[Federal Register Volume 80, Number 15 (Friday, January 23, 2015)]
[Proposed Rules]
[Pages 3840-3864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00297]
[[Page 3839]]
Vol. 80
Friday,
No. 15
January 23, 2015
Part IV
Department of Veterans Affairs
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38 CFR Part 3
Net Worth, Asset Transfers, and Income Exclusions for Needs-Based
Benefits; Proposed Rule
Federal Register / Vol. 80 , No. 15 / Friday, January 23, 2015 /
Proposed Rules
[[Page 3840]]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 3
RIN 2900-AO73
Net Worth, Asset Transfers, and Income Exclusions for Needs-Based
Benefits
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
regulations governing entitlement to VA pension to maintain the
integrity of the pension program and to implement recent statutory
changes. The proposed regulations would establish new requirements
pertaining to the evaluation of net worth and asset transfers for
pension purposes and would identify those medical expenses that may be
deducted from countable income for VA's needs-based benefit programs.
The intended effect of these changes is to respond to recent
recommendations made by the Government Accountability Office (GAO), to
maintain the integrity of VA's needs-based benefit programs, and to
clarify and address issues necessary for the consistent adjudication of
pension and parents' dependency and indemnity compensation claims. We
also propose to implement statutory changes pertaining to certain
pension beneficiaries who receive Medicaid-covered nursing home care,
as well as a statutory income exclusion for certain disabled veterans
and a non-statutory income exclusion pertaining to annuities.
DATES: VA must receive comments on or before March 24, 2015.
ADDRESSES: Written comments may be submitted through http://www.regulations.gov; by mail or hand-delivery to: Director, Regulation
Policy and 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-AO73, Net Worth, Asset Transfers, and Income Exclusions
for Needs-Based Benefits.'' Copies of comments received will be
available for public inspection in the Office of Regulation Policy and
Management, Room 1068, 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 may be viewed online through the Federal
Docket Management System (FDMS) at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Martha Schimpf, Analyst, Pension and
Fiduciary Service, Veterans Benefits Administration, Department of
Veterans Affairs, 21P1, 810 Vermont Ave. NW., Washington, DC 20420,
(202) 632-8863. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: The Department of Veterans Affairs (VA)
administers a needs-based benefit, ``pension,'' for wartime veterans
and for surviving spouses and children of wartime veterans. The current
pension program was established by the Veterans' and Survivors' Pension
Improvement Act of 1978, Public Law 95-588, 92 Stat. 2497, and became
effective January 1, 1979. The statutory authority for pension is 38
U.S.C. chapter 15, implemented at 38 CFR 3.271 through 3.277. As
further explained later in this Notice of Proposed Rulemaking (NPRM),
VA proposes to amend 38 CFR part 3 to preserve program integrity
because we have received information that, under current regulations,
claimants who are not actually in need may qualify for these needs-
based benefits. For clarity and consistency, some of the changes we
propose would apply to other needs-based benefits as well. Although new
pension claimants may qualify for pension only under the current
program, VA still pays benefits under two prior pension programs. In
addition, new claimants may qualify for parents' dependency and
indemnity compensation (parents' DIC) under 38 U.S.C. 1315. Regulations
pertaining to all of these older programs are found at current 38 CFR
3.250 through 3.263.
As a preliminary matter, we propose to refer to the current pension
benefit as ``pension,'' rather than referring to ``improved pension.''
See 38 CFR 3.3(a)(3). When specificity is required in VA regulations to
distinguish between veterans and survivors, we propose to refer to
``veterans pension'' and ``survivors pension'' instead of ``disability
pension'' and ``death pension.'' We have determined that the term
``disability pension'' is a misnomer because a veteran who has attained
age 65 does not need to be disabled to receive pension. See 38 U.S.C.
1513. We also note that subchapter II of 38 U.S.C. chapter 15 is titled
``Veterans' Pensions'' and subchapter III is titled ``Pensions to
Surviving Spouses and Children.'' The proposed terms would be
consistent with the titles used in the statutes.
We would not amend current Sec. 3.3(a)(3) in this rulemaking or
amend other references in part 3 to ``improved pension,'' ``disability
pension,'' or ``death pension,'' but would implement the terminology
changes over time. We also would not amend references to VA's prior
pension programs, ``section 306'' and ``old law'' pension.
Executive Summary
1. Legal Authority and Need for Rulemaking
Section 501 of title 38, United States Code, authorizes VA to
prescribe regulations necessary for administration of its programs. In
the context of VA's needs-based pension benefit, sections 1522 and 1543
of title 38, United States Code, direct VA to deny, reduce, or
discontinue the payment of pension when it is reasonable that a
claimant consume some portion of his or her net worth for his or her
maintenance. Because nothing in sections 1522 and 1543 define when ``it
is reasonable'' for a claimant to consume some part of his or her net
worth or provide criteria for determining when net worth is excessive,
VA may interpret the law by filling these gaps.
Similarly, section 1503(a)(8) of title 38, United States Code,
authorizes VA to deduct from a pension claimant's countable income
payments for unreimbursed medical expenses but does not define a
medical expense for VA purposes. This rulemaking would fill that gap.
This proposed rulemaking would amend regulations governing VA's
needs-based pension programs to promote consistency in benefit
decisions, reduce opportunities for attorneys and financial advisors to
take advantage of pension claimants, and preserve the integrity of the
pension program. The revised regulations would promote consistent
decisions by establishing a bright-line net worth limit and re-defining
net worth as the sum of assets and annual income. The revised
regulations would also promote consistent decisions by defining in
regulations those unreimbursed medical expenses that VA will deduct
from a claimant's annual income for purposes of determining a
claimant's annual pension payment.
By establishing in regulations a look-back and penalty period for
claimants who transfer assets before applying for pension to create the
appearance of economic need where it does not exist, the revised rules
would reduce opportunities for financial advisors to provide advice for
the restructuring of assets that, in many cases, renders the claimant
ineligible for other needs-based benefits. Establishing a look-back
[[Page 3841]]
and penalty period for pre-application transfers of assets would also
preserve the integrity of the pension program by ensuring that VA only
pays the benefit to those with genuine need.
2. Summary of Major Provisions
Proposed Sec. 3.274 would establish a clear net worth limit. VA
does not currently have a bona fide net worth limit. The proposed net
worth limit is the dollar amount of the maximum community spouse
resource allowance established for Medicaid purposes at the time the
final rule is published. This amount is currently $119,220, which would
be indexed for inflation by adjusting it at the same time and by the
same percentage as cost-of-living increases provided to Social Security
beneficiaries. The amount of a claimant's net worth would be determined
by adding the claimant's annual income to his or her assets. VA would
calculate the amount of a claimant's net worth when it receives an
original or new pension claim; a request to establish a new dependent;
or information that net worth has increased or decreased. Proposed
Sec. 3.274 would provide that a claimant's net worth can decrease if
the claimant's annual income decreases or if the claimant spends down
assets on basic necessities such as food, clothing, shelter, or health
care. Proposed Sec. 3.274 would include effective dates for benefit
rate adjustments due to net worth.
Proposed Sec. 3.275 would describe how VA calculates assets. It
would provide that VA would not consider a claimant's primary
residence, including a residential lot area not to exceed 2 acres, as
an asset. Proposed Sec. 3.275 would also provide that if the residence
is sold, proceeds from the sale are assets unless the proceeds are used
to purchase another residence within the calendar year of the sale.
Proposed Sec. 3.276 would provide new requirements pertaining to
pre-application asset transfers and net worth evaluations to qualify
for VA pension. The changes respond to recommendations that the
Government Accountability Office (GAO) made in a May 2012 report,
``Veterans Pension Benefits: Improvements Needed to Ensure Only
Qualified Veterans and Survivors Receive Benefits.'' Section 3.276
would establish a presumption, absent clear and convincing evidence
showing otherwise, that asset transfers made during the look-back
period were made to establish pension entitlement. The changes would
establish a 36-month look-back period and establish a penalty period
not to exceed 10 years for those who dispose of assets to qualify for
pension. The penalty period would be calculated based on the total
assets transferred during the look-back period to the extent they would
have made net worth excessive. The penalty period would begin the first
day of the month that follows the last asset transfer.
Proposed Sec. 3.278 would define and clarify what VA considers to
be a deductible medical expense for all of its needs-based benefits.
The medical expense amendments will help to ensure that those who
process VA needs-based claims process them fairly and consistently and
that only needy claimants receive needs-based benefits. It would
provide definitions for several terms, including activities of daily
living (ADLs) and instrumental activities of daily living (IADLs), and
provide that custodial care means regular assistance with two or more
activities of ADLs or assistance because a person with a mental
disorder is unsafe if left alone due to the mental disorder. It would
provide that generally, payments to facilities such as independent
living facilities are not medical expenses, nor are payments for
assistance with IADLs. However, there would be exceptions for disabled
individuals who require health care services or custodial care. The
proposed rule would place a limit on the hourly payment rate that VA
may deduct for in-home attendants.
Proposed Sec. 3.279 would place in one central location all
statutory exclusions from income and assets that apply to all VA needs-
based benefits.
Proposed Sec. 3.503 would incorporate in regulations statutory
changes regarding Medicaid-covered nursing home care and applicability
to surviving child beneficiaries.
3. Assessment of Costs and Benefits
VA's impact analysis can be found as a supporting document at
http://www.regulations.gov, usually within 48 hours after the
rulemaking document is published. Additionally, a copy of the
rulemaking and its impact analysis are available on VA's Web site at
http://www1.va.gov/orpm/, by following the link for ``VA Regulations
Published.''
Background Information on Net Worth and Asset Transfers for Pension
Under 38 U.S.C. 1522 and 1543, VA may not pay pension to a veteran
or survivor when the corpus of the individual's estate is such that
under all the circumstances, including consideration of the
individual's income and that of the individual's spouse or dependent
children, it is reasonable that the individual consume some part of the
estate for his or her maintenance prior to receiving pension. However,
Congress has not prescribed criteria for determining whether it would
be reasonable to require an individual to consume his or her assets
before receiving pension. VA implemented sections 1522 and 1543 in
current 38 CFR 3.274 and 3.275. We have determined that the current
implementing regulations also do not prescribe effective criteria for
determining whether or not net worth bars pension entitlement.
The Veterans Benefits Administration's (VBA) Adjudication
Procedures Manual (manual), M21-1MR, which interprets VA regulations
and establishes procedures for implementing regulations, instructs
adjudicators to deny pension on excessive net worth grounds if ``a
claimant's assets are sufficiently large that the claimant could live
off these assets for a reasonable period of time.'' M21-1MR, Part V,
Subpart iii, Chapter 1, Section J.67.g. The manual also provides that
``[p]ension entitlement is based on need and that need does not exist
if a claimant's estate is of such size that he/she could use it for
living expenses.'' Id. at J.67.h. However, neither current regulations
nor the manual defines ``reasonable period of time'' or establish
definitive pension net worth limits. Accordingly, GAO concluded in its
May 2012 report that VA adjudicators ``lack[ ] specific guidance on how
to determine whether or not a claimant's financial resources are
sufficient to meet their basic needs without the pension benefit.''
U.S. Government Accountability Office, GAO-12-540, Veterans' Pension
Benefits: Improvements Needed to Ensure Only Qualified Veterans and
Survivors Receive Benefits 14 (2012).
The GAO report also identified over 200 organizations that market
services, primarily financial planning services, to assist veterans and
survivors with transferring assets in order to reduce net worth and
qualify for VA pension. As GAO noted, ``[c]urrent federal law allows
veterans to transfer significant assets'' before applying for pension
and still qualify for pension, which is inconsistent with the purpose
of the program.'' GAO-12-540, at 22. Currently, a pension claimant may
lawfully transfer significant assets before applying for pension.
Current Sec. 3.276(b) provides that a pension claimant's gift of
property to a relative residing in the same household is not recognized
as reducing the claimant's corpus of estate and a pension claimant's
sale of property to such a relative is not recognized as reducing
[[Page 3842]]
the claimant's corpus of estate if the purchase price or other
consideration for the sale is so low as to equate to a gift. However,
there is currently no objective standard for determining whether the
purchase price or other consideration for the sale is so low as to
equate to a gift. Current Sec. 3.276 also provides that a pension
claimant's gift of property to someone other than a relative living in
the claimant's household will not be recognized as reducing the
claimant's corpus of estate unless it is clear that the claimant has
relinquished ``all rights of ownership, including the right of
control'' over the property. However, current Sec. 3.276 does not
prohibit a claimant from making a gift of property to an individual not
living in the claimant's household immediately before applying for
pension, so currently such a gift would reduce the claimant's corpus of
estate. Also, the regulation does not define the terms ``ownership''
and ``control.''
Sections 1522 and 1543 require VA to deny or discontinue pension
when it is reasonable to require the individual to consume some portion
of his or her net worth for personal maintenance. The legislative
history of the current pension program reveals Congress' intent that
``a needs-based system . . . apply only to those veterans who are, in
fact, in need.'' H.R. Rep. No. 95-1225, at 33 (1978), reprinted in 1978
U.S.C.C.A.N. 5583, 5614. We interpret the statutory requirement to
consume excessive net worth prior to receiving needs-based pension as
precluding pension entitlement based upon transferring assets that a
claimant or beneficiary could use for his or her maintenance. Congress
did not intend that a claimant who has sufficient assets for self-
support could preserve those assets for his or her heirs or transfer
them as gifts and still qualify for pension at the expense of
taxpayers. In our view, it would be an unreasonable interpretation of
current law to conclude that Congress intended that veterans and
survivors could use the pension program as an estate planning tool,
under which they may preserve or gift assets and shift responsibility
for their support to the Government. Accordingly, we propose to amend
VA's net worth and asset transfer regulations to ensure program
integrity and preserve the program for wartime veterans and their
survivors who actually need Government support.
