[Federal Register Volume 68, Number 164 (Monday, August 25, 2003)]
[Rules and Regulations]
[Pages 50966-50972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21646]


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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: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) is adding a new 
provision to its adjudication regulations concerning certain awards of 
disability compensation and dependency and indemnity compensation 
(DIC). The new rule explains that 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 new 
rule also provides that VA may pay to certain survivors of a deceased 
beneficiary, or to the beneficiary's estate, any amounts the 
beneficiary was entitled to receive under the effective-date provisions 
of this rule, but which were not paid prior to the beneficiary's death. 
The purpose of this rule is to reflect the requirements of court orders 
in a class-action case.

DATES: Effective Date: September 24, 2003.

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: On January 28, 2003, VA published in the 
Federal Register (68 FR 4132), a proposed rule to establish provisions 
at 38 CFR 3.816 explaining certain rules arising from court orders in 
the class action litigation in Nehmer v. United States Department of 
Veterans Affairs, No. CV-86-6160 TEH (N.D. Cal.). As explained in that 
notice, the rule is intended to explain two exceptions to generally-
applicable adjudication rules that have resulted from the Nehmer court 
orders.
    First, this rule will clarify the standards governing the effective 
dates of disability compensation or dependency and indemnity 
compensation (DIC) awarded to Nehmer class members under liberalizing 
regulations establishing presumptions that certain diseases are 
associated with herbicide exposure in service. That change is necessary 
to address an apparent conflict between 38 U.S.C. 5110(g), which 
generally prohibits VA from awarding retroactive effective dates that 
precede the date a liberalizing regulation took effect, and the Nehmer 
court orders, which require VA to assign such retroactive effective 
dates for certain awards to Nehmer class members. The new rule explains 
that, when VA awards disability compensation or DIC to a Nehmer class 
member based on a VA regulation issued under the Agent Orange Act of 
1991, Pub. L. 102-4, establishing a presumption that a disease is 
associated with herbicide exposure, VA will assign an effective date 
for the award that corresponds to the date the claim was received or to 
the date of a previously-denied claim based on the same disease, 
without regard to the provisions of 38 U.S.C. 5110(g).
    Second, this rule will clarify that, when a Nehmer class member 
dies before receiving payment to which he or she is entitled under the 
Nehmer court orders, VA will pay the entire amount of such unpaid 
benefits to certain survivors or to the class member's estate if there 
are no such survivors. This change is necessary to address an apparent 
conflict between 38 U.S.C. 5121(a), which, in some circumstances, 
prohibits VA from paying amounts that had accrued for periods more than 
two years prior to the beneficiary's death, and the Nehmer court 
orders, which require VA to pay the entire amount of any unpaid 
benefits to the survivors or estate of a deceased Nehmer class member. 
Further, although section 5121(a) requires payment to the person who 
bore the expense of the beneficiary's last sickness and burial if there 
are no surviving members of the decedent's immediate family, the Nehmer 
court orders require payment to the decedent's estate in that 
circumstance. This rule will provide that, in cases governed by the 
Nehmer court orders, VA will pay the entire amount of such benefits to 
the specified survivors or to the decedent's estate, without regard to 
the two-year limit in 38 U.S.C. 5121(a).
    We received comments on the proposed rule from three commenters. 
One commenter expressed unqualified support for the rule. The other 
commenters expressed general support for the rule, but disagreed with 
certain aspects of it, as discussed below.

