[Federal Register Volume 73, Number 212 (Friday, October 31, 2008)]
[Proposed Rules]
[Pages 65212-65234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25547]



[[Page 65211]]

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Part V





Department of Veterans Affairs





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38 CFR Part 5



Payments and Adjustments to Payments; Proposed Rule

  Federal Register / Vol. 73 , No. 212 / Friday, October 31, 2008 / 
Proposed Rules  

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 5

RIN 2900-AM06


Payments and Adjustments to Payments

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to reorganize 
and rewrite in plain language provisions applicable to payment of VA 
benefits and adjustments to payments. These revisions are proposed as 
part of VA's rewrite and reorganization of all of its compensation and 
pension rules in a logical, claimant-focused, and user-friendly format. 
The intended effect of the proposed revisions is to assist claimants, 
beneficiaries and VA personnel in locating and understanding these 
rules.

DATES: Comments must be received by VA on or before December 30, 2008.

ADDRESSES: Written comments may be submitted through http://www.regulations.gov; by mail or hand-delivery to: Director, Regulations 
Management (02REG), Department of Veterans Affairs, 810 Vermont Ave., 
NW., Room 1068, Washington, DC 20420; or by fax to (202) 273-9026 (not 
a toll-free number). Comments should indicate that they are submitted 
in response to ``RIN 2900-AM06--Payments and Adjustments to Payments.'' 
Copies of 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) 461-4902 for an appointment (not a toll-free number). 
In addition, during the comment period, comments may be viewed online 
through the Federal Docket Management System (FDMS) at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: William F. Russo, Director of 
Regulations Management (02REG), Department of Veterans Affairs, 810 
Vermont Avenue, NW., Washington, DC 20420, (202) 461-4902 (not a toll-
free number).

SUPPLEMENTARY INFORMATION: The Secretary of Veterans Affairs has 
established an Office of Regulation Policy and Management to provide 
centralized management and coordination of VA's rulemaking process. One 
of the major functions of this office is to oversee a Regulation 
Rewrite Project (the Project) to improve the clarity and consistency of 
existing VA regulations. The Project responds to a recommendation made 
in the October 2001 ``VA Claims Processing Task Force: Report to the 
Secretary of Veterans Affairs.'' The Task Force recommended that the 
compensation and pension regulations be rewritten and reorganized in 
order to improve VA's claims adjudication process. Therefore, the 
Project began its efforts by reviewing, reorganizing, and redrafting 
the content of the regulations in 38 CFR part 3 governing the 
compensation and pension program of the Veterans Benefits 
Administration. These regulations are among the most difficult VA 
regulations for readers to understand and apply.
    Once rewritten, the proposed regulations will be published in 
several portions for public review and comment. This is one such 
portion. It includes proposed rules regarding general rate-setting and 
adjustment and resumption of benefits. After review and consideration 
of public comments, final versions of these proposed regulations will 
ultimately be published in a new part 5 in 38 CFR.

Outline

Overview of New Part 5 Organization.
Overview of This Notice of Proposed Rulemaking.
Table Comparing Current Part 3 Rules with Proposed Part 5 Rules.
Content of Proposed Regulations.
    General Rate-Setting and Payments
    5.690 Where to find benefit rates and income limits.
    5.691 Adjustments for fractions of dollars.
    5.692 Fractions of one cent not paid.
    5.693 Beginning date for certain VA benefit payments.
    5.694 Surviving spouse's benefit for the month of the veteran's 
death.
    5.695 Payments to or for a child pursuing a course of 
instruction at an approved educational institution.
    5.696 Awards of dependency and indemnity compensation when not 
all dependents apply.
    5.697 Exchange rates for income received or expenses paid in 
foreign currencies.
    General Reductions, Discontinuances, and Resumptions
    5.705 General effective dates for reduction or discontinuance of 
benefits.
    5.706 Payments excluded in calculating income or net worth.
    5.707 Deductible medical expenses.
    5.708 Eligibility verification reports.
    5.709 Claimant and beneficiary responsibility to report changes.
    5.710 Adjustment in benefits due to reduction or discontinuance 
of a benefit to another payee.
    5.711 Payment to dependents due to the disappearance of a 
veteran for 90 days or more.
    5.712 Suspension of VA benefits due to the disappearance of a 
payee.
    5.713 Restriction on VA benefit payments to an alien located in 
enemy territory.
    5.714 Restriction on delivery of VA benefit payments to payees 
located in countries on Treasury Department list.
    5.715 Claims for undelivered or discontinued benefits.
Endnote Regarding Amendatory Language.
Paperwork Reduction Act of 1995.
Regulatory Flexibility Act.
Executive Order 12866.
Unfunded Mandates.
Catalog of Federal Domestic Assistance Numbers and Titles.
List of Subjects in 38 CFR Part 5.

Overview of New Part 5 Organization

    We plan to organize the part 5 regulations so that most of the 
provisions governing a specific benefit are located in the same 
subpart, with general provisions pertaining to all compensation and 
pension benefits also grouped together. This organization will enable 
claimants, beneficiaries, and their representatives, as well as VA 
adjudicators, to find information relating to a specific benefit more 
quickly than the organization provided in current part 3.
    The first major subdivision would be ``Subpart A--General 
Provisions.'' It would include information regarding the scope of the 
regulations in new part 5, general definitions, and general policy 
provisions for this part. This subpart was published as proposed on 
March 31, 2006. See 71 FR 16464.
    ``Subpart B--Service Requirements for Veterans'' would include 
information regarding a veteran's military service, including the 
minimum service requirement, types of service, periods of war, and 
service evidence requirements. This subpart was published as proposed 
on January 30, 2004. See 69 FR 4820.
    ``Subpart C--Adjudicative Process, General'' would inform readers 
about claims and benefit application filing procedures, VA's duties, 
rights and responsibilities of claimants and beneficiaries, general 
evidence requirements, and general effective dates for new awards, as 
well as revision of decisions and protection of VA ratings. This 
subpart will be published as three separate Notices of Proposed 
Rulemaking (NPRMs) due to its size. The first, concerning the duties of 
VA and the rights and responsibilities of claimants and beneficiaries, 
was published as proposed on May 10, 2005. See 70 FR 24680. The second, 
covering general evidence requirements, effective dates for awards, 
revision of decisions, and protection of VA ratings, was published as 
proposed on May 22, 2007. See 72 FR 28770. The third, concerning

[[Page 65213]]

rules on filing VA benefits claims, was published as proposed on April 
14, 2008. See 73 FR 20136.
    ``Subpart D--Dependents and Survivors'' would inform readers how VA 
determines whether an individual is a dependent or a survivor for 
purposes of determining eligibility for VA benefits. It would also 
provide the evidence requirements for these determinations. This 
subpart was published as proposed on September 20, 2006. See 71 FR 
55052.
    ``Subpart E--Claims for Service Connection and Disability 
Compensation'' would define service-connected disability compensation 
and service connection, including direct and secondary service 
connection. This subpart would inform readers how VA determines service 
connection and entitlement to disability compensation. The subpart 
would also contain those provisions governing presumptions related to 
service connection, rating principles, and effective dates, as well as 
several special ratings. This subpart will be published as three 
separate NPRMs due to its size. The first, concerning presumptions 
related to service connection, was published as proposed on July 27, 
2004. See 69 FR 44614. The second, relating to special ratings and 
ratings for health care eligibility only, was published as proposed on 
October 17, 2008. See 73 FR 62004.
    ``Subpart F--Nonservice-Connected Disability Pensions and Death 
Pensions'' would include information regarding the three types of 
nonservice-connected pension: Old-Law Pension, Section 306 Pension, and 
Improved Pension. This subpart would also include those provisions that 
state how to establish entitlement to Improved Pension and the 
effective dates governing each pension. This subpart will be published 
in two separate NPRMs due to its size. The portion concerning Old-Law 
Pension, Section 306 Pension, and elections of Improved Pension was 
published as proposed on December 27, 2004. See 69 FR 77578. The 
portion concerning eligibility and entitlement requirements, as well as 
effective dates for Improved Pension, was published as proposed on 
September 26, 2007. See 72 FR 54776.
    ``Subpart G--Dependency and Indemnity Compensation, Death 
Compensation, Accrued Benefits, and Special Rules Applicable Upon Death 
of a Beneficiary'' would contain regulations governing claims for 
dependency and indemnity compensation (DIC); death compensation; 
accrued benefits; benefits awarded; and various special rules that 
apply to the disposition of VA benefits, or proceeds of VA benefits, 
when a beneficiary dies. This subpart would also include related 
definitions, effective date rules, and rate-of-payment rules. This 
subpart was published as two separate NPRMs due to its size. The 
portion concerning accrued benefits, death compensation, special rules 
applicable upon the death of a beneficiary, and several effective date 
rules, was published as proposed on October 1, 2004. See 69 FR 59072. 
The portion concerning DIC benefits and general provisions relating to 
proof of death and service-connected cause of death was published as 
proposed on October 21, 2005. See 70 FR 61326.
    ``Subpart H--Special and Ancillary Benefits for Veterans, 
Dependents, and Survivors'' would pertain to special and ancillary 
benefits available, including benefits for children with various birth 
defects. This subpart was published as proposed on March 9, 2007. See 
72 FR 10860.
    ``Subpart I--Benefits for Certain Filipino Veterans and Survivors'' 
would pertain to the various benefits available to Filipino veterans 
and their survivors. This subpart was published as proposed on June 30, 
2006. See 71 FR 37790.
    ``Subpart J--Burial Benefits'' would pertain to burial allowances. 
This subpart was published as proposed on April 8, 2008. See 73 FR 
19021.
    ``Subpart K--Matters Affecting the Receipt of Benefits'' would 
contain provisions regarding bars to benefits, forfeiture of benefits, 
and renouncement of benefits. This subpart was published as proposed on 
May 31, 2006. See 71 FR 31056.
    ``Subpart L--Payments and Adjustments to Payments'' would include 
general rate-setting rules, several adjustment and resumption 
regulations, and election-of-benefit rules. Because of its size, 
subpart L will be published in two separate NPRMs, one of which is this 
NPRM. The first, concerning payments to beneficiaries who are eligible 
for more than one benefit, was published as proposed on October 2, 
2007. See 72 FR 56136. The second, concerning provisions applicable to 
payment of VA benefits and adjustments to payments, is the subject of 
this document.
    The final subpart, ``Subpart M--Apportionments to Dependents and 
Payments to Fiduciaries and Incarcerated Beneficiaries,'' would include 
regulations governing apportionments, benefits for incarcerated 
beneficiaries, and guardianship.
    Some of the regulations in this NPRM cross-reference other 
compensation and pension regulations. If those regulations have been 
published in this or earlier NPRMs for the Project, we cite the 
proposed part 5 section. We also include, in the relevant portion of 
the Supplementary Information, the Federal Register page where a 
proposed part 5 section published in an earlier NPRM may be found. 
However, where a regulation proposed in this NPRM would cross-reference 
a proposed part 5 regulation that has not yet been published, we cite 
to the current part 3 regulation that deals with the same subject 
matter. The current part 3 section we cite may differ from its eventual 
part 5 counterpart in some respects, but this method will assist 
readers in understanding these proposed regulations where no part 5 
counterpart has yet been published. If there is no part 3 counterpart 
to a proposed part 5 regulation that has not yet been published, we 
have inserted ``[regulation that will be published in a future Notice 
of Proposed Rulemaking]'' where the part 5 regulation citation would be 
placed.
    Because of its large size, proposed part 5 will be published in a 
number of NPRMs, such as this one. VA will not adopt any portion of 
part 5 as final until all of the NPRMs have been published for public 
comment.
    In connection with this rulemaking, VA will accept comments 
relating to a prior rulemaking issued as a part of the Project, if the 
matter being commented on relates to both rulemakings.

Overview of This Notice of Proposed Rulemaking

    This NPRM pertains to those regulations governing payment of 
benefits, adjustments to payments, and regulations related to 
resumption of benefits. These regulations would be contained in 
proposed Subpart L of new 38 CFR part 5. Although these regulations 
have been substantially restructured and rewritten for greater clarity 
and ease of use, most of the basic concepts contained in these proposed 
regulations are the same as in their existing counterparts in 38 CFR 
part 3. However, a few substantive differences are proposed, as are 
some regulations that do not have counterparts in 38 CFR part 3.

Table Comparing Current Part 3 Rules With Proposed Part 5 Rules

    The following table shows the relationship between the current 
regulations in part 3 and those proposed regulations contained in this 
NPRM:

[[Page 65214]]



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                                            Based in whole or in part on
   Proposed part 5  section or paragraph      38 CFR part 3 section or
                                               paragraph (or ``New'')
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5.690.....................................  3.21
5.691(a)..................................  3.260(g)
5.691(b)..................................  3.29(a) and (c)
5.691(c)..................................  3.29(b)
5.692.....................................  3.112
5.693(a)..................................  3.31(a)
5.693(b)..................................  Introduction to 3.31.
5.693(c)..................................  3.31(b) and (c)
5.693(c)(1)...............................  3.31(b)
5.693(c)(2)...............................  New.
5.693(c)(3)...............................  3.31(c)(1)
5.693(c)(4)...............................  3.31(c)(3)
5.693(c)(5)...............................  3.31(c)(4)
5.693(c)(6)...............................  3.31(c)(5)
5.693(c)(7)...............................  3.31(c)(3)
5.693(c)(8)...............................  3.31(c)(2)
5.693(c)(9)...............................  3.656(a) and (d)
5.693(d)..................................  3.401(e), 3.750
5.693(e)(1) and (e)(2)....................  3.31(c)(2)
5.693(e)(3)...............................  Introduction to 3.31.
5.694.....................................  3.20
5.695(a)..................................  3.57(a)(1)(iii)
5.695(b)..................................  3.57(a)(1)(iii), 3.667(a)(1)
                                             and (a)(2)
5.695(c) and (c)(1).......................  3.667(a)(3)
5.695(c)(2)...............................  3.667(a)(4)
5.695(c)(3)...............................  3.667(a)(3)
5.695(d)..................................  3.667(a)(5)
5.695(e)..................................  New
5.695(f)..................................  3.667(b)
5.695(g)..................................  3.667(c)
5.695(h)..................................  3.667(d)
5.695(i)..................................  3.667(f)
5.696.....................................  3.107
5.697(a)..................................  Introduction to 3.32.
5.697(a)(1)...............................  3.32(a)(1)
5.697(a)(2)...............................  3.32(a)(2)
5.697(b) and (c)..........................  3.32(b)
5.705(a)..................................  Introduction to 3.500,
                                             3.500(a), Introduction to
                                             3.501, Introduction to
                                             3.502, 3.503(a).
5.705(b)..................................  New.
5.706(a) and (b)..........................  New.
5.706(b)(1)...............................  3.261(a)(32)
5.706(b)(2)...............................  3.262(z), 3.263(h),
                                             3.272(v), 3.275(j),
                                             3.261(a)(41)
5.706(b)(3)...............................  3.262(u), 3.263(f),
                                             3.272(p), 3.275(g),
                                             3.261(a)(36)
5.706(b)(4)...............................  New.
5.706(b)(5)...............................  3.262(s), 3.263(e),
                                             3.272(o), 3.275(f),
                                             3.261(a)(35)
5.706(b)(6)...............................  3.262(y), 3.263(g),
                                             3.272(u), 3.275(i),
                                             3.261(a)(40)
5.706(b)(7)...............................  New.
5.706(b)(8)...............................  3.262(v), 3.272(r),
                                             3.261(a)(37)
5.706(b)(9) and (10)......................  New.
5.706(b)(11)..............................  3.262(x), 3.272(t),
                                             3.261(a)(39)
5.706(b)(12) through (14).................  New.
5.706(b)(15)..............................  3.262(q), 3.272(k),
                                             3.261(a)(33) and (a)(34)
5.706(b)(16) through (22).................  New.
5.706(b)(23)..............................  3.261(a)(14)
5.706(b)(24)..............................  New.
5.707(a) and (b)..........................  New.
5.707(c)..................................  3.261(b)(1), 3.262(l),
                                             3.272(g)
5.708(a)..................................  3.256(b), 3.277(c)
Introduction to 5.708(b)..................  3.277(c)(3)
5.708(b)(1)...............................  New.
5.708(b)(2)...............................  3.256(b)(3), 3.277(c)(2)
5.708(c)..................................  New.
5.708(d)..................................  3.661(a)(1) and (2)
5.708(e)..................................  3.256(c), 3.277(d)
5.708(f)(1)...............................  3.256(c), 3.277(d)
5.708(f)(2)...............................  New.
5.708(f)(3)...............................  3.661(b)(2)(i)
5.708(g)..................................  3.661(b)(2)(iii)
5.708(h)..................................  3.661(b)(2)(ii)
5.709(a)..................................  3.256(a), 3.277(a) and (b),
                                             3.660(a)(1)
5.709(b)..................................  3.256(a), 3.277(b)
5.710(a)..................................  3.651(a)
5.710(b)..................................  3.651(b)
5.710(c)..................................  3.651(c)
5.711(a)..................................  3.656(a)
5.711(b)..................................  3.656(a)
5.711(c)..................................  3.656(d)
5.711(d)(1)...............................  3.656(b)
5.711(d)(2)...............................  3.656(c)
5.712.....................................  3.158(c)
5.713(a) through (b)(1)...................  3.653(a)
5.713(b)(2) and (b)(3)....................  New.
5.713(c)..................................  New.
5.714(a)..................................  New.
5.714(b)..................................  3.653(c)(1)
5.714(c) and (d)..........................  3.653(c)
5.714(e)..................................  3.653(b)
5.714(f)..................................  New.
5.715(a)..................................  New.
5.715(b)(1)...............................  3.653(b)
5.715(b)(2)...............................  3.653(c)(3)
5.715(b)(3)...............................  3.653(b)
5.715(c)..................................  3.653(b)
5.715(d)..................................  3.653(b) and (c)(3)
5.715(e)..................................  3.653(d)
5.715(f)..................................  New.
------------------------------------------------------------------------

    Readers who use this table to compare existing regulatory 
provisions with the proposed provisions, and who observe a substantive 
difference between them, should consult the text that appears later in 
this document for an explanation of significant changes in each 
regulation. Not every paragraph of every current part 3 section 
regarding the subject matter of this rulemaking is accounted for in the 
table. In some instances, other portions of the part 3 sections that 
are addressed in these proposed regulations will appear in subparts of 
part 5 that are being published separately for public comment. For 
example, a reader might find a reference to paragraph (a) of a part 3 
section in the table, but no reference to paragraph (b) of that section 
because paragraph (b) will be addressed in a separate NPRM. The table 
also does not include provisions from part 3 regulations that will not 
be repeated in part 5. Such provisions are discussed specifically under 
the appropriate part 5 heading in this preamble. Readers are invited to 
comment on the proposed part 5 provisions and also on our proposals to 
omit those part 3 provisions from part 5.