Proposed Net Worth and Asset Transfer Amendments
Current 38 CFR 3.274, 3.275, and 3.276 use the terms ``net worth''
and ``corpus of the estate'' to describe the assets available to a
claimant or beneficiary that could bar pension entitlement if
sufficiently great. In particular, current Sec. 3.275(b) gives the
same definition to both terms. We propose to use the term ``net worth''
in proposed Sec. Sec. 3.274, 3.275, and 3.276 because it is the more
commonly understood term. In addition, as explained in more detail
below, net worth would be defined as the sum of a claimant's or
beneficiary's assets and annual income.
Section 3.274--Net Worth and VA Pension
We propose to revise Sec. 3.274 to establish new policies
pertaining to pension and net worth. As we explained above, sections
1522 and 1543 require VA to deny or discontinue pension when, under all
the circumstances, ``it is reasonable'' that the claimant or
beneficiary use some portion of the applicable net worth for his or her
maintenance. VA implemented this statutory requirement in current Sec.
3.274, which essentially tracks the language of the statutes and
prescribes denial or discontinuance of pension when it is reasonable
that the individual consume ``some part'' of his or her net worth for
personal maintenance. Current Sec. 3.274(a) pertains to denial or
discontinuance of veterans' pension entitlement based on excessive net
worth, and Sec. 3.274(c) pertains to denial or discontinuance of
surviving spouses' pension entitlement based on excessive net worth.
Current paragraphs (b) and (d) prescribe when VA must deny or
discontinue increased pension paid to a veteran or surviving spouse,
respectively, on account of a child. Current paragraph (e) pertains to
denial or discontinuance of surviving children's pension entitlement
based on excessive net worth.
Unlike the regulatory framework governing other Federal needs-based
programs, such as the Social Security Administration's Supplemental
Security Income (SSI) program, see e.g., 20 CFR 416.1205, which
prescribes a $2,000 limit on resources (i.e., assets) for unmarried
individuals and a $3,000 limit for married individuals, VA's net worth
regulations do not prescribe clear limits for pension entitlement.
Rather, for determining whether some part of a claimant's net worth
should be consumed for his or her maintenance, current Sec. 3.275(d)
requires VA to consider the claimant's income with (1) the liquidity of
the property, (2) the life expectancy of the claimant, (3) the number
of dependent family members, and (4) the potential rate of depletion of
available assets. Absent from current Sec. Sec. 3.274 and 3.275(d) are
clear rules for evaluating these factors and determining whether a
claimant's assets and income are sufficient to meet his or her needs
without pension. As a result, GAO concluded that VA adjudicators had to
use their own discretion, leading to inconsistent decisions for
similarly situated claimants. See GAO-12-540, at 14-15.
In addition to producing inconsistent decisions, current rules
require development of additional information not solicited in the
initial application for compensation and pension, VA Form 21-526, or
the application for survivors' benefits, VA Form 21P-534. For example,
to determine the potential rate of depletion of a claimant's net worth,
VA must gather information about a claimant's living expenses and
reconcile those expenses with the claimant's income over an unspecified
period of time. This development necessarily adds time and complexity
to the adjudication of these needs-based benefits, potentially creating
greater financial hardship for claimants as they wait for VA to decide
their claims.
As stated above, the statutory authorities for net worth, 38 U.S.C.
1522 and 1543, require VA to consider a veteran's, surviving spouse's,
or child's annual income when determining whether excessive net worth
bars pension entitlement. Current regulations governing VA's assessment
of net worth, 38 CFR 3.275(d), require VA, in making net worth
determinations, to consider ``the amount of the claimant's income,''
together with other considerations. In order to account for the
statutory annual income component of net worth determinations, we
propose a new net worth definition which VA would calculate by adding
assets and annual income.
Proposed Sec. 3.274(a) would establish a clear net worth limit for
pension entitlement. Establishing a clear limit would promote
uniformity and consistency in pension entitlement determinations
consistent with the purpose of the pension program. Additionally, under
a clear bright-line limit, it would no longer be necessary for claim
adjudicators to complete lengthy, subjective net-worth determinations,
which would free up limited resources for other claim-related
activities, specifically timely delivery of benefits to individuals who
immediately need Government support.
The net worth limit for pension entitlement that we propose to use
is the standard maximum community spouse resource allowance (CSRA)
prescribed by Congress for Medicaid, another Federal needs-based
benefit program, which we consider sufficiently
[[Page 3843]]
analogous to VA's pension program to use the Congressional resource
limit on Medicaid entitlement in VA's program. For the Medicaid
program, Congress has established a standard maximum resource amount
that the ``community spouse'' of an institutionalized individual may be
allowed to retain without the institutionalized spouse losing
entitlement to Medicaid because of excessive resources. Congress
established this standard maximum amount, referred to as the maximum
CSRA, at $60,000 in 1989 and indexed that amount for inflation by
increasing it by the same percentage as the percentage increase in the
average consumer price index for all urban consumers. See 42 U.S.C.
1396r-5(f) and (g). For calendar-year 2014, the maximum CSRA is
$117,240. See http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Eligibility/Downloads/Spousal-Impoverishment-2014.pdf. As described in further detail below, we would use the dollar
amount of the maximum CSRA that is in effect at the effective date of
the final rule after publication in the Federal Register and have
inserted a temporary placeholder in the proposed rule.
Congress' intent in establishing the CSRA was to prevent the
impoverishment of the non-institutionalized spouse of a Medicaid-
covered individual. VA's intent in proposing to adopt the maximum CSRA
as the net worth limit for pension entitlement is similar in that we
seek to prevent the impoverishment of wartime veterans and their
dependents or survivors as a prerequisite for obtaining VA pension. We
recognize that a veteran or a veteran's surviving spouse may have built
up a modest amount of savings prior to applying for pension and that
there might be a need to retain a reasonable portion of these assets to
respond to unforeseen events, such as medical conditions requiring care
in an assisted living facility or nursing home.
The current cost of nursing home and assisted living care supports
our proposal to adopt the maximum CSRA. A recent survey found that the
average annual cost of a semi-private room in a nursing home was over
$81,000, and the cost of a private room was over $90,000. MetLife
Mature Market Institute, ``Market Survey of Long-Term Care Costs'' 4
(2012). A 2010 survey also found that the average annual cost of a
private room in a nursing home was over $90,000. Prudential Research
Report, ``Long-Term Care Cost Study'' 15 (2010). One survey found that
the average cost of a residence in an assisted living facility was
$3,550 monthly or $42,600 annually. MetLife Mature Market Institute,
``Market Survey of Long-Term Care Costs'' 4 (2012). The cost of such
facilities would quickly deplete the savings permitted by our proposed
use of the maximum CSRA even with the supplemental income provided by
VA's pension program, which for 2014 is established at a maximum of
$25,022 annually for a veteran with a spouse and $13,563 annually for a
surviving spouse. Given the high cost of such care and the fact that
many veterans or survivors may have to pay for the care, we have
determined that it would be reasonable to establish the maximum CSRA as
the net worth limit for pension entitlement. This limit would
correspond roughly to the cost of residential care in a nursing home or
assisted living facility for 1 to 2 years.
Proposed Sec. 3.274(a) includes several placeholders that describe
what the final rule would contain if implemented. The net worth limit
would be the dollar amount of the current maximum CSRA as of the
effective date of the final rule, to be increased by the same
percentage as the increase in Social Security benefits whenever there
is a cost-of-living increase in benefit amounts payable under the
Social Security Act. VA would publish the current limit on its Web
site. The proposed regulation text also does not include the Web site
address because VA has not yet determined the address at which the net
worth limit would be published. We have inserted ``location to be
determined'' in the proposed regulation text as a placeholder and would
provide the Web site address, current net worth limit, and effective
date in the final rule.
Under proposed Sec. 3.274(b), VA would deny or discontinue pension
if a claimant's or beneficiary's net worth exceeds the net worth limit.
It would not be necessary to retain the reasonableness language in the
current regulation under this bright-line limit. We have determined
that it would be reasonable and consistent with the purpose of the
pension program to fairly and consistently assess net worth and to make
pension entitlement determinations using standardized criteria.
Proposed Sec. 3.274(b)(1) would define a claimant's or beneficiary's
net worth as the sum of his or her assets and annual income. We propose
this new definition because under VA's net worth statutes, 38 U.S.C.
1522 and 1543, VA must consider a claimant's or child's annual income
when determining if net worth bars pension entitlement. To account for
this statutory requirement, net worth for VA pension purposes would
include both an asset component and an income component. This would be
reflected for veterans, surviving spouses, and surviving children in
proposed Sec. 3.274(b)(1) and for dependent children in proposed Sec.
3.274(d)(2).
Proposed Sec. 3.274(b)(2) would provide that VA calculates a
claimant's or beneficiary's assets under this section and Sec. 3.275;
and paragraph (b)(3) would provide cross-references to make it clear
that ``annual income'' for net worth purposes is the same ``annual
income'' used for calculating a pension entitlement rate for a claimant
or a beneficiary. Proposed paragraph (b)(4) gives an example of a net
worth calculation.
Proposed Sec. 3.274(c) generally restates provisions in current
Sec. 3.274(a), (c), and (e) and explains whose assets VA includes as a
claimant's or beneficiary's assets. A veteran's assets include the
assets of the veteran as well as the assets of the veteran's spouse, if
the veteran has a spouse. See 38 U.S.C. 1522(a). A surviving child's
assets include those of his or her custodian unless the custodian is an
institution. We also propose to refer to the provisions of current 38
CFR 3.57(d) and clarify that, when a surviving child is in the joint
custody of a natural or adoptive parent and a stepparent, the surviving
child's assets also include the assets of the stepparent. This
provision is consistent with 38 U.S.C. 1543(b), pertaining to a
surviving child's net worth.
Proposed Sec. 3.274(d) would clarify paragraphs (b) and (d) of
current Sec. 3.274 prescribing how a child's net worth affects a
veteran's or surviving spouse's pension entitlement. The current
paragraphs restate statutory provisions in providing that ``increased
pension'' payable to a veteran or a surviving spouse on account of a
child is barred if it is reasonable that some part of the child's net
worth be consumed for the child's maintenance. See 38 U.S.C. 1522(b)
and 1543(a)(2). In this context, VA has interpreted the statutory
phrase ``increased pension'' to refer to the statutory maximum pension
rates rather than the pension entitlement rate. The pension entitlement
rate is the pension amount that a claimant or beneficiary is entitled
to receive after VA subtracts the claimant's or beneficiary's income
from the statutory maximum rate. If a child has sufficient income, a
veteran's or surviving spouse's entitlement rate can decrease rather
than increase when the child is established as a dependent. Sections
1522(b) and 1543(a)(2) refer to the increased pension payable under the
applicable subsections of sections 1521 and 1542 respectively, which
provide
[[Page 3844]]
the maximum pension rates. Sections 38 U.S.C. 1522(b) and 1543(a)(2)
also explicitly provide that a child with excessive net worth ``shall
not be considered as the veteran's [or surviving spouse's] child for
[pension purposes]. Accordingly, proposed Sec. 3.274(d) states that VA
would not consider a child to be a veteran's or surviving spouse's
dependent for pension purposes when the child's net worth exceeds the
net worth limit. This would be true even if removing the child as a
dependent results in an increased pension entitlement rate for the
veteran or surviving spouse.
Proposed Sec. 3.274(d)(1) would clarify two issues pertaining to
dependent children. Proposed paragraph (d)(1)(i) would provide that a
``dependent child'' refers, for the purposes of this section, to a
child for whom a veteran or a surviving spouse is entitled to an
increased maximum annual pension rate. The maximum annual pension rates
are the annual pension rates set forth in 38 U.S.C. 1521 for veterans
and 38 U.S.C. 1541 for surviving spouses. These maximum rates are then
reduced by countable annual income, divided by 12, and rounded down to
the nearest whole number to calculate the monthly pension entitlement
rate. The maximum annual pension rate is the annual amount to which an
eligible claimant is entitled to receive if his or her annual income is
zero.
Technically, surviving spouses do not have dependent children for
VA purposes. For VA purposes, any child must be a child of the veteran.
A veteran's child who is not in the custody of a surviving spouse, as
custody is defined at Sec. 3.57(d), is a surviving child who is
eligible for pension in his or her own right. However, referring to a
veteran's child in the custody of a surviving spouse as a ``dependent
child'' makes the necessarily complex net worth regulations somewhat
easier to understand. There is statutory and regulatory precedent for
referring to a child in this manner. Under 38 U.S.C. 1506(1) and 38 CFR
3.277(a), a ``dependent child'' is a child for whom a person is
receiving or entitled to receive increased pension.
Proposed Sec. 3.274(d)(1)(ii) would provide that a ``potential
dependent child'' refers to a child who is excluded from a veteran's or
surviving spouse's pension award solely or partly because the child's
net worth exceeds the limit and provides that references to a
``dependent child'' also include such potential dependent children.
Similar to proposed paragraphs (b)(1) through (b)(3) for claimants
and beneficiaries, paragraphs (d)(2) through (d)(4) of proposed Sec.
3.274 set forth the meaning of net worth for dependent children, and
describe how VA calculates a dependent child's assets and annual income
to determine the amount of the child's net worth. The applicable net
worth statutes, 38 U.S.C. 1522(b) and 1543(a)(2), provide that a
dependent child's estate includes only the estate of the child, but VA
must consider the income of the child, the veteran or surviving spouse,
and other dependents when determining if the child's net worth is
excessive. Therefore, Sec. 3.274(d)(2) would provide that a dependent
child's assets include the child's assets only, and Sec. 3.274(d)(3)
would provide that VA will calculate a dependent child's annual income
under Sec. 3.275 and will include the annual income of the child as
well as the annual income of the veteran or surviving spouse that would
be included if VA were calculating a pension entitlement rate for the
veteran or the surviving spouse. See 38 U.S.C. 1522(b) and 1543(a)(2).
