[Federal Register Volume 71, Number 125 (Thursday, June 29, 2006)]
[Proposed Rules]
[Pages 37027-37031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10228]


-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AM28


Accrued Benefits

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
adjudication regulation regarding accrued benefits. The amendments are 
the result of changes in statute and to clarify existing regulatory 
provisions.

DATES: Comments must be received by VA on or before August 28, 2006.

ADDRESSES: Written comments may be submitted by: mail or hand-delivery 
to the Director, Regulations Management (00REG1), Department of 
Veterans Affairs, 810 Vermont Ave., NW., Room 1068, Washington, DC 
20420; fax to (202) 273-9026; or e-mail through www.Regulations.gov. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AM28.'' All comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday 
(except holidays). Please call (202) 273-9515 for an appointment.

FOR FURTHER INFORMATION CONTACT: Maya Ferrandino, Consultant, Policy 
and Regulations Staff, Compensation and Pension Service, Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Avenue, NW., Washington, DC 20420, (202) 273-7211.

SUPPLEMENTARY INFORMATION: Section 104 of the Veterans Benefits Act of 
2003 (the ``Act''), Public Law 108-183, amended 38 U.S.C. 5121, which 
addresses payment of certain accrued benefits upon the death of a 
beneficiary. To ensure consistency with statutory changes and for 
clarification purposes, VA proposes to amend its regulations regarding 
accrued benefits.
    Prior to its amendment by section 104 of the Act, the introductory 
portion of 38 U.S.C. 5121(a) read as follows:

    Except as provided in sections 3329 and 3330 of title 31, 
periodic monetary benefits (other than insurance and servicemen's 
indemnity) under laws administered by the Secretary to which an 
individual was entitled at death under existing ratings or 
decisions, or those based on evidence in the file at date of death 
(hereinafter in this section and section 5122 of this title referred 
to as ``accrued benefits'') and due and unpaid for a period not to 
exceed two years, shall, upon the death of such individual be paid 
as follows * * *.


[[Page 37028]]


38 U.S.C. 5121(a) (2002).
    VA traditionally construed 38 U.S.C. 5121(a) as providing only one 
type of benefit to survivors: Accrued benefits. The United States Court 
of Appeals for Veterans Claims (CAVC) in Bonny v. Principi, 16 Vet. 
App. 504 (2002), interpreted section 5121(a) differently. The CAVC's 
analysis includes the following:

    The comma in the middle of paragraph (a), between ``decisions'' 
and ``or,'' and the use of the conjunction ``or'' after the comma, 
indicate that the separated phrases state substantive alternatives. 
38 U.S.C. 5121(a). The paragraph provides for payment of (1) 
periodic monetary benefits to which an individual was entitled at 
death under existing ratings or decisions, which the Court will call 
``benefits awarded but unpaid'', or (2) periodic monetary benefits 
based on evidence in the file at the date of an entitled 
individual's death and due and unpaid for a period not to exceed two 
years, which are called ``accrued benefits'' for purposes of 
sections 5121 and 5122. Id.
* * * * *
    The important distinction between the two types of periodic 
monetary benefits is that one type of benefits is due to be paid to 
the veteran at his death and one type is not. As to the former, when 
the benefits have been awarded but not paid pre-death, an eligible 
survivor is to receive the entire amount of the award. The right to 
receive the entire amount of periodic monetary benefits that was 
awarded to the eligible individual shifts to the eligible survivor 
when payment of the award was not made before the eligible 
individual died. This interpretation of 38 U.S.C. 5121(a) is 
completely consistent with the plain language of the statute, as 
previously quoted and interpreted herein.
    As to the latter type of periodic monetary benefits, what is 
determinative regarding accrued benefits is that evidence in the 
individual's file at the date of death supports a decision in favor 
of awarding benefits. Because the benefits cannot be awarded to the 
deceased individual, an eligible survivor can claim a portion of 
those accrued benefits.