Content of Proposed Regulations

General Rate-Setting and Payments

5.690 Where To Find Benefit Rates and Income Limits
    Proposed Sec.  5.690 is based on current Sec.  3.21, with a few 
changes.
    First, we propose to not include in part 5 the reference to 
appendix B of the Veterans Benefits Administration Manual M21-1 because 
the reference is outdated and because the rates are available at our 
Web site, which is easily available to the general public. The proposed 
regulation would guide readers to that site. Second, we propose to 
include a reference to the monthly allowances payable under 38 U.S.C. 
chapter 18 for children disabled from spina bifida or with certain 
birth defects. Adding this reference in connection with the general 
reference to the publication of rates on our Web site will direct 
readers to one location to find information about most of the rates for 
benefits payable under part 5.
    Current Sec.  3.21 involves monetary rates for VA benefits. The 
last two sentences of current Sec.  3.21 read:

    The maximum annual rates of improved pension payable under Pub. 
L. 95-588 (92 Stat. 2497) are set forth in Sec. Sec.  3.23 and 3.24. 
The monthly rates and annual income limitations applicable to 
parents [DIC] are set forth in Sec.  3.25.

    Although the rates and income limits for Improved Pension and 
parents' DIC were at one time contained in Sec. Sec.  3.23 through 
3.25, that is no longer the case. Moreover, the rates and income limits 
applicable to Improved Pension and parents' DIC, like the other VA 
benefits described above, are available on our Web site. Therefore, we 
propose not to include a reference to the part 5 equivalents of current 
Sec. Sec.  3.23 through 3.25 in Sec.  5.690.
5.691 Adjustments for Fractions of Dollars
    Proposed Sec.  5.691 provides rules regarding how VA rounds to the 
nearest dollar in various calculations. It restates in plain language 
current Sec. Sec.  3.29 and 3.260(g).

[[Page 65215]]

    Current Sec.  3.260(g) includes rules governing the computation of 
income for both pension and parents' DIC. (DIC for surviving spouses 
and children is not based on income.) To clarify that, in the context 
of DIC, income calculations are relevant only as to parents' DIC, 
proposed Sec.  5.691(a) would specifically refer to ``parents' 
dependency and indemnity compensation'' instead of ``dependency and 
indemnity compensation.''
    Sections 5.531 through 5.534, cited in proposed Sec.  5.691(a), 
were published as proposed on October 21, 2005. See 70 FR 61326, 61344-
47. Section 5.370, also cited in proposed Sec.  5.691(a), was published 
as proposed on September 26, 2007. See 72 FR 54776, 54792.
    We have intentionally omitted from proposed Sec.  5.691(c) the June 
1, 1983, applicability date for rates of pension, found in current 
Sec.  3.29(b). Because these regulations will apply only to claims 
filed on or after the effective date of part 5, which will be no 
earlier than 2011, it is exceedingly unlikely that these regulations 
will apply to pension awards retroactive earlier than 1984. We have 
also simplified the text for clarity.
5.692 Fractions of One Cent Not Paid
    Proposed Sec.  5.692 restates in plain language current Sec.  
3.112. VA intends no substantive change.
    We note that, with respect to certain benefits, 38 U.S.C. 
5312(c)(2) explicitly permits VA to round payments ``in such manner as 
the Secretary considers equitable and appropriate for ease of 
administration.'' This statute, combined with VA's general rulemaking 
authority, gives VA authority to exclude fractions of a cent from 
payment. VA considers this practice equitable and necessary to 
efficiently administer the benefit programs covered by proposed 38 CFR 
part 5.
5.693 Beginning Date for Certain VA Benefit Payments
    The Omnibus Budget Reconciliation Act of 1982 (OBRA), Pub. L. 97-
253, 96 Stat. 763, introduced a number of Federal cost-saving measures. 
Section 401 of the OBRA, 96 Stat. at 801, which is now codified at 38 
U.S.C. 5111, ``Commencement of period of payment,'' prohibits VA from 
paying certain benefits for any period before the first day of the 
calendar month following the month in which the award or increased 
award of the benefit becomes effective. The provisions of 38 U.S.C. 
5111 are currently implemented in Sec.  3.31 and are the subject of 
proposed Sec.  5.693. We propose several changes from the current 
regulation.
    Proposed Sec.  5.693(b) restates current Sec.  3.31(b) and 
incorporates with one change the list in the introduction to Sec.  3.31 
of the benefits affected by the beginning payment date rule. The 
benefits affected are disability compensation, pension, dependency and 
indemnity compensation and monetary allowances under 38 U.S.C. chapter 
18 for children disabled from spina bifida or with certain birth 
defects. The proposed change is that we not include the reference to 
Vietnam, which is found in current Sec.  3.31. This change is required 
because the law no longer limits chapter 18 benefits to children of 
Vietnam-era service veterans. See Pub. L. 108-183, sec. 102, 117 Stat. 
2651, 2653 (adding 38 U.S.C. 1821, ``Benefits for children of certain 
Korea service veterans born with spina bifida''). Therefore, proposed 
Sec.  5.693(b)(4) simply refers to payment of ``monetary allowances 
under 38 U.S.C. chapter 18 for children disabled from spina bifida or 
with certain birth defects.''
    Proposed Sec.  5.693(c) lists payments that are not subject to the 
general rule found in proposed paragraph (b). The list is derived from 
current Sec.  3.31(b) and (c). We propose to add a payment not found in 
the current regulation. The new payment, found in proposed Sec.  
5.693(c)(2), pertains to ``[a]wards restoring a previously reduced 
benefit because the circumstances requiring reduction no longer 
exist.'' VA does not consider such a restoration of a previously 
reduced award to be an ``increased award'' as defined by proposed Sec.  
5.693(a), but rather a restoration of the pre-adjustment rate. This 
award is more correctly viewed as a discontinuance of a temporary 
reduction and not an increase subject to the delayed payments described 
in proposed paragraph (b) of this section.
    Next, we propose to restate with clarifying language an exception 
found in current Sec.  3.31(c)(4). Current Sec.  3.31(c)(4) includes an 
exception to the delayed payment provision of OBRA for increases 
resulting solely from the enactment of certain types of legislation and 
includes several examples. One example, found at Sec.  3.31(c)(4)(iii), 
refers to ``[c]hanges in the criteria for statutory award 
designations.'' The example is taken from examples in the joint House 
and Senate Committee Conference report regarding OBRA. See H.R. Conf. 
Rep. No. 97-759, at 82 (1982), as reprinted in 1982 U.S.C.C.A.N. 1846, 
1877. Apart from this example, the term ``statutory award'' does not 
appear elsewhere in the report. Rather than use the term ``statutory 
award'' in part 5, we would refer in Sec.  5.693(c)(5)(v) to an ``award 
of special monthly compensation.'' This is consistent with long-
standing VA usage of the term ``statutory award.'' For example, Talbert 
v. Brown, 7 Vet. App. 352, 354 (1995), involved entitlement to special 
monthly compensation under ``a statutory award pursuant to Public Law 
No. 82-427.'' Public Law No. 82-427, 66 Stat. 295, introduced 
provisions currently codified in 38 U.S.C. 1114(k), which provides for 
special monthly compensation to veterans.
    Finally, we propose not to include current Sec.  3.31(c)(3)(vi) in 
part 5. The current regulation excludes an adjustment because of 
limitations placed on the size of the estate of a hospitalized 
incompetent veteran. However, the limitation in question was imposed by 
former 38 U.S.C. 5503(b), which was repealed by section 204(a) of the 
Veterans Education and Benefits Expansion Act of 2001, Pub. L. 107-103, 
115 Stat. 976, 990.
    Section 5.461, cited in proposed Sec.  5.693(a)(4), was published 
as proposed on December 27, 2004. See 69 FR 77578, 77588-89. Section 
5.745, cited in proposed Sec.  5.693(d)(1), was published as proposed 
on October 2, 2007. See 72 FR 56136, 56149.
5.694 Surviving Spouse's Benefit for the Month of the Veteran's Death
    Proposed Sec.  5.694 is a plain language restatement of current 
Sec.  3.20. The proposed regulation provides rules regarding payment to 
a surviving spouse for the month of the veteran's death. In proposed 
paragraph (a) we have created a term, ``month-of-death benefit,'' to 
serve as shorthand for a payment to a deceased veteran's surviving 
spouse for the month in which the veteran died and in the amount of 
disability compensation or pension that the veteran would have received 
for that month, if not for his or her death. Using this term would make 
this section easier to read and help ensure clarity.
    We propose not to include current Sec.  3.20(a) in proposed Sec.  
5.694. Section 3.20(a) currently reads:

    Where the veteran died on or after December 1, 1962, and before 
October 1, 1982, the rate of death pension or [DIC] otherwise 
payable for the surviving spouse for the month in which the death 
occurred shall be not less than the amount of pension or 
compensation which would have been payable to or for the veteran for 
that month but for his or her death. (Authority: 38 U.S.C. 5310)

Any award of benefits under current Sec.  3.20(a) would pertain to a 
veteran who died between December 1, 1962, and September 30, 1982, more 
than 25 years ago. The only situation in which

[[Page 65216]]

payment of benefits under this paragraph could arise presently is in a 
retroactive benefit adjustment based on clear and unmistakable error. 
However, in such a case, VA would be required to apply the provisions 
of Sec.  3.20(a) in effect at the time the erroneous decision was made, 
not the current provisions. Therefore, there is no reason to include 
Sec.  3.20(a) in part 5.
    Section 5.550, cited in proposed Sec.  5.694(d), was published as 
proposed on October 1, 2004. See 69 FR 59072, 59085.
5.695 Payments to or for a Child Pursuing a Course of Instruction at an 
Approved Educational Institution
    Proposed Sec.  5.695 is based on current Sec. Sec.  3.57(a)(1)(iii) 
and 3.667. The proposed section includes provisions related to payment 
of additional Improved Pension or disability compensation to a veteran 
or Improved Pension to a surviving spouse based on a child pursuing a 
course of instruction at an approved educational institution, and 
direct payment of Improved Pension or dependency and indemnity 
compensation (DIC) to a child on or after the child's 18th birthday, 
but before the child's 23rd birthday, if the child is pursuing a course 
of instruction at an approved educational institution. Proposed Sec.  
5.695(a) defines the term ``approved educational institution'' 
consistent with the definition of ``educational institution'' in Sec.  
3.57(a)(1)(iii).
    Whereas current Sec.  3.667(a)(1) and (2) merely indicate that 
benefits ``may be paid,'' proposed Sec.  5.695(b) specifies which 
benefits will be paid and to whom. This additional information, only 
implied by the current regulation, will be helpful to the reader. No 
substantive change is intended. Section 5.417, cited in proposed Sec.  
5.695(b), was published as proposed on September 26, 2007. See 72 FR 
54776, 54799-800.
    We have intentionally not included in proposed Sec.  5.695(c) the 
reference to September 30, 1981, which appears in current Sec.  
3.667(a)(3). This date is not relevant to proposed part 5 because no 
claim adjudicated under part 5 could pertain to a child then between 
the ages of 18 and 23 who was age 18 before September 30, 1981. Section 
5.573, cited in proposed Sec.  5.695(c), was published as proposed on 
October 21, 2005. See 70 FR 61326, 61348.
    Section 5.524, cited in proposed Sec.  5.695(d), was published as 
proposed on October 21, 2005. See 70 FR 61326, 61344.
    Proposed Sec.  5.695(e) explains that if a child is pursuing a 
course of instruction at an approved educational institution on or 
after the child's 18th birthday and a claim is not received within 1 
year, benefits may still be paid to the child effective the date VA 
receives the child's claim. We propose to include this provision in 
order to fill a deficiency in the current regulation. The provision is 
consistent with 38 U.S.C. 5110 (the general effective date statute) and 
other effective-date provisions found in proposed part 5. It will 
provide valuable information for regulation users and VA personnel.
    Section 5.764, cited in proposed Sec.  5.695(i)(1), was published 
as proposed on October 2, 2007. See 72 FR 56136, 56154.
5.696 Awards of Dependency and Indemnity Compensation When Not All 
Dependents Apply
    Proposed Sec.  5.696 is based on current Sec.  3.107. We have 
updated the citation to Sec.  3.251(a)(4), contained in current Sec.  
3.107, to the proposed part 5 counterpart Sec.  5.536(d), which was 
published as proposed on October 21, 2005. See 70 FR 61326, 61347. 
Although the language is much clearer in this part 5 regulation, we 
have not made any substantive changes from current Sec.  3.107.
5.697 Exchange Rates for Income Received or Expenses Paid in Foreign 
Currencies
    Proposed Sec.  5.697 is derived from current Sec.  3.32. The 
current regulation provides rules pertaining to income received or 
expenses paid in foreign currencies. We propose the following changes 
from the current regulation.
    Proposed Sec.  5.697(a)(1) states that if VA is informed of a 
change in a beneficiary's income or expenses paid in a foreign currency 
that would affect his or her entitlement, VA will make retroactive 
adjustments to the benefit rate using the quarterly exchange rate in 
effect when VA receives the notice of the change in income received or 
expenses paid in a foreign currency.
    Current Sec.  3.32(b) references ``burial, plot or headstone 
allowances.'' We propose to use the phrase ``burial benefits'' instead 
of using the current phrase, ``burial, plot or headstone allowances,'' 
to be consistent with the term that we expect to use to describe 
monetary burial benefits in subpart J of part 5, which is currently 
being developed by VA.
    Sections 5.550 and 5.555, cited in proposed Sec.  5.697(c)(1), were 
published as proposed on October 1, 2004. See 69 FR 59072, 59085-86.

General Reductions, Discontinuances, and Resumptions

5.705 General Effective Dates for Reduction or Discontinuance of 
Benefits
    Currently, Sec. Sec.  3.500 through 3.503 set forth rules that 
govern how VA assigns an effective date to a reduction or 
discontinuance of disability compensation, pension, or dependency and 
indemnity compensation (DIC). Each of the reduction and discontinuance 
effective-date regulations contains general rules on the subject. Each 
regulation also contains multiple paragraphs that apply to a specific, 
narrow basis for reduction or discontinuance of benefits payable to a 
specific type of beneficiary. In view of our proposal to organize by 
benefit and topic the part 5 rewrites of the current part 3 
regulations, the specific rules in Sec. Sec.  3.500 through 3.503 will 
be organized in the part 5 subpart associated with the specific 
benefits or subjects to which they apply. Proposed Sec.  5.705 includes 
generally applicable rules, based on Sec. Sec.  3.500 through 3.503.
    In 38 U.S.C. 5112(a), Congress requires VA to generally fix a 
reduction or discontinuance of compensation, pension, or DIC ``in 
accordance with the facts found,'' ``[e]xcept as otherwise specified in 
[38 U.S.C. 5112].'' Proposed Sec.  5.705(a) states this general rule. 
We propose to include the monetary allowances under chapter 18 of title 
38, United States Code, in the list of benefits to which the general 
rule applies. Although 38 U.S.C. 5112 does not refer to chapter 18 
benefits, 38 U.S.C. 1832(b)(4) makes provisions of 38 U.S.C. 5112(a) 
and (b) applicable to monetary allowances under chapter 18.
    In 38 U.S.C. 5112(b), Congress provides ten specific exceptions to 
the general rule. In such situations, the effective date of the 
reduction or discontinuance ``shall be'' assigned as directed in the 
particular paragraph of section 5112(b), and not as directed by the 
general ``facts found'' provision in section 5112(a). Thus, section 
5112 permits the assignment of an effective date for a reduction or 
discontinuance in accordance with the facts found only when there is no 
specific provision requiring VA to assign the effective date on some 
other basis. This interpretation is consistent with general rules of 
statutory interpretation (i.e., that a specific rule modifies a more 
general one) and decisions from the Court of Appeals for Veterans 
Claims on this subject.
    Accordingly, we have retained the basic concepts from the 
introductory language to current Sec.  3.500 and Sec.  3.500(a), and 
modified them to