Burial Benefits

    Two commenters suggested that we add provisions to the rule 
specifying that when service connection for the cause of a Nehmer class 
member's death is established under a presumption issued pursuant to 
the Agent Orange Act, VA may pay a service-connected burial allowance 
under 38 U.S.C. 2307, even if the death occurred prior to the effective 
date of the regulation establishing the presumption. Those suggestions 
are based on a 1995 opinion of VA's General Counsel, designated as 
VAOPGCPREC 15-95, which stated such a conclusion in the context of a 
Nehmer class member's claim.
    We make no change based on these comments. The additional 
provisions suggested by the commenters do not relate to the effective 
date of awards of disability compensation or DIC, nor to the manner of 
paying amounts due and unpaid to a beneficiary at death. Rather, they 
pertain to a distinct issue concerning entitlement to service-connected 
burial benefits under 38 U.S.C. 2307. Because these comments relate 
solely to matters outside the scope of the rule we proposed, we will 
make no change based on them.
    Moreover, unlike the subjects of our proposed rule, the General 
Counsel's conclusion regarding entitlement to service-connected burial 
benefits does not rest upon the requirements of the Nehmer court 
orders, nor does it establish an exception to the generally applicable 
adjudication rules. In our January 2003 notice of proposed rule making, 
we explained that the purpose of the proposed rule was to explain the 
requirements of the Nehmer court orders, which created exceptions to 
the general statutory prohibitions in 38 U.S.C. 5110(g) and 5121(a) 
applicable to Nehmer class members. The General

[[Page 50967]]

Counsel's conclusion that service-connected burial benefits may be paid 
for deaths preceding the effective date of a regulatory presumption was 
based on the interpretation of statutes and regulations; it was not 
based on the Nehmer court orders and did not establish any exception to 
governing statutory requirements for Nehmer class members. Accordingly, 
we will not incorporate that conclusion in this final rule.

Identifying Prior Claims or Decisions

    One commenter suggested a revision to proposed Sec.  3.816(c)(2), 
which explains when a disability compensation award may be made 
retroactive to the date of a prior claim for compensation for a covered 
herbicide disease that was pending on May 3, 1989 or was received by VA 
between that date and the effective date of the regulation establishing 
a presumption of service connection for the disease. As proposed, Sec.  
3.816(c)(2) would explain that a prior claim will be considered a claim 
for compensation for a particular covered herbicide disease if the 
claimant's application and other submissions may reasonably be viewed, 
under the standards ordinarily governing such claims, as indicating an 
intent to apply for compensation for the covered herbicide disease. The 
commenter asserts that the Nehmer court orders also require payment of 
retroactive benefits in cases where the prior claim did not request 
compensation for a covered herbicide disease, but VA nevertheless 
denied compensation for such disease in its decision on the veteran's 
claim.
    Longstanding VA policy reflected in VA procedural manuals provides 
that when disability compensation is claimed, VA must make a formal 
rating decision as to each disability that was either claimed by the 
veteran or noted in the veteran's records, subject to certain 
exceptions for non-claimed conditions that are acute and transitory or 
recorded by history only. That policy is currently stated in VA Manual 
M21-1, Part VI, para. 3.09(b), and was previously stated in VA Manual 
M21-1, para. 46.02 at the time of the 1991 final stipulation and order. 
Accordingly, VA may have denied disability compensation for conditions 
not expressly claimed by the veteran.
    The 1991 final stipulation and order in Nehmer stated effective-
date rules governing two kinds of claims: those where VA denied 
benefits in a decision rendered between September 25, 1985 and May 3, 
1989 (which decisions were voided by a 1989 Nehmer court order), and 
those where a claim was filed after May 3, 1989 and may or may not have 
been denied by VA before VA awarded benefits under an applicable 
regulatory presumption. With respect to the voided decisions, the 
stipulation and order provided that an award of benefits for a covered 
herbicide disease would be retroactive to the date of the previously-
denied claim if the basis of the award was the same as the basis of the 
prior claim. The stipulation and order specified that the ``basis'' of 
the claim would be determined by reference to the diseases that were 
coded in the prior decision as required by former paragraph 46.02 of VA 
Manual M21-1. This requirement is reflected in Sec.  3.816(c)(1) of the 
proposed regulation, which addresses claims denied by VA between 
September 25, 1985 and May 3, 1989.
    With respect to claims filed after May 3, 1989, the 1991 final 
stipulation and order merely provides that the effective date of an 
award will be the later of the date the claim was received or the date 
disability arose or death occurred. It provided no criteria for 
determining whether an award related to a previously-filed claim or a 
prior decision by VA denying benefits. In proposed Sec.  3.816(c)(2), 
we explained that VA would apply the ordinary standards of claim 
interpretation to determine whether a claim received after May 3, 1989 
was a claim for compensation for the covered herbicide disease for 
which benefits were ultimately awarded. We believe it is necessary to 
state guidelines based on the nature of the claim, rather than only the 
nature of a prior VA decision, because paragraph (c)(2) applies in 
cases where VA may not have issued any prior decision on the veteran's 
claim. However, we did not intend to preclude retroactive payments in 
cases where VA did issue a decision denying compensation for a covered 
herbicide disease in a decision rendered after May 3, 1989.
    As explained above, the 1991 final stipulation and order is 
ambiguous as to whether retroactive payments may be made where a 
veteran did not request service connection for a covered herbicide 
disease but VA expressly denied compensation for such disease in a 
decision rendered after May 3, 1989. We believe the stipulation may 
reasonably be construed to allow retroactive payment in those 
circumstances. Accordingly, we will revise proposed Sec.  3.816(c)(2) 
to clarify that retroactive payment may be made where a VA decision 
rendered between May 3, 1989 and the effective date of the relevant 
statutory or regulatory presumption denied compensation for a disease 
that reasonably may be construed as the same covered herbicide disease 
for which compensation was later awarded. As explained in our January 
2003 notice of proposed rulemaking, we do not intend to require exact 
agreement in the terminology or diagnostic codes used to describe the 
disease at different times, if circumstances reasonably indicate that 
the same disease is involved.