Bonny, 16 Vet. App. at 507-08. The CAVC's analysis recognized two kinds 
of benefits under 38 U.S.C. 5121, which the court called ``accrued 
benefits'' and ``benefits awarded but unpaid.''
    Section 104(a) of the Act removed the two-year limitation on 
accrued benefits payable under 38 U.S.C. 5121. Section 104(c) of the 
Act made ``technical amendments'' to 38 U.S.C. 5121, including removal 
of the comma after ``or decisions'' in the introductory text of 
paragraph (a). This is the same comma relied upon by the CAVC in Bonny 
for interpreting 38 U.S.C. 5121 to require a distinction between 
accrued benefits and ``benefits awarded but unpaid.'' Therefore, an 
important question is whether Congress intended to change the 
interpretation of 38 U.S.C. 5121 required by the Bonny decision by 
removing this comma. Based on the following analysis, we believe that 
it did.
    The Act resulted from enactment of House bill H.R. 2297, as 
amended, 108th Cong. (2003). The ``Explanatory Statement on Senate 
Amendment to House Bill, H.R. 2297, as Amended'' notes that the Act 
reflects a compromise agreement reached by the House and Senate 
Committees on Veterans' Affairs on provisions of a number of House and 
Senate bills affecting veterans' benefits. Section 104 of the Act was 
based on portions of two of these bills, section 6 of H.R. 1460, 108th 
Cong. (2003), and section 105 of S. 1132, as amended, 108th Cong. 
(2003). See 149 Cong. Rec. S15,133-34 (daily ed. Nov. 19, 2003).
    The removal of the comma in question in 38 U.S.C. 5121(a) comes 
from section 105(b) of S. 1132, as passed by the Senate. See 149 Cong. 
Rec. S13,745 (daily ed. Oct. 31, 2003). S. 1132 was also based on a 
number of other bills, including S. 1188, 108th Cong. (2003). A 
principal purpose of S. 1188 was to amend 38 U.S.C. 5121 ``to repeal 
the two-year limitation on the payment of accrued benefits that are due 
and unpaid by the Secretary of Veterans Affairs upon the death of a 
veteran or other beneficiary under laws administered by the 
Secretary.'' 149 Cong. Rec. S7,476 (daily ed. June 5, 2003). As 
originally drafted, S. 1188 did not include the ``technical 
amendments'' in section 104(c) of the Act.
    On July 10, 2003, the Senate Committee on Veterans' Affairs held a 
hearing on a number of the bills that would become the sources of S. 
1132. Persons who testified at that hearing included Daniel L. Cooper, 
VA's Under Secretary for Benefits, whose statement to the Committee 
included the following comment concerning S. 1188:

    In addition, we note one technical change needed in section 2 of 
S. 1188 should it be enacted. The comma in current section 5121(a) 
following ``existing ratings or decisions'' should be deleted to 
clarify, for purposes of 38 U.S.C. 5121(b) and (c) and 5122, that 
the term ``accrued benefits'' includes both benefits that have been 
awarded to an individual in existing ratings or decisions but not 
paid before the individual's death, as well as benefits that could 
be awarded based on evidence in the file at the date of death.

S. Rep. No. 108-169, at 46-47 (2003).
    Further, in its discussion of section 105 of S. 1132, the Committee 
noted that:

    At the Committee's hearing on July 10, 2003, Under Secretary 
Cooper commented as follows: ``The distinction the Bonny decision 
draws between the two categories of claimants--those whose claims 
had been approved and those whose entitlement had yet to be 
recognized when they died--is really one without a difference. In 
either case, a claimant's estate is deprived of the value of 
benefits to which the claimant was, in life, entitled.''