[[Page 65217]]

enhance the clarity of the current provisions. The first sentence of 
proposed Sec.  5.705(a) restates the current language as follows: 
``Except as otherwise provided, VA will assign an effective date for 
the reduction or discontinuance of disability compensation, pension, 
dependency and indemnity compensation (DIC), or the monetary allowances 
under chapter 18 of title 38, United States Code, in accordance with 
the facts found.''
    The introductory text to current Sec.  3.500 also states that 
``[t]he effective date * * * will be the earliest of the dates stated 
in these paragraphs unless otherwise provided.'' Sections 3.501, 3.502, 
and 3.503(a) all provide that ``[t]he effective date * * * will be the 
earliest of the dates stated in this section.'' Current Sec. Sec.  
3.501 through 3.503 do not reference Sec.  3.500. The wording in the 
current sections implies that each section exclusively provides the 
effective date of a reduction or discontinuance of benefits to the 
class of beneficiaries covered in the particular section. The language 
does not explicitly acknowledge that Sec.  3.500 provides the default 
rule when none of the specific provisions in Sec. Sec.  3.501 through 
3.503 apply. The part 5 rule would be explicit in this regard.
    Additionally, if a specific paragraph in Sec.  3.500 applies and 
there is no applicable provision in Sec. Sec.  3.501 through 3.503, 
then the specific paragraph in Sec.  3.500 applies. For example, when a 
surviving spouse's right to receive benefits is discontinued based on 
his or her renouncement of the benefit, an event that is not covered 
under Sec.  3.502, the effective date is assigned in accordance with 
Sec.  3.500(q). For these reasons, VA applies Sec.  3.500 in cases 
involving veterans, surviving spouses, parents and children, 
notwithstanding that Sec. Sec.  3.501 through 3.504 appear to 
exclusively provide the effective dates of reductions and 
discontinuances applicable to those beneficiaries. Thus, the proposed 
part 5 rule clearly states the general applicability of Sec.  5.705 but 
does not represent a substantive change in VA practice or policy.
    The second sentence of proposed Sec.  5.705(a) reads: ``If more 
than one effective-date provision applies to a particular issue or 
event, VA will reduce or discontinue the benefit(s) in accordance with 
the earliest applicable date.'' This language restates similar 
references to the ``earliest date,'' which appear in current Sec. Sec.  
3.500 through 3.503. The proposed language is easier to understand and 
apply, but it will not substantively alter VA's current interpretation 
of the governing statute or VA's regulations.
    The introductory paragraphs to Sec. Sec.  3.500 through 3.502 and 
Sec.  3.503(a) identically state a general effective-date provision, 
``Where an award is reduced, the reduced rate will be effective the day 
following the date of discontinuance of the greater benefit.'' In the 
last sentence of proposed Sec.  5.705(a) we propose to restate this 
provision as follows: ``VA will pay a reduced rate or discontinue 
benefits effective the date of reduction or discontinuance.'' Stating 
the effective date in this manner--focusing only on the date that the 
new rate begins rather than on the date that the old rate ends--
clarifies the effective-date provisions for reductions and 
discontinuances. We propose similar wording throughout part 5. VA 
intends no substantive change by this rewording.
    Under proposed Sec.  5.705(a), as with the current rules, benefits 
are subject to reduction on the earliest applicable date. In view of 
that requirement, it would be useful to provide a reference tool in 
order to help VA and claimants locate the effective-date provisions 
throughout part 5. Proposed Sec.  5.705(b) is reserved for a table with 
the locations of specific reduction and discontinuance rules once part 
5 is published in the Federal Register. For the benefit of persons 
reviewing this NPRM, we have included a table to notify readers of the 
effective-date provisions that we intend to reference in the final 
version of this paragraph. We do not intend that proposed Sec.  
5.705(b) contain any substantive rules. In Sec.  5.705(b), we make a 
statement to this effect, to prevent the reliance on this chart by 
claimants or adjudicators. When considering the issue of effective 
date, users of part 5 should apply the specific regulation referenced 
in the chart, rather than rely on the chart itself.
    As proposed, the table shows both already published and as yet 
unpublished Part 5 sections. The unpublished sections are included as 
placeholders; many may change before publication. Section 5.101 of 
Subpart C was published as proposed on May 10, 2005. See 70 FR 24680. 
Proposed Sec. Sec.  5.152, 5.165, and 5.177 of Subpart C were published 
as proposed on May 22, 2007. See 72 FR 28770. The Subpart D provisions 
were published as proposed on September 20, 2006. See 71 FR 55052. 
Section 5.477 of Subpart F was published as proposed on December 27, 
2004. See 69 FR 77578. Sections 5.568 to 5.572 of Subpart G were 
published as proposed on October 1, 2004. See 69 FR 59072. A correction 
to proposed Sec.  5.570 was published on October 21, 2004. See 69 FR 
61914. Sections 5.524, 5.573, and 5.574 of Subpart G were published as 
proposed on October 21, 2005. See 70 FR 61326. The Subpart H provisions 
were published as proposed on March 9, 2007. See 72 FR 10860. The 
Subpart I provisions were published as proposed on June 30, 2006. See 
71 FR 37790. The Subpart K provisions were published as proposed on May 
31, 2006. See 71 FR 31056.
5.706 Payments Excluded in Calculating Income or Net Worth
    Proposed Sec.  5.706 contains a list of payments that are excluded 
by VA in calculating income or net worth for those benefits that are 
based on financial need, which are: Improved Pension, Section 306 
Pension, Old-Law Pension, and parents' dependency and indemnity 
compensation (DIC). Financial need is also the basis for establishing 
dependency of parents in veterans' disability compensation cases. The 
specific rules related to income and net worth limits for these five 
benefits are located in the subpart dealing with each specific benefit. 
However, there are certain payments that are excluded from income and 
net worth by Federal statute for all Federal need-based programs. 
Proposed Sec.  5.706 contains a list of these payments. It will be 
helpful to consolidate all of these exclusions into one location and in 
table form.
    Current Sec.  3.261 contains a table listing the exclusions from 
countable income for Old-Law Pension, Section 306 Pension, parents' 
DIC, and dependency of parents. Current Sec.  3.263 contains exclusions 
from net worth for Section 306 Pension and dependency of parents. 
Current Sec.  3.272 contains exclusions from countable income for 
Improved Pension, and current Sec.  3.275 contains exclusions from net 
worth for Improved Pension. Exclusions common to each VA need-based 
benefit are included in table form in proposed Sec.  5.706(b). The 
exclusions that are not common to each VA need-based benefit are 
contained in the regulations pertaining to the individual benefit. In 
addition, we propose to include in this table certain statutory 
exclusions from countable income or net worth that are not included in 
part 3.
    Proposed Sec.  5.706(b)(1) would exclude, from countable income, 
relocation payments made under the Uniform Relocation Assistance and 
Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601 et 
seq.), Pub. L. 91-646, 84 Stat. 1894. Current Sec.  3.261(a)(32) 
excludes relocation payments under Public Law No. 90-448 and Public Law 
No. 90-495. However, the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 repealed these relocation 
payment

[[Page 65218]]

provisions and exclusions. Section 216 of the 1970 Act provides that 
payments made under the Act are to be excluded from countable income. 
See 42 U.S.C. 4636.
    Proposed Sec.  5.706(b)(4) excludes from countable income and net 
worth consideration, payments made to individuals because of their 
status under Pub. L. 103-286, as victims of Nazi persecution. The 
exclusion of this source of income will implement this statute, which 
is not implemented by a part 3 regulation.
    Proposed Sec.  5.706(b)(7) excludes certain appropriations to 
comply with judgments of the Indian Claims Commission and the Court of 
Federal Claims that are held under the Indian Judgment Funds Use and 
Distributions Act (25 U.S.C. 1401 et seq.) or another act of Congress.
    Proposed Sec.  5.706(b)(8) excludes from income and net worth 
consideration the interests of individual Indians in trust or 
restricted lands. The current regulations under Sec. Sec.  3.262(v) and 
3.272(r) only exclude income of up to $2,000 per calendar year received 
by American Indian beneficiaries from trust or restricted lands. 
Pursuant to 25 U.S.C. 1408, interests of individual Indians in trust or 
restricted lands shall not be considered a resource, and up to $2,000 
per year of income received by individual Indians that is derived from 
such interests shall not be considered income. Therefore, in order to 
extend the exclusion to net worth consideration, proposed Sec.  
5.706(b)(8) would exclude from net worth the interests received by 
individual Indians from trust or restricted lands.
    Proposed Sec.  5.706(b)(9) excludes from income and net worth 
consideration income derived from certain submarginal land of the 
United States that is held in trust for certain Indian tribes in 
accordance with 25 U.S.C. 459. Proposed Sec.  5.706(b)(10) excludes 
from income and net worth consideration up to $2,000 of per capita 
distributions under the Old Age Assistance Claims Settlement Act (25 
U.S.C. 2301 et seq.). The exclusions described in Sec.  5.706(b)(9) and 
Sec.  5.706(b)(10) will implement statutory provisions which were not 
implemented in part 3.
    Proposed Sec.  5.706(b)(11) excludes from income and net worth 
consideration, any income or asset received under the Alaska Native 
Claims Settlement Act (43 U.S.C. 1626). Current Sec. Sec.  3.262(x) and 
3.272(t) exclude the following payments from income consideration: cash 
(including cash dividends on stock received from a Native Corporation) 
to the extent that it does not, in the aggregate, exceed $2,000 per 
individual per year; stock (including stock issued or distributed by a 
Native Corporation as a dividend or distribution on stock); a 
partnership interest; land or an interest in land (including land or an 
interest in land received from a Native Corporation as a dividend or 
distribution on stock); and an interest in a settlement trust. The 
Alaska Native Claims Settlement Act (43 U.S.C. 1626) provides that the 
income or asset received from a Native Corporation shall not be 
considered or taken into account as an asset or resource. Therefore, in 
order to extend the exclusion to net worth consideration, proposed 
Sec.  5.706(b)(11) would exclude from net worth the cited income and 
assets listed in this paragraph.
    Proposed Sec.  5.706(b)(12) excludes from income and net worth 
consideration payments received under the Maine Indian Claims 
Settlement Act of 1980 (25 U.S.C. 1721 et seq.). The exclusion of this 
source of income will implement this statute not implemented in part 3.
    Proposed Sec.  5.706(b)(13) excludes from income consideration 
allowances, earnings, and payments to individuals participating in 
programs under the Workforce Investment Act of 1998 (29 U.S.C. 2931), 
which provides that allowances, earnings, and payments to individuals 
participating in programs under the Act shall not be considered as 
income for the purposes of determining eligibility for, and the amount 
of income transfer and in-kind aid furnished under, any Federal or 
federally assisted program based on need. There is no resource 
exemption. Therefore, proposed Sec.  5.706(b)(13) would only exclude 
from income consideration income derived from the Workforce Investment 
Act of 1998. The exclusion of this source of income will implement this 
statute not implemented in part 3.
    Proposed Sec.  5.706(b)(14) excludes from income consideration 
allowances, earnings, and payments to AmeriCorps participants. Pursuant 
to 42 U.S.C. 12637, allowances, earnings, and payments to individuals 
participating in programs under subchapter I of title 42 shall not be 
considered as income for the purposes of determining eligibility for, 
and the amount of income transfer and in-kind aid furnished under, any 
Federal or federally assisted program based on need. There is no 
resource exemption. Therefore, proposed Sec.  5.706(b)(14) would only 
exclude from income consideration income derived from the National and 
Community Service Act of 1990. The exclusion of this source of income 
will implement this statute, which is not implemented in part 3.
    Current Sec.  3.262(q) and Sec.  3.272(k) list excludable income 
from various Federal volunteer programs without reference to net worth 
consideration. Through a series of legislative changes, these programs 
are now administered by the Corporation for National and Community 
Service rather than by the agencies listed in Sec.  3.262(q) and Sec.  
3.272(k). See Pub. L. 103-82, 107 Stat. 785. Section 5044(f) of title 
42, United States Code, provides that payments made under the act which 
created the Corporation for National and Community Service, with 
certain exceptions, do not reduce or eliminate assistance that 
volunteers may be receiving under other programs. We propose to account 
for this change in the law by providing, in Sec.  5.706(b)(15), that 
payments received from any of the volunteer programs administered by 
the Corporation for National and Community Service would be excluded 
from income and net worth.
    Proposed Sec.  5.706(b)(16) excludes from income and net worth 
consideration the value of the allotment provided to an eligible 
household under the Food Stamp Program. Proposed Sec.  5.706(b)(17) 
excludes from income and net worth consideration the value of free or 
reduced price for food under the Child Nutrition Act of 1966 (42 U.S.C. 
chapter 13A). Proposed Sec.  5.706(b)(18) excludes from income and net 
worth consideration the value of any child care provided or arranged 
(or any amount received as payment for such care or reimbursement for 
costs incurred for such care) under the Child Care and Development 
Block Grant Act of 1990 (42 U.S.C. chapter 105). Proposed Sec.  
5.706(b)(19) excludes from income and net worth consideration the value 
of services, but not wages, provided to a resident of an eligible 
housing project under a congregate services program under the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. chapter 130). 
Finally, proposed Sec.  5.706(b)(20) excludes from income and net worth 
consideration the amount of any home energy assistance payments or 
allowances provided directly to, or indirectly for the benefit of, an 
eligible household under the Low-Income Home Energy Assistance Act of 
1981 (42 U.S.C. chapter 94). The exclusion of the five sources of 
income will implement these statutes not implemented in part 3.
    Proposed Sec.  5.706(b)(21) excludes from income consideration 
payments, other than wages or salaries, received from programs funded 
under the Older Americans Act of 1965 (42 U.S.C. chapter 35). In 
accordance with 42 U.S.C. 3020a(b), such payments may not

[[Page 65219]]

be treated as income or benefits for the purpose of any other program 
or provision of Federal or State law. The exclusion of this source of 
income will implement this statute not implemented in part 3.
    Proposed Sec.  5.706(b)(22) excludes from income and net worth 
consideration, amounts of student financial assistance received under 
Title IV of the Higher Education Act of 1965, including Federal work-
study programs, under Bureau of Indian Affairs student assistance 
programs, or vocational training under the Carl D. Perkins Vocational 
and Technical Education Act of 1998 (20 U.S.C. chapter 44). The 
exclusion of this source of income will implement this statute, which 
is not implemented in part 3.
    Proposed Sec.  5.706(b)(24) excludes from income and net worth 
consideration, payments received under the Medicare transitional 
assistance program and any savings associated with the Medicare 
prescription drug discount card (42 U.S.C. 1395w-141(g)(6)).
5.707 Deductible Medical Expenses
    Proposed Sec.  5.707, based on current Sec. Sec.  3.261(b)(1), 
3.262(l), and 3.272(g), pertains to medical expenses that are deducted 
from countable annual income. In Sec.  5.707, we propose to define the 
categories of expenses that will be considered ``medical expenses.''
    Paragraph (a) of proposed Sec.  5.707 cites several other proposed 
rules that were published in prior Notices of Proposed Rulemaking: 
Sec.  5.413 Income deductions for calculating adjusted annual income 
(regarding Improved Pension), 72 FR 54776, 54797-98 (Sept. 26, 2007), 
Sec.  5.474 Deductible Expenses for Section 306 Pension Only, 69 FR 
77578, 77591-92 (Dec. 27, 2004), and Sec.  5.532 Deductions from income 
(regarding parents' DIC), 70 FR 61326, 61345 (Oct. 21, 2005).
    Proposed Sec.  5.707(b) defines the term ``licensed healthcare 
provider.'' We propose to inform regulation users that individual 
states are responsible for such licensing. We also propose to list 
examples of licensed healthcare providers.
    For Improved Pension, the authority for VA to deduct from countable 
annual income a portion of amounts paid for unreimbursed medical 
expenses derives from 38 U.S.C. 1503(a)(8). For parents' dependency and 
indemnity compensation (DIC), the authority for VA to deduct unusual 
medical expenses from countable annual income derives from 38 U.S.C. 
1315(f)(3). For Section 306 Pension, such authority derives from 
section 306 of Pub. L. 95-588, 92 Stat. 2508, which provides that 
beneficiaries who do not wish to elect Improved Pension may continue to 
receive the pension amount they were receiving on December 31, 1978, 
subject to certain applicable laws that existed on that date. The 
applicable law pertaining to medical expenses on that date was 38 
U.S.C. 503(c) as in effect on December 31, 1978. (Section 503 was later 
renumbered section 1503). VA has identified specific types of expenses 
that will be considered deductible ``medical expenses,'' because that 
term is not defined by statute. We propose to group these specific 
types of expenses into broad categories, as listed in paragraph (c) of 
the proposed rule.
    Proposed Sec.  5.707(c) explains that the term ``medical expenses'' 
includes payments made for care by a licensed healthcare provider, 
medical supplies and medications, adaptive equipment, transportation, 
health insurance premiums, and institutional forms of care and in-home 
attendants. We propose to include in paragraph (c) detailed provisions 
relating to the broad categories of medical expenses. Proposed Sec.  
5.707(c)(2) will state that vitamins will be deducted as a medical 
expense only if the individual is directed by a ``healthcare provider 
authorized to write prescriptions'' to take the vitamins. These 
clarifications provide further guidance as to allowable medical 
expenses.
    Proposed Sec.  5.707(c)(6) includes details relating to medical 
expenses paid for different forms of institutional care. Institutions 
such as nursing homes, custodial institutions, soldiers' and sailors' 
homes, or veterans' homes often provide a range of ``services,'' which 
may include healthcare. In such settings, VA wishes to ensure that 
deductions from countable annual income reflect Congress' intent that 
amounts be deducted for ``medical expenses'' only, and not for other 
primary or incidental services. For example, if fees are paid to an 
institution that houses and maintains an individual because the 
individual needs to live in a protected environment (see proposed 
paragraph (c)(6)(iv), ``Custodial Care''), the portion of the fees paid 
for medical treatment will be deducted from countable annual income. 
However, the portion of the fees paid for strictly custodial care will 
not be deducted. Similarly, VA may deduct fees paid to a nursing home 
if the individual is there as a ``patient'' and not merely as a 
``resident.'' Individuals in veterans' homes or soldiers' and sailors' 
homes may have expenses deducted if they are actually receiving medical 
care, but expenses will not be deducted merely for domiciliary 
functions performed by the homes.
5.708 Eligibility Verification Reports
    Proposed Sec.  5.708 combines provisions from current Sec. Sec.  
3.256, 3.277, and 3.661 with a few substantive changes. The proposed 
regulation includes rules regarding when VA will require claimants and 
beneficiaries to complete an eligibility verification report (EVR).
    Proposed Sec.  5.708(a)(1) would define an EVR. The current 
regulations, Sec. Sec.  3.256(b) and 3.277(c) require the use of an EVR 
in certain circumstances, such as to obtain a social security number or 
to obtain certain information from a beneficiary receiving parents' 
dependency and indemnity compensation (DIC) or pension. Requiring an 
EVR under these circumstances is unnecessarily restrictive and 
burdensome to both VA personnel and the beneficiary who must file the 
EVR. In some cases, verifying a social security number can be achieved 
by sending a simple form letter or by making a direct telephone call to 
the individual. Hence, an EVR is defined as a ``form that VA may use to 
obtain'' certain information, rather than as a ``form that VA shall use 
to obtain'' that information.
    Current Sec.  3.661(b)(2) uses the term, ``12-month annualization 
period'' to describe the reporting period for which a beneficiary 
reports income, adjustments to income, and net worth to VA. We propose 
to use the term ``reporting period'' instead of ``12-month 
annualization period,'' for ease of use by claimants, beneficiaries, VA 
claims examiners, and other interested parties. We therefore propose in 
paragraph (a) to include a definition of ``reporting period'' and to 
use that term in Sec.  5.708 and Sec.  5.697.
    In order to provide flexibility to VA personnel, we propose to use 
in Sec.  5.708(b) the word ``may'' in place of the word ``shall,'' 
which will give VA the option of not using an EVR to obtain some types 
of information. In addition, we would make this new, permissive rule 
applicable to both claimants and beneficiaries, in order to improve 
VA's ability to process both claims and ongoing awards, by 
incorporating into Sec.  5.708(b)(1), long-standing VA practice 
regarding when to send an EVR. Therefore, proposed paragraph (b) 
provides the circumstances under which EVRs ``may'' be sent to 
beneficiaries and claimants.
    Proposed Sec.  5.708(c) includes an important exception regarding 
sending an annual EVR to certain parents' DIC beneficiaries. 
Specifically, 38 U.S.C. 1315(e) states that when a parent has