Payments to Survivors or Estates of Deceased Beneficiaries

    We proposed to state, in paragraph (f) of 38 CFR 3.816, that, when 
a Nehmer class member dies before receiving amounts due and unpaid 
under the Nehmer court orders, VA will pay the entire amount of unpaid 
benefits to the class member's surviving spouse, child(ren), or 
dependent parents, in that order of preference. In the event no such 
survivors are in existence, we proposed that VA would pay to the person 
who bore the expense of the class member's last sickness and burial as 
much of the unpaid benefits as necessary to reimburse such person for 
those expenses. Two commenters disagreed with this provision and 
asserted that the Nehmer court orders require VA to release payments to 
the estates of deceased class members.
    In our January 2003 notice of proposed rule making, we stated that 
we considered it necessary to seek clarification from the district 
court regarding VA's ability to release payments in the manner 
proposed. On April 21, 2003, the district court issued an order stating 
that, in the event a Nehmer class member dies, VA must release payments 
as provided in an August 3, 2001 stipulation between the parties to the 
Nehmer case. Specifically, the Court stated that VA must release the 
payments to the first of the following individuals or entities who is 
in existence when payment is made: (a) The class member's spouse; (b) 
the class member's children (in equal shares); (b) the class member's 
parents (in equal shares); (d) the class member's estate.
    In accordance with the district court's order and the comments, we 
are revising the proposed rule to provide that VA will release payment 
to the estate of the deceased class member when there is no surviving 
spouse, child, or parent. We proposed to caption paragraph (f) of 38 
CFR 3.816(f) ``Payment of Benefits to Survivors of Deceased 
Beneficiaries.'' Based on the court order and the comments, we will 
change this to ``Payment of Benefits to Survivors or Estates of 
Deceased Beneficiaries.''
    As proposed, the first sentence of paragraph (f)(1)(i) would have 
stated

[[Page 50968]]