Nothing in current Sec. 3.274 or any other current regulation
prescribes when VA must calculate net worth for purposes of determining
initial, continued, or increased pension entitlement. Accordingly, in
Sec. 3.274(e), we propose to prescribe that VA would calculate net
worth when VA receives: (1) An original pension claim, (2) a new
pension claim after a period of non-entitlement, (3) a request to
establish a new dependent, or (4) information that a veteran's,
surviving spouse's, or child's net worth has increased or decreased.
Information about a claimant's net worth may come from the claimant
him or herself or from VA matching programs with the Internal Revenue
Service (IRS) or the Social Security Administration (SSA). Such
matching programs are authorized under 38 U.S.C. 5317. VA would obtain
information from the IRS and the SSA before paying pension and when re-
calculating net worth for pension under Sec. 3.274(e). We intend that
proposed paragraph (e) would provide notice to VA adjudicators,
claimants, and beneficiaries regarding the types of claims or benefit
adjustments that require a net worth calculation. As explained above in
the information pertaining to Sec. 3.274(b)(1), net worth would be
defined as the sum of a claimant's assets and his or her annual income.
Proposed paragraph (e) would also clarify that generally, VA calculates
net worth only when the claimant meets other factors necessary for
pension entitlement. Proposed Sec. 3.274(e) would clarify for readers
that if, for example, a veteran is not entitled to pension because he
or she lacks wartime service or because his or her annual income
exceeds the maximum annual pension rate, VA will not calculate net
worth. However, paragraph (e)(3) would provide an exception. If the
evidence of record shows that net worth exceeds the net worth limit, VA
may decide the pension claim before determining if the claimant meets
other pension entitlement factors. In such a case, VA would notify the
claimant of the entitlement factors not established. This prevents VA
from developing a case when the evidence clearly shows that a claimant
is not entitled to the benefit.
Nothing in current Sec. 3.274 or any other VA regulation addresses
the issue of whether claimants denied pension due to excessive net
worth may lawfully decrease their net worth and qualify for pension. To
remedy this omission, proposed Sec. 3.274(f) would discuss the three
ways in which claimants could decrease their net worth to lawfully
qualify for pension. Under proposed Sec. 3.274(f)(1), claimants could
make certain expenditures that would decrease their assets and thereby
establish entitlement, continue entitlement, or increase entitlement to
pension. Proposed Sec. 3.274(f)(1) would limit authorized expenditures
to expenditures for basic living expenses or for education or
vocational rehabilitation. Such a limitation is consistent with the
requirement in sections 1522 and 1543 that the individual consume some
part of net worth for his or her maintenance when net worth is
excessive. Given the purpose of the needs-based program established by
Congress, we interpret ``maintenance'' to mean basic necessities such
as food, clothing, shelter, or health care. Because education or
vocational rehabilitation expenses can lead to decreased reliance on
pension, we believe that such expenses should also be considered part
of an individual's maintenance for this purpose.
Proposed Sec. 3.274(f)(2) would simply cross-reference the
regulations that apply to pension annual income calculations. By law,
VA must consider annual income in determining net worth. A decrease in
annual income is the second method by which net worth can decrease. In
proposed Sec. 3.274(f)(3), we address how VA will treat payments,
e.g., unreimbursed medical expenses, which can decrease either annual
income or assets. VA would not consider the same payments to decrease
both the annual income and the asset components of net worth. Proposed
[[Page 3845]]
Sec. 3.274(f)(3) provides that VA will first apply the payment amounts
to decrease annual income. We believe this is fair and reasonable
because it is the amount of the annual income that determines the
pension entitlement rate. If there are remaining deductible amounts and
net worth still exceeds the limit, VA will use those amounts to reduce
the asset component of net worth. We would provide two examples of this
provision.
Paragraphs (g), (h), and (i) of proposed Sec. 3.274 are proposed
net worth effective-date provisions. Proposed paragraph (g) is based on
current Sec. 3.660(d) and would prescribe the effective date of
entitlement or increased entitlement after VA has denied, reduced, or
discontinued a pension award based on excessive net worth. Proposed
paragraph (g)(1) would describe the scope of the rule. Consistent with
current Sec. 3.660(d), proposed paragraph (g)(2) would prescribe the
effective date of entitlement or increased entitlement as the day net
worth ceases to exceed the limit as long as, before the pension claim
has become finally adjudicated, the claimant or beneficiary submits a
certified statement that net worth has decreased. ``Finally
adjudicated'' is defined in 38 CFR 3.160(d), and for net worth
decisions, means that the 1-year period for beginning the appeal
process by filing a Notice of Disagreement (NOD) has expired or that
the claim has been appealed and decided. If VA does not receive the
certified statement within one year after VA's decision notice to the
claimant of the denial, reduction, or discontinuance (and does not
appeal), the effective date is the date VA receives a new pension
claim. VA always has the right, under 38 CFR 3.277(a), to require that
a claimant or beneficiary submit additional evidence to support
entitlement or continuing entitlement as the situation warrants and
proposed Sec. 3.274(g)(2) would so provide.
Proposed Sec. 3.274(h) pertains to reduction or discontinuance of
a beneficiary's pension entitlement based on excessive net worth.
Proposed paragraph (h)(1) would restate the statutory end-of-year
effective date for reducing or discontinuing a pension award because of
excessive net worth. See 38 U.S.C. 5112(b)(4)(B). The first day of non-
payment or reduced rate would be the first day of the year that follows
the net worth change. This is consistent with longstanding VA
implementation of reduction and discontinuance effective dates. See 38
CFR 3.500. Proposed paragraph (h)(2) would clarify that if net worth
decreases to or below the limit before the effective date, VA will not
reduce or discontinue the pension award on the basis of excessive net
worth. Proposed Sec. 3.274(h)(2) would provide that VA must receive
the beneficiary's certified statement that net worth has decreased and
must receive it before VA has reduced or discontinued the pension
award. (If VA does, in fact, reduce or discontinue the pension award,
then proposed paragraph (g)(2) would apply and the claimant would be
able to submit evidence of continuing entitlement for VA to
retroactively resume the award.)
Proposed Sec. 3.274(i) prescribes additional effective dates that
pertain to changes in a dependent child's net worth. As discussed above
in the information pertaining to Sec. 3.274(d), a child would not be
considered a veteran's or surviving spouse's dependent child if the
child's net worth exceeds the net worth limit. In addition, we
discussed how a veteran's or surviving spouse's pension entitlement may
increase or decrease when a child is established as a dependent based
on the amount of annual income the child may have. Proposed Sec.
3.274(i)(1) would refer readers to paragraphs (g) and (h) for the
intuitive situation in which establishing a dependent child (because
the child's net worth has decreased) results in an increased pension
entitlement rate for the veteran or surviving spouse.
Proposed Sec. 3.274(i)(2) would address the situation in which
establishing a dependent child results in a decreased pension
entitlement rate for the veteran or surviving spouse. Paragraph
(i)(2)(i) would establish an end-of-year effective date for a decreased
pension entitlement rate when an increase in a dependent child's net
worth results in removing the child from the award when the child's net
worth is excessive. This end-of-year effective date is the same
regardless of whether establishing or not establishing the dependent
child due to a net worth change results in a decreased pension
entitlement rate for the veteran or surviving spouse. Under 38 U.S.C.
5112(b), the ``effective date of a reduction or discontinuance of . . .
pension . . . by reason of change in [net worth] shall be the last day
of the calendar year in which the change occurred.'' Emphasis added.
Proposed paragraph (i)(2)(ii) would establish the effective date
for an increased entitlement rate based on removing the child as a
dependent as the date VA receives a claim for an increased pension rate
based on the dependent child's net worth increase. This is consistent
with 38 CFR 3.660(c), effective March 24, 2015. See 79 FR 57697,
September 25, 2014.
The explanatory derivation table below regarding net worth
effective dates is provided as an aid for those reading this NPRM.
Table 1--Net Worth (NW) Effective-Date Provisions Derivations
----------------------------------------------------------------------------------------------------------------
Change from
Proposed Sec. 3.274 Derived from Situation Effective date current rule
----------------------------------------------------------------------------------------------------------------
3.274(g)........................ 3.660(d).......... NW has decreased Entitlement from No date change.
after VA denial, date of NW Addition of
reduction, or increase if certified
discontinuance. information statement
received timely. requirement.
3.274(h)........................ 3.660(a)(2)....... NW has increased End-of-the-year No date change.
and reduction or that NW increases. Addition of
discontinuance certified
necessary. statement
requirement when
NW decreases
before the
effective date.
3.274(i)(1)..................... New Cross-
Reference.
3.274(i)(2)(1).................. 3.660(d).......... Dependent child's End-of-the-year No date change.
NW has decreased that NW decreases.
and adding the
child results in
a rate decrease
for the veteran
or surviving
spouse.
[[Page 3846]]
3.274(i)(2)(2).................. 3.660(c).......... Dependent child's Date of receipt of No date change.
NW has increased claim for Claim required for
and removing the increased rate increased rate.
child results in based on child's
a rate increase NW increase.
for the veteran
or surviving
spouse.
----------------------------------------------------------------------------------------------------------------
We would remove from Sec. 3.660(d), which pertains to net worth
effective dates, the reference to Sec. 3.274, but the reference to
Sec. 3.263 would remain intact. With the exception of removing or
redesignating certain paragraphs as explained below in the discussion
regarding conforming amendments, we propose no changes to Sec. 3.263,
which applies to net worth decisions for section 306 pension and to
parental dependency for veterans disability compensation purposes under
38 U.S.C. 1115.
Finally, we would update the authority citation at the end of Sec.
3.274 to include the effective-date statutes, 38 U.S.C. 5110 and 5112,
along with the net worth statutes, 38 U.S.C. 1522 and 1543.
Section 3.275--How VA Determines the Asset Amount for Pension Net Worth
Determinations
Although sections 1522 and 1541 require VA to deny or discontinue
pension or increased pension when a veteran's, surviving spouse's, or
child's net worth is excessive, nothing in these statutes prescribes
how VA should calculate net worth. VA implemented the statutory net
worth provisions in current 38 CFR 3.275 by establishing net worth
evaluation criteria. We propose to amend Sec. 3.275 consistent with
proposed Sec. 3.274.
As noted in the above discussion of proposed Sec. 3.274, we
propose to establish the maximum CSRA as the net worth limit for
pension entitlement. Net worth over that limit would not meet the
reasonableness standard prescribed by Congress in sections 1522 and
1543. VA would determine the amount of the asset component of a
claimant's net worth using objective criteria and compare the net worth
to a published limit in order to determine whether a claimant's net
worth permits an award or increased award of pension. This objective
standard would promote fair and consistent decision-making and would
allow VA to process claims more efficiently for individuals who
immediately need supplemental income. Accordingly, the criteria in
current Sec. 3.275(d) for subjectively evaluating net worth would not
be applicable under the proposed rule. Proposed Sec. 3.275 would
define the term ``assets'' instead of ``net worth'' or ``corpus of
estate.'' As we described above in the information pertaining to Sec.
3.274(b), net worth would consist of both an asset component and an
annual income component to account for the statutory provision that VA
must consider annual income in its net worth determinations. Because we
are proposing a bright line net worth limit, net worth would be the sum
of assets and income, and the term ``assets'' would be used in many
locations where ``net worth'' is currently used because net worth does
not currently have an income component per se. Proposed Sec. 3.275
would also provide exclusions from assets as described in greater
detail below. We would not include the net worth evaluation criteria
from current paragraph (d) because net worth would no longer be
evaluated using those criteria; rather, there would be a bright line
net worth limit.
Under current Sec. 3.275(e), VA excludes from the net worth (i.e.,
assets) of a child reasonable amounts for actual or prospective
educational or vocational expenses until the child attains age 23.
There is no statutory requirement for this exclusion and we believe
that the monetary amount of the net worth limit we proposed in Sec.
3.275(a) is sufficient to account for vocational or educational
expenses until age 23. Public high school education in the United
States is free. The United States Department of Education College
Affordability and Transparency Center reports average net prices of
college attendance for 2011-2012. Average net price is for full-time
beginning undergraduate students who received grant or scholarship aid
from federal, state or local governments, or the institution. The
following college prices are reported per semester for 4-year colleges:
Public (e.g., State): $11,582; Private not-for-profit: $20,247; and
Private for profit: $21,742. Therefore, we believe that the maximum
CSRA of $117,240 (2014) is also an appropriate limit for children, and
proposed Sec. 3.275 does not include the language of Sec. 3.275(e).
Proposed Sec. 3.275(a)(1) would define ``assets'' and restate most
of current Sec. 3.275(a), (b), and (c), although we would use the term
``assets.'' Proposed paragraph (a)(1) would also use the term ``fair
market value'' rather than the term ``market value'' that current
paragraph (a)(1) uses. We would include a cross-reference to proposed
Sec. 3.276(a)(4), which would define ``fair market value.'' In
proposed paragraph (a)(2), we propose to define ``claimant'' in order
to simplify Sec. Sec. 3.275 and 3.276. Proposed paragraph (a)(2)(i)
would provide that, with one exception, ``claimant'' would mean a
pension beneficiary, a dependent spouse, or a dependent or potential
dependent child as described in proposed Sec. 3.274(d), as well as a
veteran, surviving spouse, or surviving child pension applicant for the
purposes of Sec. Sec. 3.275 and 3.276. The exception, at proposed
(a)(2)(ii), would define claimant as ``a pension beneficiary or
applicant who is a veteran, a surviving spouse, or a surviving child.''
This definition would apply to paragraph (b)(1), which would regulate
the manner in which VA treats the exclusion of a residence. This
exception is necessary to make clear that VA does not exclude more than
one residence per family unit. These definitions would simplify
Sec. Sec. 3.275 and 3.276 because the proposed net worth and asset
transfer provisions would apply to each of these individuals and one
term would describe all affected individuals.
Proposed paragraph (a)(3) would define ``residential lot area'' to
state and clarify VA's policy with respect to lot size. Current Sec.
3.275(b) provides that VA does not include a claimant's ``dwelling . .