[[Page 65220]]

reached the age of 72 and has been receiving parents' DIC during 2 
consecutive calendar years, the parent will not be required to annually 
report their income by filing an EVR. However, Sec.  1315(e) does 
require that a parent receiving parents' DIC notify VA whenever there 
is a material change in his or her annual income and we have 
incorporated this requirement in paragraph (c). The text in paragraph 
(c) of proposed Sec.  5.708(c) is an exception to the general rule 
stated in paragraph (b) and we have pointed that out in the 
introductory paragraph of (b).
    Proposed Sec.  5.708(d) specifies actions VA may take upon receipt 
of information or an EVR. Current part 3 provisions contain an 
explanation of the actions VA takes upon receipt of an EVR from a 
beneficiary. Missing, however, is an explanation of the action VA takes 
when an EVR is received from a claimant. This explanation is necessary 
to completely address actions VA will take regarding EVRs received from 
claimants and beneficiaries. In addition, because paragraph (b) of this 
rule would make the use of an EVR optional, paragraph (d) states the 
action VA may take upon receipt of either an EVR or information from a 
claimant or a beneficiary.
    Proposed Sec.  5.708(d) also describes generally the action VA 
takes when the expected annual income is uncertain. This provision is 
based on current Sec.  3.661(a)(2). We have updated the citations to 
Sec. Sec.  3.260(b) and 3.271(f), contained in current Sec.  
3.661(a)(2), to the proposed part 5 counterparts. See 69 FR 77578, 
77593 (Dec. 27, 2004) (proposed Sec.  5.478(a)); 70 FR 61326, 61345 
(Oct. 21, 2005) (proposed Sec.  5.531(e); 72 FR 54776, 54801 (Sept. 26, 
2007) (proposed Sec.  5.423).
    Proposed Sec.  5.708(f) provides for the action VA will take when a 
beneficiary does not return a completed EVR in a timely manner. We are 
proposing to incorporate a long-standing VA practice which is helpful 
to beneficiaries in proposed Sec.  5.708(f)(2). VA's practice is that 
when a beneficiary submits an incomplete EVR within 60 days after the 
date VA requested the EVR, VA will notify the beneficiary that the EVR 
is incomplete and inform him or her of the additional information 
needed to complete it. If VA does not receive a completed EVR within 
120 days after the date VA first requested the EVR from the 
beneficiary, VA will immediately suspend further benefit payments.
    Current Sec.  3.661(b)(2)(i) was once applicable when VA used the 
``annualization period'' as the period for which income is reported by 
the beneficiary. VA is now using the 12-month calendar year as its 
annual reporting period. Section 5.708(f)(3) is a plain language 
rewrite of the applicable provision of current Sec.  3.661(b)(2)(i) to 
reflect the change in the annual reporting period. VA intends no 
substantive change by this rewording.
    Current Sec.  3.661(b)(2)(iii) allows VA to resume the payment of 
benefits from the date they were stopped (because a beneficiary failed 
to return an EVR) if VA receives information requested in the EVR 
within 1 year after the end of the 12-month period for which the 
beneficiary had been asked to provide the EVR. Current Sec.  
3.661(b)(2)(ii), titled ``Adjustment of overpayment,'' however, reads:

    If evidence of entitlement to improved pension or DIC for any 
period for which payment of improved pension or DIC was discontinued 
for failure to file an [EVR] is received at any time, payment of 
improved pension or DIC shall be awarded for the period of 
entitlement for which benefits were discontinued for failure to file 
an [EVR].

This paragraph means that if information requested in an EVR is 
provided by a beneficiary more than 1 year after the end of the 12-
month period for which VA requested the EVR, retroactive payments may 
be paid only for the purpose of reducing or eliminating any overpayment 
created as a result of loss of entitlement during that same EVR 
reporting period. In other words, current Sec.  3.661(b)(2)(ii) limits 
the payment of retroactive benefits to the amount of the overpayment 
created as a result of the failure to return an EVR if VA does not 
receive the EVR timely. We propose to clarify the current language in 
proposed Sec.  5.708(h).
    Finally, we propose not to include current Sec. Sec.  3.256(b)(2) 
and 3.661(b)(1) in part 5. The current sections permit VA to require 
that beneficiaries receiving Old-Law Pension and Section 306 Pension 
complete an EVR and provide the effective date for discontinuance of 
those benefits for failure to return a completed EVR. However, 
eligibility for these two programs is limited to individuals who have 
been continuously entitled to receive benefits under one of these 
programs from the dates they were superseded until the present. The 
last date eligibility could be established for Old-Law Pension was June 
30, 1960, and the last date eligibility could be established for 
Section 306 Pension was December 31, 1978. The majority of individuals 
entitled to receive benefits under these two programs are advanced in 
age, and their population is rapidly declining; currently, fewer than 
100,000 such beneficiaries exist. For these reasons, VA no longer 
requests EVRs from individuals receiving benefits under these two 
pension programs.
5.709 Claimant and Beneficiary Responsibility To Report Changes
    Proposed Sec.  5.709 is a combination of some of the provisions in 
Sec. Sec.  3.256, 3.277, and 3.660. Proposed paragraph (a) restates 
concepts from current Sec. Sec.  3.256(a), 3.277(a) and (b), and 
3.660(a)(1), which require that pension or parents' DIC claimants or 
beneficiaries promptly notify VA of changes in the factors that affect 
entitlement to those benefits. Both Sec.  3.256(a) and Sec.  3.277(a) 
and (b) require a claimant or beneficiary to ``promptly notify'' VA of 
changes, while Sec.  3.660(a)(1) requires a beneficiary to provide 
notification ``when the recipient acquires knowledge that he or she 
will begin to receive additional income or when his or her marital or 
dependency status changes.'' Although worded differently, all three 
provisions contain comparable notification requirements, which are 
intended to mean that a claimant or beneficiary must promptly notify VA 
when that person becomes aware of changes in the factors that affect 
entitlement. Therefore, proposed Sec.  5.709(a) requires that claimants 
and beneficiaries ``promptly notify VA of any material change'' that 
would affect entitlement to pension or parents' DIC.
    Current Sec.  3.277(a) gives VA authority to require ``information, 
proofs, and evidence'' from an individual as needed to ``determine the 
annual income and the value of the corpus of the estate of'' a pension 
claimant or beneficiary. We include this authority in proposed Sec.  
5.709(a) too. However, proposed Sec.  5.709(a) does not include the 
word ``proofs.'' We note that the word ``proofs'' is antiquated and may 
confuse some regulation users. We therefore propose to omit the word 
``proofs'' from the phrase and use ``information and evidence'' in 
proposed Sec.  5.709(a).
    Proposed Sec.  5.709(b) sets forth the factors affecting 
entitlement to pension and parents' DIC which change most frequently. 
In keeping with our goal of rewriting and reorganizing part 3 
regulations in a user-friendly format, it would be helpful to 
consolidate all of these factors into a reference table. Proposed Sec.  
5.709(b) includes this table along with a few clarifications of some of 
the provisions in current Sec. Sec.  3.256 and 3.277. We do not intend 
that proposed Sec.  5.709(b) confer any substantive rights.
    The first clarification concerns current Sec. Sec.  3.256(a)(4) and 
3.277(b)(4). The current paragraphs provide that claimants and 
beneficiaries must notify VA of changes in ``[n]ursing home

[[Page 65221]]

patient status.'' However, the notification requirement only applies to 
veterans and surviving spouses claiming or receiving pension and 
parents claiming or receiving parents' DIC. The table in proposed Sec.  
5.709(b) would indicate that nursing home status is a factor affecting 
entitlement to pension for veterans and surviving spouses and DIC for 
parents.
    Second, current Sec.  3.660(a)(1) requires that a veteran, 
surviving spouse, or child receiving pension, or a parent receiving 
death compensation or parents' DIC, must notify VA ``of any * * * 
dependency status changes.'' This may lead some readers to erroneously 
conclude that a veteran's parent or a surviving child must report 
changes in the number of children he or she has. However, the number of 
children a claimant or beneficiary has is a factor that affects 
entitlement only when the claimant or beneficiary is a veteran or 
surviving spouse. Proposed Sec.  5.709(b) makes this clear.
    Section 5.220, cited in proposed Sec.  5.709(b), was published as 
proposed on September 20, 2006. See 71 FR 55052, 55069. Section 
5.411(b), also cited in proposed Sec.  5.709(b), was published as 
proposed on September 26, 2007. See 72 FR 54776, 54796. Section 5.473, 
also cited in proposed Sec.  5.709(b), was published as proposed on 
December 27, 2004. See 69 FR 77578, 77591.
5.710 Adjustment in Benefits Due to Reduction or Discontinuance of a 
Benefit to Another Payee
    Proposed Sec.  5.710 is a plain language rewrite of current Sec.  
3.651 and provides rules for adjustments to a beneficiary's payments 
when a benefit to another payee is reduced or discontinued. VA intends 
no substantive change by this rewording.
5.711 Payment to Dependents Due to the Disappearance of a Veteran for 
90 Days or More
    Proposed Sec.  5.711 is based on current Sec.  3.656 and provides 
that when a veteran disappears for 90 days or more, benefits may be 
paid to the veteran's dependents.
    Current Sec.  3.656 refers to payment ``to or for'' a veteran's 
dependents. We propose to omit the ``or for'' qualifier in Sec.  5.711. 
A number of regulations in current part 3 refer to payment of various 
VA benefits ``to or for'' a veteran, a child, or a surviving spouse. 
This language as used in current Sec.  3.656 is used to indicate that a 
payment may be made directly to a beneficiary or to a fiduciary for 
that beneficiary. A typical example of the latter would be payment to a 
child's parent or guardian as the fiduciary of a VA beneficiary who is 
a minor. Another example would be payment to a VA-appointed fiduciary 
on behalf of an incompetent beneficiary. However, we note that although 
VA disability compensation and pension benefits are always potentially 
payable to a fiduciary for a VA beneficiary when the conditions 
warrant, the ``to or for'' phrase may be confusing to some regulation 
users. Further, inasmuch as benefits are always potentially payable to 
a fiduciary for a beneficiary, it is not necessary to state that 
explicitly in every regulation. Therefore, we have omitted the ``or 
for'' qualifier in proposed Sec.  5.711. Interested persons may find 
rules relating to payment through fiduciaries in 38 CFR part 13, and 
that topic will also be addressed in subpart M of proposed part 5. We 
intend no substantive change by omission of the ``or for'' language.
    In addition, current Sec.  3.656(a) uses the word ``parents.'' This 
word has the potential to confuse readers because a parent must first 
be established as a dependent of a veteran who was in receipt of 
disability compensation at the time of the veteran's disappearance in 
order to be considered for benefits as a dependent parent. Under 38 
U.S.C. 1158, where a veteran receiving disability compensation 
disappears, VA may pay the compensation otherwise payable to the 
veteran, to the veteran's ``parents.'' The amount of such payments may 
not exceed the amount payable to the parents if the veteran had died 
from a service-connected disability. Because only dependent parents are 
eligible for parents' DIC benefits, no benefits would be payable to a 
non-dependent parent under Sec.  1158. Therefore, we are proposing to 
use the term ``dependent parents'' instead of ``parents'' in proposed 
Sec.  5.711(b).
    We also propose to replace the language ``date of last payment'' 
(used in current Sec.  3.656(a) and other part 3 sections) throughout 
this rulemaking with ``the first day of the month after the month for 
which VA last paid benefits,'' which is clearer and more specific. No 
substantive change is intended by this change.
    Current Sec.  3.656(a) states that if a veteran is missing for 90 
days or more, VA will pay the veteran's dependents the lesser of the 
DIC which would be payable if the veteran had died from a service-
connected cause or the amount of disability compensation when the 
veteran disappeared. In proposed Sec.  5.711(b)(1) we clarify how VA 
distributes such payments: if VA pays DIC pursuant to this paragraph, 
then it will pay benefits to the dependents as if the veteran were 
deceased, and if VA pays disability compensation pursuant to this 
paragraph, then it will pay benefits in equal amounts to the 
dependents. These payment methods are fair to dependents and are simple 
for VA to administer.
    Current Sec.  3.656(b) states that if a missing veteran's 
whereabouts become known VA will discontinue the award to the 
dependents and ``appropriate action will be taken to adjust the 
veteran's award in accordance with the facts found.'' We have not 
included this quoted material in proposed Sec.  5.711 because this 
section pertains to payments made to dependents of missing veterans. 
Proposed Sec.  5.712, which pertains to payments made to veterans who 
are missing and later found, includes this material.
    Current Sec.  3.656(d) references Improved Pension, Section 306 
Pension, and Service Pension. Service Pension is the name for Spanish 
American War Pension. See 38 CFR 3.1(x). There are no Spanish American 
War veterans still living, so it would be inappropriate to include the 
term ``Service Pension'' in proposed Sec.  5.711(c)(1).
    Section 5.502, cited in proposed Sec.  5.711(d), was published as 
proposed on October 21, 2005. See 70 FR 61326, 61341.
5.712 Suspension of VA Benefits Due to the Disappearance of a Payee
    Proposed Sec.  5.712 concerns the suspension and resumption of 
benefits for a payee whose whereabouts are or were unknown. Proposed 
Sec.  5.712(a) states VA's long-standing practice to suspend benefit 
payments when a payee's whereabouts are unknown. If the payee is 
ultimately located, VA pays the suspended benefits to him or her, so 
the payee is not deprived of any payments. Title 38, United States 
Code, requires VA to pay benefits to those who are entitled. Ensuring 
that benefit payments are received by the payee is an inherent part of 
that duty.
    Current Sec.  3.158(c) provides for resumption of payments if the 
payee's whereabouts become known. This concept has been restated in 
plain language in proposed Sec.  5.712(b). VA intends no substantive 
change by this rewording.
    The last sentence of proposed Sec.  5.712(b) states, ``Retroactive 
payments under this paragraph (b) will be reduced by the amount of any 
payments made to a veteran's dependents under Sec.  5.711.'' During the 
period of suspension, 38 U.S.C. 1158 and 1507 (the statutory 
authorities for Sec.  5.711) authorize VA to reallocate disability 
compensation or pension to the veteran's dependents.

[[Page 65222]]

The benefits paid under Sec.  5.711 are those benefits that would be 
otherwise payable to the veteran if not for his or her disappearance. 
Therefore, when a veteran's whereabouts become known and his or her 
benefits are restored, VA will not pay the veteran benefits that have 
already been paid to dependents. This rule is not explicitly stated in 
part 3 but we have included it in Sec.  5.712(b).
5.713 Restriction on VA Benefit Payments to an Alien Located in Enemy 
Territory
    Current Sec.  3.653 describes two different types of restrictions 
on the payment of VA benefits to persons located in foreign countries. 
Provisions relating to these restrictions are included in proposed 
Sec. Sec.  5.713 (the withholding of benefits to an alien located in 
enemy territory) and 5.714 (the withholding of checks sent to foreign 
countries specifically listed by the Department of the Treasury). 
Provisions regarding claims for undelivered or discontinued benefits 
affected by these restrictions are stated in proposed Sec.  5.715.
    Proposed Sec.  5.713 addresses the first restriction and would 
implement 38 U.S.C. 5308, ``Withholding benefits of persons in 
territory of the enemy.'' Proposed Sec.  5.713(b), which is based on 
current Sec.  3.653(a), permits payment to an alien's dependents of the 
benefits discontinued under this section. A change from the current 
section would include language that more closely follows 38 U.S.C. 
5308(c). Specifically, proposed paragraph (b)(1) provides that VA may 
apportion and pay all or any part of the alien's benefits to his or her 
dependents, up to the amount the dependents would receive if the alien 
were dead.
    Proposed Sec.  5.713(b) also regulates the reduction or 
discontinuation of payments to the alien's dependents. Because VA will 
often have no way of knowing when an alien leaves enemy territory, and 
to avoid creation of unnecessary overpayments, payments to dependents 
will be discontinued effective as of the date VA receives notice that 
the alien is no longer located in enemy territory or under enemy 
control. In addition, proposed Sec.  5.713(b) provides that benefit 
payments to the alien's dependents will be reduced or discontinued, as 
required by law, upon the death of the alien or dependent, upon 
reduction or discontinuance of the alien's benefits, or cessation of 
dependent status.
    Current Sec.  3.653(a) is limited to compensation, pension and DIC. 
However, we note that under 38 U.S.C. 5308(a), the rule applies to any 
award of ``gratuitous benefits under the laws administered by the 
Secretary.''
    Paragraph 7 of VAOPGCPREC 06-91, 56 FR 25156 (June 3, 1991), states 
that:

    7. Interim Issue (CONTR-169), dated January 13, 1960, providing 
necessary instructions for the fiscal implementation of Pub. L. 86-
146, provides in paragraph D.3 in pertinent part:
    ``a. Immediately upon death of a veteran who has been adjudged 
or rated incompetent, the balance in the Personal Funds of Patients 
account will be analyzed to determine the source thereof, i.e., 
funds derived from gratuitous benefits deposited by the VA under 
laws administered by the VA or from other sources. For this purpose 
gratuitous benefits are defined as all benefit payments under laws 
administered by the VA except insurance payments (Servicemen's 
Indemnity benefits are not insurance payments).''