that, when a class member dies, VA will pay the full amount of any 
retroactive benefits owed the class member under the proposed 
regulation to the living person or persons who, at the time of death, 
would have been eligible to receive accrued benefits under 38 U.S.C. 
5121(a)(2)-(a)(4). The cited statutory provisions authorize payment to 
a surviving spouse, child(ren), or dependent parent(s), in that order 
of priority. The second sentence of proposed paragraph (f)(1)(i) would 
further have stated that a person's status as a surviving spouse, 
child, or dependent parent would 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.
    As explained above, the district court's April 2003 order specifies 
the individuals and entities entitled to payment. Further, the court's 
order states that the provisions of 38 U.S.C. 5121 do not govern such 
payments. Accordingly, we will delete the first sentence of paragraph 
(f)(1)(i), as proposed, and will amend paragraph (f)(1) to list the 
eligible payees as identified by the court's order. Revised paragraph 
(f)(1) will specify that VA will release payment to the first of the 
listed individual or entities that is in existence at the time payment 
is made.
    We will delete the second sentence of paragraph (f)(1)(i), as 
proposed, because it reflects requirements applicable to 38 U.S.C. 
5121(a). For purposes of 38 U.S.C. 5121(a), eligibility for payment as 
a surviving spouse, child, or parent is limited by a number of 
statutory provisions. For example, a ``surviving spouse'' is generally 
defined, with certain exceptions, as one who has not remarried. 
Eligibility for payment as a ``child'' is limited to unmarried children 
under the age of 18, or who became permanently incapable of self-
support before attaining age 18, or who are under 23 years of age and 
pursuing a course of education at an approved institution. Eligibility 
for payment as a parent is subject to dependency. In view of the 
district court's conclusions that the provisions of the parties' August 
2001 stipulation, rather than the provisions of 38 U.S.C. 5121(a), 
govern payments, we conclude that those restrictions are inapplicable. 
The August 2001 stipulation does not expressly incorporate the 
statutory limitations on recognition as a spouse, child, or dependent 
parent. Further, the provisions of the August 2001 stipulation reflect 
the view that payments to spouses, children, and parents were 
authorized because those persons are the usual heirs to a decedent's 
estate, and that rationale would apply irrespective of age, marital 
status, or dependency. We will add language to Sec.  3.816(f)(1) to 
clarify that those limitations do not apply. Specifically, we will 
provide that payments to a spouse will be made irrespective of current 
marital status, that payments to a child will be made irrespective of 
age or marital status, and that payments to a parent will be made 
irrespective of dependency. We will further explain that a spouse is a 
person who was married to the class member at the time of the class 
member's death. We will explain that the term ``child'' includes 
natural and adopted children, and also includes any stepchildren who 
were members of the class member's household at the time of the class 
member's death. We note that stepchildren ordinarily are not entitled 
to inherit from a stepparent's estate under the laws of intestate 
succession, and some stepchildren may have no direct relationship with 
the deceased class member. However, the laws governing veterans' 
benefits provide that a stepchild who was a member of a veteran's 
household at the time of the veteran's death is entitled to certain 
death benefits, including payment of amounts due and unpaid to the 
deceased veteran. We believe that persons who would be considered 
children under the laws governing VA benefits should not be excluded 
from receiving payment pursuant to the court orders in this case. 
Accordingly, we are defining ``child'' to include such stepchildren. We 
will also explain that the term ``parent'' includes natural and 
adoptive parents but that, in the case of successive parents, the 
persons who last stood in the relationship of parents to the class 
member will be considered the parents.
    The last two sentences of paragraph (f)(1)(i), as proposed, will be 
deleted because they pertain to matters specific to determinations 
under 38 U.S.C. 5121.
    Paragraph (f)(1)(ii) of 38 CFR 3.816, as proposed, would have 
stated that, if there is no living person eligible to receive benefits 
under 5121(a)(2)-(a)(4), VA would pay to the person who bore the 
expense of the class member's last sickness and burial only such 
portion of the class member's unpaid benefits as would be necessary to 
reimburse that person for such expense. We are removing this provision 
because it is contrary to the district court's order.
    The other provisions of proposed 38 CFR 3.816(f) are not affected 
by the court's order, and we received no comments concerning them. 
Accordingly, we are adopting them without change.