. including a reasonable lot area'' in determining the amount of the
claimant's net worth. Proposed Sec. 3.275(a)(3) would define
``residential lot area'' as the lot on which a residence sits that is
similar in size to other residential lots in the vicinity of the
residence, but not to exceed 2 acres (87,120 square feet), unless the
additional acreage is not marketable. The additional property might not
be marketable if, for example, the property is only slightly more than
2 acres, the additional property is not accessible, or there are zoning
limitations that prevent selling the additional property.
[[Page 3847]]
The United States Census Bureau reports that in 2010, the average
lot size for new single-family homes sold was 17,590 square feet. In
metropolitan areas, it was 16,585 square feet and outside metropolitan
areas, it was 27,363 square feet. We propose to establish a 2-acre
residential lot area limit to avoid disadvantaging veterans and
survivors who may have purchased a residence with an above-average lot
size long before they developed a need for the support provided by the
pension program. This limit would support our policy choice, under
which we exclude a claimant's primary residence from assets, while at
the same time placing a reasonable limit on excluded property for
purposes of preserving the pension program for Veterans and survivors
who have an actual need.
Proposed paragraph (b) would prescribe exclusions from assets. In
proposed paragraph (b)(1), we would incorporate other matters of
longstanding VA policy with respect to a claimant's residence, as
explained and justified below. Under current Sec. 3.275(b), VA
excludes a claimant's ``dwelling'' from net worth. We propose to refer
to a claimant's ``primary residence'' rather than to a ``dwelling'' to
clarify that VA excludes only the value of the single residence, along
with the residential lot area, where the claimant has established a
permanent place of residence, not the value of other properties where
the claimant may occasionally reside. The proposed rule clarifies that
a claimant can have only one primary residence at any given time. The
term ``primary residence'' is well understood because a primary
residence is considered a legal residence for the purposes of income
tax and acquiring a mortgage. We also propose to state that, if the
residence is sold, VA would not include the proceeds from the property
sale as an asset to the extent the claimant uses the proceeds to
purchase another residence within the same calendar year. This
provision would be consistent with the effective-date rule in 38 U.S.C.
5112(b)(4)(B), which provides that a reduction or discontinuance of
pension based upon a change in net worth is effective the last day of
the calendar year in which the change occurred. However, to the extent
the sale price exceeds the purchase price of the latter residence, the
excess amount would be included as an asset.
Consistent with proposed Sec. 3.275(a)(1), proposed Sec.
3.275(b)(1)(i) would state that VA will not subtract from a claimant's
assets the amount of any mortgages or encumbrances on a claimant's
primary residence. Because VA would not include a claimant's primary
residence as an asset and mortgages and encumbrances would be property-
specific, VA would not subtract mortgages or encumbrances on the
primary residence from other assets.
Current Sec. 3.275(b) does not address whether VA excludes a
claimant's residence if the claimant is receiving care in a nursing
home or other residential facility or receiving care in the home of a
family member. The legislative history of Public Law 95-588, which
created the current pension program, indicates that Congress was aware
that VA does not include a beneficiary's residence as part of net worth
and did not intend to change that policy. See 123 Cong. Rec. S19754,
(daily ed. Dec. 15, 1977) (statement of Sen. Cranston). However, the
legislative history does not address the point at which VA should
discontinue the primary residence exclusion. Accordingly, at proposed
paragraph (b)(1)(ii), we propose to state that VA would exclude a
claimant's primary residence as an asset regardless of whether the
claimant is residing in a nursing home, medical foster home, or an
assisted living or similar residential facility that provides custodial
care, or resides with a family member for custodial care. The terms
``nursing home,'' ``medical foster home,'' ``assisted living, adult day
care, or similar facility,'' and ``custodial care'' would be defined in
proposed Sec. 3.278(b) with a cross reference in proposed Sec.
3.275(b)(1)(ii) to that regulation. Because there is generally a
possibility that an individual may return to his or her primary
residence, and VA supports such a return, we propose to prescribe
clearly that a claimant's primary residence is not an asset for VA
pension purposes. Consistent with our current policy, we would also
specify that any rental income from the primary residence would be
countable annual income under Sec. 3.271(d) for pension entitlement
purposes (and thus would be part of net worth under proposed Sec.
3.274). This is consistent with the general rule in 38 U.S.C. 1503(a)
that ``all payments of any kind or from any source . . . shall be
included'' in determining annual income except as specifically
excluded.
Proposed paragraphs (b)(3) through (b)(6) would list four types of
payments that are excluded from assets for VA's net worth calculations
for pension. These four exclusions apply to current pension but do not
apply to prior pension programs. Proposed paragraph (b)(3) would list
payments under section 6 of the Radiation Exposure Compensation Act of
1990 and is taken from current Sec. 3.275(h). Proposed paragraph
(b)(4) would list payments made under section 103(c) of the Ricky Ray
Hemophilia Relief Fund Act of 1998, which are excluded under 42 U.S.C.
300c-22(note). Proposed paragraph (b)(5) would list payments made under
the Energy Employees Occupational Illness Compensation Program, which
are excluded under 42 U.S.C. 7385e(2). Proposed paragraph (b)(6) would
list payments made to certain eligible Aleuts under 50 U.S.C. App.
1989c-5. These payments are excluded under 50 U.S.C. App. 1989c-
5(d)(2).
Below in this NPRM, we propose a new Sec. 3.279 that would list
payments that are statutorily excluded in determining entitlement to
all needs-based benefits that VA administers. The payments listed in
paragraphs (f), (g), (i), and (j), of current Sec. 3.275 would be
listed in proposed Sec. 3.279; therefore, they would not be included
in proposed Sec. 3.275(b). Proposed Sec. 3.275(b)(7) cross-references
proposed Sec. 3.279 and excludes from net worth other applicable
payments listed there. The payments described in current Sec. 3.275(e)
are already accounted for in setting the net worth limit (see
discussion of the CSRA above). As explained and justified later in this
NPRM, the exclusion described in paragraph (k) of current Sec. 3.275
would not be included in these regulations.
Waived Income Provision Relocation and Revision
We propose to move the provision of current 38 CFR 3.276(a), which
pertains to waived income, to a new paragraph (i) in 38 CFR 3.271. We
believe that Sec. 3.271 would be a more appropriate location for a
provision that applies to income counting than would Sec. 3.276.
Proposed Sec. 3.276 pertains to asset transfers and penalty periods
with respect to net worth calculations. Section 1503(a) of title 38,
United States Code, requires VA to consider as income ``all payments of
any kind or from any source (including salary, retirement or annuity
payments, or similar income, which has been waived . . .).'' This
provision of section 1503(a) became effective July 1, 1960, when Public
Law 86-211 established what we now term ``section 306'' pension. The
previous pension program, which we now term ``old-law'' pension, was an
``all-or-nothing'' benefit in which a small increase in income could
result in the total loss of VA pension. Therefore, beneficiaries often
wished to waive receipt of other income so as not to lose pension
entitlement, and VA regulations pertaining to old-law pension permit
this. See 38 CFR 3.262(h). However,
[[Page 3848]]
Public Law 86-211 required VA to count waived income for pension
purposes, thus preventing beneficiaries from ``creat[ing] their own
need so as to qualify for the benefit.'' See S. Rep. No. 86-666, at 4
(1959), as reprinted in 1959 U.S.C.C.A.N. 2190, 2193. This provision
was carried forward to the current pension program in section 1503(a),
and VA implemented it in current 38 CFR 3.276(a), which we now propose
to move to proposed 38 CFR 3.271(i). Proposed Sec. 3.271(i)
essentially restates current Sec. 3.276(a) in that it also provides
that VA would count waived income. We would also add a reference to
proposed Sec. 3.279, which would list statutory exclusions from
income. Additionally, longstanding VA policy provides a qualified
exception to the general rule regarding waiver, such that if an
individual withdraws a Social Security claim after a finding of
entitlement to Social Security benefits, so as to maintain eligibility
for an unreduced Social Security benefit on attainment of a certain
age, this withdrawal is not considered to be a waiver. In this
situation, the individual's withdrawal of the claim is more accurately
and fairly characterized under section 1503(a) as a deferral of income
rather than a waiver. Accordingly, we propose to clearly state this
policy in proposed Sec. 3.271(i).
Section 3.276--Asset Transfers and Penalty Periods
Sections 1522 and 1543 of 38 U.S.C. require VA to deny or
discontinue pension when a claimant's or beneficiary's net worth,
including consideration of annual income, is excessive. As stated in
the above introductory information on net worth determinations and
asset transfers, current Sec. 3.276(b), which pertains to asset
transfers, is not effective in proscribing transfers of significant
assets for the purpose of creating pension entitlement, which is
inconsistent with a needs-based benefit program. We therefore propose
significant changes to VA's asset transfer regulation consistent with
our interpretation of Congress' intent. Significantly, we propose to
establish a 36-month look-back period for claimants who transfer assets
in order to reduce net worth and create pension entitlement. We also
propose to establish penalty periods related to such transfers.
Proposed Sec. 3.276(a) would define ``covered asset,'' ``covered
asset amount,'' ``fair market value,'' ``transfer for less than fair
market value,'' ``annuity,'' ``trust,'' ``uncompensated value,''
``look-back period'' and ``penalty period.'' These definitions would
make this necessarily complex regulation easier to understand. We would
also provide a cross-reference to the definition of ``claimant'' in
proposed Sec. 3.275, which, as previously discussed, would mean
claimants, beneficiaries, and dependent spouses, as well as dependent
or potentially dependent children. We use the same terminology in this
NPRM when describing proposed changes to Sec. 3.276.
We would define ``covered asset'' to mean an asset that was part of
net worth, was transferred for less than fair market value, and would
have caused or partially caused net worth to exceed the limit had the
claimant not transferred the asset. The ``covered asset amount'' would
be the monetary amount by which net worth would have exceeded the limit
on account of a covered asset if the uncompensated value of the covered
asset had been included in the net worth calculation. We would include
two examples of covered asset amounts. These definitions are important
because the covered asset amount is the amount that VA proposes to use
to calculate the penalty period as described below. A smaller covered
asset amount results in a shorter penalty period. We propose to define
``covered asset amount'' in this manner because, in our view, it would
be inequitable to calculate a penalty period using the entire
transferred amount when net worth would have exceeded the limit by only
a small amount if the claimant had not transferred any assets at all.
In proposed Sec. 3.276(a)(4), we propose to define ``fair market
value'' as the price at which an asset would change hands between a
willing buyer and willing seller who are under no compulsion to buy or
sell and who have reasonable knowledge of relevant facts. VA uses the
best available information to determine fair market value, such as
inspections, appraisals, public records, and the market value of
similar property if applicable. Using the best available information to
determine a fair value is a restatement of current and longstanding
policy.
We then propose to define ``transfer for less than fair market
value'' as selling, conveying, gifting, or exchanging an asset for an
amount less than the fair market value of the asset. In addition, we
would include as a transfer for less than fair market value any asset
transfer to or purchase of any financial instrument or investment that
reduces net worth and would not be in the claimant's financial interest
were it not for the claimant's attempt to qualify for VA pension by
transferring assets to or purchasing such instruments or investments.
Two examples of such instruments or investments are annuities and
trusts. We would define ``annuity'' to mean ``a financial instrument
that provides income over a defined period of time for an initial
payment of principal.'' This definition is derived from the GAO report.
We would define ``trust'' to mean a legal arrangement by which an
individual (the grantor) transfers property to an individual or an
entity (the trustee), who manages the property according to the terms
of the trust, whether for the grantor's own benefit or for the benefit
of another individual. As previously stated, the GAO report identified
numerous organizations that assist claimants with transferring assets
to create pension entitlement. Therefore, we are including these asset
transfers in the proposed definition of ``transfer for less than fair
market value.'' We note that similar terms are used in 42 U.S.C.
1382b(c), which pertains to Social Security Administration's SSI
program. There are certain similarities between SSI and VA's pension
program in that both are based on need. In light of VA's broad
authority to implement appropriate net worth regulations and in the
absence of specific statutory guidance, we have drawn some of the
proposed language in this NPRM from 42 U.S.C. 1382b, which pertains to
resources (i.e., net worth) for SSI.
The ``uncompensated value'' of an asset would be defined as the
difference between its fair market value and the amount of compensation
an individual receives for the asset. (In this context, the word
``compensation'' has its more general meaning rather than the technical
meaning given in 38 U.S.C. 101(13).) In the case of an asset transfer
to, or purchase of, a financial instrument or investment such as a
trust or an annuity, the uncompensated value would mean the amount of
money or the monetary value of other assets so transferred.
Proposed Sec. 3.276(a)(7) would define ``look-back period'' to
mean the 36-month period before the date on which VA receives either an
original pension claim or a new pension claim after a period of non-
entitlement. As previously stated, VA proposes to establish a 3-year
look-back period similar to that employed by the Social Security
Administration in administering its SSI program. Although Medicaid uses
a 5-year look-back period for most transfers of assets, as a policy
matter, VA believes that a 3-year look-back period is sufficient to
preserve the integrity of its pension program.
``Penalty period'' would be defined as a period of non-entitlement
due to transfer of a covered asset.
[[Page 3849]]
Proposed Sec. 3.276(b) would establish VA's policy with regard to
pension entitlement and covered assets and would put claimants on
notice that VA may require evidence to determine whether a prohibited
asset transfer has occurred. This is consistent with current Sec.
3.277(a), which provides that VA always has the right to request proof
of entitlement to pension. We would reference Sec. 3.277(a) in Sec.
3.276(b). See also 38 U.S.C. 1506(1).
Proposed Sec. 3.276(c) would establish a presumption, rebuttable
by clear and convincing evidence, that transferring an asset during the
look-back period was for the purpose of reducing net worth to establish
entitlement to pension. As a result, the asset would be considered a
covered asset. The presumption could be rebutted if the claimant
establishes that he or she transferred an asset as the result of fraud,
misrepresentation, or unfair business practice related to the sale or
marketing of financial products or services for purposes of
establishing entitlement to VA pension. We propose that evidence
substantiating the application of this exception may include a
complaint contemporaneously filed with state, local, or Federal
authorities reporting the incident. In such a case, VA would not
consider the transferred asset to be a covered asset and would thus not
calculate any penalty period, although this would mean that net worth
would be excessive and the provisions of Sec. 3.274 regarding reducing
net worth would apply.
