec.  3.816  Awards under the Nehmer Court Orders for disability or 
death caused by a condition presumptively associated with herbicide 
exposure.

    (a) Purpose. This section states effective-date rules required by 
orders of a United States district court in the class-action case of 
Nehmer v. United States Department of Veterans Affairs, No. CV-86-6160 
TEH (N.D. Cal.).
    (b) Definitions. For purposes of this section'
    (1) Nehmer class member means:
    (i) A Vietnam veteran who has a covered herbicide disease; or
    (ii) A surviving spouse, child, or parent of a deceased Vietnam 
veteran who died from a covered herbicide disease.
    (2) Covered herbicide disease means a disease for which the 
Secretary of Veterans Affairs has established a presumption of service 
connection before October 1, 2002 pursuant to the Agent Orange Act of 
1991, Public Law 102-4, other than chloracne. Those diseases are:
    (i) Type 2 Diabetes (Also known as type II diabetes mellitus or 
adult-onset diabetes).
    (ii) Hodgkin's disease.
    (iii) Multiple myeloma.
    (iv) Non-Hodgkin's lymphoma.

[[Page 4140]]

    (v) Acute and Subacute peripheral neuropathy.
    (vi) Porphyria cutanea tarda.
    (vii) Prostate cancer.
    (viii) Respiratory cancers (cancer of the lung, bronchus, larynx, 
or trachea).
    (ix) Soft-tissue sarcoma (as defined in Sec.  3.309(e)).
    (c) Effective date of disability compensation. If a Nehmer class 
member is entitled to disability compensation for a covered herbicide 
disease, the effective date of the award will be as follows:
    (1) If VA denied compensation for the same covered herbicide 
disease in a decision issued between September 25, 1985 and May 3, 
1989, the effective date of the award will be the later of the date VA 
received the claim on which the prior denial was based or the date the 
disability arose, except as otherwise provided in paragraph (c)(3) of 
this section. A prior decision will be construed as having denied 
compensation for the same disease if the prior decision denied 
compensation for a disease that reasonably may be construed as the same 
covered herbicide disease for which compensation has been awarded. 
Minor differences in the terminology used in the prior decision will 
not preclude a finding, based on the record at the time of the prior 
decision, that the prior decision denied compensation for the same 
covered herbicide disease.
    (2) If the class member's claim for disability compensation for the 
covered herbicide disease was either pending before VA on May 3, 1989, 
or was received by VA between that date and the effective date of the 
statute or regulation establishing a presumption of service connection 
for the covered disease, the effective date of the award will be the 
later of the date such claim was received by VA or the date the 
disability arose, except as otherwise provided in paragraph (c)(3) of 
this section. A claim will be considered a claim for compensation for a 
particular covered herbicide disease if the claimant's application and 
other supporting statements and submissions may reasonably be viewed, 
under the standards ordinarily governing compensation claims, as 
indicating an intent to apply for compensation for the covered 
herbicide disability.
    (3) If the class member's claim referred to in paragraph (c)(1) or 
(c)(2) of this section was received within one year from the date of 
the class member's separation from service, the effective date of the 
award shall be the day following the date of the class member's 
separation from active service.
    (4) If the requirements of paragraph (c)(1) or (c)(2) of this 
section are not met, the effective date of the award shall be 
determined in accordance with Sec. Sec.  3.114 and 3.400.
    (d) Effective date of dependency and indemnity compensation (DIC). 
If a Nehmer class member is entitled to DIC for a death due to a 
covered herbicide disease, the effective date of the award will be as 
follows:
    (1) If VA denied DIC for the death in a decision issued between 
September 25, 1985 and May 3, 1989, the effective date of the award 
will be the later of the date VA received the claim on which such prior 
denial was based or the date the death occurred, except as otherwise 
provided in paragraph (d)(3) of this section.
    (2) If the class member's claim for DIC for the death was either 
pending before VA on May 3, 1989, or was received by VA between that 
date and the effective date of the statute or regulation establishing a 
presumption of service connection for the covered herbicide disease 
that caused the death, the effective date of the award will be the 
later of the date such claim was received by VA or the date the death 
occurred, except as otherwise provided in paragraph (d)(3) of this 
section. In accordance with Sec.  3.152(b)(1), a claim by a surviving 
spouse or child for death pension will be considered a claim for DIC. 
In all other cases, a claim will be considered a claim for DIC if the 
claimant's application and other supporting statements and submissions 
may reasonably be viewed, under the standards ordinarily governing DIC 
claims, as indicating an intent to apply for DIC.
    (3) If the class member's claim referred to in paragraph (d)(1) or 
(d)(2) of this section was received within one year from the date of 
the veteran's death, the effective date of the award shall be the first 
day of the month in which the death occurred.
    (4) If the requirements of paragraph (d)(1) or (d)(2) of this 
section are not met, the effective date of the award shall be 
determined in accordance with Sec. Sec.  3.114 and 3.400.
    (e) Effect of other provisions affecting retroactive entitlement.--
(1) General. If the requirements specified in paragraphs (c)(1) or 
(c)(2) or (d)(1) or (d)(2) of this section are satisfied, the effective 
date shall be assigned as specified in those paragraphs, without regard 
to the provisions in 38 U.S.C. 5110(g) or Sec.  3.114 prohibiting 
payment for periods prior to the effective date of the statute or 
regulation establishing a presumption of service connection for a 
covered herbicide disease. However, the provisions of this section will 
not apply if payment to a Nehmer class member based on a claim 
described in paragraph (c) or (d) of this section is otherwise 
prohibited by statute or regulation, as, for example, where a class 
member did not qualify as a surviving spouse at the time of the prior 
claim or denial.
    (2) Claims Based on Service in the Republic of Vietnam Prior To 
August 5, 1964. If a claim referred to in paragraph (c) or (d) of this 
section was denied by VA prior to January 1, 1997, and the veteran's 
service in the Republic of Vietnam ended before August 5, 1964, the 
effective-date rules of this regulation do not apply. The effective 
date of benefits in such cases shall be determined in accordance with 
38 U.S.C. 5110. If a claim referred to in paragraph (c) or (d) of this 
section was pending before VA on January 1, 1997, or was received by VA 
after that date, and the veteran's service in the Republic of Vietnam 
ended before August 5, 1964, the effective date shall be the later of 
the date provided by paragraph (c) or (d) of this section or January 1, 
1997.

