[Federal Register Volume 76, Number 147 (Monday, August 1, 2011)]
[Rules and Regulations]
[Pages 45697-45705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19473]



[[Page 45697]]

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AO10


Vocational Rehabilitation and Employment Program--Changes to 
Subsistence Allowance

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

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SUMMARY: This interim final rule amends Department of Veterans Affairs 
(VA) regulations to reflect changes made by the Post-9/11 Veterans 
Educational Assistance Improvements Act of 2010, effective August 1, 
2011, that affect payment of vocational rehabilitation benefits for 
certain service-disabled veterans. Pursuant to these changes, a 
veteran, who is eligible for a subsistence allowance under chapter 31 
of title 38, United States Code, and educational assistance under 
chapter 33 of title 38, United States Code, may participate in a 
rehabilitation program under chapter 31 and elect to receive a payment 
equal in amount to an applicable military housing allowance payable 
under title 37, United States Code, instead of the regular subsistence 
allowance under chapter 31. In addition, payments of subsistence 
allowances during periods between school terms are discontinued, and 
payments during periods of temporary school closings are modified. This 
rulemaking amends VA regulations consistent with this new authority.

DATES: This interim final rule is effective August 1, 2011. Comments 
must be received on or before August 31, 2011.

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. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AO10, Vocational Rehabilitation and Employment Program--Changes to 
Subsistence Allowance.'' Copies of comments received will be available 
for public inspection in the Office of Regulation Policy and 
Management, Room 1063B, between the hours of 8:00 a.m. and 4:30 p.m., 
Monday through Friday (except holidays). Please call (202) 461-4902 for 
an appointment. (This is not a toll-free number.) In addition, during 
the comment period, comments are available online through the Federal 
Docket Management System (FDMS) at http://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Alvin Bauman, Senior Policy Analyst, 
Vocational Rehabilitation and Employment Service (28), Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Ave., NW, Washington, DC 20420, (202) 461-9600 (not a toll-free 
number).

SUPPLEMENTARY INFORMATION: Section 3108 of title 38, United States Code 
(U.S.C.), requires the payment of a subsistence allowance to veterans 
during a period of participation in a rehabilitation program under 
chapter 31 of title 38, United States Code. Pursuant to 38 U.S.C. 
3322(a), a veteran cannot receive assistance under chapter 31 and 
chapter 33, Post-9/11 Educational Assistance, concurrently; he or she 
must elect under which chapter to receive assistance. Because the 
monthly housing allowance authorized under chapter 33 for eligible 
individuals pursuing programs of education may be considerably higher 
than the appropriate chapter 31 subsistence allowance, veterans with 
service-connected disabilities have an incentive to apply for chapter 
33 educational assistance rather than enroll in VA's chapter 31 program 
of vocational rehabilitation and training. By doing so, they would 
forego certain individualized rehabilitation services, such as 
counseling and employment assistance, which are available under chapter 
31. Congress recognized this and was ``concerned that the greater 
benefit available under the chapter 33 program provides a disincentive 
for service-connected disabled veterans to enroll in the chapter 31 
program, which means they would forego the important and valuable 
benefits, services, counseling, and employment assistance support that 
are available under the chapter 31 program of training and 
rehabilitation.'' S. Rep. No. 111-346 at 23 (2010). Congress intended 
to remove this disincentive by allowing eligible veterans to elect a 
payment equal in amount to an applicable military housing allowance 
payable under title 37, United States Code, if they enroll in a chapter 
31 rehabilitation program. Id.
    Accordingly, Congress amended 38 U.S.C. 3108(b), effective August 
1, 2011, to authorize a veteran, eligible for both a chapter 31 
subsistence allowance and a chapter 33 educational assistance to 
participate in a rehabilitation program under chapter 31 and elect to 
receive a payment in an alternate amount in lieu of the chapter 31 
subsistence allowance. The Post-9/11 Veterans Educational Assistance 
Improvements Act of 2010, Public Law 111-377, sec. 205. The alternate 
amount must be equal to the ``applicable monthly amount of basic 
allowance for housing payable under [37 U.S.C. 403] for a member with 
dependents in pay grade E-5 residing in the military housing area that 
encompasses all or the majority portion of the ZIP code area in which 
is located the institution providing the rehabilitation program 
concerned'' (BAH). Id. Under the new law, veterans may receive the 
individualized supportive services provided under chapter 31 and elect 
the alternate amount to receive a greater monthly allowance than they 
would otherwise receive.
    We are therefore amending 38 CFR 21.264 to allow a veteran to elect 
a subsistence allowance in an alternate amount, which we refer to as 
the Post-9/11 subsistence allowance, in lieu of the amount provided for 
in 38 CFR 21.260(b). We are indicating that, to be eligible to elect 
the Post-9/11 subsistence allowance, a veteran must be found to be 
eligible for training or education under chapter 31 and educational 
assistance under chapter 33. We specifically indicate that entitlement 
to all chapter 31 services and assistance remains when this election is 
made. For administrative purposes, we will allow a veteran who has 
elected to receive payment of the Post-9/11 subsistence allowance to 
reelect payment of the chapter 31 subsistence allowance at the rate in 
Sec.  21.260(b) only after completion of a term, quarter, semester, or 
defined period of instruction, unless the veteran no longer meets the 
eligibility criteria for the election or would be unable to continue in 
a rehabilitation program without immediate approval of the reelection.
    We are also amending 38 CFR 21.260(a) to include the Post-9/11 
subsistence allowance as a type of subsistence allowance that a veteran 
participating in a rehabilitation program under 38 U.S.C. chapter 31 
may elect to receive. In addition, we are amending Sec.  21.260 by 
adding a new paragraph (c) to provide for payment of the Post-9/11 
subsistence allowance in the event of an election, beginning August 1, 
2011, based on the basic allowance for housing payable under 37 U.S.C. 
403. In a footnote, we clarify that the Post-9/11 subsistence allowance 
is paid in lieu of the subsistence allowance authorized in Sec.  
21.260(b) and is not adjusted for dependents. We interpret Congress' 
intent in basing the alternate amount a veteran may elect to receive on 
the basic allowance for housing payable to a member of the military 
with dependents in pay grade E-5 to mean that all veterans who elect to 
receive the Post-9/11 subsistence allowance should