Presumptions Established Under the Benefits Expansion Act of 2001

    We proposed to provide that the nonstatutory adjudication rules 
flowing from the Nehmer court orders would apply only with respect to 
regulatory presumptions of service connection established pursuant to 
the Agent Orange Act of 1991, Public Law 102-4, prior to October 1, 
2002. We explained that the scope of the Nehmer rules is defined by a 
May 1991 Final Stipulation and Order entered in the Nehmer case, which 
specified that the rules would apply to presumptions of service 
connection established by VA under the Agent Orange Act of 1991, Public 
Law 102-4. We noted that, under the terms of the Agent Orange Act of 
1991, Public Law 102-4, VA's authority to issue regulatory presumptions 
of service connection expired on September 30, 2002. Accordingly, we 
concluded that the Nehmer rules applied to awards based on presumptions 
of service connection established prior to October 1, 2002.
    We noted that Congress in 2001 enacted legislation authorizing VA 
to establish new presumptions of service connection during the 
additional period from October 1, 2002 to September 30, 2015. Veterans 
Education and Benefits Expansion Act of 2001, Pub. L. No. 107-103, 
Sec.  201(d) (Benefits Expansion Act). We concluded that the Nehmer 
rules would not apply to awards based on presumptions established 
pursuant to the new authority granted by this Act.
    Two commenters expressed disagreement with our conclusion and 
asserted that the Nehmer rules should be applied to awards based on 
presumptions established under the Benefits Expansion Act. We make no 
change based on these comments, for the reasons explained in our 
January 2003 notice of proposed rule making and the additional reasons 
stated below in response to the comments we received.
    One commenter asserts that it would be unfair to apply different 
effective date rules to Vietnam veterans' claims based on presumptions 
established under the Agent Orange Act of 1991 and those based on 
presumptions established under the Benefits Expansion Act. Although we 
agree that a uniform set of effective-date rules would ordinarily be 
preferable, the prospect of disparate treatment does not provide a 
basis for changing these rules. VA's obligation to comply with both 38 
U.S.C. 5110(g) and the Nehmer court orders necessarily requires 
disparate treatment of claims that are similar in many respects. 
Section 5110(g)

[[Page 50969]]

