[Federal Register Volume 71, Number 223 (Monday, November 20, 2006)]
[Rules and Regulations]
[Pages 67059-67061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19603]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AM13


Phase-In of Full Concurrent Receipt of Military Retired Pay and 
Veterans Disability Compensation for Certain Military Retirees

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) is amending its 
regulations concerning concurrent receipt of military retired pay and 
veterans' disability compensation. This final rule implements section 
641 of the National Defense Authorization Act for Fiscal Year 2004 
(Pub. L. 108-136). This law permits certain veterans who are entitled 
to military retired pay and are receiving disability compensation for a 
service-connected disability (or a combination of service-connected 
disabilities) rated at 50 percent or higher to receive disability 
compensation as well as their military retired pay. The intended effect 
of the regulation is to clearly state who is eligible for concurrent 
receipt of disability compensation and military retired pay, who must 
waive military retired pay to receive disability compensation, and how 
to file such a waiver.

DATES: Effective Date: This amendment is effective November 20, 2006.

FOR FURTHER INFORMATION CONTACT: Maya Ferrandino, Consultant, 
Regulations Staff (211D), Compensation and Pension Service, Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Ave., NW., Washington, DC 20420, (202) 273-7211.

SUPPLEMENTARY INFORMATION: On July 7, 2005, VA published in the Federal 
Register (70 FR 39213) a proposal to revise VA's rules concerning 
concurrent receipt of military retired pay and veterans' disability 
compensation. Interested persons were invited to submit written 
comments on or before September 6, 2005. We received comments from six 
members of the public. Subsequently, on January 6, 2006, Congress 
further amended section 1414 of title 10, United States Code, by 
enacting section 663 of Public Law 109-163, the National Defense 
Authorization Act for Fiscal Year 2006. This Notice first explains why 
we have made changes based on the comments to the July 7, 2005, notice 
of proposed rulemaking, and then explains changes necessitated by 
section 663 of Public Law 109-163.

Comments to July 7, 2005, Notice of Proposed Rulemaking

    Three commenters stated support for concurrent receipt. These 
commenters did not suggest any changes to the proposed rule, and we 
make no change based on these comments.
    Two commenters questioned the 20-year service requirement for the 
program, and why those who are medically retired from the military, 
with less than 20 years of service, have to give up their retired pay 
in order to receive disability compensation. Title 10 U.S.C. 1414(b)(2) 
clearly precludes persons medically retired with less than 20 years of 
service from concurrently

[[Page 67060]]

receiving retired pay and VA benefits. Thus, in this rulemaking, VA is 
simply implementing existing law passed by Congress. VA does not have 
authority to change the eligibility requirements provided by statute 
regarding the concurrent receipt of retired pay and VA benefits for 
retired veterans. However, we have removed the general 20-year-service 
requirement from proposed Sec.  3.750(b)(1) because 10 U.S.C. 1414 
contains no such requirement.
    Moreover, because we believe that several of the comments, as well 
as our own internal review during the comment period, suggest a need 
for some clarification as to the waivers required by 10 U.S.C. 1414 of 
persons retired under chapter 61 of title 10, U.S.C., we have slightly 
modified the structure and language of Sec.  3.750(b)(2). Paragraph 
(b)(2) now clearly states that persons retired under chapter 61 must 
comply with any waivers required by Sec.  3.750(c) as well as any 
waivers required by 38 U.S.C. 5304 and 5305, which are explicitly 
applicable to chapter 61 retirees under 10 U.S.C. 1414(b)(1). We also 
clarify in paragraph (c) the types of waivers applicable to persons who 
are eligible for both retired pay and disability compensation. These 
changes directly implement statutory language, which is not susceptible 
to a different interpretation, and simply clarify the regulation 
previously proposed, without changing the rights and obligations 
governed by that regulation.
    One commenter stated that the amendment to 10 U.S.C. 1414 made by 
section 641 of Public Law 108-136 will also affect 10 U.S.C. 1408, The 
Uniformed Services Former Spouses Protection Act, Public Law 97-252, 96 
Stat. 730 (1982)), which is administered by the Department of Defense 
(DoD). The commenter asserted that, in affecting section 1408, the new 
provisions will affect State, local or tribal governments as they 
independently adjudicate civil court marital separation agreements and 
divorce decrees, which are required to address protection of a military 
service person's rights. This comment is outside of the scope of the 
proposed regulation. The commenter suggested no changes to the 
regulation; the comment questioned a statute's effect on another, 
tangentially related statute that is outside VA's authority. Therefore, 
we make no change based on this comment.
    In paragraph (a), we changed, ``For the purposes of this section,'' 
to read, ``For the purposes of this part,'' because all part 3 
references to military retired pay meet this definition. Also in 
paragraph (a), we changed ``classified as military retired pay'' to 
``classified as retired pay'' to clarify that the service department 
need not use the specific adjective ``military'' in its classification. 
No substantive change is intended by this clarification.

Changes Necessitated by Section 663 of Public Law 109-163

    On January 6, 2006, section 663 of the National Defense 
Authorization Act for Fiscal Year 2006, Public Law 109-163, amended 
section 1414 of title 10, United States Code. Section 663 permits 
certain veterans who are eligible for military retired pay and for 
veterans' disability compensation for 100-percent disability based on a 
determination of individual unemployability to receive concurrent 
payment of both military retired pay and disability compensation 
subject to the phase-in period during the period beginning on January 
1, 2004, and ending on September 30, 2009. VA adjudicates individual 
unemployability claims under 38 CFR 4.16. Based on this change in law, 
we have included veterans receiving disability compensation based on a 
VA determination of individual unemployability under 38 CFR 4.16 in 
section (b)(1), and added language to section (c)(ii) concerning the 
phase-in period to incorporate this provision into the rule.
    VA appreciates the comments submitted in response to the proposed 
rule. Based on the rationale stated in the proposed rule and in this 
document, the proposed rule is adopted as a final rule with the changes 
noted above.