    Therefore, we propose in Sec.  5.713(a) to make this section 
applicable to ``all VA benefits except insurance payments.''
    Finally, we propose to not include current Sec. Sec.  3.400(l) and 
3.500(j) in part 5. These paragraphs are merely cross-references to 
award, reduction, or discontinuance effective-date provisions that are 
included in proposed Sec.  5.713. Cross-references are not necessary.
5.714 Restriction on Delivery of VA Benefit Payments to Payees Located 
in Countries on Treasury Department List
    Proposed Sec.  5.714 addresses restrictions on payments to 
individuals located in countries listed by the Department of the 
Treasury. This regulation implements 31 U.S.C. 3329, ``Withholding 
checks to be sent to foreign countries,'' and 31 U.S.C. 3330, ``Payment 
of Department of Veterans Affairs checks for the benefit of individuals 
in foreign countries.'' The first statute, 31 U.S.C. 3329, requires 
that the Secretary of the Treasury prohibit sending a Federal payment 
to a foreign country when the Secretary decides that there is no 
reasonable assurance the intended recipient of the payment will receive 
it and be able to negotiate it for its full value. The second statute, 
31 U.S.C. 3330, provides special rules for applying 31 U.S.C. 3329 to 
VA benefits. The specific countries subject to the prohibition are 
listed in 31 CFR 211.1, ``Withholding delivery of checks.'' We propose 
to refer readers to 31 CFR 211.1, rather than list the affected 
countries, because the list is subject to change by the Department of 
the Treasury.
    Proposed Sec.  5.714(a) defines the following terms used in this 
section and elsewhere in part 5: ``Payee,'' ``special deposit account'' 
(the special account referenced in 31 U.S.C. 3329), and ``Treasury 
Department list'' (the list of countries in 31 CFR 211.1). Although 
these definitions are new, they reflect current VA practices 
contemplated by part 3 of title 38, CFR.
    Current Sec.  3.653(c) is limited to ``aliens residing in'' a 
country on the Treasury Department list; however, we note that 38 
U.S.C. 3329 and 3330 are not limited to aliens and are based on 
delivery to a country, not residency in a country. Therefore, in 
proposed Sec.  5.714(c), we apply the restriction on check delivery to 
a ``payee located in a country on the Treasury Department list.''
    Further, section 3330(a) of title 31, United States Code, prohibits 
VA from sending checks ``if the check is * * * to be sent to a person 
in the United States or a territory or possession of the United States, 
and the person is legally responsible for the care of an individual in 
a foreign country.'' Although broadly written, this provision is not 
intended to bar VA benefit payments to anyone in the U.S. who is 
legally responsible for any person located in a foreign country. 
Rather, its intended effect is only to bar payment to a person in the 
U.S. or its territories or possessions on behalf of a VA beneficiary 
located in a country on the Treasury Department list. We propose to 
make that clear in proposed Sec.  5.714(c).
    Section 3329 of title 31, United States Code, prohibits sending VA 
checks to countries on the Treasury Department list. Neither the 
statute, nor its implementing regulation, 31 CFR 211.1, precludes a 
payee located in such countries from taking delivery outside of that 
country. It is VA's practice to permit delivery of checks to a U.S. 
Foreign Service post in a country that is not on the Treasury 
Department list, if requested by a payee. We propose to include this 
provision in Sec.  5.714(d). VA intends no substantive change, inasmuch 
as this method of delivery is mentioned in current Sec.  3.653(c)(1) 
and (2).
5.715 Claims for Undelivered or Discontinued Benefits
    Proposed Sec.  5.715 explains how to claim benefits discontinued 
under proposed Sec.  5.713. It also explains how to claim benefits that 
could not be delivered because of the restrictions in proposed Sec.  
5.714. Proposed Sec.  5.715(a) cross-references the definitions of 
``payee,'' ``special deposit account,'' and ``Treasury Department 
list'' in Sec.  5.714(a).
    Proposed Sec.  5.715(b)(2) states that there is no time limit for 
filing claims under this section. This provision is based on current 
Sec.  3.653(c)(3) with one change involving time limits for filing 
claims for discontinued or withheld benefits. The current regulation 
states

[[Page 65223]]

that there is no time limit with respect to claims for benefits 
withheld from a person located in a country on the Treasury Department 
list. There is also no time limit with respect to claims for benefit 
payments to an alien whose benefits were discontinued. We have included 
general language in proposed Sec.  5.715(b)(2) in order to make clear 
that there is no time limit for claims filed for benefits discontinued 
under Sec.  5.713 or withheld under Sec.  5.714.
    Proposed Sec.  5.715 is based on 38 U.S.C. 5308(b). Section 5308(b) 
requires that a new claim by an alien whose benefits were discontinued 
under section 5308 be ``accompanied by evidence satisfactory to the 
Secretary showing that such alien was not guilty of mutiny, treason, 
sabotage, or rendering assistance to the enemy.'' Section 3329(c)(1) of 
title 31 in essence provides that before the Secretary of the Treasury 
can pay out VA benefit funds in the special deposit account, the person 
claiming payment must satisfy VA of his or her right to the withheld 
funds. We propose to address these concerns by providing in Sec.  
5.715(d) that VA may request any evidence necessary to support a claim 
under this section. This includes evidence that the payee has not been 
guilty of mutiny, treason, sabotage, or rendering assistance to an 
enemy and evidence of continued entitlement to benefits during the time 
that awarded benefits were discontinued or benefit payments were 
undelivered.
    Section 5.677, cited in proposed Sec.  5.715(c), was published as 
proposed on May 31, 2006. See 71 FR 31056, 31065-66. Section 5.90, 
cited in proposed Sec.  5.715(d), will restate the content of current 
Sec.  3.159. Space was reserved in part 5 in a prior Notice of Proposed 
Rulemaking. See 70 FR 24680, 24683 (May 10, 2005); see also 73 FR 23353 
(April 30, 2008) (amending 38 CFR 3.159). Section 5.565, cited in 
proposed Sec.  5.715(f), was published as proposed on October 1, 2004. 
See 69 FR 59072, 59088-89.

Endnote Regarding Amendatory Language

    We intend to ultimately remove part 3 entirely, but we are not 
including amendatory language to accomplish that at this time. VA will 
provide public notice before removing part 3.

Paperwork Reduction Act

    Although this document contains provisions constituting a 
collection of information, at 38 CFR 5.708 and 5.709, under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501-3521), no new 
or proposed revised collections of information are associated with this 
proposed rule. The information collection requirements for Sec. Sec.  
5.708 and 5.709 are currently approved by the Office of Management and 
Budget (OMB) and have been assigned OMB control number 2900-0101.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed 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, 5 U.S.C. 601-612. This proposed amendment would not 
affect any small entities. Therefore, pursuant to 5 U.S.C. 605(b), this 
proposed amendment 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 Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget (OMB) unless OMB waives such 
review, as any regulatory action that is likely to result in a rule 
that may: (1) Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) Create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) Materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
Raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.
    The economic, interagency, budgetary, legal, and policy 
implications of this proposed rule have been examined and it has been 
determined to be a significant regulatory action under the Executive 
Order because it is likely to result in a rule that may raise novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.

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 an expenditure by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This proposed rule would have no such 
effect on State, local, or tribal governments, or 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 64.100, Automobiles and Adaptive Equipment 
for Certain Disabled Veterans and Members of the Armed Forces; 64.101, 
Burial Expenses Allowance for Veterans; 64.102, Compensation for 
Service-Connected Deaths for Veterans' Dependents; 64.104, Pension for 
Non-Service-Connected Disability for Veterans; 64.105, Pension to 
Veterans Surviving Spouses, and Children; 64.106, Specially Adaptive 
Housing for Disabled Veterans; 64.109, Veterans Compensation for 
Disability; 64.110, Veterans Dependency and Indemnity Compensation for 
Service-Connected Death; 64.115, Veterans Information and Assistance; 
and 64.127, Monthly Allowance for Children of Vietnam Veterans Born 
with Spina Bifida.

List of Subjects in 38 CFR Part 5

    Administrative practice and procedure, Claims, Disability benefits, 
Pensions, Veterans.

    Approved: August 19, 2008.
Gordon H. Mansfield,
Deputy Secretary of Veterans Affairs.
    For the reasons set forth in the preamble, VA proposes to amend 38 
CFR Part 5, as proposed to be added at 69 FR 4832, January 30, 2004, 
and as amended, by adding subpart L as follows:

PART 5--COMPENSATION, PENSION, BURIAL, AND RELATED BENEFITS

Subpart L--Payments and Adjustments to Payments

General Rate-Setting and Payments

Sec.
5.690 Where to find benefit rates and income limits.
5.691 Adjustments for fractions of dollars.
5.692 Fractions of one cent not paid.
5.693 Beginning date for certain VA benefit payments.
5.694 Surviving spouse's benefit for the month of the veteran's 
death.

[[Page 65224]]

5.695 Payments to or for a child pursuing a course of instruction at 
an approved educational institution.
5.696 Awards of dependency and indemnity compensation when not all 
dependents apply.
5.697 Exchange rates for income received or expenses paid in foreign 
currencies.
5.698--5.704 [Reserved]

General Reductions, Discontinuances, and Resumptions

5.705 General effective dates for reduction or discontinuance of 
benefits.
5.706 Payments excluded in calculating income or net worth.
5.707 Deductible medical expenses.
5.708 Eligibility verification reports.
5.709 Claimant and beneficiary responsibility to report changes.
5.710 Adjustment in benefits due to reduction or discontinuance of a 
benefit to another payee.
5.711 Payment to dependents due to the disappearance of a veteran 
for 90 days or more.
5.712 Suspension of VA benefits due to the disappearance of a payee.
5.713 Restriction on VA benefit payments to an alien located in 
enemy territory.
5.714 Restriction on delivery of VA benefit payments to payees 
located in countries on Treasury Department list.
5.715 Claims for undelivered or discontinued benefits.
5.716-5.739 [Reserved]

    Authority: 38 U.S.C. 501(a) and as noted in specific sections.

Subpart L--Payments and Adjustments to Payments

General Rate-Setting and Payments


Sec.  5.690  Where to find benefit rates and income limits.

    The rates of disability compensation, dependency and indemnity 
compensation, Old-Law Pension, Section 306 Pension, Improved Pension, 
and monthly allowances under 38 U.S.C. chapter 18 for children disabled 
from spina bifida or with certain birth defects, as well as the income 
limits applicable to Old-Law Pension, Section 306 Pension, Improved 
Pension, and parents' dependency and indemnity compensation, are 
available on VA's public Web site at http://www.va.gov.

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

Sec.  5.691  Adjustments for fractions of dollars.

    (a) Calculation of adjusted annual income. For purposes of 
entitlement to pension, VA will round down to the nearest dollar when 
calculating the adjusted annual income. See Sec.  5.370 for the 
definition of adjusted annual income. For purposes of entitlement to 
parents' dependency and indemnity compensation (DIC), VA will round 
down to the nearest dollar when calculating the annual income. See 
Sec. Sec.  5.531 through 5.534 for how to calculate parents' DIC annual 
income.

(Authority: 38 U.S.C. 1503(b))


    (b) Calculation of increased rates and income limits. VA will round 
up to the nearest dollar when calculating the increase due to a cost-
of-living adjustment of any of the following amounts:
    (1) Improved Pension maximum annual pension rates;
    (2) Old-Law Pension and Section 306 Pension annual income limits;
    (3) Income of a spouse when excluded from a veteran's countable 
annual income for Old-Law Pension and Section 306 Pension purposes;
    (4) Parents' DIC annual rates and income limits; or
    (5) The monthly allowance rates under 38 U.S.C. chapter 18 for 
children disabled from spina bifida or with certain birth defects.

(Authority: 38 U.S.C. 5312(c))


    (c) Calculation of monthly or other pension rates. VA will round 
down to the nearest dollar the amount of Improved Pension or Section 
306 Pension payable.

(Authority: 38 U.S.C. 5123)

Sec.  5.692  Fractions of one cent not paid.

    VA will not pay fractions of a cent when paying any benefit.

(Authority: 38 U.S.C. 501(a), 5312(c)(2))

Sec.  5.693  Beginning date for certain VA benefit payments.

    (a) Definition. For purposes of this section, ``increased award'' 
means a benefit payment increased as a result of:
    (1) An added dependent;
    (2) An increase in disability or disability rating, including but 
not limited to a temporary increased rating;
    (3) A reduction in income;
    (4) An election of Improved Pension under Sec.  5.461;
    (5) Except as provided in paragraph (c)(6) of this section, a 
temporary total rating under Sec.  4.29 of this chapter, ``Ratings for 
service-connected disabilities requiring hospital treatment or 
observation''; or
    (6) A temporary total rating under Sec.  4.30 of this chapter, 
``Convalescent ratings.''
    (b) Beginning payment date rule. Except as provided in paragraph 
(c) of this section, benefits identified in this paragraph will not be 
paid for any period before the first day of the month after the month 
in which the payment becomes effective. However, VA will consider 
beneficiaries to be in receipt of monetary benefits as of the effective 
date of the award. This paragraph applies to awards or increased awards 
of the following benefits made based on an original claim, reopened 
claim, or claim for increase:
    (1) Disability compensation;
    (2) Pension;
    (3) Dependency and indemnity compensation (DIC); or
    (4) The monetary allowances under 38 U.S.C. chapter 18 for children 
disabled from spina bifida or with certain birth defects.
    (c) Exceptions to beginning payment date rule. The beginning 
payment date in paragraph (b) of this section does not apply to the 
following awards, which are payable as of the effective date:
    (1) Awards that provide only for continuity of entitlement with no 
increase in the rate of payment.
    (2) Awards restoring a previously reduced benefit because the 
circumstances requiring reduction no longer exist.
    (3) Awards to a surviving spouse at the veteran's rate for the 
month of the veteran's death.
    (4) Awards that change any withholding, reduction, or suspension by 
reason of:
    (i) Recoupment;
    (ii) An offset to collect indebtedness;
    (iii) Hospitalization (Institutionalization);
    (iv) Incompetency;
    (v) Incarceration; or
    (vi) Discontinuance of apportionment.
    (5) Benefit increases resulting solely from the enactment of 
certain types of legislation, including:
    (i) Cost-of-living increases for disability compensation and DIC 
for surviving spouses and children;
    (ii) Increases in the maximum annual pension rate for Improved 
Pension;
    (iii) Increases in the income limits and maximum monthly rate for 
parents' DIC;
    (iv) Increases in the monetary allowances under 38 U.S.C. chapter 
18 for children disabled from spina bifida or with certain birth 
defects; and
    (v) Statutory changes in the criteria for the award of special 
monthly compensation.
    (6) Awards based on temporary total ratings under Sec.  4.29 of 
this chapter when the entire period of hospitalization or treatment, 
including any period of post-hospitalization convalescence, begins and 
ends within the same calendar month. In such cases the period of 
payment will begin on the first day of the month in which the 
hospitalization or treatment began.
    (7) Apportionments of benefits.
    (8) Certain awards of disability compensation to a veteran who is 
also

[[Page 65225]]

eligible for retired pay, as described in paragraph (d)(1) of this 
section.
    (9) Awards to a veteran's dependent of benefits that the veteran 
was receiving or entitled to receive when the veteran disappeared for 
90 days or more.
    (d) Cases involving waiver of retired pay. (1) If the veteran's 
retired pay, as defined in Sec.  5.745(a), is greater than the amount 
of VA disability compensation payable, VA will pay disability 
compensation from the effective date the veteran waives such retired 
pay.
    (2) If the amount of VA disability compensation payable is greater 
than the veteran's retired pay, VA's payment of the difference for any 
period before the effective date of the veteran's waiver of such 
retired pay is subject to the beginning payment date rule described in 
paragraph (b) of this section.
    (3) Nothing in this section prevents the veteran from receiving 
retired pay before the effective date of waiver of such pay.

(Authority: 38 U.S.C. 501(a), 1832, 5305, 5111)

Sec.  5.694  Surviving spouse's benefit for the month of the veteran's 
death.

    (a) Month-of-death benefit. For purposes of this section, ``month-
of-death benefit'' means a payment to a deceased veteran's surviving 
spouse for the month in which the veteran died and in the amount of 
disability compensation or pension that the veteran would have received 
for that month, if not for his or her death.
    (b) Surviving spouse entitled to death pension or dependency and 
indemnity compensation (DIC) for the month of death. (1) If the 
surviving spouse is entitled to death pension or DIC for the month of 
the veteran's death in an amount greater than the amount of disability 
compensation or pension that the veteran would have received for that 
month but for his or her death, then the surviving spouse is not 
entitled to a month-of-death benefit.
    (2) If the surviving spouse is entitled to death pension or DIC for 
the month of the veteran's death in an amount equal to or less than the 
amount of disability compensation or pension that the veteran would 
have received for that month but for his or her death, then the 
surviving spouse is entitled to death pension or DIC for the month of 
the veteran's death in an amount equal to the amount of disability 
compensation or pension that veteran would have received for that month 
but for his or her death.
    (c) Surviving spouse not entitled to death pension or DIC for the 
month of death. If the veteran died after December 31, 1996, and the 
surviving spouse is not entitled to death pension or DIC for the month 
of the veteran's death, then the surviving spouse is entitled to the 
month-of-death benefit. If the veteran died before December 31, 1996, 
then such a surviving spouse is not entitled to the month-of-death 
benefit.
    (d) Payment issued to deceased veteran. If VA issues payment to a 
deceased veteran for the month-of-death benefit, the payment will be 
treated as payable to a surviving spouse who is otherwise eligible for 
payment under paragraph (c) of this section. If the payment issued to a 
deceased veteran is negotiated or deposited by the surviving spouse, 
the payment will be considered the benefit to which the surviving 
spouse is entitled under paragraph (c) of this section. However, if 
such payment is less than the amount the surviving spouse would receive 
under paragraph (c) of this section, the unpaid difference may be paid 
as accrued benefits. See Sec.  5.550 (defining accrued benefits).