Proposed Sec. 3.276(d) would set forth an exception that applies
to assets transferred to a trust for the benefit of a veteran's child
whom VA rates or has rated as being permanently incapable of self-
support under the provision of 38 CFR 3.356. VA would not consider
assets transferred to a trust established on behalf of such a child to
be covered assets as long as there is no circumstance under which
distributions from the trust can be used to benefit the veteran,
veteran's spouse, or surviving spouse.
VA considered providing for an exception consistent with the
``undue hardship'' determination prescribed in the aforementioned SSI
statute, 42 U.S.C. 1382b(c)(1)(C)(iv). However, the statutory resource
limit in the SSI program is $3,000 for an individual with a spouse and
$2,000 for an individual with no spouse. See 42 U.S.C. 1382(a)(3).
Because these limits are significantly lower than the net worth limit
that VA proposes to use, we do not believe that a hardship provision is
warranted.
In proposed Sec. 3.276(e), VA would establish a penalty period for
covered assets transferred during the look-back period and the criteria
for calculating such a penalty period. In providing the calculations
for the length of the penalty period, we have again drawn on 42 U.S.C.
1382b(c), pertaining to SSI. Subsection (c)(1)(A)(iv) of 42 U.S.C.
1382b establishes a formula for calculating penalty periods for
purposes of SSI. VA's formula would be similar. VA's formula would
determine a penalty period in months by dividing the covered asset
amount by the applicable maximum annual pension rate under 38 U.S.C.
1521(d), 1541(d), or 1542 as of the date of the pension claim, rounded
down to the nearest whole number. For veterans and surviving spouses,
we would use the maximum annual pension rate at the aid and attendance
level. (Surviving children are not entitled to aid and attendance.) We
note that the higher the divisor, the shorter the penalty period.
Although not all veterans and surviving spouses to whom the regulation
would apply would qualify for pension at the aid and attendance level,
we believe that most claimants who transfer covered assets would
qualify at this level. Further, and again following the example of the
SSI statute, we note that the divisor for calculating penalty periods
for SSI is the maximum monthly SSI benefit payable. We would use the
applicable maximum annual pension rate in effect as of the date of the
pension claim and the rule would include the VA Web site at which the
rates may be found.
We propose to set a maximum penalty period of 10 years. We
considered setting the maximum penalty period at 36 months, which would
be consistent with the SSI statute; however, after further
consideration, we determined that it would be inequitable for an
individual who transfers, for example, $1,000,000 to have a penalty
period of the same length as an individual who transfers $25,000.
Under proposed Sec. 3.276(e)(2), the penalty period would begin on
the date that would have been the payment date of an original or new
pension award if the claimant had not transferred a covered asset and
the claimant's net worth had been within the limit. Under proposed
Sec. 3.276(e)(3), the claimant, if otherwise qualified, would then be
entitled to pension benefits effective the last day of the last month
of the penalty period, with a payment date as of the first day of the
following month in accordance with 38 CFR 3.31.
We would provide an example of penalty period calculations at
proposed Sec. 3.276(e)(4).
Proposed Sec. 3.276(e)(5) states that, with two exceptions, VA
would not recalculate a penalty period under this section. VA would
recalculate the penalty period if the original calculation is shown to
be erroneous or if all of the covered assets were returned to the
claimant before the date of claim or within 30 days after the date of
claim. If, not later than 90 days after VA's decision notice pertaining
to the penalty period, VA receives evidence showing that all covered
assets have been returned to the claimant, VA would not assess a
penalty period. Although VA would not assess a penalty period in such a
situation, the claimant's net worth would be excessive, but would be
available for the claimant to use for his or her needs consistent with
Congressional intent. Once correctly calculated, the penalty period
would be fixed, and return of covered assets after the 30-day period
provided would not shorten the penalty period. Numerous penalty period
recalculations would detract from the primary mission of paying pension
benefits to those in need. Claimants always have the right to appeal
any VA decision. See 38 CFR 20.201.
Section 3.277--Eligibility Reporting Requirements
VA has discretionary authority, under 38 U.S.C. 1506, to require
pension beneficiaries to complete annual Eligibility Verification
Reports (EVR) to verify the amount of their income, net worth, and the
status of their dependents. VA has implemented this authority at 38 CFR
3.277(c)(2), which currently provides that VA ``shall'' require an EVR
in particular situations. We now propose to remove the word ``shall''
and replace it with the word ``may,'' which reflects the statute and
gives VA discretionary authority to require EVRs.
Section 3.278--Deductible Medical Expenses
Section 1503(a)(8) authorizes VA, in determining annual income in
the current pension program, to exclude from annual income amounts paid
by a veteran, veteran's spouse, or surviving spouse, or by or on behalf
of a veteran's child, for unreimbursed medical expenses to the extent
they exceed 5 percent of the applicable maximum annual pension rate. In
the parents' DIC program, section 1315(f)(3) authorizes VA to exclude
from a claimant's annual income ``unusual medical expenses.'' See 38
CFR 3.262(l) (defining unusual medical expenses and implementing the
exclusion for parents' DIC and section 306 pension).
[[Page 3850]]
There is currently no regulation that adequately defines ``medical
expense'' for VA purposes. Current 38 CFR 3.262(l) and 3.272(g) are
clear that a deductible medical expense must be unreimbursed and must
be made on behalf of certain individuals, e.g., the veteran, veteran's
spouse, veteran's surviving spouse, or other qualifying relatives.
Except for the provision in 38 CFR 3.362(l) that unreimbursed health,
accident, sickness, and hospitalization insurance premiums are included
in medical expenses for purposes of section 306 pension and parents'
DIC, VA regulations do not define what constitutes an unreimbursed
medical expense for VA's needs-based benefit programs. In particular,
no regulation reflects current VA policy pertaining to deductions
available for institutional forms of care and in-home attendants.
We therefore propose to add new Sec. 3.278 to improve clarity and
consistency in determining what constitutes a medical expense that is
deductible from a claimant's or beneficiary's income. We would use the
term ``deductible'' because even though the statutes and the
implementing regulations cited above speak in terms of medical expense
``exclusions,'' VA treats deductions and exclusions differently. A
deduction is an amount subtracted from income, whereas an exclusion is
an amount not counted in the first instance. For our purposes, this
technical difference is not important.
Proposed Sec. 3.278 would implement sections 1315(f)(3) and
1503(a)(8) by describing and defining the medical expenses that VA may
deduct for purposes of three of VA's needs-based benefit programs. In
proposed paragraph (a), we would define the scope of proposed Sec.
3.278. Proposed paragraph (b) defines various terms. Proposed Sec.
3.278(b)(1) would define ``health care provider.'' We propose to
require that an individual be licensed by a state or country to provide
health care in the state or country in which the individual provides
the health care. We intend that individual states be responsible for
such licensing. However, we recognize that some claimants,
beneficiaries, and family members do not reside in any state and,
therefore, we would require that the provider be licensed by a state
``or country.'' We also propose to list examples of licensed health
care providers. In paragraph (b)(1)(ii), we would include within the
definition of ``health care provider'' a nursing assistant or home
health aide who is supervised by a licensed health care provider.
Paragraphs (b)(2) and (b)(3) of proposed Sec. 3.278 would define
``activities of daily living'' (ADL) and ``instrumental activities of
daily living'' (IADL). These terms are well-known and understood in the
health care industry and are used in other Federal regulations,
including VA regulations. For the purposes of determining deductible
medical expenses for VA's needs-based benefits, ADLs would mean basic
self-care activities and would consist of ``bathing or showering,
dressing, eating, toileting, and transferring.'' We would also define
``transferring'' to mean an individual's moving himself or herself,
such as getting in and out of bed. These activities are essentially
those described in current Sec. 3.352, and the inability to perform
these activities is considered at least partly determinative of an
individual's need for the regular aid and attendance of another
individual for VA purposes. Proposed Sec. 3.278(b)(3) would define
IADLs for VA medical expense deduction determinations as independent
living activities, such as shopping, food preparation, housekeeping,
laundering, managing finances, handling medications, using the
telephone, and transportation for non-medical purposes. Proposed
paragraph (e)(4) would provide that VA does not consider expenses for
assistance with IADLs to be medical expenses except in certain
circumstances because such personal care expenses are not intrinsically
medical. Other Government agencies, such as the Internal Revenue
Service and Social Security Administration, also do not consider such
expenses to be medical expenses for their purposes except in limited
circumstances. One item that is often included as an IADL is
transportation. Our definition of IADL would include ``transportation
for non-medical purposes'' because it is longstanding VA policy to
consider transportation for medical purposes to be a deductible medical
expense, and we would continue that policy.
Although managing finances is an IADL for purposes of this section,
we propose to clarify that managing finances does not include services
rendered by a VA-appointed fiduciary. We also provide, in proposed
paragraph (e)(5), that a fee paid to a VA-appointed fiduciary is not a
deductible medical expense. Beneficiaries pay fees to VA-appointed
fiduciaries out of their monthly VA benefits. Accordingly, we have
determined that it would be inappropriate to permit a deduction from
income for financial management services, and thus increase the amount
of pension paid, when VA benefits are used to pay for the services.
Proposed Sec. 3.278(b)(4) would define ``custodial care'' as
regular assistance with two or more ADLs or regular supervision because
an individual with a mental disorder is unsafe if left alone due to the
mental disorder This definition is consistent with current VA policy.
Proposed Sec. 3.278(b)(5) would define ``qualified relative.''
Under 38 U.S.C. 1503(a)(8) and 1315(f)(3), VA may deduct medical
expenses paid by a veteran, a veteran's dependent spouse, a surviving
spouse, or a surviving child (pension and section 306 pension) or by a
veteran's parent (parents' DIC). The implementing regulations, 38 CFR
3.262(l) and 3.272(g), limit whose medical expenses VA may deduct. In
addition to the claimant's or beneficiary's medical expenses, the
medical expenses of dependents and certain other family members are
deductible. We would define ``qualified relative'' as a veteran's
dependent spouse, a veteran's dependent or surviving child, and other
relatives of the claimant who are members or constructive members of
the claimant's household whose medical expenses are deductible under
Sec. Sec. 3.262(l) or 3.272(g). A ``constructive member'' of a
household is an individual who would be a member of the household if
the individual were not in a nursing home, away at school, or a similar
situation. Defining a ``qualified relative'' for the purposes of the
medical expense deduction makes the regulation simpler. We would not
include veterans or surviving spouses in the definition because
veterans and surviving spouses are the only pension beneficiaries who
can be rated or presumed to require the aid and attendance of another
individual or to be housebound under 38 CFR 3.351. This distinction is
significant as will be explained below in this NPRM. We would also not
include claimants who are parents for parents' DIC purposes because
they too can be rated or presumed to require the aid and attendance of
another individual.
Proposed Sec. 3.278(b)(6), the definition of ``nursing home,''
would cross-reference current Sec. 3.1(z)(1) or (2), which defines
``nursing home'' for all of 38 CFR part 3, with provision made that if
the facility is not located in a state, then the facility must be
licensed in the country in which it is located.
Consistent with current VA health care regulations, proposed
paragraph (b)(7) would define ``medical foster home'' as a privately
owned residence, recognized and approved by VA, that offers a non-
institutional alternative to nursing home care for veterans who are
unable to live alone safely due to
[[Page 3851]]
chronic or terminal illness. See 38 CFR 17.73.
Proposed paragraph (b)(8) would define ``assisted living, adult day
care, or similar facility.'' We would use this rather lengthy term to
avoid confusion that could result from the fact that not all facilities
that meet our proposed definition use the same nomenclature. Some
governmental institutions could also fall under our proposed
definition. Our proposed definition for such a facility is that it must
provide individuals with custodial care; however, the facility may
contract with a third-party provider to provide such care. We would
further provide that residential facilities must be staffed with
custodial care providers 24 hours per day. To be included in our
definition, a facility must be licensed if such facilities are required
to be licensed in the state or country in which the facility is
located.
Proposed paragraph (c) would prescribe VA's general medical expense
policy and list examples of expenses that VA considers medical expenses
for its needs-based benefits. In general, medical expenses for VA
purposes are payments for items or services that are medically
necessary or that improve a disabled individual's ability to function.
This reflects longstanding VA policy with respect to medical expenses.
Proposed Sec. 3.278(c) would specify that the term ``medical
expenses'' includes, but is not limited to, payments specified in
paragraphs (c)(1) through (c)(7). Paragraphs (c)(1) through (c)(7) list
payments made to a health care provider; payments for medications,
medical supplies, medical equipment, and medical food, vitamins, and
supplements; payments for adaptive equipment; transportation expenses
for medical purposes; health insurance premiums; smoking cessation
products; and payments for institutional forms of care and in-home care
as provided in paragraph (d). We propose to include in paragraph (c)
detailed provisions relating to the broad categories of medical
expenses. These clarifications provide further guidance regarding the
medical expenses that may be deducted from income.
Under current policy, medical expenses include payments for care
provided by a health care provider, but not for cosmetic procedures
that only improve or enhance appearance, although these may be
deductible if the purpose of such procedure is to improve a congenital
or accidental deformity or is related to treatment for a diagnosed
medical condition. Proposed Sec. Sec. 3.278(c)(1) and (e)(2) would
continue this policy.
We propose to prescribe in Sec. 3.278(c)(4) that VA limits the
deductible expense per mile for travel by private vehicle to the
current Privately Owned Vehicle (POV) mileage reimbursement rate
specified by the United States General Services Administration (GSA).