[[Page 45698]]

receive an amount adjusted for dependents. Therefore, we are not 
further adjusting the Post-9/11 subsistence allowance for dependents as 
we do for chapter 31 subsistence allowance under Sec.  21.260(b).
    The rehabilitation program under chapter 31 includes on-job 
training and non-paid work experience, during which an employer or 
agency rather than an institution provides the training or 
rehabilitation. Pub. L. 111-377 authorizes any veteran eligible for 
both a chapter 31 subsistence allowance and chapter 33 educational 
assistance, to participate in a rehabilitation program and elect the 
alternate amount of payment of subsistence allowance, but it does not 
specify how to calculate the alternate amount in the absence of an 
institution. To allow payment of the Post-9/11 subsistence allowance 
for veterans who are participating in on-job training or non-paid work 
experience, in Sec.  21.260(c)(1), we include in the definition of BAH 
that the zip code of the institution, employer, or agency providing the 
training or rehabilitation may be used in determining the amount of the 
Post-9/11 subsistence allowance.
    The applicable rates of payment of the subsistence allowance for 
veterans participating in a chapter 31 rehabilitation program are set 
forth in 38 U.S.C. 3108(b) and adjusted based on the rate of pursuit of 
training, whether full-time, three-quarter-time, or half-time, and 
increased yearly by the percentage by which the Consumer Price Index 
increases. Rates of payment for each type of training or rehabilitation 
program are also found in tables in 38 CFR 21.260(b), with current 
rates published yearly on the VA's Internet Web site. As stated 
previously, Pub. L. 111-377, sec. 205, specifies that the alternate 
amount that may be elected in lieu of the subsistence allowance must be 
equal to the applicable monthly amount of basic allowance for housing 
payable under 37 U.S.C. 403 for a member with dependents in pay grade 
E-5 residing in the military housing area that encompasses all or the 
majority portion of the ZIP code area in which is located the 
institution providing the rehabilitation program concerned. However, 
the new law does not specify that this alternate amount be paid 
regardless of whether the training is pursued full-time or part-time. 
There is no indication by Congress that the Post-9/11 subsistence 
allowance must be paid in a manner different than the way current 
subsistence allowance is paid. We interpret the lack of specificity in 
this regard as an indication that we may continue to follow our current 
practice of adjusting subsistence allowance rates based on rate of 
pursuit of training. Furthermore, we continue to believe that veterans 
who pursue training on a less than full-time basis should not be paid 
the full amount of subsistence allowance.
    Accordingly, we are adjusting rates of the Post-9/11 subsistence 
allowance based on rates of pursuit of training. In a table in new 
Sec.  21.260(c), we specify the payments of the Post-9/11 subsistence 
allowance for the rehabilitation program that currently qualifies for 
payment of a subsistence allowance under chapter 31. In a footnote to 
the table, we explain that payments for courses being taken 
simultaneously at more than one institution will be based on the BAH of 
the zip code assigned to the parent institution. We retain the rule 
with respect to payment of the current subsistence allowance for on-job 
training that the rate paid may not exceed the difference between the 
monthly training wage, not including overtime, and the entrance 
journeyman wage for the veteran's objective. We also retain the rule 
with respect to payment of the current subsistence allowance for 
improvement of rehabilitation potential that the quarter-time rate may 
be paid only during a period of extended evaluation.
    For veterans pursuing a program of in-home training, including 
training with an independent instructor or training solely through 
distance learning, in which case the institution is in a different zip 
code than where the veteran is located, Public Law 111-377 does not 
specify how to calculate payments of the alternate subsistence 
allowance that may be elected under this law. With respect to payments 
of the monthly living stipend for veterans receiving chapter 33 
educational assistance for pursuit of a program of education solely by 
distance learning, Public Law 111-377 does specify how to calculate 
payments. For veterans pursuing a program of education on more than a 
half-time basis, solely by distance learning, Public Law 111-377 
provides for payment of the chapter 33 living stipend at the rate of up 
to 50 percent of the national average of basic allowance for housing 
payable under 37 U.S.C. 403 for a member of the military with 
dependents in pay grade E-5, adjusted based on the rate of pursuit. 
Congress provided for such rate because it believed that, although 
``payment of some portion of the living allowance is appropriate . . . 
since one of the basic purposes of the living allowance is to offset 
the cost of housing away from home and since most distance learning is 
pursued from home, the full allowance does not appear supported at this 
time.'' S. Rep. No. 111-346 at 11 (2010). Similarly, for veterans 
pursuing training or rehabilitation under chapter 31 through a program 
of in-home training, including solely through distance learning, there 
is no local institution providing the rehabilitation or training and no 
housing costs to offset. We believe Congress' statement with regard to 
the monthly living stipend for veterans pursuing a program of education 
was intended to apply to the similarly situated veterans pursuing 
training or rehabilitation under chapter 31.
    Accordingly, we will base the rate of the Post-9/11 subsistence 
allowance for veterans pursuing training or rehabilitation full-time 
through a program of in-home training or solely through distance 
learning on the national average of basic allowance for housing payable 
under 37 U.S.C. 403 for a member of the military with dependents in pay 
grade E-5 and pay the allowance at 50 percent of the national average. 
In Sec.  21.260(c)(2) we define BAH National Average as ``the average 
(i.e., unweighted arithmetic mean) monthly amount of the basic 
allowance for housing payable under 37 U.S.C. 403 for a member of the 
military with dependents in pay grade E-5 residing in the United 
States''. We will continue to make payments, adjusted based on rate of 
pursuit, for veterans pursuing training or rehabilitation in-home or 
solely through distance learning. We will therefore calculate the rates 
of the Post-9/11 subsistence allowance for those veterans pursuing 
training or rehabilitation in home or solely through distance learning 
at less than full-time (three-quarter time or half-time) in the same 
manner as we do for veterans pursuing institutional training or 
rehabilitation. Thus, veterans pursuing training or rehabilitation in-
home or solely through distance learning at three-quarter time will 
receive \3/4\ of 50 percent of the BAH National Average, or \3/8\ of 
the BAH National Average, and veterans pursuing training or 
rehabilitation in-home or solely through distance learning half-time 
will receive \1/2\ of 50 percent of the BAH National Average, or \1/4\ 
of the BAH National Average. These rates of payment will be found in 
the table in Sec.  21.260(c). In a footnote to the table, we clarify 
that payments for training consisting of both distance learning and 
courses at a local institution are based on the BAH of the local 
institution because the veteran will incur costs away from home that 
the allowance is intended to offset.