(Authority: 38 U.S.C. 5111(c), 5310)

Sec.  5.695  Payments to or for a child pursuing a course of 
instruction at an approved educational institution.

    (a) Definition. An ``approved educational institution'' means a 
permanent organization, approved by VA, that offers courses of 
instruction to a group of students who meet its enrollment criteria, 
including schools, colleges, academies, seminaries, technical 
institutes, and universities. The term also includes home schools that 
operate in compliance with the compulsory attendance laws of the States 
in which they are located, whether treated as private schools or home 
schools under State law. The term ``home schools'' is limited to 
courses of instruction for grades kindergarten through 12.

(Authority: 38 U.S.C. 104(a))


    (b) Payment of Improved Pension or disability compensation. 
Additional disability compensation will be paid to a veteran, or a 
higher rate of Improved Pension may be paid to a veteran or a surviving 
spouse, for a child of the veteran at least 18 years but less than 23 
years old who is pursuing a course of instruction at an approved 
educational institution. If no surviving spouse is eligible to Improved 
Death Pension or such child of the veteran is not in the surviving 
spouse's custody, Improved Death Pension may be paid directly to such 
child. For the definition of custody see paragraph (a) of Sec.  5.417 
``Child custody for purposes of determining dependency for Improved 
Pension.'' An award under this section will be effective on or after 
the child's 18th birthday.
    (1) Child began pursuing a course of instruction at an approved 
educational institution before reaching age 18. If a child began 
pursuing a course of instruction at an approved educational institution 
on or before the child's 18th birthday and VA receives a claim on or 
before the child's 18th birthday or no later than 1 year after the 
child's 18th birthday, the effective date will be the child's 18th 
birthday.
    (2) Child began pursuing a course of instruction at an approved 
educational institution after reaching age 18. If a child began 
pursuing a course of instruction at an approved educational institution 
after reaching age 18 and a claim is received no later than 1 year 
after the date the child began pursuing a course of instruction at an 
approved educational institution, the effective date will be the date 
the child began pursuing a course of instruction at an approved 
educational institution.
    (c) Payment of dependency and indemnity compensation (DIC) to a 
child not receiving DIC before reaching age 18. If a child was not 
receiving DIC before reaching age 18, DIC will be paid directly to the 
child for periods beginning on or after the child's 18th birthday if 
the child is entitled to DIC and is pursuing a course of instruction at 
an approved educational institution. The effective date of the award of 
benefits will be as follows:
    (1) Child was pursuing a course of instruction at an approved 
educational institution upon reaching age 18. If the child began 
pursuing a course of instruction at an approved educational institution 
on or before the child's 18th birthday and a claim for DIC is received 
on or before the child's 18th birthday or no later than 1 year after 
the child's 18th birthday, the effective date will be the first day of 
the month in which the child turned 18.
    (2) Child began pursuing a course of instruction after reaching age 
18. If the child began pursuing a course of instruction at an approved 
educational institution after reaching age 18 and a claim for DIC is 
received no later than 1 year after the date the child began pursuing a 
course of instruction at an approved educational institution, the 
effective date will be the first day of the month the child began 
pursuing a course of instruction at an approved educational 
institution.
    (3) Child established as a surviving spouse's dependent. If 
immediately before a child's 18th birthday, the child was established 
as a dependent of a surviving spouse entitled to DIC, and

[[Page 65226]]

the child's claim for DIC is received on or before the child's 18th 
birthday or no later than 1 year after the child's 18th birthday, the 
effective date of the DIC to the child will be the child's 18th 
birthday.

(Authority: 38 U.S.C. 5110(e))


    Cross Reference: For information on the impact on awards to other 
children, see Sec.  5.573, ``Effective date for dependency and 
indemnity compensation rate adjustments when an additional survivor 
files an application.''
    (d) Payment of DIC to a child receiving DIC before reaching age 18. 
If a child was receiving DIC in his or her own right before reaching 
age 18, payments may be made for periods beginning on or after the 
child's 18th birthday if the child is pursuing a course of instruction 
at an approved educational institution. Benefits will be payable 
directly to the child as follows:
    (1) Child began pursuing a course of instruction before reaching 
age 18. If the child began pursuing a course of instruction at an 
approved educational institution on or before the child's 18th birthday 
and evidence of school attendance is received on or before the child's 
18th birthday or no later than 1 year after the child's 18th birthday, 
payments will be made from the child's 18th birthday.
    (2) Child began pursuing a course of instruction after reaching age 
18. If the child began pursuing a course of instruction at an approved 
educational institution after reaching age 18 and evidence of school 
attendance at an approved educational institution is received no later 
than 1 year after the date the child began pursuing a course of 
instruction, payments will be made from the date the child began 
pursuing a course of instruction.

(Authority: 38 U.S.C. 5110(e))


    Cross Reference: For the rate of payment, see Sec.  5.524, ``Awards 
of dependency and indemnity compensation benefits to children when 
there is a retroactive award to a school child.''
    (e) Claims filed outside the one-year period. If VA receives a 
claim referred to in paragraphs (b) or (c), or evidence referred to in 
paragraph (d), of this section after the expiration of the 1-year 
period, the effective date will be the date VA receives the claim or 
evidence.
    (f) Payments for vacation or holiday periods. (1) Child returns to 
an approved educational institution. A child is considered to be 
pursuing a course of instruction at an approved educational institution 
during a vacation or holiday period if the child:
    (i) Was pursuing a course of instruction at an approved educational 
institution immediately before the vacation or holiday period; and
    (ii) Resumes the course of instruction at the beginning of the next 
term either at the same or a different approved educational 
institution.
    (2) Child fails to return to an approved educational institution. 
When payment has been made for a vacation or holiday period, and the 
child does not resume the course of instruction, benefits will be 
discontinued effective the first day of the month after the month for 
which VA last paid benefits, or the first day of the month that the 
child was scheduled to resume the course of instruction, whichever date 
is earlier.

(Authority: 38 U.S.C. 5112(b)(7))


    (g) Ending dates. (1) Course of instruction completed. Except as 
provided in paragraph (f)(2) of this section, benefits will be paid 
under this section through the last day of the month in which a course 
of instruction was or will be completed.
    (2) Termination of course of instruction before completion. 
Benefits will be paid under this section through the last day of the 
month in which the course of instruction was terminated.
    (h) Transfer to another course of instruction or another 
educational institution. Payments previously made under this section 
will not be adjusted because the child changed a course of instruction 
or transferred to a different approved educational institution.
    (i) Bars to benefit payments under this section. Benefits under 
this section will not be paid if:
    (1) The child has elected to receive educational assistance under 
38 U.S.C. chapter 35 (see Sec. Sec.  5.764 and 21.3023 of this 
chapter); or
    (2) The child is pursuing a course of instruction at an approved 
educational institution where the child is completely supported at the 
expense of the Federal Government, such as a military service academy.

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

Sec.  5.696  Awards of dependency and indemnity compensation when not 
all dependents apply.

    Except as provided in Sec.  5.536(d), ``One parent--marriage ends 
or parent is separated from spouse,'' in any case where a dependency 
and indemnity compensation (DIC) claim has been filed by or on behalf 
of at least one dependent but VA believes that other dependents may be 
entitled to DIC based on the death of the same veteran, the award 
(original or amended) to all dependents who have filed claims will be 
made for all periods at the rates and in the same manner as though 
there were no dependents other than the dependents who filed claims. 
However, if the file reflects that there are additional potential DIC 
claimants and less than 1 year has passed since the veteran's death, 
the award to a dependent who has filed a claim will be made at the rate 
which would be payable as if all dependents were receiving benefits. 
If, at the expiration of the 1-year period, claims have not been filed 
for such dependents, VA will pay the full rate to the dependents 
already receiving DIC. This payment will include any retroactive 
amounts to which they are entitled.

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

Sec.  5.697  Exchange rates for income received or expenses paid in 
foreign currencies.

    (a) Pension and parents' dependency and indemnity compensation 
(DIC) rates. In determining the rate of pension or parents' DIC payable 
to an individual, VA will convert the amount of income received or 
expenses paid in foreign currencies into U.S. dollars using the 
quarterly exchange rates established by the U.S. Department of the 
Treasury as provided in this section. Benefits will be paid in U.S. 
dollars.
    (1) Calculation of pension or parents' DIC rates. Because exchange 
rates for foreign currencies cannot be determined in advance, VA will 
estimate pension or parents' DIC rates using the most recent quarterly 
exchange rate. When the beneficiary or claimant informs VA of a change 
in income or expenses that would affect entitlement, VA will make 
retroactive benefit adjustments based on the exchange rate in effect at 
the time VA received notice of the change in income or expenses.
    (2) Retroactive adjustments due to changes in exchange rates. (i) 
For retroactive adjustments to pension or parents' DIC rates due to 
changes in the currency exchange rate, VA will use the average of the 
four most recent quarterly exchange rates.
    (ii) If income or expenses are reported for a prior reporting 
period, VA will calculate any retroactive benefit rate adjustment using 
the average of the four most recent quarterly exchange rates which were 
available on the last day of the reporting period for which the income 
is being reported. See Sec.  5.708(a)(2) (definition of ``reporting 
period'').
    (b) Burial benefits--(1) General rule. VA will calculate monetary 
burial

[[Page 65227]]

benefits (as defined in [regulation that will be published in a future 
Notice of Proposed Rulemaking]) payable as reimbursement for burial 
expenses paid in foreign currency using the quarterly exchange rate for 
the quarter in which expenses were paid. If the U.S. Department of the 
Treasury has not yet published a rate for that quarter, the payment 
amount will be calculated using the most recent quarterly exchange 
rate. Payments will be made in U.S. dollars.
    (2) Exception. If burial benefits are payable to an unpaid 
creditor, VA will calculate the payment amount using the quarterly 
exchange rate for the quarter in which the veteran died. When 
entitlement originates during a quarter for which the U.S. Department 
of the Treasury has not yet published a quarterly rate, amounts due 
will be calculated using the most recent quarterly exchange rate. 
Payments will be made in U.S. dollars.
    (c) Accrued benefits-- (1) General rule. Accrued benefits, as 
defined in Sec.  5.550, may be paid in accordance with Sec.  5.555 as 
reimbursement to the person who bore the expense of the deceased 
beneficiary's last illness and/or burial. VA will calculate such 
accrued benefits based on expenses paid in foreign currency using the 
quarterly exchange rate for the quarter in which the expenses were 
paid. If the U.S. Department of the Treasury has not yet published a 
rate for that quarter, the payment amount will be calculated using the 
most recent quarterly exchange rate. Payments will be made in U.S. 
dollars.
    (2) Exception. If accrued benefits are payable to an unpaid 
creditor, VA will calculate the payment amount using the quarterly 
exchange rate for the quarter in which the beneficiary died. When 
entitlement originates during a quarter for which the U.S. Department 
of the Treasury has not yet published a quarterly rate, amounts due 
will be calculated using the most recent quarterly rate. Payments will 
be made in U.S. dollars.

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

Sec. Sec.  5.698-5.704  Reserved

General Reductions, Discontinuances, and Resumptions


Sec.  5.705  General effective dates for reduction or discontinuance of 
benefits.

    (a) General rule. Except as otherwise provided, VA will assign an 
effective date for the reduction or discontinuance of disability 
compensation, pension, dependency and indemnity compensation (DIC), or 
the monetary allowances under chapter 18 of title 38, United States 
Code, in accordance with the facts found. If more than one effective-
date provision applies to a particular issue or event, VA will reduce 
or discontinue the benefit(s) in accordance with the earliest 
applicable date. VA will pay a reduced rate or discontinue benefits 
effective the date of reduction or discontinuance.
    (b) The following table lists the locations of specific reduction 
and discontinuance effective-date provisions in part 5. The table is 
provided solely for informational purposes, and does not contain any 
substantive rules.

------------------------------------------------------------------------
            Effective-date provision                 Part 5 location
------------------------------------------------------------------------
                Subpart C--Adjudicative Process, General
------------------------------------------------------------------------
Filing a claim for death benefits..............           Sec.   5.53(c)
Requirement to provide Social Security numbers.          Sec.   5.101(c)
Failure to report for VA examination or                  Sec.   5.103(d)
 reexamination.................................
Certifying continuing eligibility to receive             Sec.   5.104(c)
 benefits......................................
Effective dates based on change of law or VA             Sec.   5.152(b)
 issue.........................................
Effective dates for reduction or discontinuance             Sec.   5.165
 of awards based on erroneous payments.........
Effective dates for severing service connection             Sec.   5.177
 or discontinuing or reducing benefit payments.
------------------------------------------------------------------------
                   Subpart D--Dependents and Survivors
------------------------------------------------------------------------
Evidence of dependency--reduction or                     Sec.   5.181(c)
 discontinuance of VA benefits.................
Effective date of reduction or discontinuance               Sec.   5.184
 of VA benefits due to the death of a
 beneficiary's dependent.......................
Effective date of reduction or discontinuance               Sec.   5.197
 of improved pension, compensation, or
 dependency and indemnity compensation due to
 marriage or remarriage........................
Effective date of reduction or discontinuance               Sec.   5.198
 of improved pension, compensation, or
 dependency and indemnity compensation due to
 divorce or annulment..........................
Effective date of discontinuance of VA benefits             Sec.   5.204
 to a surviving spouse who holds himself, or
 herself, out as the spouse of another person..
Effective date of reduction or discontinuance--             Sec.   5.231
 child reaches age 18 or 23....................
Effective date of reduction or discontinuance--             Sec.   5.232
 terminated adoptions..........................
Effective date of reduction or discontinuance--             Sec.   5.233
 stepchild no longer a member of the veteran's
 household.....................................
Effective date of an award, reduction, or                   Sec.   5.234
 discontinuance of benefits based on child
 status due to permanent incapacity for self-
 support.......................................
------------------------------------------------------------------------
  Subpart E--Claims for Service Connection and Disability Compensation
------------------------------------------------------------------------
Effective dates--reduction or severance of                  Sec.   5.313
 service-connected disability compensation.....
Effective dates--discontinuance of total                    Sec.   5.314
 disability rating based on individual
 unemployability...............................
Effective dates--reduction or discontinuance of             Sec.   5.315
 additional disability compensation based on
 parental dependency...........................
Effective dates--Additional compensation for             Sec.   5.334(b)
 regular aid and attendance payable for a
 veteran's spouse..............................
------------------------------------------------------------------------
 Subpart F--Nonservice-Connected Disability Pensions and Death Pensions
------------------------------------------------------------------------
Effective dates for awards, reductions, and                 Sec.   5.393
 discontinuances of special monthly pension....
Improved Pension income adjustments--effective      Sec.   5.421(a), (c)
 dates, categories, and counting...............
Improved Pension time limits to establish                   Sec.   5.423
 entitlement or to increase rate based on
 income........................................
Effective date of discontinuance of Improved                Sec.   5.433
 Death Pension payments to a beneficiary no
 longer recognized as the veteran's surviving
 spouse........................................
Award, or discontinuance of award, of Improved      Sec.   5.434(b), (c)
 Death Pension to a surviving spouse where
 Improved Death Pension payments to a child are
 involved......................................

[[Page 65228]]