generally provides that, when benefits are awarded under a liberalizing 
regulation establishing a presumption of service connection, VA may not 
pay benefits for any period prior to the effective date of that 
regulation. Accordingly, any veteran who becomes entitled to service 
connection pursuant to a presumption, including presumptions relating 
to radiation exposure, mustard gas exposure, or prisoner of war 
experience, is subject to this restriction on retroactive payment. The 
Nehmer court orders establish a limited non-statutory exception to this 
general rule for certain claims based on herbicide exposure, and 
inevitably require that some veterans will be accorded retroactive 
benefits that most other veterans cannot receive. In determining where 
the line must be drawn, we necessarily look to the governing legal 
authorities.
    VA is required to give effect to the clear statutory requirements 
in 38 U.S.C. 5110(g), in the absence of authority to the contrary. To 
the extent the Nehmer court orders require action seemingly at odds 
with section 5110(g), we believe they are most reasonably viewed as 
creating a non-statutory exception to section 5110(g)'s requirements. 
We believe it would be inappropriate, however, to disregard the clear 
requirements of section 5110(g) in cases that are not within the scope 
of the Nehmer court orders. The United States Court of Appeals for the 
Federal Circuit and the United States Court of Appeals for Veterans 
Claims have held that 38 U.S.C. 5110(g) governs the effective date of 
awards made pursuant to regulatory presumptions of service connection 
for diseases associated with herbicide exposure, at least in cases that 
are not clearly within the scope of the Nehmer court orders. See 
Williams v. Principi, 15 Vet. App. 189 (2001) (en banc); aff'd, 310 
F.3d 1374 (Fed. Cir. 2002). As explained in our January 2003 notice of 
proposed rule making and reiterated below, the 1991 stipulation and 
order in Nehmer provides an exception to 38 U.S.C. 5110(g) that applies 
by its terms only to certain claims based on presumptions established 
under the authority granted in Agent Orange Act of 1991, Public Law 
102-4.
    One commenter asserts that these rules should apply to presumptions 
established under the Benefits Expansion Act because, when VA and the 
representatives for the Nehmer class entered into the May 1991 Final 
Stipulation and Order, they intended to incorporate any changes 
Congress might make in the future to the sunset provisions of the Agent 
Orange Act of 1991, Public Law 102-4. VA does not agree.
    The United States District Court for the Northern District of 
California has held that the May 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). The May 1991 
stipulation and order specified that it would apply to presumptions 
established under the Agent Orange Act of 1991, Public Law 102-4. Both 
the district court and the United States Court of Appeals for the Ninth 
Circuit have noted that, at the time the parties entered into the May 
1991 stipulation and order, the Agent Orange Act of 1991, Public Law 
102-4, vested VA with authority to establish presumptions only for a 
specified 10-year period. Nehmer v. United States Department of 
Veterans Affairs, No. CV-86-6160 TEH (N.D. Cal. Dec. 12, 2000); Nehmer 
v. Veterans' Administration, 284 F.3d 1158, 1162 n.3. (9th Cir. 2002). 
The scope of the Nehmer rules must be determined with respect to the 
law existing in 1991, rather than the subsequent changes in law enacted 
ten years after the final stipulation and order was entered.
    The terms of a contract ``do not change with the enactment of 
subsequent legislation, absent a specific contractual provision 
providing for such a change.'' Winstar Corp. v. United States, 64 F.3d 
1531, 1547 (Fed. Cir. 1995), aff'd, 518 U.S. 839 (1996). 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). The 1991 stipulation and order 
in Nehmer contains no provision providing for subsequent changes in 
law. Accordingly, the enactment of the Benefits Expansion Act of 2001 
cannot expand the Government's authority under the May 1991 stipulation 
and order.
    The commenter asserts that, if Congress had enacted legislation 
after May 1991 to shorten the 10-year life span of the Agent Orange Act 
of 1991, the parties would have agreed that VA was relieved from the 
original agreement made in contemplation of a 10-year life span. The 
commenter argues that it necessarily follows that the parties intended 
to incorporate any subsequent legislative changes either limiting or 
extending VA's authority to establish presumptions. We do not agree, 
and we believe the hypothetical scenario described by the commenter is 
inapt. The 1991 stipulation and order in Nehmer did not require VA to 
issue regulations under the Agent Orange Act of 1991, Public Law 102-4. 
Rather, it established rules for determining the effective dates of 
benefit awards made pursuant to such regulations as VA would issue 
under that statute. Accordingly, the hypothetical legislation 
shortening the life span of the Agent Orange Act of 1991, Public Law 
102-4, would not have altered any provision in the 1991 stipulation and 
order, but would have, at most, resulted in fewer presumptions to which 
the terms of the stipulation and order would apply. Moreover, even if 
there were any conflict between the 1991 stipulation and order and the 
hypothetical legislation described by the commenter, we would still 
disagree with the commenter's conclusion. Where intervening and 
unforeseen events interfere with fulfillment of a contract, the 
performance by one or more parties may be excused under principles of 
contract law relating to impossibility or impracticability of 
performance. The hypothetical described by the commenter would likely 
be governed by that principle rather than any inference that the 
parties silently intended to incorporate subsequent changes in law.
    Two commenters assert that extending the Nehmer rules to 
presumptions established under the Benefits Expansion Act would be 
consistent with Congress' purpose in that Act. Specifically, the 
commenters state that Congress extended VA's authority to establish 
presumptions because the scientific evidence regarding the effects of 
herbicide exposure continues to develop. As explained above, the 2001 
enactment of the Benefits Expansion Act does not bear upon the parties' 
intent when they entered into the 1991 final stipulation and order. 
Moreover, nothing in the Benefits Expansion Act suggests a legislative 
intent to authorize retroactive benefits.
    The Benefits Expansion Act, Public Law 107-103, reflects a purpose 
to require ongoing periodic reviews of the scientific evidence to 
determine whether additional presumptions of service connection should 
be established. It does not, however, reflect any purpose to authorize 
retroactive benefits based on presumptions established under that Act. 
To the contrary, Congress has expressly limited the retroactive effect 
of new presumptions established by VA under the Benefits Expansion Act 
or any other statute. Section 5110(g) of title 38,

[[Page 50970]]