Id. at 8.
    Based on this legislative history, we conclude that Congress' 
purpose in removing the comma from the introductory paragraph of 38 
U.S.C. 5121(a) was to provide for only one type of benefit under 
section 5121, removing the distinction between accrued benefits and 
``benefits awarded but unpaid'' that resulted from the Bonny decision.
    The interplay between Bonny and section 104 of the Act is also 
affected by the fact that different portions of section 104 of the Act 
became effective at different times. Because there is no specific 
effective date in the Act for section 104(c) (the ``technical 
amendments'' which include removal of the comma that was a basis for 
the CAVC's interpretation of 38 U.S.C. 5121 in Bonny), that portion of 
the Act became effective when the Act was signed into law on December 
16, 2003. On the other hand, under section 104(d) of the Act, the 
amendment to 38 U.S.C. 5121(a) removing the provision restricting 
benefits to those that were due and unpaid ``for a period not to exceed 
two years'' applies to deaths occurring on or after December 16, 2003.
    These factors lead to consideration of what, if any, viability the 
Bonny distinctions between accrued benefits and ``benefits awarded but 
unpaid'' still have. For the reasons discussed in the following 
paragraphs, we conclude that these distinctions are still applicable in 
a very limited number of cases. Particularly because of the differences 
in effective date provisions for different provisions of section 104 of 
the Act, sorting this out involves looking at the time line for when 
the deceased beneficiary died and when claims for 38 U.S.C. 5121 
benefits were received and decided.
    Based on the plain language of the Act, we believe the Bonny 
division of 38 U.S.C. 5121 benefits clearly does not apply if the 
deceased beneficiary died on or after December 16, 2003. Effective on 
that date, the statutory basis for Bonny's interpretation of 38 U.S.C. 
5121 as creating two different types of VA benefits was removed. In any 
event, there would be little benefit to claimants for preserving the 
distinction in such cases because the two-year benefit limitation has 
been repealed in cases where the deceased beneficiary died on or after 
December 16, 2003.

[[Page 37029]]

    For claims filed on or after December 16, 2003, VA must apply 38 
U.S.C. 5121 as amended by the Act. However, the two-year limitation 
applies to all 38 U.S.C. 5121 accrued benefit claims VA received on or 
after December 16, 2003, if the deceased beneficiary died before 
December 16, 2003. This is true because (1) the Act removed the 
statutory underpinnings of the Bonny decision effective on December 16, 
2003, but (2) Congress very clearly intended the removal of the two-
year limitation in amended 38 U.S.C. 5121 to be effective only where 
the deceased beneficiary died on or after December 16, 2003.
    The last question is how VA should apply 38 U.S.C. 5121 to cases 
where the deceased beneficiary died before December 16, 2003, and a 
claim for section 5121 benefits was pending on December 16, 2003. We 
propose that the Act's amendments do not apply in such cases.
    VA's General Counsel addressed retroactive application of a new 
statute in VAOPGCPREC 7-2003 (2003), holding:

    In Kuzma v. Principi, 341 F.3d 1327 (Fed. Cir. 2003), the United 
States Court of Appeals for the Federal Circuit [(Federal Circuit)] 
overruled Karnas v. Derwinski, 1 Vet. App. 308 (1991), to the extent 
it conflicts with the precedents of the Supreme Court and the 
Federal Circuit. Karnas is inconsistent with Supreme Court and 
Federal Circuit precedent insofar as Karnas provides that, when a 
statute or regulation changes while a claim is pending before [VA] 
or a court, whichever version of the statute or regulation is most 
favorable to the claimant will govern unless the statute or 
regulation clearly specifies otherwise. Accordingly, that rule 
adopted in Karnas no longer applies in determining whether a new 
statute or regulation applies to a pending claim. Pursuant to 
Supreme Court and Federal Circuit precedent, when a new statute is 
enacted or a new regulation is issued while a claim is pending 
before VA, VA must first determine whether the statute or regulation 
identifies the types of claims to which it applies. If the statute 
or regulation is silent, VA must determine whether applying the new 
provision to claims that were pending when it took effect would 
produce genuinely retroactive effects. If applying the new provision 
would produce such retroactive effects, VA ordinarily should not 
apply the new provision to the claim. If applying the new provision 
would not produce retroactive effects, VA ordinarily must apply the 
new provision.