[[Page 45699]]

    In addition, for veterans pursuing training or rehabilitation under 
chapter 31 in foreign institutions, in which case there is no 
institution with a zip code on which to base the rates of payment, 
Public Law 111-377 does not specify how to calculate payments of the 
Post-9/11 subsistence allowance. For veterans pursuing a program of 
education under chapter 33 in a foreign country, Public Law 111-377 
does specify that payment of the living stipend be based on the 
national average of basic allowance for housing payable under 37 U.S.C. 
403 for a member of the military with dependents in pay grade E-5 and 
adjusted based on the rate of pursuit. We believe it is reasonable to 
calculate payments of the Post-911 subsistence allowance for veterans 
pursuing training or rehabilitation under chapter 31 in foreign 
institutions in the same manner that Congress provided for similarly 
situated veterans pursuing a program of education under chapter 33. 
Therefore, we will base rates of payment of the Post-9/11 subsistence 
allowance for training in foreign institutions on the BAH National 
Average amount. We will continue to make payments of the Post-9/11 
subsistence allowance for training in foreign institutions adjusted 
based on rate of pursuit of training.
    Under 38 CFR 21.79, VA charges for entitlement usage to determine 
remaining entitlement. VA bases charges for entitlement usage on the 
principle that a veteran who pursues a rehabilitation program for one 
day should be charged one day of entitlement. When a chapter 31 
participant elects to receive payment of the Post-9/11 subsistence 
allowance under Sec.  21.260(c) in lieu of a subsistence allowance 
under Sec.  21.260(b), he or she will continue to receive chapter 31 
benefits and services. In such cases, the entitlement usage will be 
deducted from the veteran's chapter 31 entitlement. No entitlement 
charges will be made against chapter 33 because the veteran will not be 
using chapter 33 benefits. We are revising Sec.  21.79 to make clear 
that we will determine entitlement usage in this manner in the event of 
an election of the Post-9/11 subsistence allowance.
    Section 3112 of title 38, United States Code, establishes a 
revolving fund for VA to use to make advances of no more than twice the 
amount of the full-time institutional monthly subsistence allowance for 
a veteran with no dependents to veterans pursuing a rehabilitation 
program under chapter 31. Section 21.274 of title 38, Code of Federal 
Regulations, specifies that the fund is to pay veterans who would 
otherwise be unable to begin or continue in a rehabilitation program 
without such assistance. Section 21.274 also specifies that the amount 
of the advance may not exceed the amount needed or twice the monthly 
subsistence allowance for a veteran without dependents in full-time 
institutional training. Section 3112 clearly establishes that the limit 
on these advances is based on the full-time institutional rate for a 
veteran with no dependents. The full-time institutional rate for a 
veteran with no dependents is specified in Sec.  21.260(b), whereas all 
rates in new Sec.  21.260(c) are based on an allowance that includes 
dependents. Therefore, the limit on the advances may not be based on 
the rates of the Post-9/11 subsistence allowance in Sec.  21.260(c). 
Accordingly, we clarify in Sec.  21.274(d)(1)(iii) that the limit 
placed on the amount advanced from the revolving fund is based on the 
subsistence allowance in Sec.  21.260(b).
    Pursuant to 38 U.S.C. 3680(a)(3)(B), subsistence allowances are 
authorized to be paid during periods when schools are temporarily 
closed under an established policy based upon an Executive Order of the 
President or due to an emergency situation, during periods between 
consecutive school terms if there is a transfer to enroll in and pursue 
a similar course at a different educational institution if the period 
between consecutive terms is 30 days or less, or, in certain 
circumstances, during periods between school terms, where the 
educational institution certifies enrollment on an individual term 
basis. Section 206 of Public Law 111-377 removes the authority to 
continue to pay allowances between consecutive school terms involving a 
transfer to another educational institution and between school terms 
where the educational institution certifies enrollment on an individual 
term basis. Section 206 also restricts the total number of weeks for 
which allowances may be paid during periods when schools are 
temporarily closed under an established policy based upon an Executive 
Order of the President or due to an emergency situation to 4 weeks in 
any 12-month period.
    Accordingly, we are amending our regulation, Sec.  21.270, 
``Payment of subsistence allowance during leave and between periods of 
instruction'', that allows for the payment of subsistence allowance 
between periods of instruction. We are removing paragraph (b), 
``Payment for intervals between periods of instruction'', which 
currently directs the payment of subsistence allowances for periods 
between consecutive school terms involving a transfer and between 
school terms where the educational institution certifies enrollment on 
an individual term basis. We are also redesignating paragraph (c), 
``Payment for other periods'', as paragraph (b). The new paragraph will 
continue to specify that subsistence allowance will be paid for periods 
in which the school is closed temporarily under emergency conditions 
described in Sec.  21.4138(f). In a separate rulemaking, VA is 
preparing a revision to Sec.  21.4138(f) to incorporate the change in 
law regarding the restriction on the total number of weeks for which 
allowances for veterans receiving any VA education benefit, including 
chapter 31 benefits, may be paid during periods of temporary closure. 
In addition, we are adding an authority citation to the end of the 
section for clarification, correcting a misspelling, and revising the 
section heading to replace the words ``between periods of instruction'' 
with the words ``other periods''.