The current amount can be obtained from www.gsa.gov, and we would also
post the current amount on VA's Web site at a location to be
determined. We have inserted ``location to be determined'' in the
proposed regulation text as a placeholder and would provide the Web
site address in the final rule. We would also clarify that the
difference between transportation expenses calculated under this
criterion and the amount of other VA or non-VA transportation
reimbursements are deductible medical expenses. This policy is similar
to considering a co-payment to a health care provider as a deductible
medical expense even though insurance pays the remainder. We would
provide an example of this longstanding policy in the proposed rule.
In proposed Sec. 3.278(c)(5), we would clarify that medical
expenses include Medicare Parts B and D premiums as well as long-term
care insurance premiums.
Proposed Sec. 3.278(d) would prescribe VA's medical expense policy
for payments for institutional and in-home care services. In accordance
with longstanding VA policy, proposed paragraph (d)(1) would provide
that payments to hospitals, nursing homes, medical foster homes, and
inpatient treatment centers, including the cost of meals and lodging
charged by such facilities, are deductible medical expenses.
In paragraph (d)(2), we propose to clarify VA's policy with respect
to in-home attendants. We also propose a limit to the hourly in-home
care rate that VA would deduct. We propose this limit to minimize
instances of fraudulent or excessive in-home care charges. We also
would require that payments, to qualify as medical expenses for VA,
must be commensurate with the number of hours that the provider attends
to the disabled individual. The proposed limit is reasonable and
derived from a reputable industry source. The limit that we propose is
the average hourly rate for home health aides, which is published
annually by the MetLife Mature Market Institute in its ``Market Survey
of Long-Term Care Costs'' (MetLife Survey). We considered using for
this purpose the mean hourly wage for home health aides published by
the United States Department of Labor (DoL) Bureau of Labor Statistics.
(See http://www.bls.gov/oes/current/oes311011.htm.) However, the 2012
Met Life Survey shows that the 2012 national average private-pay hourly
rate for home health aides to be $21.00 per hour, which was unchanged
from 2011. The lowest average hourly rate was $3.00 per hour and the
highest was $32.00 per hour. The May 2013 DoL mean hourly wage for home
health wage was $10.60 per hour. We have determined that using the
higher hourly rate as a limit better supports our policy decision to
ensure that wartime veterans and their families receive the highest
level of care possible while simultaneously being mindful of the
interests of taxpayers. We would use the most current applicable
MetLife report and would publish the limit on a VA Web site at a
location to be determined. We have inserted ``location to be
determined'' in the proposed regulation text as a placeholder and would
provide the Web site address in the final rule.
We would next state the general rule that an in-home attendant must
be a health care provider for the expense to qualify as a medical
expense and that only payments for assistance with ADLs or health care
services are medical expenses. However, if a veteran or a surviving
spouse (or parent for parents' DIC) meets the criteria for regular aid
and attendance or is housebound, the attendant does not need to be a
health care provider. In addition, VA would consider payments for
assistance with IADLs (as defined by VA) to be medical expenses, as
long as the attendant's primary responsibility is to provide the
veteran, surviving spouse, or parent with health care services or
custodial care. In accordance with current VA policy, this provision
would also apply to a qualified relative if a physician or physician
assistant states in writing that, due to physical or mental disability,
the relative requires the health care services or custodial care that
the in-home attendant provides.
Similarly, proposed paragraph (d)(3) would address facilities that
are assisted living, adult day care, and similar facilities, and would
provide the general rule that only payments for health care services
and assistance with ADLs provided by a health care provider are medical
expenses. However, if a veteran or surviving spouse (or parent for
parents' DIC) meets the criteria for regular aid and attendance or is
housebound, the care does not need to be provided by a health care
provider. In addition, if the primary reason for the veteran or
surviving spouse to be in the facility is to receive health care
services or custodial care that the facility
[[Page 3852]]
provides, then VA would deduct all fees paid to the facility, including
meals and lodging. This provision would also apply to a qualified
relative if a physician or physician assistant states in writing that,
due to the relative's physical or mental disability, the relative
requires the health care services or custodial care that the facility
provides.
Proposed paragraph (e) would list examples of items and services
that are not medical expenses for purposes of VA needs-based benefits.
We would clarify that generally, payments for items or services that
benefit or maintain general health, such as vacations and dance
classes, are not medical expenses, nor are fees paid to a VA-appointed
fiduciary, as explained above. Proposed paragraph (e)(2) would provide
that cosmetic procedures are not medical expenses except in the
instances described in proposed paragraph (c)(1). We would also clarify
that except as specifically provided, medical expenses do not include
assistance with IADLs (i.e., shopping, food preparation, housekeeping,
laundering, managing finances, handling medications, using the
telephone, and transportation for non-medical purposes), nor do they
include payments for meals and lodging, except in limited situations
involving custodial care. Here, we would explicitly state that this
category applies to facilities such as independent living facilities
that do not provide individuals with health care services or custodial
care.
VA's intent in promulgating these rules is to ensure that
deductions from countable income reflect Congress' intent that amounts
be deducted for ``medical expenses'' only, and not for other services
such as meals and lodging or excessive administrative services not
directly related to the provision of medical care. We would provide
cross references to Sec. Sec. 3.262(l) and 3.272(g); amend Sec. Sec.
3.262(l) and 3.272(g) to cross reference the new medical expense
regulation; and make corresponding amendments to Sec. 3.261.
Section 3.279--Statutory Exclusions From Income or Assets (Net Worth or
Corpus of the Estate)
As stated above in this NPRM in the information pertaining to Sec.
3.275, we propose a new Sec. 3.279 regarding statutory exclusions from
income or assets, which would list 27 exclusions applicable to all VA-
administered needs-based benefits. We note that we propose no change to
net worth terminology for VA's older benefit programs in this
rulemaking; therefore, we would continue to use the previous terms in
addition to the term ``assets,'' which would apply to current-law
pension. We would use the terms ``Corpus of estate'' in the applicable
heading in paragraphs (b) through (e) along with ``assets,'' in order
to ensure consistency with current 38 CFR 3.261(c). We here use the
term ``assets'' to describe the changes and additions.
Many of these exclusions are already contained in current VA
regulations. We have determined that it would be useful for regulation
users to have all of the statutory exclusions listed in one regulation.
Exclusions that are not applicable to every VA-administered needs-based
benefit would be contained only in the regulations pertaining to the
benefit. This NPRM describes statutory exclusions that are either not
currently contained in 38 CFR part 3 or are only partly contained in
current part 3.
Proposed paragraph (a) would describe the scope of the section as
described above.
Proposed Sec. 3.279(b)(1) would exclude from income relocation
payments made under the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, as amended. 42 U.S.C. 4601. Payments
made under the Act are excluded from income by 42 U.S.C. 4636.
Proposed Sec. 3.279(b)(4) would exclude from income and assets
payments made to individuals because of their status under Public Law
103-286, as victims of Nazi persecution.
Proposed Sec. 3.279(b)(7) would exclude from income and assets
payments under the National Flood Insurance Act of 1968. See 42 U.S.C.
4031.
Proposed Sec. 3.279(c)(1) would exclude from income and assets
funds paid under the Indian Tribal Judgment Funds Use or Distribution
Act, 25 U.S.C. 1401, while such funds are held in trust. The first
$2,000 per year of income received by individual Native Americans in
satisfaction of a judgment of the United States Court of Federal Claims
is excluded from income. The law originally pertained to judgments of
the Indian Claims Commission as well as judgments of the United States
Court of Federal Claims. However, the Government discontinued the
Indian Claims Commission on September 30, 1978, so we would not refer
to the Commission in proposed Sec. 3.279(c)(1). We also propose to
include a clarification which complies with a precedent opinion of VA's
Office of the General Counsel, VAOPGCPREC 1-94, 59 FR 27307, May 26,
1994, which held that the $2,000 exclusion for per-capita payments
applies to the sum of all payments received in an annual reporting
period.
Proposed Sec. 3.279(c)(2) would exclude from income the first
$2,000 per year received by individual Indians that is derived from an
individual Native American's interest in trust or restricted lands. It
would also exclude from assets all interest of individual Native
Americans in trust or restricted lands. See 42 U.S.C. 1408. Current
regulations only address the income component.
Proposed Sec. 3.279(c)(3) would address exclusions under the Per
Capita Distributions Act, codified at 25 U.S.C. 117a-117c. Under
section 117b(a), distributions of funds are subject to the provisions
of 25 U.S.C. 1407. The exclusions under Sec. 3.279(c)(3) would mirror
the exclusions under Sec. 3.279(c)(1).
Proposed Sec. 3.279(c)(4) would exclude from income and assets
income derived from certain submarginal land of the United States that
is held in trust for certain Native American tribes in accordance with
25 U.S.C. 459e.
Proposed Sec. 3.279(c)(5) would exclude from income and assets up
to $2,000 per year of per capita distributions under the Old Age
Assistance Claims Settlement Act, 25 U.S.C. 2301.
Proposed Sec. 3.279(c)(6) would exclude from income and assets 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 American 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
American 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 American 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 Native Corporation
shall not ``be considered or taken into account as an asset or
resource'' for any Federal program. 43 U.S.C. 1626(c). Therefore, to
extend the exclusion to assets, proposed Sec. 3.279(c)(6) would
exclude from assets the income and assets described above. We would
also extend the exclusion to certain bonds that are statutorily
excluded but are not specifically mentioned in current Sec. 3.262(x)
or 3.272(t).
Proposed Sec. 3.279(c)(7) would exclude from income and assets
payments received under the Maine Indian Claims Settlement Act of 1980,
25 U.S.C. 1721.
[[Page 3853]]
Proposed Sec. 3.279(c)(8) would exclude payments received by
Native Americans under the settlement in Cobell v. Salazar, Civil
Action No. 96-1285 (TFH) (D.D.C.). Section 101(f)(2) of Public Law 111-
291, December 8, 2010, provides that amounts from this settlement
received by an individual Indian as a lump sum or a periodic payment
are not to be treated as income or resources (i.e., net worth for VA
purposes) during the 1-year period beginning on the date of receipt.
Accordingly, because VA counts lump-sum payments as income for a 1-year
period, proposed Sec. 3.279(c)(8) would exclude such payments from
income and would exclude them from assets for 1 year.
Proposed Sec. 3.279(d)(1) would exclude from income 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 needs-based program. There would be no net worth exclusion.
Proposed Sec. 3.279(d)(2) would exclude from income allowances,
earnings, and payments to AmeriCorps participants pursuant to 42 U.S.C.
12637. There would be no asset exclusion.
Current Sec. Sec. 3.262(q) and 3.272(k) list payments from various
Federal volunteer programs that are excluded from income. Through a
series of legislative changes, these programs are now administered by
the Corporation for National and Community Service. See Public Law 103-
82. 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 the level
of or eliminate eligibility for assistance that volunteers may be
receiving under other government programs. We propose to account for
this change in the law by providing, in proposed Sec. 3.279(d)(3),
that payments received from any of the volunteer programs administered
by the Corporation for National and Community Service would be excluded
from income and assets unless the payments are equal to or greater than
the minimum wage. We propose to provide that the minimum wage for this
purpose is that under the Fair Labor Standards Act of 1938, 29 U.S.C.
201, or that under the law of the state where the volunteers are
serving, whichever is greater.
Proposed Sec. 3.279(e)(1) would exclude from income and assets the
value of the allotment provided to an eligible household under the Food
Stamp Program. Proposed Sec. 3.279(e)(2) would exclude from income and
assets the value of free or reduced-price food under the Child
Nutrition Act of 1966, 42 U.S.C. 1771.
Proposed Sec. 3.279(e)(3) would exclude from income 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. 9858.
Proposed Sec. 3.279(e)(4) would exclude from income 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. 8011.
Proposed Sec. 3.279(e)(5) would exclude from income and assets 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.
8621.
Proposed Sec. 3.279(e)(6) would exclude from income payments,
other than wages or salaries, received from programs funded under the
Older Americans Act of 1965, 42 U.S.C. 3001. In accordance with 42
U.S.C. 3020a(b), such payments may not be treated as income for the
purpose of any other program or provision of Federal or state law.
Proposed Sec. 3.279(e)(7) would exclude from income and assets the
amount of student financial assistance received under Title IV of the
Higher Education Act of 1965, including Federal work-study programs,
Bureau of Indian Affairs student assistance programs, or vocational
training under the Carl D. Perkins Vocational and Technical Education
Act of 1998, as amended, 20 U.S.C. chapter 44.
Proposed Sec. 3.279(e)(8) would exclude from income annuities
received under subchapter 1 of the Retired Serviceman's Family
Protection Plan. 10 U.S.C. 1441. We note that this exclusion is
currently listed at Sec. 3.261(a)(14) for prior law pension, but is
not listed as an income exclusion from current pension at Sec. 3.262.
Inasmuch as 10 U.S.C. 1441 was amended after January 1, 1979, we
believe this statutory exclusion meets the requirement for inclusion in
Sec. 3.279, i.e., it applies to all needs-based benefits that VA
administers.
As an aid to those who read this supplementary information, we are
providing the following derivation table for proposed Sec. 3.279. It
lists only new income exclusions (i.e., income exclusions not currently
found in 38 CFR part 3) and exclusions derived from current Sec.
3.272. It does not list exclusions derived from Sec. Sec. 3.261 or
3.262. If an exclusion is derived from Sec. Sec. 3.261 or 3.262 but
not listed in current Sec. 3.272, the derivation table below lists the
proposed Sec. 3.279 exclusion as ``new.''
Table 2--Proposed Sec. 3.279 Derivation
------------------------------------------------------------------------
Derived from current Sec.
Proposed Sec. 3.279 3.272 (or ``New'')
------------------------------------------------------------------------
3.279(b)(1).............................. New.
3.279(b)(2).............................. 3.272(v).
3.279(b)(3).............................. 3.272(p).
3.279(b)(4).............................. New.
3.279(b)(5).............................. 3.272(o).
3.279(b)(6).............................. 3.272(u).
3.279(b)(7).............................. New.
3.279(c)(1).............................. New.