    As to the first criterion, with respect to the technical 
corrections in section 104(c), the Act does not ``identif[y] the types 
of claims to which it applies.'' The question then becomes whether 
applying the Act's provisions to claims pending before VA on December 
16, 2003, would produce a ``genuinely retroactive'' effect. For the 
reasons stated below, we believe that it would. Therefore, VA will not 
apply the Act's amendments to claims for 38 U.S.C. 5121 benefits 
pending before VA on December 16, 2003.
    Determining whether applying changes in the law would produce a 
genuinely retroactive effect is a complex undertaking. However, as 
discussed in VAOPGCPREC 7-2003:

    [S]tatutes or regulations that restrict the bases for 
entitlement to a benefit might have disfavored retroactive effects 
as applied to some claims that were pending when they took effect. 
For example, if a veteran was entitled to benefits based on the law 
existing when he or she filed an application with VA, and a 
restrictive change in the governing law occurs before VA adjudicates 
the claim, application of the new restriction might retroactively 
extinguish the claimant's previously existing right to benefits for 
periods before the new law took effect. In those circumstances, 
Landgraf [v. USI Film Products, 511 U.S. 244 (1994),] indicates that 
the intervening restriction would not apply in determining the 
claimant's rights for such periods.

We believe that these principles control the question at hand and call 
for application of 38 U.S.C. 5121 as it existed prior to the Act to 
claims pending on December 16, 2003.
    VA has not contested the holding in Bonny and we thus conclude that 
Bonny states the governing interpretation of 38 U.S.C. 5121 prior to 
the amendments made by the Act. Applying the technical amendment to 
section 5121(a) made by the Act to pending claims would limit the 
amount of benefits some claimants could receive under section 5121(a) 
subsequent to the Bonny decision and prior to enactment of the Act. 
That is, a claimant who had a claim for ``benefits awarded but unpaid'' 
pending on December 16, 2003, would be limited to two years of benefits 
because the technical amendment of the Act eliminated the Bonny 
division of section 5121(a) benefits and the removal of the two-year 
limitation applies only in cases in which the deceased beneficiary died 
on or after December 16, 2003. We believe this would constitute a 
genuine retroactive effect.
    We propose to amend Sec.  3.1000 to reflect the changes to section 
5121 made by the Act. As this proposed regulation will be published 
more than one year after the effective dates prescribed in the Act, we 
propose not to include information regarding the effective dates in the 
regulation itself. If the beneficiary died prior to December 16, 2003, 
and a claim for benefits under 38 U.S.C. 5121 was pending as of 
December 16, 2003, the claim will be adjudicated under the provisions 
of Sec.  3.1000, and the VA regulations cited therein, in effect on 
December 16, 2003. If the beneficiary died prior to December 16, 2003, 
but VA received a claim for benefits under 38 U.S.C. 5121 on or after 
December 16, 2003, the claim will be adjudicated under the proposed 
provisions of Sec.  3.1000, except that the two-year limitation will 
continue to apply. This is because the basis for the Bonny court's 
interpretation of 38 U.S.C. 5121(a) is no longer viable as of December 
16, 2003, but the removal of the two-year limitation is effective only 
where the beneficiary died on or after December 16, 2003.
    To summarize, there are now three potential groups of claimants for 
accrued benefits under current law, whose eligibility varies as 
described on this table:

----------------------------------------------------------------------------------------------------------------
                                      Deceased beneficiary died prior to December 16,
                                                           2003                           Deceased beneficiary
                                   ----------------------------------------------------     died on or after
                                        Claim pending on        Claim received on or        December 16, 2003
                                        December 16, 2003     after  December 16, 2003
----------------------------------------------------------------------------------------------------------------
Does the one-year time limit to     (1) Yes for accrued       Yes for accrued benefits  Yes for accrued benefits
 file the claim apply?               benefits.
                                    (2) No for benefits       In this situation         In this situation
                                     awarded but unpaid.       ``accrued benefits''      ``accrued benefits''
                                                               includes benefits         includes benefits
                                                               awarded but unpaid.       awarded but unpaid.
Does the two-year limitation on     (1) Yes for accrued       Yes for accrued benefits  No.
 the benefit-payable period apply?   benefits.
                                    (2) No for benefits       In this situation         This limitation does not
                                     awarded but unpaid.       ``accrued benefits''      apply if a deceased
                                                               includes benefits         beneficiary died on or
                                                               awarded but unpaid.       after December 16,
                                                                                         2003.
----------------------------------------------------------------------------------------------------------------


[[Page 37030]]