Administrative Procedure Act

    In accordance with 5 U.S.C. 553(b)(3)(B), the Secretary of Veterans 
Affairs finds that there is good cause to dispense with advance public 
notice and opportunity to comment on this rule and good cause to 
publish this rule with an immediate effective date. The Secretary finds 
that it is impracticable and contrary to the public interest to delay 
this regulation for the purpose of soliciting prior public comment. 
Sections 205 and 206 of Public Law 111-377 require that certain changes 
to the rehabilitation program take effect on August 1, 2011. This 
interim final rule is necessary to implement by August 1, 2011, the 
statutory changes as they relate to chapter 31 subsistence allowances. 
For instance, Public Law 111-377 does not address how the alternate 
rate of subsistence allowance will be calculated in different 
situations. Allowing veterans to elect an alternate rate of subsistence 
allowance will ensure that such veterans receive the supportive 
services under chapter 31 to assist them in the transition from 
military to civilian careers. Because eligible veterans will begin to 
make the election on August 1, 2011, it is important to have procedures 
in place by this date to allow veterans to receive the alternate rate 
of subsistence allowance authorized under the law as soon as they are 
able. For these reasons, the Secretary of Veterans Affairs is issuing 
this rule as an interim final rule. The Secretary of Veterans Affairs 
will consider and address comments that are received within 30 days of 
the date this

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interim final rule is published in the Federal Register.

Unfunded Mandates

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

Paperwork Reduction Act

    This interim final rule does not contain any collections of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this regulatory action 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 regulatory action will affect individuals and will 
not affect any small entities. Therefore, pursuant to 5 U.S.C. 605(b), 
this regulatory action is exempt from the initial and final flexibility 
analysis requirements of sections 603 and 604.

Congressional Review Act

    Under the Congressional Review Act, 5 U.S.C. 801-08, a major rule 
is one that would have an annual effect on the economy of $100 million 
or more, cause major increases in costs or prices for consumers, or 
have significant adverse effects on competition or other aspects of the 
economy. We have determined this rulemaking to be a major rule because 
it will have an annual effect on the economy in excess of $100 million. 
However, this rulemaking falls within an exception to the requirement 
in 5 U.S.C. 801(a)(3) that a rule may not take effect until at least 60 
days after the rule and accompanying report are submitted to Congress. 
VA will submit a copy of this regulatory action and VA's Regulatory 
Impact Analysis to the Comptroller General and to Congress, but the 
rule will become effective upon publication in the Federal Register. 
The Secretary has determined in accordance with 5 U.S.C. 808(2) that 
there is good cause to make this regulatory action effective 
immediately because advance public notice and opportunity to comment 
thereon are impractical and contrary to the public interest. Sections 
205 and 206 of Public Law 111-377 require that the changes to the 
rehabilitation program take effect on August 1, 2011. VA regulations 
must be in effect because Public Law 111-377 does not address how the 
alternate rate of subsistence allowance will be calculated in different 
situations. Allowing veterans to elect an alternate rate of subsistence 
allowance will ensure that such veterans receive the supportive 
services under chapter 31 to assist them in the transition from 
military to civilian careers. Because eligible veterans will begin to 
make the election on August 1, 2011, it is important to have procedures 
in place by this date to allow veterans to receive the alternate rate 
of subsistence allowance authorized under the law as soon as they are 
able.

Executive Orders 13563 and 12866

    Executive Orders 13563 and 12866 direct agencies to assess the 
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 effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. Executive Order defines a ``significant regulatory 
action,'' which requires review by the Office of Management and Budget 
(OMB), 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. This rule has been designated an ``economically'' significant 
regulatory action under section 3(f)(1) of Executive Order 12866. 
Accordingly, the rule has been reviewed by OMB.
    VA has examined the economic, interagency, budgetary, legal, and 
policy implications of this regulatory action and followed OMB Circular 
A-4 to the extent feasible in this Regulatory Impact Analysis. The 
circular first calls for a discussion of the need for the regulatory 
action.

Statement of Need

    This rulemaking will amend VA regulations to reflect changes made 
by the Post-9/11 Veterans Educational Assistance Improvements Act of 
2010. We are revising Sec.  21.264 to allow veterans eligible for a 
chapter 31 subsistence allowance and chapter 33 educational assistance 
to elect either the allowable chapter 31 subsistence allowance or an 
alternate amount of subsistence allowance, referred to as the Post-9/11 
subsistence allowance. In addition, we are amending Sec.  21.260 to 
include the Post-9/11 subsistence allowance rates, which are based on 
the military housing allowance payable under title 37, United States 
Code, referred to as the BAH. The BAH is based on the ZIP code area 
where the institution providing the rehabilitation program is located.
    We are also amending Sec.  21.274 to clarify that the maximum 
amount allowable for an advance from the revolving fund will stay the 
same--twice the amount of full-time subsistence allowance for a veteran 
with no dependents in institutional training. In Sec.  21.274, we are 
adding the phrase ``specified in 21.260(b)'' to clarify that the 
advance from the revolving fund is based on the chapter 31 subsistence 
allowance rates and not on the Post-9/11 subsistence allowance rates 
specified in Sec.  21.260(c).
    In addition, we are amending Sec.  21.270 to prohibit payment of 
either the chapter 31 subsistence allowance or the Post-9/11 
subsistence allowance during intervals between school terms. Payments 
of subsistence allowance between school terms are no longer authorized 
and payments of subsistence allowance during temporary school closings 
are limited to 4 weeks in any 12-month period.