Paperwork Reduction Act

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

Regulatory Flexibility Act

    The Secretary hereby certifies that this final 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. The reason for this certification is that this amendment would not 
directly affect any small entities. Only VA beneficiaries could be 
directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this final 
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 final rule and has 
concluded that it is a significant regulatory action 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 final 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 rulemaking are 64.104, Pension for Non-Service-
Connected Disability for Veterans; 64.105, Pension to Veterans 
Surviving Spouses, and Children; 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, 
Pensions, Veterans.

    Approved: August 10, 2006.
Gordon H. Mansfield,
Deputy Secretary of Veterans Affairs.

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

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:


[[Page 67061]]


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


0
2. Revise Sec.  3.750 to read as follows:


Sec.  3.750  Entitlement to concurrent receipt of military retired pay 
and disability compensation.

    (a) Definition of military retired pay. For the purposes of this 
part, military retired pay is payment received by a veteran that is 
classified as retired pay by the Service Department, including retainer 
pay, based on the recipient's service as a member of the Armed Forces 
or as a commissioned officer of the Public Health Service, the Coast 
and Geodetic Survey, the Environmental Science Services Administration, 
or the National Oceanic and Atmospheric Administration.
    (b) Payment of both military retired pay and disability 
compensation or improved pension--(1) Compensation. Subject to 
paragraphs (b)(2) and (b)(3) of this section, a veteran who is entitled 
to military retired pay and disability compensation for a service-
connected disability rated 50 percent or more, or a combination of 
service-connected disabilities rated at 50 percent or more, under the 
schedule for rating disabilities (38 CFR part 4, subpart B), or based 
on a determination of individual unemployability under 38 CFR 4.16, is 
entitled to receive both payments subject to the phase-in period 
described in paragraph (c) of this section.
    (2) Chapter 61 disability retirees retiring with 20 or more years 
of service. Disability retired pay payable under 10 U.S.C. Chapter 61 
to a veteran with 20 or more years of creditable service may be paid 
concurrently with disability compensation to a qualifying veteran 
subject to the following:
    (i) Any waiver required during the phase-in period under paragraph 
(c)(1)(ii) of this section; and
    (ii) if the veteran's disability retired pay exceeds the amount of 
retired pay the veteran would have received had the veteran retired 
based on length of service, the veteran must waive that excess amount 
of disability retired pay in order to receive VA disability 
compensation.
    (3) Chapter 61 disability retirees retiring with less than 20 years 
of service. Veterans who receive disability retired pay under 10 U.S.C. 
Chapter 61 with less than 20 years of creditable service are not 
eligible for concurrent receipt.
    (4) Improved Pension. A veteran may receive improved pension and 
military retired pay at the same time without having to waive military 
retired pay. However, in determining entitlement to improved pension, 
VA will treat military retired pay in the same manner as countable 
income from other sources.
    (c) Waiver--(1) When a waiver is necessary. (i) A waiver of 
military retired pay is necessary in order to receive disability 
compensation when a veteran is eligible for both military retired pay 
and disability compensation but is not eligible under paragraphs (b)(1) 
or (b)(2) of this section to receive both benefits at the same time.
    (ii) All veterans who are eligible to receive both military retired 
pay and disability compensation at the same time under paragraphs 
(b)(1) or (b)(2) of this section, except those receiving compensation 
for a disability rated 100 percent, must file a waiver in order to 
receive the maximum allowable amount of disability compensation during 
the phase-in period. For veterans receiving disability compensation 
based on a VA determination of individual unemployability, the phase-in 
period ends on December 30, 2009. For all other veterans, the phase-in 
period ends on December 31, 2013. After the phase-in period, veterans 
retired under 10 U.S.C. chapter 61 who are eligible for concurrent 
receipt must still file a waiver under the circumstances described in 
paragraph (b)(2)(ii) of this section.

(Authority: 10 U.S.C. 1414, 38 U.S.C. 5304, 5305)

    (2) How to file a waiver of military retired pay. A veteran may 
request a waiver of military retired pay in any written, signed 
statement, including a VA form, which reflects a desire to waive all or 
some military retired pay. The statement must be submitted to VA or to 
the Federal agency that pays the veteran's military retired pay. VA 
will treat as a waiver an application for VA compensation filed by a 
veteran who is entitled to military retired pay.
    (d) Elections and the right to reelect either benefit. (1) A 
veteran who has filed a waiver of military retired pay under this 
section has elected to receive disability compensation. A veteran may 
reelect between benefits covered by this section at any time by 
submitting a written, signed statement to VA or to the Federal agency 
that pays the veteran's military retired pay.
    (2) An election filed within 1 year from the date of notification 
of Department of Veterans Affairs entitlement will be considered as 
``timely filed'' for effective date purposes. See Sec.  3.401(e)(1). If 
the veteran is incompetent, the 1-year period will begin on the date 
that notification is sent to the next friend or fiduciary. In initial 
determinations, elections may be applied retroactively if the claimant 
was not advised of his or her right of election and its effect.

(Authority: 38 U.S.C. 5304(a), 5305)

 [FR Doc. E6-19603 Filed 11-17-06; 8:45 am]
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