3.279(c)(2).............................. 3.272(r).
3.279(c)(3) through (c)(5)............... New.
3.279(c)(6).............................. 3.272(t).
3.279(c)(7) through (d)(2)............... New.
3.279(d)(3).............................. 3.272(k).
3.279(e)(1) through (e)(8)............... New.
3.279(e)(9).............................. 3.272(w).
------------------------------------------------------------------------
Conforming Amendments, Corrections, and Other Exclusions
Because the statutory exclusions pertaining to all VA-administered
needs-based benefits would be listed in proposed Sec. 3.279, for
purposes of notice, we propose not to include such statutory exclusions
in other regulations. We previously listed paragraphs we would not
include in proposed Sec. 3.275, which pertains to net worth for
current pension. Section 3.263 pertains to net worth for section 306
pension and dependency of parents for VA service-connected compensation
purposes. (Net worth is not a factor for parents' DIC or old-law
pension.) We would remove paragraphs (e), (f), (g), and (h) from Sec.
3.263 because these paragraphs list net worth exclusions that would be
listed at new Sec. 3.279, in paragraphs (b)(5), (b)(3), (b)(6),
(b)(2), and (e)(9), respectively.
We would amend Sec. 3.270, which describes the applicability of
certain regulations that pertain to needs-based benefits, to remove
from paragraph (a) ``Sections 3.250 to 3.270.'' and add in its place
``Sections 3.250 to 3.270 and sections 3.278 and 3.279.'' Currently,
Sec. Sec. 3.250 to 3.270 apply only to (1) the
[[Page 3854]]
prior pension programs, (2) parents' DIC, and (3) parental dependency.
Current Sec. Sec. 3.271 to 3.277 apply only to current pension.
Because proposed new Sec. 3.278 would apply to all VA-administered
needs-based benefits for which medical expenses may be deducted and
proposed new Sec. 3.279 would apply to all VA-administered needs-based
benefits, it is necessary to amend Sec. 3.270 to include the proposed
new regulations.
For reasons described below in the information pertaining to
conforming amendments and additions to Sec. 3.272, we would remove
paragraph (i) from Sec. 3.263.
Conforming Amendments and Corrections to Sections 3.261 and 3.262
Sections 3.261 and 3.262 set forth income exclusions for section
306 pension, old-law pension, parental dependency for compensation
under Sec. 3.250, and parents' DIC. We would remove paragraphs (s),
(u), (v), (x), (y), and (z) from current Sec. 3.262 because these
paragraphs list income exclusions that would be listed at new Sec.
3.279, in paragraphs (b)(5), (b)(3), (c)(2), (c)(6), (b)(6), (b)(2),
and (e)(9), respectively. We would redesignate paragraphs (t) and (w)
of current Sec. 3.262 as proposed paragraphs (s) and (t) of proposed
Sec. 3.262. We also propose a correction to current Sec. 3.262(w),
which we propose to redesignate as Sec. 3.262(t). Current Sec.
3.262(w) provides that income received under Section 6 of the Radiation
Exposure Compensation Act, Public Law 101-426, is excluded for purposes
of parents' DIC under the authority of 42 U.S.C. 2210 note. This is
accurate; however, the exclusion also applies to parental dependency
for compensation purposes. The note at 42 U.S.C. 2210 provides that
``amounts paid to an individual under [Section 6 of the Radiation
Exposure Compensation Act] . . . shall not be included as income or
resources for purposes of determining eligibility to receive benefits
described in section 3803(c)(2)(C) of title 31, United States Code or
the amount of such benefits.'' 42 U.S.C. 2210 note. The list of
benefits at section 3803(c)(2)(C) does not include section 306 pension
or old-law pension but does include parental dependency for
compensation purposes in addition to parents' DIC. Accordingly, the
exclusion at proposed Sec. 3.262(t) would apply to parental dependency
for compensation purposes as well as to parents' DIC.
Additionally, we would add to proposed Sec. 3.262 a new paragraph
(u), which would refer to other payments excluded from income in
proposed Sec. 3.279.
We would remove current entries (35) through (37) and (39) through
(41) from current Sec. 3.261(a). We propose a correction to current
entry (38) of Sec. 3.261(a), which we would redesignate as entry (35).
This entry currently references Sec. 3.262(w), which would be
redesignated as Sec. 3.262(t) as described above. Further, current
entry (38) of Sec. 3.261(a) is erroneous because it shows that income
received under Section 6 of the Radiation Exposure Compensation Act is
excluded for purposes of old-law pension and section 306 pension when
this is not the case as explained above. Proposed entry (35) would
provide the correct information.
Additionally, we would add to proposed Sec. 3.261(a) a new entry
(36), which would refer to other payments excluded from income in
proposed new Sec. 3.279.
For reasons described below in the information pertaining to
conforming amendments and additions to Sec. 3.272, we would remove
paragraph (a)(41) from Sec. 3.261 and paragraph (aa) from Sec. 3.262;
and paragraph (i) from Sec. 3.263.
Conforming Amendments and Additions to Section 3.272
Section Sec. 3.272 sets forth income exclusions for current
pension. We propose to add to current Sec. 3.272(g) a reference to
proposed Sec. 3.278 that would define medical expenses. We also
propose to remove from current Sec. 3.272, regarding exclusions from
income, paragraphs (k), (o), (p), (r), (t), (u), (v), and (w), because
these paragraphs contain statutory income exclusions that would be
listed in proposed Sec. 3.279. We also propose to redesignate current
paragraphs (q), (s), and (x) as (o), (p), and (q), respectively. We
would add new paragraphs (k), (r), and (s). We would also amend the
authority citation in paragraph (q), as proposed to be redesignated,
due to a law change. Section 604 of Public Law 111-275 amended 38
U.S.C. 1503 to add a new paragraph (a)(11), which we describe below,
and redesignated former paragraph (a)(11) as (a)(12).
We propose to remove paragraph (w) because it describes a statutory
income and asset exclusion of payments received under the Medicare
transitional assistance program and any savings associated with the
Medicare prescription drug discount card. This program was discontinued
on December 31, 2005. See 42 U.S.C. 1395w-141(a)(ii)(C). The program
was replaced with the Medicare coverage gap discount program under the
authority of 42 U.S.C. 1395w-114a. The statutory authority for the new
program does not include language pertaining to eligibility to other
Federal benefits; therefore, we propose to remove this exclusion.
We also propose to add a new income exclusion at Sec. 3.272(k)
that would clarify VA's policy pertaining to income from certain
annuities. We would provide that VA would exclude payments from an
annuity and count, on an annual basis, only the interest component of
the payments if a claimant or beneficiary, or someone acting on his or
her behalf, transfers an asset to the annuity principal and either (1)
VA has already considered the fair market value of the transferred
asset as an asset, or (2) the funds used to purchase the annuity were
proceeds from the sale of the claimant's or beneficiary's primary
residence that was previously excluded as an asset from VA's net worth
calculation and such funds are not sufficient to cause net worth to
exceed the limit under proposed Sec. 3.274(a).
Generally, VA counts income from Individual Retirement Accounts and
similar investments, even though such income represents a partial
return on principal. In addition, a claimant or beneficiary may
transfer assets from one form to another form, e.g., selling real
estate at fair market value and placing the proceeds into a savings
account or certificate of deposit. Such a transfer of assets has no
impact on net worth for VA pension as long as VA has included the fair
market value as an asset and net worth remains within the net worth
limit. However, sometimes a claimant or beneficiary, or someone acting
on his or her behalf, will sell an asset or his or her residence and
purchase an annuity with the proceeds. We emphasize that these are
situations in which the proceeds would not cause net worth to bar
pension entitlement. If a claimant sells his or her primary residence
that was previously excluded as an asset and uses the proceeds to
purchase an annuity, VA views such a transfer in a similar manner as if
the claimant had placed the proceeds from the sale in a bank account.
If the proceeds were placed in a bank account, then the bank account
itself would be an asset. However, incremental withdrawals from the
bank account would not count as income. Accordingly, fairness would
dictate that the same proceeds, if placed into an annuity principal
rather than a bank account, should not result in countable income that
reduces pension entitlement, although the annuity principal itself
could adversely affect pension entitlement if the value of the
[[Page 3855]]
annuity principal caused net worth to exceed the net worth limit.
In proposed Sec. 3.272(r), we would incorporate a new statutory
income exclusion. Section 604 of the Veterans' Benefits Act of 2010,
Public Law 111-275, amended 38 U.S.C. 1503(a) to provide a new income
exclusion beginning in calendar year 2012. The statute now excludes
from a veteran's countable income ``payment of a monetary amount of up
to $5,000 to a veteran from a state or municipality that is paid as a
veterans' benefit due to injury or disease.'' We propose to implement
this change in law by excluding all such payments from the claimant's
or beneficiary's income, not to exceed a total of $5,000 in a 12-month
annualization period (an annualization period is generally a calendar
year). In proposed Sec. 3.272(s), we would add a reference to other
payments excluded from income listed in Sec. 3.279.
As an aid to those who read this supplementary information, we are
providing the following proposed distribution and derivation tables for
current and proposed Sec. 3.272.
Table 3--Current Sec. 3.272 Distribution
------------------------------------------------------------------------
Distributed to or no change
Current Sec. 3.272 in location
------------------------------------------------------------------------
3.272(a) through (j)..................... No change.
3.272(k)................................. 3.279(d)(3).
3.272(l) through (n)..................... No change.
3.272(o)................................. 3.279(b)(5).
3.272(p)................................. 3.279(b)(3).
3.272(q)................................. 3.272(o).
3.272(r)................................. 3.279(c)(2).
3.272(s)................................. 3.272(p).
3.272(t)................................. 3.279(c)(6).
3.272(u)................................. 3.279(b)(6).
3.272(v)................................. 3.279(b)(2).
3.272(w)................................. Removed.
3.272(x)................................. 3.272(q).
------------------------------------------------------------------------
Table 4--Proposed Sec. 3.272 Derivation
------------------------------------------------------------------------
Derived from, no change, or
Proposed Sec. 3.272 ``new''
------------------------------------------------------------------------
3.272(a) through (f)..................... No change.
3.272(g), last sentence.................. New.
3.272(h) through (j)..................... No change.
3.272(k)................................. New.
3.272(l) through (n)..................... No change.
3.272(o)................................. 3.272(q).
3.272(p)................................. 3.272(s).
3.272(q)................................. 3.272(x).
3.272(r)................................. New.
3.272(s)................................. New.
------------------------------------------------------------------------
Statutory Change to Medicaid Nursing Home Provision
We propose to amend current 38 CFR 3.551(i) to reference the
authorizing statute, 38 U.S.C. 5503(d)(7) rather than to specify the
statutory sunset date. Section 203 of Public Law 112-260, enacted
January 10, 2013, amended 38 U.S.C. 5503(d)(7) to extend to November
30, 2016, the sunset date for reductions of pension to $90 for certain
beneficiaries receiving Medicaid-approved care in a nursing home.
Previously, the Veterans Benefits Act of 2010, Public Law 111-275, had
extended this sunset date to May 31, 2015, and Public Law 112-56 had
extended it to September 30, 2016. To avoid multiple future regulatory
changes, proposed paragraph (i) would provide the sunset date as the
date given in 38 U.S.C. 5503(d)(7).
We would also add ``surviving child'' where appropriate to state
that the Medicare reduction pertains to a surviving child claiming or
receiving pension in his or her own right. This change would make the
rule consistent with the statutory amendments made by section 606 of
the Veterans Benefits Act of 2010. We would make clarifying changes to
the title and content of current Sec. 3.551(i) to reflect the above
noted changes. Finally, we would amend 38 CFR 3.503 to add paragraph
(c), which would be an effective-date provision pertaining to Medicaid-
covered nursing home care for surviving children. Proposed paragraph
(c) would mirror Sec. Sec. 3.501(i)(6) and 3.502(f), which apply to
veterans and surviving spouses, respectively. We would amend the
authority citation to include 38 U.S.C. 5503(d).
Paperwork Reduction Act
This proposed rule includes a collection of information under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) that requires
approval by the Office of Management and Budget (OMB). Accordingly,
under 44 U.S.C. 3507(d), VA has submitted an information collection
request to OMB for review. OMB assigns a control number for each
collection of information it approves. VA may not conduct or sponsor,
and a person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number. Proposed 38
CFR 3.276 and 3.278 contain a collection of information under the
Paperwork Reduction Act of 1995. If OMB does not approve the collection
of information as requested, VA will immediately remove the provisions
containing a collection of information or take such other action as is
directed by OMB.
Comments on the collections of information contained in this
proposed rule should be submitted to the Office of Management and
Budget, Attention: Desk Officer for the Department of Veterans Affairs,
Office of Information and Regulatory Affairs, Washington, DC 20503,
with copies sent by mail or hand delivery to the Director, Office of
Regulation Policy and Management (02REG), Department of Veterans
Affairs, 810 Vermont Ave. NW., Room 1068, Washington, DC 20420; fax to
(202) 273-9026 (this is not a toll-free number); or email comments
through www.Regulations.gov. Comments should indicate that they are
submitted in response to ``RIN 2900-AO73.''
VA considers comments by the public on proposed collections of
information in--
Evaluating whether the proposed collections of information
are necessary for the proper performance of the functions of VA,
including whether the information will have practical utility;
Evaluating the accuracy of VA's estimate of the burden of
the proposed collections of information, including the validity of the
methodology and assumptions used;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of the collections of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
The collections of information contained in 38 CFR 3.276 and 3.278
are described immediately following this paragraph, under their
respective titles.
Title: Asset Transfers and Penalty Periods.
Summary of collection of information: Under proposed 38 CFR 3.276,
claimants would be required to report to VA whether they have
transferred assets within the 3 years prior to claiming pension or
anytime thereafter and if so, information about those assets. This
would also require amendments to the following existing application
forms:
VA Form 21-526, Veterans Application for Compensation and/
or Pension, OMB Control Number 2900-0001.