Summary of Estimated Impact

    The estimated costs associated with this regulation are 
$111,239,000.00 for Fiscal Year (FY) 2012 and $854,897,000.00 over a 5 
year period. These are estimated costs based on the fact that there are 
significant costs to VA based on new provisions to Sec.  21.264 and an 
offset of costs (projected savings) from the new provisions to Sec.  
21.270 of this rulemaking.

[[Page 45701]]



----------------------------------------------------------------------------------------------------------------
                                                                 Projected savings from
                                         Estimated impact of       no longer allowing
                                           paying increased      payment of subsistence
             Fiscal year                subsistence allowance       allowance during     Estimated costs  ($000)
                                         based on BAH ($000)    intervals between terms
                                                                         ($000)
----------------------------------------------------------------------------------------------------------------
2012.................................                 $162,579                  $51,340                 $111,239
2013.................................                  194,298                   53,685                  140,613
2014.................................                  224,957                   55,252                  169,705
2015.................................                  257,256                   56,865                  200,391
2016.................................                  291,533                   58,584                  232,949
                                      --------------------------------------------------------------------------
    5-Year Total.....................                1,130,623                  275,726                  854,897
----------------------------------------------------------------------------------------------------------------

    Estimated costs and projections are based on the best reasonably 
obtainable and available economic information. This analysis sets forth 
the basic assumptions, methods, and data underlying the analysis and 
discusses the uncertainties associated with the estimates. Assumptions 
and methodologies for each portion of the analysis are explained in 
more detail in the Estimate of Potential Program Costs below. VA 
invites public comments on all of these projections.

Cost Benefit

    The Post-9/11 subsistence allowance rates are greater than the 
current chapter 31 subsistence allowance rates. Therefore, VA believes 
that chapter 31 participants who are eligible to receive the greater 
subsistence allowance will require less dependence on support programs 
and will be able to devote more attention to their chapter 31 training/
rehabilitation program, thus creating better employment opportunities 
and a better quality of life.

Alternatives

    VA believes that there are no alternatives to the promulgation of 
this rulemaking. The provisions of sections 205 and 206 of Public Law 
111-377 must be implemented in the Code of Federal Regulations to 
ensure accurate and consistent application of the law.

Estimate of Potential Program Costs

Section 21.264

    To project the best possible economic impact of Sec.  21.264 in 
this rulemaking, VA conducted an analysis to determine the average 
annual difference between the chapter 31 subsistence allowance rate and 
the new Post-9/11 subsistence allowance rate. Utilizing the FY 2012 
President's Budget, the average annual chapter 31 subsistence allowance 
rate is estimated to be $4,962.12 in FY 2012, and the average annual 
Post-9/11 subsistence allowance rate is estimated to be $12,444.94 in 
FY 2012. With the average annual Post-9/11 subsistence allowance rate 
being $7,482.82 more than the average annual chapter 31 subsistence 
allowance rate, VA assumes that all eligible chapter 31 participants 
will elect to receive the Post-9/11 subsistence allowance rate under 
the new provisions of Sec.  21.264.
    VA also conducted an analysis on the total population of 
participants in the Vocational Rehabilitation and Employment's (VR&E) 
chapter 31 program. The analysis focused on the number of participants 
who are currently receiving a monthly chapter 31 subsistence allowance 
and who also have Operations Enduring Freedom and Iraqi Freedom (OEF/
OIF) military service.
    Data from VR&E's FY 2012 Workload Projections for Trainees/
Participants indicate that there will be approximately a total of 
62,078 chapter 31 participants receiving chapter 31 subsistence 
allowance in FY 2012. Workload projections for the number of 
participants receiving subsistence allowance were based on FY 2010 
actual number of 61,405 from the VA Benefits Delivery Network Computer 
Output Identification Number Target System Report 6002 with projected 
increases for FY 2011 and FY 2012. To align with projections from the 
FY 2012 President's Budget, the number of participants for FY 2012 
(63,259) was then reduced by the number of participants that VA 
projected would transfer from chapter 31 benefits to the Post-9/11 GI 
Bill. Data-Matching between the Department of Defense and VA databases 
indicated that approximately 30% of VR&E participants in FY 2011 had 
OEF/OIF military service that qualified them to elect the Post-9/11 
subsistence allowance. Over the next five years, VR&E projects an 
increase of 5% per year of VR&E participants who have OEF/OIF service 
based on the influx of more recent veterans leaving active duty and 
applying for benefits while veterans from previous eras complete 
participation in VR&E.
    This data also identified an estimated 21,727 chapter 31 
participants, or 35% of the total chapter 31 participants (62,078), who 
will receive a monthly subsistence allowance in FY 2012 and have OEF/
OIF military service. It is estimated that all of these 21,727 
participants will elect and receive the Post-9/11 subsistence allowance 
based on their OEF/OIF service in FY 2012.
    The estimated total number of chapter 31 participants (21,727) who 
will be eligible to elect and receive the Post-9/11 subsistence 
allowance based on their OEF/OIF service in FY 2012 was multiplied by 
the difference between the two subsistence allowance rates ($7,482.82), 
totaling approximately $163 million in FY 2012.
    Projected increases to participants receiving subsistence 
allowance, average annual payments, and the percentage of chapter 31 
participants receiving subsistence allowance were applied in the out-
years and shown in the table below.