United States Code, provides that, when disability compensation, DIC, 
or pension benefits are awarded pursuant to a new regulation, the 
effective date of the benefit award may not be earlier than the 
effective date of the regulation itself. Further, 38 U.S.C. 1116(c), 
which governs regulations issued under the Benefits Expansion Act, 
provides that regulations under that Act establishing new presumptions 
of service connection shall be effective on the date they are issued. 
Although these statutory provisions alone amply convey Congress' 
intent, we note that the legislative history of 38 U.S.C. 1116(c) 
further establishes that Congress was concerned with the possibility 
that according retroactive effect to new regulatory presumptions would 
be unfair insofar as it would accord preferential treatment to veterans 
with disabilities associated with herbicide exposure, as compared with 
all other veterans who become entitled to benefits under a liberalizing 
statute or regulation. See S. Rep. 379, 101st Cong., 2nd Sess. 105-06 
(1990) (expressing disapproval of VA's past actions in issuing 
retroactive presumptions of service connection according ``preferential 
treatment'' to certain veterans).
    We note further that section 10(e) of the Agent Orange Act of 1991, 
Public Law 102-4, expressly referenced the Nehmer court orders. That 
provision delayed the effective date of certain changes to preexisting 
law made by Public Law 102-4 for a period of six months or for a lesser 
period in the event that the Secretary of Veterans Affairs determined 
that VA had fulfilled its obligations under the Nehmer court orders 
based on the prior law. If Congress had intended to codify and extend 
the provisions of the Nehmer court orders when it enacted the Benefits 
Expansion Act, Public Law 107-103, it is reasonable to expect that it 
would have done so by a similar express reference to Nehmer. However, 
neither the text nor the legislative history of Public Law 107-103 
discusses the Nehmer court orders. Applying the Nehmer court orders to 
presumptions established under the Benefits Expansion Act, Public Law 
107-103, would be contrary to the governing statutory requirements in 
38 U.S.C. 1116(c) and 5110(g), and we have found nothing in the 
language, purpose, or history of the Benefits Expansion Act to suggest 
that Congress intended VA to ignore those statutory requirements.
    For these reasons, we find that Congress has clearly expressed its 
intent that regulations issued under the Benefits Expansion Act will 
not provide a basis for awarding benefits for any period prior to the 
date such regulations are issued. Accordingly, we make no change based 
on this comment.

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 such 
effect on State, local, or tribal governments, or the private sector.

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: July 2, 2003.
Anthony J. Principi,
Secretary of Veterans Affairs.

0
For the reasons set forth in the preamble, 38 CFR part 3 is amended as 
follows:

PART 3--ADJUDICATION

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

0
1. The authority citation for part 3, subpart A continues to read as 
follows:

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


0
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.
    (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

[[Page 50971]]

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:
    (i) 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; or
    (ii) VA issued a decision on the claim, between May 3, 1989 and the 
effective date of the statute or regulation establishing a presumption 
of service connection for the covered disease, in which VA denied 
compensation for a disease that reasonably may be construed as the same 
covered herbicide disease for which compensation has been awarded.
    (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: Public Law 104-275, sec. 505)

    (f) Payment of Benefits to Survivors or Estates 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 to 
the first individual or entity listed below that is in existence at the 
time of payment:
    (i) The class member's spouse, regardless of current marital 
status.
    Note to Paragraph (f)(1)(i): For purposes of this paragraph, a 
spouse is the person who was legally married to the class member at the 
time of the class member's death.
    (ii) The class member's child(ren), regardless of age or marital 
status (if more than one child exists, payment will be made in equal 
shares, accompanied by an explanation of the division).
    Note to Paragraph (f)(1)(ii): For purposes of this paragraph, the 
term ``child'' includes natural and adopted children, and also includes 
any stepchildren who were members of the class member's household at 
the time of the class member's death.
    (iii) The class member's parent(s), regardless of dependency (if 
both parents are alive, payment will be made in equal shares, 
accompanied by an explanation of the division).
    Note to Paragraph (f)(1)(iii): For purposes of this paragraph, the 
term ``parent'' includes natural and adoptive parents, but in the event 
of successive parents, the persons who last stood as parents in 
relation to the class member will be considered the parents.
    (iv) The class member's estate.
    (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 2 
years do not apply to payments under this section. The provisions of 38 
U.S.C. 5121(c) and

[[Page 50972]]

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. 03-21646 Filed 8-22-03; 8:45 am]
BILLING CODE 8320-01-P