    Based on the statutory changes described above, we propose to amend 
Sec.  3.1000(a) by deleting the comma between the phrases ``to which a 
payee was entitled at his death under existing ratings or decisions'' 
and ``or those based on evidence in the file at date of death''. We 
also propose to delete the phrase ``for a period not to exceed 2 years 
prior to the last date of entitlement as provided in Sec.  3.500(g).'' 
We note that 38 CFR 3.500(g) addresses the effective date of a 
discontinuance or reduction based on the death of the beneficiary. 
Because Sec.  3.500(g) is only used in Sec.  3.1000 regarding the two 
year period, which was repealed by section 104(a) of the Act, and is 
not applicable otherwise to Sec.  3.1000, we propose to delete the 
reference to Sec.  3.500(g). We also propose to change the outdated 
phrase ``his death'' in current Sec.  3.1000(a) to ``his or her 
death''.
    Section 104(b) of the Act also amended section 5121 to provide that 
surviving parents may claim accrued benefits upon the death of a child 
who had claimed benefits under 38 U.S.C. chapter 18. Under section 
104(d) of the Act, this amendment applies when the child dies on or 
after December 16, 2003. To ensure consistency with the statute, we 
propose to include this new provision in Sec.  3.1000. We propose to 
add this provision as a new Sec.  3.1000(a)(4), and redesignate current 
Sec.  3.1000(a)(4) as (a)(5), because current Sec.  3.1000(a)(4) is a 
catch-all default provision, and appropriately should be the last 
provision in paragraph (a).
    The Federal Circuit clarified another aspect of benefits under 38 
U.S.C. 5121 in Jones v. West, 136 F.3d 1296, 1299 (Fed. Cir. 1998):

    Reading [38 U.S.C.] 5101 and 5121 together compels the 
conclusion that, in order for a surviving spouse to be entitled to 
accrued benefits, the veteran must have had a claim pending at the 
time of his death for such benefits or else be entitled to them 
under an existing rating or decision. Section 5101(a) is a clause of 
general applicability and mandates that a claim must be filed in 
order for any type of benefit to accrue or be paid.

Therefore, we additionally propose to amend the definition of 
``[e]vidence in the file at date of death'' in Sec.  3.1000(d)(4) to 
``evidence in VA's possession on or before the date of the 
beneficiary's death, even if such evidence was not physically located 
in the VA claims folder on or before the date of death, in support of a 
claim for VA benefits pending on the date of death.'' We also propose 
to define ``claim for VA benefits pending on the date of death'' in a 
new Sec.  3.1000(d)(5) as ``a claim filed with VA that had not been 
finally adjudicated by VA on or before the date of death.'' This 
statement means that VA would consider a filed claim to have been 
pending on the date of death, if it had not been adjudicated, or, if 
the claim had been adjudicated, the time to appeal had not expired or 
there was no final decision by the Board of Veterans' Appeals (BVA or 
Board). We additionally propose to state in new Sec.  3.1000(d)(5) that 
a claim may include a deceased beneficiary's claim to reopen a finally 
disallowed claim based upon new and material evidence or a deceased 
beneficiary's claim of clear and unmistakable error in a prior rating 
or decision.
    We note the definition in new Sec.  3.1000(d)(5) does not preclude 
a survivor from filing an accrued benefits claim based on a decedent's 
claim that had been judicially appealed. In that case, the CAVC 
typically vacates the BVA decision in order to preserve potential 
accrued benefits claims. For example, the CAVC noted the following in 
Sagnella v. Principi, 15 Vet. App. 242, 246 (2001):

    This Court held in Landicho [v. Brown, 7 Vet. App. 42 (1994),] 
that the appropriate remedy [when a veteran dies while his or her 
BVA decision is on appeal] is to vacate the Board decision from 
which the appeal was taken and to dismiss the appeal. Landicho, 7 
Vet. App. at 54. This ensures that the Board decision and the 
underlying VA regional office (RO) decision(s) will have no 
preclusive effect in the adjudication of any accrued-benefits claims 
derived from the veteran's entitlements. It also nullifies the 
previous merits adjudication by the RO because that decision was 
subsumed in the Board decision.