                                         Estimated Impact of Paying Increased Subsistence Allowance Based on BAH
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Total 
                                                                  of Chapter 31    Total     * Percent of     Average annual
                                                                     (CH31)            of CH31            CH31           difference
                              FY                                  participants      participants      participants     between current     Obligations
                                                                    receiving       receiving SA      receiving SA     CH31 SA and new       ($000)
                                                                   Subsistence      with OEF/OIF      with OEF/OIF      post-9/11 SA
                                                                 Allowance (SA)        service           service
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012..........................................................            62,078            21,727                35         $7,482.82          $162,579

[[Page 45702]]

 
2013..........................................................            63,892            25,557                40          7,602.54           194,298
2014..........................................................            64,531            29,038                45          7,746.99           224,957
2015..........................................................            65,176            32,588                50          7,894.19           257,256
2016..........................................................            65,828            36,206                55          8,052.07           291,533
                                                               -----------------------------------------------------------------------------------------
    5-Year Total..............................................  ................  ................  ................  ................         1,130,623
--------------------------------------------------------------------------------------------------------------------------------------------------------
* VA assumes that the percentage of CH31 participants receiving SA and who have OEF/OIF military service will increase by 5% each year based on the
  influx of more recent veterans leaving active duty and applying for benefits while veterans from previous eras complete participation in VR&E.

Section 21.270

    To project the best possible economic impact of Sec.  21.270 in 
this rulemaking, VA conducted an analysis to determine the associated 
costs and/or savings by no longer allowing payment of either chapter 31 
or Post-9/11 subsistence allowance during intervals between school 
terms.
    This amendment applies to all participants of the chapter 31 
program who are currently participating in a training/rehabilitation 
program for which subsistence allowance is payable.
    Based on the FY 2012 President's Budget, the average annual 
subsistence allowance payment is estimated to be $4,962.12 in FY 2012. 
The average annual payment is based on 9 months of enrollment; 
therefore, an average monthly subsistence payment would be $551.35. We 
assumed that, on average, participants would have received one-and-a-
half months of interval subsistence allowance based on enrollment in 
training for 9 months of the year. Therefore, the average annual 
interval subsistence allowance rate for this 1.5 month interval period 
is estimated to be $827.03 ($551.35 x 1.5) in FY 2012.
    Data from VR&E's FY 2012 Workload Projections for Trainees/
Participants indicate that there will be approximately 62,078 chapter 
31 participants receiving chapter 31 subsistence allowance in FY 2012. 
Workload projections for the number of participants receiving 
subsistence allowance were based on FY 2010 actual number of 61,405 
from the VA Benefits Delivery Network Computer Output Identification 
Number Target System Report 6002 with projected increases for FY 2011 
and FY 2012. To align with projections from the FY 2012 President's 
Budget, the number of participants for FY 2012 (63,259) was then 
reduced by the number of participants that VA projected would transfer 
from chapter 31 benefits to the Post-9/11 GI Bill.
    The FY 2012 average annual interval subsistence allowance rate 
($827.03) was multiplied by the FY 2012 total number of CH31 
participants receiving subsistence allowance (62,078), totaling 
approximately $51,340,000.00 in projected savings to VA in FY 2012. 
Projected savings are estimated to be $51.3 million during FY 2012 and 
$275.7 million over a five-year period.
    Projected increases to participants receiving subsistence allowance 
and average annual payments were applied in the out-years and are shown 
in the table below.

    Projected Savings From No Longer Allowing Payment of Subsistence Allowance During Intervals Between Terms
----------------------------------------------------------------------------------------------------------------
                                                             Total 
                                                                 of CH31       Average  annual
                                                              participants      interval  SA       Obligations
                            FY                                  receiving     rate (1.5  mths.       ($000)
                                                               subsistence         of SA)
                                                             allowance (SA)
----------------------------------------------------------------------------------------------------------------
2012......................................................            62,078           $827.03           $51,340
2013......................................................            63,892            840.25            53,685
2014......................................................            64,530            856.22            55,252
2015......................................................            65,176            872.49            56,865
2016......................................................            65,829            889.94            58,584
                                                           -----------------------------------------------------
    5-Year Total..........................................  ................  ................           275,726
----------------------------------------------------------------------------------------------------------------

Accounting Statement and Table

    As required by OMB Circular A-4, in the table below, VA has 
prepared an accounting statement showing the classification of 
transfers, benefits and costs associated with the provisions of this 
rulemaking.

[[Page 45703]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Transfers
                                                               -----------------------------------------------------------------------------------------
               Category                      Year  dollar                                                            Present value        Annualized
                                                                 FY2012    FY2013    FY2014    FY2015    FY2016  ---------------------------------------
                                                                                                                     3%        7%        3%        7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized Transfers  2010..................    $111.2    $140.6    $169.7    $200.4    $232.9    $774.7    $684.2    $164.2    $156.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualitative benefits..................                          The Post-9/11 subsistence allowance rates are greater than the current CH31 subsistence
                                                                allowance rates. Therefore, VA believes that CH31 participants who are eligible to
                                                                receive the greater subsistence allowance will require less dependence on support
                                                                programs and will be able to devote more attention to their CH31 training/rehabilitation
                                                                program, thus creating better employment opportunities and a better quality of life.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.................................                          None.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    There are no duplicative, overlapping, or conflicting Federal rules 
identified with this regulatory action.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number and title for the 
program that would be affected by this interim final rule is 64.116, 
Vocational Rehabilitation for Disabled Veterans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. John R. 
Gingrich, Chief of Staff, Department of Veterans Affairs, approved this 
document on July 21, 2011, for publication.