 
Effective dates for Old-Law Pension and Section             Sec.   5.477
 306 Pension reductions or discontinuances.....
------------------------------------------------------------------------
  Subpart G--Dependency and Indemnity Compensation, Death Compensation,
     Accrued Benefits, and Special Rules Applicable Upon Death of a
                               Beneficiary
------------------------------------------------------------------------
Awards of dependency and indemnity compensation          Sec.   5.524(c)
 benefits to children when there is a
 retroactive award to a school child...........
Effective dates for discontinuance of DIC or                Sec.   5.568
 death compensation payments to a person no
 longer recognized as the veteran's surviving
 spouse........................................
Effective date for award, or termination of                 Sec.   5.569
 award, of DIC or death compensation to a
 surviving spouse where DIC or death
 compensation payments to children are involved
Effective date for reduction in DIC--surviving              Sec.   5.570
 spouses.......................................
Effective date for reduction or discontinuance              Sec.   5.572
 based on increased income--parents' DIC.......
Effective date for dependency and indemnity                 Sec.   5.573
 compensation rate adjustments when an
 additional dependent files an application.....
Effective dates of awards and discontinuances            Sec.   5.574(b)
 of special monthly dependency and indemnity
 compensation..................................
------------------------------------------------------------------------
 Subpart H--Special and Ancillary Benefits for Veterans, Dependents, and
                                Survivors
------------------------------------------------------------------------
Awards of VA benefits based on special acts or      Sec.   5.581(d), (e)
 private laws..................................
Effective dates of awards for certain disabled              Sec.   5.591
 children of Vietnam veterans..................
------------------------------------------------------------------------
     Subpart I--Benefits for Certain Filipino Veterans and Survivors
------------------------------------------------------------------------
Filipino veterans and their survivors:                      Sec.   5.618
 Effective dates of reductions and
 discontinuances for benefits at the full-
 dollar rate...................................
------------------------------------------------------------------------
          Subpart K--Matters Affecting the Receipt of Benefits
------------------------------------------------------------------------
Effective dates--forfeiture....................             Sec.   5.681
Presidential pardon for offenses causing                 Sec.   5.682(d)
 forfeiture....................................
Renouncement of benefits.......................          Sec.   5.683(c)
------------------------------------------------------------------------
             Subpart L--Payments and Adjustments to Payments
------------------------------------------------------------------------
Beginning date for certain VA benefit payments.          Sec.   5.693(b)
Benefits paid to or for a child pursuing a           Sec.   5.695(b)-(g)
 course of instruction at an approved
 educational institution.......................
Eligibility verification reports...............     Sec.   5.708(f), (g)
Adjustment in benefits due to reduction or               Sec.   5.710(b)
 discontinuance of a benefit to another payee..
Payment to dependents due to the disappearance     Sec.   5.711(b), (c),
 of a veteran for 90 days or more..............                      (d)
Suspension of VA benefits due to the                        Sec.   5.712
 disappearance of a payee......................
Restriction on VA benefit payments to an alien           Sec.   5.713(b)
 located in enemy territory....................
Reduction of special monthly compensation based    Sec.   5.720(b), (e),
 on the need for regular aid and attendance                          (f)
 while a veteran is receiving hospital care....
Resumption of special monthly compensation          Sec.   5.721(c), (b)
 based on the need for regular aid and
 attendance when a veteran is discharged or
 released from hospital care...................
Reduction of Improved Pension while a veteran      Sec.   5.722(a), (d),
 is receiving domiciliary or nursing home care.                 (e), (f)
Reduction of Improved Pension while a veteran       Sec.   5.723(b), (c)
 or surviving spouse is receiving Medicaid-
 covered care in a nursing facility............
Reduction of special monthly pension based on      Sec.   5.724(b), (d),
 the need for regular aid and attendance for                         (e)
 Improved Pension while a veteran is receiving
 hospital care.................................
Resumption of Improved Pension and special          Sec.   5.725(c), (d)
 monthly pension based on the need for regular
 aid and attendance after discharge or release
 from hospital care............................
Reduction of Section 306 Pension while a            Sec.   5.726(a), (d)
 veteran is receiving hospital care............
Reduction of Old-Law Pension while a veteran is     Sec.   5.727(a), (c)
 receiving hospital care.......................
Reduction of special monthly pension based on       Sec.   5.728(b), (e)
 the need for regular aid and attendance for
 Old-Law Pension or Section 306 Pension while a
 veteran is receiving hospital care............
Resumption of Section 306 Pension and special       Sec.   5.729(c), (e)
 monthly pension based on the need for regular
 aid and attendance when a veteran is
 discharged or released from hospital care.....
Resumption of Old-Law Pension and special          Sec.   5.730(c), (d),
 monthly pension based on the need for regular                       (e)
 aid and attendance when a veteran is
 discharged or released from hospital care.....
General effective dates for awarding, reducing,          Sec.   5.743(b)
 or discontinuing VA benefits because of an
 election......................................
Prohibition against receipt of active military           Sec.   5.746(c)
 service pay and VA benefits for the same
 period........................................
Effect of election of compensation under the             Sec.   5.754(d)
 Radiation Exposure Compensation Act of 1990 on
 payment of certain VA benefits................
Payment of multiple VA benefits to a surviving    Sec.   5.762(c)(6)(ii)
 child based on the service of more than one
 veteran.......................................
Payment of dependents' educational assistance            Sec.   5.764(a)
 (DEA) and VA pension or dependency and
 indemnity compensation (DIC) for the same
 period........................................
------------------------------------------------------------------------
 Subpart M--Apportionments to Dependents and Payments to Fiduciaries and
                       Incarcerated Beneficiaries
------------------------------------------------------------------------
Effective date of apportionment discontinuance              Sec.   5.784
 or reduction..................................
Determinations of incompetency.................          Sec.   5.791(d)
Incarcerated beneficiaries--general provisions           Sec.   5.810(c)
 and definitions...............................

[[Page 65229]]

 
Discontinuance of pension during incarceration.          Sec.   5.813(b)
------------------------------------------------------------------------


(Authority: 38 U.S.C. 501(a), 1832, 5112)


    Cross Reference: Additional time period before certain reductions 
or discontinuances take effect. See Sec.  5.177.


Sec.  5.706  Payments excluded in calculating income or net worth.

    (a) Scope. This section describes payments excluded by Federal 
statutes from income and net worth determinations for VA benefits that 
are provided based on financial need. These benefits are Improved 
Pension, Section 306 Pension, Old-Law Pension, parents' dependency and 
indemnity compensation (DIC), and additional amounts of veterans' 
compensation payable for dependent parents. Income and net worth rules 
applying solely to a specific benefit are included in the regulations 
that deal with that specific benefit.
    (b) Specific payments excluded. The following table states whether 
certain payments are included or excluded as income or net worth for 
any VA-administered benefit program that is based on financial need. 
This table does not confer any substantive rights.

----------------------------------------------------------------------------------------------------------------
          Program or payment                    Income                 Net worth                Authority
----------------------------------------------------------------------------------------------------------------
                                      Compensation or Restitution Payments
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
(1) Relocation payments. Payments to    Excluded..............  Included..............  42 U.S.C. 4636.
 persons displaced as a direct result
 of programs or projects undertaken by
 a Federal agency or with Federal
 financial assistance under the
 Uniform Relocation Assistance and
 Real Property Acquisition Policies
 Act of 1970.
(2) Crime victim compensation. Amounts  Excluded..............  Excluded..............  42 U.S.C. 10602(c).
 received as compensation under the
 Victims of Crime Act of 1984 unless
 the total amount of assistance
 received from all federally funded
 programs is sufficient to fully
 compensate the claimant for losses
 suffered as a result of the crime.
(3) Restitution to individuals of       Excluded..............  Excluded..............  50 U.S.C. App. 1989b-
 Japanese ancestry. Payments made as                                                     4(f).
 restitution under Pub. L. 100-383 to
 an individual of Japanese ancestry
 who was interned, evacuated, or
 relocated during the period of
 December 7, 1941 through June 30,
 1946, pursuant to any law, Executive
 Order, Presidential proclamation,
 directive, or other official action
 respecting these individuals.
(4) Victims of Nazi persecution.        Excluded..............  Excluded..............  Sec. 1(a), Pub. L. 103-
 Payments made to individuals because                                                    286, 108 Stat. 1450, 42
 of their status as victims of Nazi                                                      U.S.C. 1437a note.
 persecution.
(5) Agent Orange settlement payments.   Excluded..............  Excluded..............  Sec. 1, Pub. L. 101-201,
 Payments made from the Agent Orange                                                     103 Stat. 1795.
 Settlement Fund or any other fund
 established pursuant to the
 settlement in the In Re Agent Orange
 product liability litigation, M.D.L.
 No. 381 (E.D.N.Y.).
(6) Chapter 18 benefits. Allowances     Excluded..............  Excluded..............  38 U.S.C. 1833(c).
 paid under 38 U.S.C. chapter 18 to a
 veteran's child with a birth defect.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
                                          Payments to Native Americans
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
(7) Indian judgment fund                Excluded..............  Excluded..............  25 U.S.C. 1407.
 distributions. Funds listed in 25
 U.S.C. 1407.
(8) Interests of individual Indians in  Excluded..............  Excluded..............  25 U.S.C. 1408.
 trust or restricted lands. Interests
 of individual Indians in trust or
 restricted lands and up to $2,000 per
 year of income received by individual
 Indians that is derived from such
 interests.
(9) Submarginal land. Income derived    Excluded..............  Excluded..............  25 U.S.C. 459e.
 from certain submarginal land of the
 United States that is held in trust
 for certain Indian tribes.
(10) Old Age Assistance Claims          Excluded..............  Excluded..............  25 U.S.C. 2307.
 Settlement Act. Up to $2,000 of per
 capita distributions under the Old
 Age Assistance Claims Settlement Act.
(11) Alaska Native Claims Settlement    Excluded..............  Excluded..............  43 U.S.C. 1626(c).
 Act. Any of the following, if
 received from a Native Corporation,
 under the Alaska Native Claims
 Settlement Act:
    (i) Cash, including cash dividends
     on stocks and bonds, up to a
     maximum of $2,000 per year;
    (ii) Stock, including stock issued
     as a dividend or distribution;
    (iii) Bonds that are subject to
     the protection under 43 U.S.C.
     1606(h) until voluntarily and
     expressly sold or pledged by the
     shareholder after the date of
     distribution;
    (iv) A partnership interest;
    (v) Land or an interest in land,
     including land received as a
     dividend or distribution on
     stock;
    (vi) An interest in a settlement
     trust.
(12) Maine Indian Claims Settlement     Excluded..............  Excluded..............  25 U.S.C. 1728.
 Act. Payments received under the
 Maine Indian Claims Settlement Act of
 1980.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
                                              Work-Related Payments
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(13) Workforce investment. Allowances,  Excluded..............  Included..............  29 U.S.C. 2931(a)(2).
 earnings, and payments to individuals
 participating in programs under the
 Workforce Investment Act of 1998 (29
 U.S.C. chapter 30).
(14) AmeriCorps participants.           Excluded..............  Included..............  42 U.S.C. 12637(d).
 Allowances, earnings, and payments to
 AmeriCorps participants under the
 National and Community Service Act of
 1990.

[[Page 65230]]

 
(15) Volunteer work. Compensation or    Excluded..............  Excluded..............  42 U.S.C. 5044(f).
 reimbursement to volunteers involved
 in programs administered by the
 Corporation for National and
 Community Service, unless the
 payments are equal to or greater than
 the minimum wage. The minimum wage is
 either under the Fair Labor Standards
 Act of 1938 (29 U.S.C. 201 et seq.)
 or under the law of the State where
 the volunteers are serving, whichever
 is greater.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
                                             Miscellaneous Payments
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(16) Food stamps. Value of the          Excluded..............  Excluded..............  7 U.S.C. 2017(b).
 allotment provided to an eligible
 household under the Food Stamp
 Program.
(17) Food for children. Value of free   Excluded..............  Excluded..............  42 U.S.C. 1780(b).
 or reduced price for food under the
 Child Nutrition Act of 1966.
(18) Child care. Value of any child     Excluded..............  Excluded..............  42 U.S.C. 9858q.
 care provided or arranged (or any
 amount received as payment for such
 care or reimbursement for costs
 incurred for such care) under the
 Child Care and Development Block
 Grant Act of 1990.
(19) Services for housing recipients.   Excluded..............  Excluded..............  42 U.S.C. 8011(j)(2).
 Value of services, but not wages,
 provided to a resident of an eligible
 housing project under a congregate
 services program under the Cranston-
 Gonzalez National Affordable Housing
 Act.
(20) Home energy assistance. The        Excluded..............  Excluded..............  42 U.S.C. 8624(f).
 amount of any home energy assistance
 payments or allowances provided
 directly to, or indirectly for the
 benefit of, an eligible household
 under the Low-Income Home Energy
 Assistance Act.
(21) Programs for older Americans.      Excluded..............  Included..............  42 U.S.C. 3020a(b).
 Payments, other than wages or
 salaries, received from programs
 funded under the Older Americans Act
 of 1965 (42 U.S.C. chapter 35).
(22) Student financial aid. Amounts of  Excluded..............  Excluded..............  20 U.S.C. 1087uu,
 student financial assistance received                                                   2415(a).
 under Title IV of the Higher
 Education Act of 1965, including
 Federal work-study programs or under
 Bureau of Indian Affairs student
 assistance programs, or vocational
 training under the Carl D. Perkins
 Vocational and Technical Education
 Act of 1998.
(23) Retired Serviceman's Family        Excluded..............  Included..............  10 U.S.C. 1441.
 Protection Plan annuities. Annuities
 received under subchapter 1 of the
 Retired Serviceman's Family
 Protection Plan.
(24) Medicare Prescription Drug         Excluded..............  Excluded..............  42 U.S.C. 1395w-
 Discount Card and Transitional                                                          141(g)(6).
 Assistance Program.
----------------------------------------------------------------------------------------------------------------


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

Sec.  5.707  Deductible medical expenses.

    (a) Scope. This section describes the medical expenses that VA will 
deduct for purposes of three of VA's benefit programs based on 
financial need: Improved Pension, Section 306 Pension, and parents' 
dependency and indemnity compensation (DIC). For the rules governing 
how such medical expenses are deducted, see 5.413 Income deductions for 
calculating adjusted annual income (regarding Improved Pension), 5.474 
Deductible Expenses for Section 306 Pension Only, and 5.532 Deductions 
from income (regarding parents' DIC).
    (b) Definition of licensed healthcare provider. For purposes of 
this section, the term ``licensed healthcare provider'' means an 
individual licensed to provide health services in the state in which 
the individual provides health services. The term includes, but is not 
limited to, physician, registered nurse, licensed vocational nurse, or 
licensed practical nurse.
    (c) Medical Expenses--general. The following payments are ``medical 
expenses'' that will be deducted from income if they are not 
reimbursed:
    (1) Care by a licensed healthcare provider. Payments made for 
diagnosis, treatment, rehabilitation, or preventive maintenance (such 
as an annual physical examination).
    (2) Medical supplies and medications. Payments made for prescribed 
medication and legal non-prescription medication. This category also 
includes medically necessary food, beverages, and vitamins that a 
licensed healthcare provider authorized to write prescriptions directs 
an individual to take.
    (3) Adaptive equipment. Payments made for adaptive devices or 
companion animals used to assist an individual with an ongoing 
disability, to the extent that a non-disabled person would not normally 
make such payments.
    (4) Transportation expenses. Payments made for transportation for 
medical purposes (including transportation to and from a licensed 
healthcare provider's office). When an individual uses a private 
vehicle, the deductible expense for traveling will be limited to 20 
cents per mile traveled, but the full cost of parking, taxi, bus, or 
other transportation costs will be deducted.
    (5) Health insurance premiums. Payments made for health, medical, 
and hospitalization insurance premiums. This category includes Medicare 
premiums.
    (6) Institutional forms of care and in-home attendants. The 
following payments are ``medical expenses'' that will be deducted from 
income:
    (i) Nursing home care. Payments made to a facility that provides 
extended term inpatient medical care and made for such care, if a 
responsible official of the facility certifies that the individual is a 
patient (as opposed to a resident) in the facility.
    (ii) In-home attendant. Payments made for an in-home attendant for 
personal care and maintenance of the immediate environment of an 
individual who is in need of regular aid and attendance or is 
housebound, if the attendant is providing some medical or nursing 
services. The attendant need not be a licensed healthcare provider. The 
attendant may be a family member.
    (iii) Veterans in State homes. Payments made to a ``State home,'' 
such as a veterans' or soldiers' and sailors' home (or the equivalent) 
operated by a State, for the domiciliary care or nursing and hospital 
care of a veteran who is a patient (as opposed to a resident) in the 
State home.
    (iv) Custodial Care. Payments made to an institution that houses 
and maintains an individual because the individual needs to live in a 
protected environment, to the extent the payments are made for medical 
treatment but not to the extent they are made for strictly custodial 
care.
    (v) Government Institution. Payments to a government institution 
for a physician-supervised program of

[[Page 65231]]

therapy or rehabilitation for an individual at that institution.
    (vi) Adult Day Care, Rest Homes, Group Homes. Payments to an adult 
day care facility, rest home, or group home in which an individual is 
maintained rather than in a nursing home, subject to paragraphs 
(c)(6)(vi)(A) through (C) of this section:
    (A) If the individual is in need of regular aid and attendance or 
is housebound, all reasonable fees paid to the facility are deducted 
from countable annual income if the facility provides some medical or 
nursing services to the individual. The services need not be provided 
by a licensed healthcare provider.
    (B) If the individual is not in need of regular aid and attendance 
and is not housebound, VA will deduct all reasonable fees paid to the 
facility, but only to the extent that they are for medical treatment 
provided by a licensed healthcare provider.
    (C) If the institution is a government facility, paragraph 
(c)(6)(v) of this section applies.

(Authority: 38 U.S.C. 501(a), 1503(a)(8), 1315(f)(3))

Sec.  5.708  Eligibility verification reports.

    (a) Definitions. (1) An ``eligibility verification report'' (EVR) 
is a form that VA may use to obtain from claimants and beneficiaries 
information about factors that affect entitlement to Improved Pension 
and parents' dependency and indemnity compensation (DIC). See Sec.  
5.709(b) for a list of some of the factors that affect entitlement to 
these benefits.
    (2) A ``reporting period'' is a time period established by VA for 
which a claimant or beneficiary reports income, adjustments to income, 
and net worth to VA.
    (b) Circumstances when VA may require completion of an eligibility 
verification report (EVR). Except as provided in paragraph (c) of this 
section, claimants or beneficiaries of pension or parents' DIC must, as 
a condition of receipt or continued receipt of benefits, file a 
completed EVR upon request in the following circumstances:
    (1) EVRs for claimants. VA may require a claimant to file a 
completed EVR annually, or when necessary to update, complete, or 
clarify information regarding the claimant's income or marital status 
or any other factor that affects entitlement.
    (2) EVRs for beneficiaries. VA may require a beneficiary to file a 
completed EVR annually or if:
    (i) The Social Security Administration has not verified the social 
security number of the beneficiary or, if applicable, the beneficiary's 
spouse;
    (ii) Evidence suggests that the beneficiary or, if applicable, the 
beneficiary's spouse or child, may have received income from sources 
other than the Social Security Administration during the current or 
previous calendar year; or
    (iii) The Secretary decides completion of an EVR is necessary to 
ensure accurate and timely reporting of changes in the factors that 
affect entitlement or to protect the Improved Pension and parents' DIC 
programs from fraud.
    (c) Eligibility verification reports for certain parents receiving 
parents' DIC. A parent receiving parents' DIC is not required to file 
an EVR if:
    (1) The parent has reached age 72; and
    (2) The parent has been receiving parents' DIC during 2 consecutive 
calendar years.
    However, a parent receiving parents' DIC must notify VA whenever 
there is a material change in his or her annual income.