(Authority: Pub. L. 104-275, sec. 505)

    (f) Payment of Benefits to Survivors of Deceased Beneficiaries.--
(1) General. If a Nehmer class member entitled to retroactive benefits 
pursuant to paragraphs (c)(1) through (c)(3) or (d)(1) through (d)(3) 
of this section dies prior to receiving payment of any such benefits, 
VA shall pay such unpaid retroactive benefits as follows:
    (i) VA will pay the full amount of unpaid retroactive benefits to 
the living person or persons who, at the time of the class member's 
death, would have been eligible to receive payment of any accrued 
benefits under 38 U.S.C. 5121(a)(2)-(a)(4). For purposes of this 
paragraph, a person's status as the spouse, child, or dependent parent 
of a veteran shall be determined as of the date of the class member's 
death, irrespective of the person's age or marital status at the time 
payment is made under this section. The determination shall be based on 
evidence on file at the date of death. If the person or persons who 
would have been eligible to receive accrued benefits at the time of the 
class member's death are now deceased, VA shall pay the full amount of 
unpaid retroactive benefits to the living person or persons who were 
next in priority under 38 U.S.C. 5121(a)(2)-(a)(4) at the time of the 
class member's death.
    (ii) If there is no living person eligible for payment under 
paragraph (f)(1)(i) of this section, VA will pay to the person who bore 
the expense of the class member's last sickness and burial only

[[Page 4141]]

such portion of the unpaid retroactive benefits as is necessary to 
reimburse the person for such expense.
    (2) Inapplicability of certain accrued benefit requirements. The 
provisions of 38 U.S.C. 5121(a) and Sec.  3.1000(a) limiting payment of 
accrued benefits to amounts due and unpaid for a period not to exceed 
two years do not apply to payments under this section. The provisions 
of 38 U.S.C. 5121(c) and Sec.  3.1000(c) requiring survivors to file 
claims for accrued benefits also do not apply to payments under this 
section. When a Nehmer class member dies prior to receiving retroactive 
payments under this section, VA will pay the amount to an identified 
payee in accordance with paragraph (f)(1) of this section without 
requiring an application from the payee. Prior to releasing such 
payment, however, VA may ask the payee to provide further information 
as specified in paragraph (f)(3) of this section.
    (3) Identifying Payees. VA shall make reasonable efforts to 
identify the appropriate payee(s) under paragraph (f)(1) of this 
section based on information in the veteran's claims file. If further 
information is needed to determine whether any appropriate payee exists 
or whether there are any persons having equal or higher precedence than 
a known prospective payee, VA will request such information from a 
survivor or authorized representative if the claims file provides 
sufficient contact information. Before releasing payment to an 
identified payee, VA will ask the payee to state whether there are any 
other survivors of the class member who may have equal or greater 
entitlement to payment under this section, unless the circumstances 
clearly indicate that such a request is unnecessary. If, following such 
efforts, VA releases the full amount of unpaid benefits to a payee, VA 
may not thereafter pay any portion of such benefits to any other 
individual, unless VA is able to recover the payment previously 
released.
    (4) Bar to accrued benefit claims. Payment of benefits pursuant to 
paragraph (f)(1) of this section shall bar a later claim by any 
individual for payment of all or any part of such benefits as accrued 
benefits under 38 U.S.C. 5121 and Sec.  3.1000.
    (g) Awards covered by this section. This section applies only to 
awards of disability compensation or DIC for disability or death caused 
by a disease listed in paragraph (b)(2) of this section.

(Authority: 38 U.S.C. 501)

[FR Doc. 03-1834 Filed 1-27-03; 8:45 am]
BILLING CODE 8320-01-P