List of Subjects in 38 CFR Part 21

    Administrative practice and procedure, Armed forces, Civil rights, 
Claims, Colleges and universities, Conflict of interests, Education, 
Employment, Grant programs--education, Grant programs--veterans, Health 
care, Loan programs--education, Loan programs--veterans, Manpower 
training programs, Reporting and recordkeeping requirements, Schools, 
Travel and transportation expenses, Veterans, Vocational education, 
Vocational rehabilitation.

    Dated: July 21, 2011.
Robert C. McFetridge,
Director, Regulation Policy and Management, Office of the General 
Counsel, Department of Veterans Affairs.
    For the reasons set forth in the preamble, VA amends 38 CFR part 21 
(subpart A) as follows:

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

Subpart A--Vocational Rehabilitation and Employment Under 38 U.S.C. 
Chapter 31

0
1. The authority citation for part 21, subpart A continues to read as 
follows:

    Authority:  38 U.S.C. 501(a), chs. 18, 31, and as noted in 
specific sections.

0
2. Amend Sec.  21.79 by:
0
a. Redesignating paragraphs (f)(2), (f)(2)(i), (f)(2)(ii), and (f)(3) 
as paragraphs (f)(3), (f)(3)(i), (f)(3)(ii), and (f)(4) respectively.
0
b. Adding a new paragraph (f)(2).
0
c. Adding an authority citation at the end of new paragraph (f)(2).
    The additions read as follows:


Sec.  21.79  Determining entitlement usage under Chapter 31.

* * * * *
    (f) Special situations. * * *
    (2) When a chapter 31 participant elects to receive payment of the 
Post-9/11 subsistence allowance under Sec.  21.260(c) in lieu of a 
subsistence allowance under Sec.  21.260(b), the entitlement usage is 
deducted from the veteran's chapter 31 entitlement. No entitlement 
charges are made against chapter 33. (Authority: 38 U.S.C. 3108(b))
* * * * *

0
3. Amend Sec.  21.260 by:
0
a. Revising paragraph (a).
0
b. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e), 
respectively.
0
c. Adding a new paragraph (c).
    The revisions and addition read as follows:


Sec.  21.260  Subsistence allowance.

    (a) General. A veteran participating in a rehabilitation program 
under 38 U.S.C. chapter 31 will receive a monthly subsistence allowance 
at the rates in paragraph (b) of this section, unless the veteran 
elects to receive an alternate payment (for the purposes of part 21, 
subpart A, referred to as the Post-9/11 subsistence allowance) as 
specified in paragraph (c) of this section, or payment at the rate of 
monthly educational assistance allowance payable under 38 U.S.C. 
chapter 30 for the veteran's type of training. See Sec.  21.264(a) for 
election of payment at the chapter 30 rate and Sec.  21.264(b) for 
election of the Post-9/11 subsistence allowance. See Sec. Sec.  
21.7136, 21.7137, and 21.7138 to determine the applicable chapter 30 
rate.

(Authority: 38 U.S.C. 3108(a), 3108(b), 3108(f))

* * * * *
    (c) Rate of payment of Post-9/11 subsistence allowance. In lieu of 
the subsistence allowance payable under paragraph (b) of this section, 
VA pays the Post-9/11 subsistence allowance at the rates in the table 
at the end of this paragraph, effective August 1, 2011, based on the 
basic allowance for housing payable under 37 U.S.C. 403. For purposes 
of the following table:
    (1) BAH means ``the applicable amount of basic allowance for 
housing payable under 37 U.S.C. 403 for a member of the military with 
dependents in pay grade E-5 residing in the military housing area that 
encompasses all or the majority portion of the ZIP code area in which 
is located the institution, agency,

[[Page 45704]]

or employer providing the rehabilitation program concerned''.
    (2) BAH National Average means ``the average (i.e., unweighted 
arithmetic mean) monthly amount of the basic allowance for housing 
payable under 37 U.S.C. 403 for a member of the military with 
dependents in pay grade E-5 residing in the United States''.