(Authority 38 U.S.C. 1315(e))


    (d) Action VA takes upon receipt of information or an eligibility 
verification report (EVR). When determining whether an individual is 
entitled to benefits, VA will consider any new information provided in 
an EVR or through other means. VA may award, deny, increase, reduce, or 
discontinue benefits based on the information provided. When the 
expected annual income is uncertain, payment of pension or parents' DIC 
will be authorized at the lowest rate or discontinued, as provided in 
Sec.  5.423, Sec.  5.478(a), or Sec.  5.531(e).
    (e) Action VA takes when a claimant does not return an eligibility 
verification report (EVR). If VA does not receive a completed EVR 
within 60 days after the date VA requested the EVR from a claimant, VA 
will deny the claim.
    (f) Action VA takes when a beneficiary does not return a completed 
eligibility verification report (EVR)--(1) Failure to return an EVR. If 
VA does not receive an EVR within 60 days after the date VA requested 
the EVR from a beneficiary, VA will immediately suspend further benefit 
payments.
    (2) Return of an incomplete EVR. If VA receives an incomplete EVR 
no later than 60 days after the date VA requested the EVR from a 
beneficiary, VA will notify the beneficiary that the EVR is incomplete 
and inform the beneficiary of the additional information needed to 
complete the EVR. If VA does not receive a completed EVR within 120 
days after the date VA first requested the EVR from the beneficiary, VA 
will immediately suspend further benefit payments.
    (3) Discontinuance for failure to return a completed EVR. A 
beneficiary whose benefits were suspended under paragraphs (f)(1) or 
(2) of this section must return the completed EVR no later than 1 year 
after the date VA first requested the EVR from the beneficiary. 
Otherwise, VA will discontinue benefits as follows:
    (i) If the reporting period is the initial reporting period, the 
effective date of discontinuance is the first day of that period; or
    (ii) If the reporting period is a subsequent reporting period, the 
effective date of discontinuance is the first day of the calendar year 
for which the beneficiary was asked to provide information in the EVR.
    (g) Action VA takes when a beneficiary returns an eligibility 
verification report (EVR) after benefits were suspended or 
discontinued. If benefits were suspended or discontinued under 
paragraph (f) of this section, VA will resume payments (if otherwise in 
order) as follows:
    (1) If VA receives the completed EVR no later than 1 year after the 
end of the reporting period for which the beneficiary was asked to 
provide the EVR, VA will resume payment of benefits as follows:
    (i) Payments suspended but not discontinued. If payments are 
suspended but not discontinued, such payments will be resumed effective 
the date of suspension.
    (ii) Payments discontinued effective before the date of suspension. 
If payments are discontinued effective before the date of suspension, 
such payments will be resumed effective the date of discontinuance.
    (2) If VA receives the completed EVR more than 1 year after the end 
of the reporting period, VA will treat the EVR as a new claim.
    (h) VA will accept the eligibility verification report (EVR) at any 
time to reduce a debt. A former beneficiary who owes or owed money to 
VA because VA discontinued payments for failure to file an EVR within 
the time limit in paragraph (f) of this section may submit the EVR at 
any time. If, based on information in the EVR, VA decides that the 
former beneficiary was entitled to benefits for any part of the period 
of time in which payment had been discontinued for failure to file an 
EVR, VA will offset the debt for that part of the period. Once the debt 
has been completely offset, VA will not pay additional benefits for 
that period.

(Authority: 38 U.S.C. 501(a), 1506)


[[Page 65232]]




Sec.  5.709  Claimant and beneficiary responsibility to report changes.

    (a) Claimants and beneficiaries of pension or parents' dependency 
and indemnity compensation (DIC) must promptly notify VA of any 
material change in a factor that affects entitlement to the benefit 
that they are claiming or receiving. VA may request any information or 
evidence that is necessary to determine whether the individual is 
entitled (or continues to be entitled) to a benefit. See Sec.  5.708 
(explaining the circumstances when VA will require an EVR).
    (b) The following table lists factors that often change and that 
affect entitlement to pension or parents' DIC. The table is intended 
solely for informational purposes. It is not intended to confer any 
substantive rights and does not list every factor that could affect 
entitlement to pension or parents' DIC.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Factors affecting Claimant/Beneficiary's entitlement to pension or parents' DIC benefits.
                                                           (``YES'' indicates that the factor may  affect entitlement. ``NO'' indicates that the factor
                                                                                          does not  affect entitlement)
                                   Claimant/beneficiary ------------------------------------------------------------------------------------------------
    Benefit type (beneficiary)        and applicable                                                                                          School
                                       dependent(s)                                                          Number of     Nursing home     attendance
                                                              Income      Marital status     Net worth     children (See      status         (if 18 or
                                                                                                           Sec.   5.220)                      older)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Improved
--------------------------------------------------------------------------------------------------------------------------------------------------------
Disability Pension (Veteran).....  Veteran.............  YES............  YES...........  YES...........  YES...........  YES...........  NO.
                                   Dependent spouse....  YES............  YES...........  YES...........  YES...........  NO............  NO.
                                   Dependent child.....  YES \1\........  YES...........  YES...........  NO............  NO............  YES.
Death Pension (Surviving spouse).  Surviving spouse....  YES............  YES...........  YES...........  YES...........  YES...........  NO.
                                   Dependent child.....  YES \1\........  YES...........  YES...........  NO............  NO............  YES.
Death Pension (Surviving child)..  Surviving child.....  YES \1\........  YES...........  YES...........  NO............  NO............  YES.
                                   Child's legal         YES \4\........  NO............  YES...........  NO............  NO............  NO.
                                    custodian.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Section 306
--------------------------------------------------------------------------------------------------------------------------------------------------------
Disability Pension (Veteran).....  Veteran.............  YES............  YES...........  YES...........  YES...........  YES...........  NO.
                                   Dependent spouse....  YES \2\........  YES...........  NO............  YES...........  NO............  NO.
                                   Dependent child.....  NO.............  YES...........  NO............  NO............  NO............  YES.
Death Pension (Surviving spouse).  Surviving spouse....  YES............  YES...........  YES...........  YES...........  YES...........  NO.
                                   Dependent child.....  YES \3\........  YES...........  NO............  NO............  NO............  YES.
Death Pension (Surviving child)..  Surviving child.....  YES \5\........  YES...........  YES...........  NO............  NO............  YES.
                                   Child's legal         NO.............  NO............  NO............  NO............  NO............  NO.
                                    custodian.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Old-Law
--------------------------------------------------------------------------------------------------------------------------------------------------------
Disability Pension (Veteran).....  Veteran.............  YES............  YES...........  NO............  YES...........  YES...........  NO.
                                   Dependent spouse....  NO.............  YES...........  NO............  YES...........  NO............  NO.
                                   Dependent child.....  NO.............  YES...........  NO............  NO............  NO............  YES.
Death Pension (Surviving spouse).  Surviving spouse....  YES............  YES...........  NO............  YES...........  YES...........  NO.
                                   Dependent child.....  YES \3\........  YES...........  NO............  NO............  NO............  YES.
Death Pension (Surviving child)..  Surviving child.....  YES............  YES...........  NO............  NO............  NO............  YES.
                                   Child's legal         NO.............  NO............  NO............  NO............  NO............  NO.
                                    custodian.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parents' DIC (Surviving parent)..  Surviving parent....  YES............  YES...........  NO............  NO............  YES...........  NO.
                                   Surviving parent's    YES \6\........  YES...........  NO............  NO............  YES...........  NO.
                                    spouse.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ A child's earned income (wages and/or salary) is not a factor under certain circumstances described in Sec.   5.411(b).
\2\ For exceptions to this rule, see Sec.   5.473.
\3\ A child's income is not a factor unless it is turned over to the surviving spouse. (See Sec.   5.473)
\4\ The income of a custodian is a factor unless the custodian is an institution rather than an individual.
\5\ Only unearned income (income other than wages and/or salary) is a factor. (See Sec.   5.473)
\6\ The income of a surviving parents' spouse is a factor unless the parent and spouse are not living together.


(Authority: 38 U.S.C. 501(a), 1315, 1521(b), (c), and (h); 1522, 
1541(b), (c), and (g); 1542; 1543; sec. 306, Pub. L. 95-588 92 Stat. 
2497)

Sec.  5.710  Adjustment in benefits due to reduction or discontinuance 
of a benefit to another payee.

    (a) Effect of reduction or discontinuance of another payee's 
benefit. If a payee becomes entitled to pension, disability 
compensation, or dependency and indemnity compensation (DIC), or an 
increase in such a benefit because payment of the same benefit to 
another payee has been reduced or discontinued, the award or increase 
will be paid without the filing of a new claim, except as provided in 
paragraph (b) of this section.
    (b) Effective date. VA will award or increase the payee's benefit 
and pay the appropriate rate effective the day following the reduction 
or discontinuance of the benefit to the other payee. If VA requests 
information or evidence, it must be received no later than 1 year after 
the date of VA's request. If the information or evidence is not 
received within 1 year, the effective date will be the date VA receives 
a new claim.
    (c) Rate payable. The rate for the persons entitled will be the 
rate that would have been payable if they had been the only original 
persons entitled.

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


[[Page 65233]]




Sec.  5.711  Payment to dependents due to the disappearance of a 
veteran for 90 days or more.

    (a) General. When a veteran receiving or entitled to receive 
disability compensation, Section 306 Pension, or Improved Pension 
disappears for 90 days or more, benefits will be paid to the veteran's 
dependent(s) as provided in this section. Dependents will be paid under 
this section only if the veteran's whereabouts are unknown to the 
dependent(s) and to VA and a claim is received from the dependent(s).
    (b) Veteran receiving or entitled to receive disability 
compensation. If the veteran was receiving or was entitled to receive 
disability compensation, benefits may be paid to the veteran's spouse, 
child, and/or dependent parent.
    (1) Rate payable. The total amount the veteran's dependent(s) will 
be paid is the lesser of either the total amount of dependency and 
indemnity compensation (DIC) that would be payable if the veteran had 
died from a service-connected disability or the amount of disability 
compensation (minus any authorized insurance deductions) the veteran 
would have received or been entitled to receive at the time of the 
veteran's disappearance.
    (i) If VA pays DIC pursuant to this paragraph, then it will pay 
benefits to the dependents as if the veteran were deceased.
    (ii) If VA pays disability compensation pursuant to this paragraph, 
then it will pay benefits in equal amounts to the dependents.
    (2) Effective date of payments. (i) If a claim for benefits under 
this section is received no later than 1 year after the first day of 
the month after the month for which VA last paid benefits to the 
veteran, then payments to the veteran's dependent(s) will be payable 
effective the first day of the month after the month for which VA last 
paid benefits to the veteran.
    (ii) If a claim for benefits under this section is received more 
than 1 year after the first day of the month after the month for which 
VA last paid benefits to the veteran, payments to the veteran's 
dependent(s) will be payable effective the date VA receives the claim.
    (c) Veteran receiving or entitled to receive pension. If the 
veteran was receiving or entitled to receive Section 306 Pension or 
Improved Pension, benefits may be paid to the veteran's spouse and/or 
child(ren). The veteran's permanent and total disability status, 
income, and net worth will be presumed to continue unchanged.
    (1) Rate payable. The total amount payable to the veteran's 
dependent(s) will be either the rate of Improved Death Pension payable 
if the veteran had died of a non-service-connected disability or the 
amount of pension the veteran would have received at the time of 
disappearance, whichever amount is less.
    (2) Effective date of payments. (i) If a claim is received no later 
than 1 year after the first day of the month after the month for which 
VA last paid benefits to the veteran, payments to the veteran's 
dependent(s) will be payable effective the first day of the month after 
the month for which VA last paid benefits to the veteran.
    (ii) If a claim for benefits is received more than 1 year after the 
first day of the month after the month for which VA last paid benefits 
to the veteran, payments to the veteran's dependent(s) will be payable 
effective the date VA receives the claim.
    (d) Discontinuance of payments to veteran's dependent(s)--(1) 
Veteran's whereabouts become known. If VA becomes aware of the 
veteran's whereabouts, payments to the veteran's dependent(s) will be 
discontinued effective the first day of the month after the month for 
which VA last paid benefits to the veteran's dependent(s).
    (2) Veteran presumed dead. Payments to the veteran's dependent(s) 
will be discontinued if the veteran is presumed dead under Sec.  5.502, 
``Proving death after 7 years of continuous, unexplained absence.''

(Authority: 38 U.S.C. 1158, 1507)

Sec.  5.712  Suspension of VA benefits due to the disappearance of a 
payee.

    (a) If a payee's whereabouts are unknown, then VA will suspend 
payment of pension, disability compensation, dependency and indemnity 
compensation, the monetary allowance under 38 U.S.C. chapter 18 for 
children disabled from spina bifida or with certain birth defects, or 
other monetary allowances.
    (b) If benefits were suspended under paragraph (a) of this section, 
then VA will resume payments if the payee's whereabouts become known. 
The effective date of payments will be the first day of the first month 
for which benefits were suspended if entitlement is otherwise 
established. Retroactive payments under this paragraph (b) will be 
reduced by the amount of any payments made to a veteran's dependents 
under Sec.  5.711.

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

Sec.  5.713   Restriction on VA benefit payments to an alien located in 
enemy territory.

    (a) Restriction on payment. VA will discontinue all VA benefits 
except insurance payments to an alien who is:
    (1) Located in the territory of an enemy of the United States or an 
enemy of any ally of the United States; or
    (2) Located in territory which is under the military control of an 
enemy of the United States or an enemy of any ally of the United 
States.
    (b) Apportionment of benefits. VA may apportion to the dependent(s) 
of an affected alien all or any part of the benefits discontinued under 
paragraph (a) of this section.
    (1) The amount payable to each dependent may not exceed the amount 
that would be payable if the alien had died.
    (2) VA will discontinue payments to the dependents effective the 
date it receives notice that the alien is no longer located in the 
territory described in paragraph (a) of this section.
    (3) VA will reduce or discontinue payments to a dependent upon the 
death of the alien or dependent, upon reduction or discontinuance of 
the alien's benefits, or when dependent status ends.
    (c) Claims for discontinued benefits. See Sec.  5.715, ``Claims for 
undelivered or discontinued benefits.''

(Authority: 38 U.S.C. 5112(a), 5308)

Sec.  5.714   Restriction on delivery of VA benefit payments to payees 
located in countries on Treasury Department list.

    (a) Definitions. For purposes of this part 5:
    (1) Payee means a person to whom a VA benefit check is payable.
    (2) Special deposit account means the ``Secretary of the Treasury, 
Proceeds of Withheld Foreign Checks'' account established under 31 
U.S.C. 3329(b)(4).
    (3) Treasury Department list is the list of countries identified by 
the Secretary of the Treasury in 31 CFR 211.1, ``Withholding delivery 
of checks,'' to which checks cannot be delivered with reasonable 
assurance that the payee will actually receive the check and be able to 
negotiate it for full value.
    (b) Evidence requests. Unless a claimant or payee who is living in 
a country on the Treasury Department list requests the alternative 
means of delivery described in paragraph (c) of this section, VA will 
not request evidence in support of a claim for VA benefits if such 
evidence would be obtained from a country on the Treasury Department 
list.
    (c) Restriction on check delivery. VA will not send benefit checks 
to a payee

[[Page 65234]]

located in a country on the Treasury Department list or to a guardian 
or other person in the United States or a territory or possession of 
the United States who is legally responsible for the care of a payee 
located in a country on the Treasury Department list.
    (d) Alternative delivery permitted. If requested by a payee located 
in a country on the Treasury Department list, VA will send VA benefit 
checks to him or her in care of a U.S. Foreign Service post, specified 
by the payee, in a country that is not on the Treasury Department list.
    (e) Disposition of benefit checks. If the payee does not request 
the alternative means of delivery described in paragraph (d) of this 
section, VA benefit checks that are not delivered because of the 
restriction described in paragraph (c) of this section will be 
deposited into the special deposit account or into the U.S. Treasury as 
miscellaneous receipts, as required by 31 U.S.C. 3329(b) and 3330(b).
    (f) Claims for undelivered benefits. See Sec.  5.715, ``Claims for 
undelivered or discontinued benefits.''

(Authority: 31 U.S.C. 3329, 3330)

Sec.  5.715  Claims for undelivered or discontinued benefits.

    (a) Definitions. For the definitions of ``payee,'' ``special 
deposit account,'' and ``Treasury Department list,'' see Sec.  
5.714(a).
    (b) Claims for undelivered or discontinued benefits. (1) A payee 
may file with VA a claim for:
    (i) Any amounts not paid because awarded benefits were discontinued 
under Sec.  5.713, ``Restriction on VA benefit payments to an alien 
located in enemy territory''; or
    (ii) Any undelivered benefit payments deposited to the payee's 
credit in the special deposit account or into the U.S. Treasury as 
miscellaneous receipts as described in Sec.  5.714(e).
    (2) There is no time limit for filing such a claim.
    (3) Undelivered amounts will be released or a discontinued benefit 
resumed only if:
    (i) For a payee whose VA benefits were discontinued under Sec.  
5.713, ``Restriction on VA benefit payments to an alien located in 
enemy territory,'' the payee is no longer subject to the restriction in 
Sec.  5.713(a);
    (ii) For a payee whose benefit checks were withheld under Sec.  
5.714, ``Restriction on delivery of VA benefit payments to payees 
located in countries on Treasury Department list,'' the payee is no 
longer subject to the restriction in Sec.  5.714(c);
    (iii) For a payee whose benefit checks were withheld under Sec.  
5.714, the country in which the payee is located is removed from the 
Treasury Department list; or
    (iv) For a payee whose benefit checks were withheld under Sec.  
5.714, the payee requests the alternative means of delivery described 
in Sec.  5.714(d).

(Authority: 31 U.S.C. 3329)


    (c) Forfeiture for treasonable acts. Payment is subject to 
forfeiture of benefits for treasonable acts as provided in Sec.  5.677.
    (d) Evidence requests. Subject to Sec.  5.90, VA may request 
evidence necessary to support a claim under this section. Evidence VA 
may request includes:
    (1) Satisfactory evidence that the payee has not been guilty of 
mutiny, treason, sabotage, or rendering assistance to an enemy; and
    (2) Evidence of continued entitlement to benefits during the time 
that awarded benefits were discontinued or benefit payments were 
undelivered.

(Authority: 38 U.S.C. 5308)


    (e) Germany and Japan. No payments will be made for any period 
before the date of filing a new claim if payments were discontinued 
before July 1, 1954, because the payee was a citizen or subject of 
Germany or Japan.

(Authority: 38 U.S.C. 5309)


    (f) Payment of funds in special deposit account upon death of a 
payee. See Sec.  5.565, ``Special rules for payment of VA benefits on 
deposit in a special deposit account when a payee living in a foreign 
country dies.''

(Authority: 31 U.S.C. 3330)

Sec. Sec.  5.716-5.739  Reserved.

[FR Doc. E8-25547 Filed 10-30-08; 8:45 am]
BILLING CODE 8320-01-P