    Finally, section 5121(a) authorizes payment to survivors only of 
periodic monetary benefits that were ``due and unpaid'' to a deceased 
beneficiary. Because VA is prohibited by 38 U.S.C. 5304(c) from paying 
compensation or pension to a veteran for any period in which the 
veteran received active service pay, no compensation or pension could 
have been ``due'' to a veteran for any period for which he or she 
actually received active service pay. Accordingly, for purposes of 
determining the amount of benefits payable to a survivor under section 
5121(a), compensation or pension benefits could not have been ``due and 
unpaid'' to the veteran for any period for which the veteran received 
active service pay. See VAOPGCPREC 10-2004 (2004). Therefore, we 
propose to add a new paragraph (i) to Sec.  3.1000 to provide this 
explanation.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. This proposed rule would not affect any small entities. 
Therefore, pursuant to 5 U.S.C. 605(b), this proposed rule is exempt 
from the initial and final regulatory flexibility analysis requirements 
of sections 603 and 604.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Order 
classifies a rule as a significant regulatory action requiring review 
by the Office of Management and Budget if it meets any one of a number 
of specified conditions, including: having an annual effect on the 
economy of $100 million or more, creating a serious inconsistency or 
interfering with an action of another agency, materially altering the 
budgetary impact of entitlements or the rights of entitlement 
recipients, or raising novel legal or policy issues. VA has examined 
the economic, legal, and policy implications of this proposed rule and 
has concluded that it is a significant regulatory action because it may 
raise novel legal and policy issues under Executive Order 12866.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any year. This proposed rule would have no such effect on 
State, local, and tribal governments, or on the private sector.

Catalog of Federal Domestic Assistance Numbers and Titles

    The Catalog of Federal Domestic Assistance program numbers and 
titles for this proposal are 64.102, Compensation for Service-Connected 
Deaths for Veterans' Dependents, 64.104, Pension for Non-Service-

[[Page 37031]]

Connected Disability for Veterans, 64.105, Pension to Veterans 
Surviving Spouses, and Children, 64.109, Veterans Compensation for 
Service-Connected Disability, and 64.110, Veterans Dependency and 
Indemnity Compensation for Service-Connected Death.

List of Subjects in 38 CFR Part 3

    Administrative practice and procedure, Claims, Disability benefits, 
Health care, Pensions, Radioactive materials, Veterans, Vietnam.

    Approved: March 17, 2006.
Gordon H. Mansfield,
Deputy Secretary of Veterans Affairs.

    For the reasons set out in the preamble, VA proposes to amend 38 
CFR part 3 (subpart A) 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. Amend Sec.  3.1000 as follows:
    a. In paragraph (a) introductory text, remove ``at his death'' and 
add, in its place, ``at his or her death''; remove ``decisions, or'' 
and add, in its place, ``decisions or''; and remove ``for a period not 
to exceed 2 years prior to the last date of entitlement as provided in 
Sec.  3.500(g)''.
    b. Redesignate paragraph (a)(4) as paragraph (a)(5).
    c. Add a new paragraph (a)(4).
    d. In paragraph (d)(4), add ``, in support of a claim for VA 
benefits pending on the date of death'' immediately following ``before 
the date of death''.
    e. Add paragraph (d)(5).
    f. Add paragraph (i).
    The additions read as follows:


Sec.  3.1000  Entitlement under 38 U.S.C. 5121 to benefits due and 
unpaid upon death of a beneficiary.

    (a) * * *
    (4) Upon the death of a child claiming benefits under chapter 18 of 
this title, to the surviving parents.
* * * * *
    (d) * * *
    (5) Claim for VA benefits pending on the date of death means a 
claim filed with VA that had not been finally adjudicated by VA on or 
before the date of death. Such a claim includes a deceased 
beneficiary's claim to reopen a finally disallowed claim based upon new 
and material evidence or a deceased beneficiary's claim of clear and 
unmistakable error in a prior rating or decision. Any new and material 
evidence must have been in VA's possession on or before the date of the 
beneficiary's death.
* * * * *
    (i) Active service pay. Benefits awarded under this section do not 
include compensation or pension benefits for any period for which the 
veteran received active service pay.

(Authority: 38 U.S.C. 5304(c))

 [FR Doc. E6-10228 Filed 6-28-06; 8:45 am]
BILLING CODE 8320-01-P