Payment of Post-9/11 Subsistence Allowance in Accordance With Public Law
                                 111-377
                     [Effective August 1, 2011] \1\
------------------------------------------------------------------------
               Type of program                          Payment
------------------------------------------------------------------------
Institutional: \2\                             .........................
    Full-time................................  Entire BAH of institution
                                                ZIP code.
    \3/4\ time...............................  \3/4\ BAH of institution
                                                ZIP code.
    \1/2\ time...............................  \1/2\ BAH of institution
                                                ZIP code.
Nonpay or nominal pay on-job training in a     .........................
 Federal, State, local, or federally
 recognized Indian tribe agency; vocational
 course in a rehabilitation facility or
 sheltered workshop; institutional non-farm
 cooperative:
    Full-time only...........................  Entire BAH of agency or
                                                institution ZIP code.
Nonpay or nominal pay work experience in a
 Federal, State, local, or federally
 recognized Indian tribe agency:
    Full-time................................  Entire BAH of agency ZIP
                                                code.
    \3/4\ time...............................  \3/4\ BAH of agency ZIP
                                                code.
    \1/2\ time...............................  \1/2\ BAH of agency ZIP
                                                code.
Farm cooperative, apprenticeship, or other on- .........................
 job training (OJT): \3\
    Full-time only...........................  Entire BAH of employer
                                                ZIP code.
Combination of institutional and OJT (Full-    .........................
 time only):
    Institutional greater than \1/2\ time....  Entire BAH of institution
                                                ZIP code.
    OJT greater than \1/2\ time \3\..........  Entire BAH of employer
                                                ZIP code.
Non-farm cooperative (Full-time only):         .........................
    Institutional............................  Entire BAH of institution
                                                ZIP code.
    On-job \3\...............................  Entire BAH of employer
                                                ZIP code.
Improvement of rehabilitation potential:       .........................
    Full-time................................  Entire BAH of institution
                                                ZIP code.
    \3/4\ time...............................  \3/4\ BAH of institution
                                                ZIP code.
    \1/2\ time...............................  \1/2\ BAH of institution
                                                ZIP code.
    \1/4\ time \4\...........................  \1/4\ BAH of institution
                                                ZIP code.
Training consisting of solely distance         .........................
 learning: \5\
    Full-time................................  \1/2\ BAH National
                                                Average.
    \3/4\ time...............................  \3/8\ BAH National
                                                Average.
    \1/2\ time...............................  \1/4\ BAH National
                                                Average.
Training in the home, including independent    .........................
 instructor:
    Full-time only...........................  \1/2\ BAH National
                                                Average.
Training in an institution not assigned a ZIP
 code, including foreign institutions:
    Full-time................................  Entire BAH National
                                                Average.
    \3/4\ time...............................  \3/4\ BAH National
                                                Average.
    \1/2\ time...............................  \1/2\ BAH National
                                                Average.
------------------------------------------------------------------------
\1\ Effective August 1, 2011, the Post-9/11 subsistence allowance may be
  paid in lieu of subsistence allowance authorized in Sec.   21.260(b),
  and is not adjusted to include dependents.
\2\ For measurement of rate of pursuit, see Sec.  Sec.   21.4270 and
  21.4272 through 21.4275. Payments for courses being taken
  simultaneously at more than one institution are based on the BAH of
  the ZIP code assigned to the parent institution.
\3\ For on-job training, payment of the Post-9/11 subsistence allowance
  may not exceed the difference between the monthly training wage, not
  including overtime, and the entrance journeyman wage for the veteran's
  objective.
\4\ The quarter-time rate may be paid only during extended evaluation.
\5\ Payment for training consisting of both distance learning and
  courses taken at a local institution is based on the BAH of the ZIP
  code assigned to the local institution.


(Authority: 38 U.S.C. 3108, 3115(a)(1))

* * * * *

0
4. Amend Sec.  21.264 by:
0
a. Revising the section heading.
0
b. Redesignating paragraphs (a) introductory text, (a)(1), (a)(2), and 
(a)(3) as paragraphs (a)(1), (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) 
respectively.
0
c. Adding a new heading to paragraph (a).
0
d. Redesignating paragraphs (b) introductory text, (b)(1), and (b)(2) 
as paragraphs (a)(2), (a)(2)(i), and (a)(2)(ii), respectively.
0
e. Redesignating paragraphs (c) introductory text, (c)(1), (c)(2), and 
(c)(3) as paragraph (a)(3), (a)(3)(i), (a)(3)(ii), and (a)(3)(iii), 
respectively.
0
f. Further redesignating paragraphs (c)(3)(i), (c)(3)(ii), and 
(c)(3)(iii) as paragraphs (a)(3)(iii)(A), (a)(3)(iii)(B), and 
(a)(3)(iii)(C), respectively.
0
g. Redesignating paragraph (d) as paragraph (a)(4).
0
h. Adding a new paragraph (b).
0
i. Revising the authority citation at the end of the section.
    The revisions and additions read as follows:


Sec.  21.264  Election of payment at the 38 U.S.C. chapter 30 
educational assistance rate or election of payment of Post-9/11 
subsistence allowance.

    (a) Election of chapter 30 educational assistance rate. * * *
    (b) Election of payment of Post-9/11 subsistence allowance.
    (1) Eligibility. Effective August 1, 2011, a veteran who applies 
and is eligible for training or education under chapter 31 may elect to 
receive payment of the Post-9/11 subsistence allowance under Sec.  
21.260(c) in lieu of a subsistence allowance under Sec.  21.260(b), 
provided the veteran has remaining eligibility for, and

[[Page 45705]]

entitlement to, educational assistance under chapter 33, Post-9/11 GI 
Bill.
    (2) Reelection of subsistence allowance under Sec.  21.260(b). 
Reelection of payment of benefits at the chapter 31 subsistence 
allowance rate under Sec.  21.260(b) may be made only after completion 
of a term, quarter, semester, or other period of instruction unless:
    (i) Chapter 33 eligibility or entitlement ends earlier; or
    (ii) Failure to approve immediate reelection would prevent the 
veteran from continuing in the rehabilitation program.
    (3) Services under chapter 31. A veteran who elects payment of the 
Post-9/11 subsistence allowance remains entitled to all other services 
and assistance under chapter 31.

(Authority: 38 U.S.C. 3108(b))


0
5. Amend Sec.  21.270 by:
0
a. Revising the section heading.
0
b. Removing paragraph (b).
0
c. Redesignating paragraph (c) as paragraph (b).
0
d. In newly redesignated paragraph (b), removing ``Weeekend'' and 
adding, in its place, ``Weekend''.
0
e. Adding an authority citation at the end of the section.
    The revision and addition read as follows:


Sec.  21.270  Payment of subsistence allowance during leave and other 
periods.

* * * * *

(Authority: 38 U.S.C. 3680(a))


0
6. Revise Sec.  21.274 (d)(1)(iii) to read as follows:


Sec.  21.274  Revolving fund loan.

* * * * *
    (d) * * *
    (1) * * *
    (iii) The advance does not exceed either the amount needed, or 
twice the monthly subsistence allowance for a veteran without 
dependents in full-time institutional training specified in Sec.  
21.260(b); and
* * * * *
[FR Doc. 2011-19473 Filed 7-29-11; 8:45 am]
BILLING CODE 8320-01-P