VA Form 21P-527, Income, Net Worth, and Employment
Statement, OMB Control Number 2900-0002.
VA Forms 21P-534, Application for Dependency and Indemnity
[[Page 3856]]
Compensation, Death Pension and Accrued Benefits by a Surviving Spouse
or Child (Including Death Compensation if Applicable), and 21P-534EZ,
Application for DIC, Death Pension, and/or Accrued Benefits, OMB
Control Number 2900-0004.
VA Forms 21P-527EZ, Application for Pension, OMB Control
No. 2900-0002.
Description of the need for information and proposed use of
information: The information is needed to ensure that only qualified
claimants receive VA needs-based benefits.
Description of likely respondents: Claimants for VA pension or
survivor benefits.
Estimated frequency of responses: Once per claim.
Estimated number of respondents per year and respondent burden:
----------------------------------------------------------------------------------------------------------------
Estimated
number of Estimated
pension and total annual
VA form No. OMB control survivor Estimated respondent reporting and
No. benefit burden recordkeeping
respondents burden (hours)
per year
----------------------------------------------------------------------------------------------------------------
21-526................................ 2900-0001 25,000 1 hour.................. 25,000
21P-527............................... 2900-0002 25,000 1 hour.................. 25,000
21P-534............................... 2900-0004 25,000 1 hour, 15 minutes...... 31,250
21P-534EZ............................. 2900-0004 75,000 50 minutes.............. 62,500
21-527EZ.............................. 2900-0002 75,000 50 minutes.............. 62,500
----------------------------------------------------------------------------------------------------------------
Title: Deductible Medical Expenses.
Summary of collection of information: Under proposed 38 CFR 3.278,
claimants would be required to submit information pertaining to their
medical expenses. Certain claimants would also be required to submit
evidence that they need custodial care or assistance with activities of
daily living. This would also require amendments to the following
existing forms:
The application forms described above in the information
pertaining to asset transfers and penalty periods.
VA Form 21P-8416, OMB Control Number 2900-0161.
Description of the need for information and proposed use of
information: The information is needed to ensure that only qualified
claimants receive VA needs-based benefits.
Description of likely respondents: Claimants for VA pension
benefits.
Estimated number of respondents per year: 60,000 pension claimants.
Estimated frequency of responses: Annual.
Estimated respondent burden: 30,000 hours (30 minutes per form x
60,000 respondents annually).
Regulatory Flexibility Act
The Secretary certifies that this proposed rule would not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This proposed rule would directly affect only individuals and
would not directly affect small entities. Therefore, pursuant to 5
U.S.C. 605(b), this rulemaking is exempt from the initial and final
regulatory flexibility analysis requirements of sections 603 and 604.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 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, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Executive Order 12866 (Regulatory Planning and Review) defines a
``significant regulatory action'' requiring review by the 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 regulatory action have been examined, and it has
been determined to be a significant regulatory action under Executive
Order 12866 because it will have an annual effect on the economy of
$100 million or more, and 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 this Executive
Order. VA's impact analysis can be found as a supporting document at
http://www.regulations.gov, usually within 48 hours after the
rulemaking document is published. Additionally, a copy of the
rulemaking and its impact analysis are available on VA's Web site at
http://www1.va.gov/orpm/, by following the link for ``VA Regulations
Published.''
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 one year. This proposed rule would have no such
effect on State, local, and tribal governments, or on the private
sector.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers and titles for
the programs affected by this proposed rule are 64.104, Pension for
Non-Service-Connected Disability for Veterans, and 64.105, Pension to
Veterans Surviving Spouses, and Children.
Signing Authority
The Secretary of Veterans Affairs, or designee, approved this
document and authorized the undersigned to sign and
[[Page 3857]]
submit the document to the Office of the Federal Register for
publication electronically as an official document of the Department of
Veterans Affairs. Robert A. McDonald, Secretary, Department of Veterans
Affairs, approved this document on August 6, 2014, for publication.
List of Subjects in 38 CFR Part 3
Administrative practice and procedure, Claims, Disability benefits,
Pensions, Veterans.
Dated: January 7, 2015.
William F. Russo,
Acting Director, Office of Regulation Policy & Management, Office of
the General Counsel, U.S. Department of Veterans Affairs.
For reasons set out in the preamble, VA proposes to amend 38 CFR
part 3 as follows:
PART 3--ADJUDICATION
Subpart A--Pension, Compensation, and Dependency and Indemnity
Compensation
0
1. The authority citation for part 3, subpart A continues to read as
follows:
Authority: 38 U.S.C. 501(a), unless otherwise noted.
0
2. Amend the table in Sec. 3.261(a) as follows:
0
a. Remove entries (35) through (37) and (39) through (42).
0
b. Redesignate entry (38) as entry (35).
0
c. Revise newly designated entry (35).
0
d. Add entry (36).
The revision and addition read as follows:
Sec. 3.261 Character of income; exclusions and estates.
* * * * *
(a) Income.
----------------------------------------------------------------------------------------------------------------
Pension;
Dependency and Pension; old- section 306
Dependency indemnity law (veterans, (veterans,
Income (parents) compensation surviving surviving See--
(parents) spouses and spouses and
children) children)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
(35) Income received under Excluded....... Excluded....... Included....... Included....... Sec.
Section 6 of the Radiation 3.262(t).
Exposure Compensation Act
(Pub. L. 101-426).
(36) Other payments excluded Excluded....... Excluded....... Excluded....... Excluded....... Sec.
from income listed in Sec. 3.262(u).
3.279.
----------------------------------------------------------------------------------------------------------------
* * * * *
0
3. Amend Sec. 3.262 as follows:
0
a. Add a sentence to the end of paragraph (l) introductory text.
0
b. Remove paragraphs (s), (u), (v), (x), (y), (z), and (aa).
0
c. Redesignate paragraphs (t) and (w) as paragraphs (s) and (t),
respectively.
0
d. Revise newly designated paragraph (t).
0
e. Add a new paragraph (u).
The additions and revision read as follows:
Sec. 3.262 Evaluation of income.
* * * * *
(l) * * * For the definition of what constitutes a medical expense,
see
Sec. 3.278 Deductible medical expenses.
* * * * *
(t) Radiation Exposure Compensation Act. For the purposes of
parents' dependency and indemnity compensation and dependency of
parents under Sec. 3.250, there shall be excluded from income
computation payments under Section 6 of the Radiation Exposure
Compensation Act of 1990.
(u) Other payments. Other payments excluded from income listed in
Sec. 3.279.
Sec. 3.263 [Amended]
0
4. Amend Sec. 3.263 by removing paragraphs (e), (f), (g), (h), and
(i).
Sec. 3.270 [Amended]
0
5. Amend Sec. 3.270 as follows:
0
a. Revise the heading in paragraph (a) by removing ``Sections 3.250 to
3.270'' and adding in its place ``Sections 3.250 through 3.270 and
sections 3.278 through 3.279''.
0
b. Revise the note to paragraph (a) by removing ``Sec. Sec. 3.250 to
3.270'' and adding in its place ``Sec. Sec. 3.250 through 3.270 and
Sec. Sec. 3.278 through 3.279''.
0
c. Revise the heading in paragraph (b) by removing ``Sections 3.271 to
3.300'' and adding in its place ``Sections 3.271 through 3.300''.
0
6. Amend Sec. 3.271 by adding paragraph (i) to read as follows:
Sec. 3.271 Computation of income.
* * * * *
(i) Waiver of receipt of income. Potential income that is not
excludable under Sec. Sec. 3.272 or 3.279 but is waived by an
individual is included as countable income of the individual. However,
if an individual withdraws a claim for Social Security benefits, after
a finding of entitlement to those benefits, in order to maintain
eligibility for unreduced Social Security benefits upon reaching a
particular age, VA will not regard this potential income as having been
waived and will therefore not count it.
(Authority: 38 U.S.C. 1503(a))
0
7. Amend Sec. 3.272 as follows:
0
a. Add a sentence to the end of paragraph (g) introductory text.
0
b. Remove paragraphs (k), (o), (p), (r), (t), (u), (v), and (w).
0
c. Redesignate paragraphs (q), (s), and (x) as paragraphs (o), (p), and
(q), respectively.
0
d. Add new paragraphs (k), (r), and (s).
0
e. Revise the authority citation in newly designated paragraph (q).
The additions and revision read as follows:
Sec. 3.272 Exclusions from income.
* * * * *
(g) Medical expenses. * * * For the definition of what constitutes
a medical expense, see Sec. 3.278, Deductible medical expenses.
* * * * *
(k) Income from certain annuity payments. VA will exclude annuity
payments and count, on an annual basis, only the interest components of
payments if a claimant or beneficiary (or someone acting on his or her
behalf) transfers an asset to an annuity principal and either of the
following statements is true:
(1) VA has already considered the fair market value of the
transferred asset as the claimant's or beneficiary's asset for VA
purposes.
(2) The funds used to purchase the annuity were proceeds from the
sale of the claimant's or beneficiary's primary residence that was
previously excluded as an asset under Sec. 3.275(b)(1), and such funds
are not sufficient to cause net worth to exceed the net worth limit
under Sec. 3.274(a).
* * * * *
[[Page 3858]]
(q) * * *
(Authority: 38 U.S.C. 1503(a)(12))
(r) Veterans' benefits from states and municipalities. VA will
exclude from income payments from a state or municipality to a veteran
of a monetary benefit that is paid as a veterans' benefit due to injury
or disease. VA will exclude up to $5,000 of such benefit in any
annualization period.
(Authority: 38 U.S.C. 1503(a)(11))
(s) Other payments. Other payments excluded from income listed in
Sec. 3.279.
0
8. Revise Sec. 3.274 to read as follows:
Sec. 3.274 Net worth and VA pension.
(a) Net worth limit. For purposes of entitlement to VA pension, the
net worth limit effective [insert effective date of the final rule
after publication in the Federal Register] is [insert the dollar amount
of the maximum community spouse resource allowance for Medicaid
purposes on the effective date of the final rule]. This limit will be
increased by the same percentage as the Social Security increase
whenever there is a cost-of-living increase in benefit amounts payable
under section 215(i) of title II of the Social Security Act (42 U.S.C.
415(i)). VA will publish the current limit on its Web site at [location
to be determined].
(b) When a claimant's or beneficiary's net worth exceeds the limit.
Except as provided in paragraph (h)(2) of this section, VA will deny or
discontinue pension if a claimant's or beneficiary's net worth exceeds
the net worth limit in paragraph (a) of this section.
(1) Net worth means the sum of a claimant's or beneficiary's assets
and annual income.
(2) Asset calculation. VA will calculate a claimant's or
beneficiary's assets under this section and Sec. 3.275.
(3) Annual income calculation. VA will calculate a claimant's or
beneficiary's annual income under Sec. 3.271, and will include the
annual income of dependents as required by law. See Sec. Sec.
3.23(d)(4), 3.23(d)(5), and 3.24 for more information on annual income
included when VA calculates a claimant's or beneficiary's pension
entitlement rate. In calculating annual income for this purpose, VA
will subtract all applicable deductible expenses, to include
appropriate prospective medical expenses under Sec. 3.272(g).
(4) Example of net worth calculation. A surviving spouse has
claimed pension. The applicable maximum annual pension rate is $8,485
and the net worth limit is $117,240. The surviving spouse's annual
income is $7,000 and her assets total $116,000. Therefore, adding the
spouse's annual income to her assets produces net worth of $123,000.
This amount exceeds the net worth limit.
(c) Assets of other individuals included as claimant's or
beneficiary's assets. (1) Claimant or beneficiary is a veteran. A
veteran's assets include the assets of the veteran as well as the
assets of his or her spouse, if the veteran has a spouse.
(2) Claimant or beneficiary is a surviving spouse. A surviving
spouse's assets include only the assets of the surviving spouse.
(3) Claimant or beneficiary is a surviving child. (i) If a
surviving child has no custodian or is in the custody of an
institution, the child's assets include only the assets of the child.
(ii) If a surviving child has a custodian other than an
institution, the child's assets include the assets of the child as well
as the assets of the custodian. If the child is in the joint custody of
his or her natural or adoptive parent and a stepparent, the child's
assets also include the assets of the stepparent. See Sec. 3.57(d) for
more information on child custody for pension purposes.
(d) How a child's net worth affects a veteran's or surviving
spouse's pension entitlement. VA will not consider a child to be a
veteran's or surviving spouse's dependent child for pension purposes if
the child's net worth exceeds the net worth limit in paragraph (a) of
this section.
(1) Dependent child and potential dependent child. For the purposes
of this section--
(i) ``Dependent child'' refers to a child for whom a veteran or a
surviving spouse is entitled to an increased maximum annual pension
rate.
(ii) ``Potential dependent child'' refers to a child who is
excluded from a veteran's or surviving spouse's pension award solely or
partly because of this paragraph (d). References in this section to
``dependent child'' include a potential dependent child.
(2) Dependent child net worth. A dependent child's net worth is the
sum of his or her annual income and the value of his or her assets.
(3) Dependent child asset calculation. VA will calculate the value
of a dependent child's assets under this section and Sec. 3.275. A
dependent child's assets include the child's assets only.
(4) Dependent child annual income calculation. VA will calculate a
dependent child's annual income under Sec. 3.271, and will include the
annual income of the child as well as the annual income of the veteran
or surviving spouse that would be included if VA were calculating a
pension entitlement rate for the veteran or surviving spouse.
(e) When VA calculates net worth. Except as provided in paragraph
(e)(3) of this section, VA calculates net worth only when:
(1) VA has received--
(i) an original pension claim;
(ii) a new pension claim after a period of non-entitlement;
(iii) a request to establish a new dependent; or
(iv) information that a veteran's, surviving spouse's, or child's
net worth has increased or decreased; and
(2) The claimant or beneficiary meets the other factors necessary
for pension entitlement as provided in Sec. 3.3(a)(3) and (b)(4).
(3) When VA may calculate net worth. If the evidence shows that net
worth exceeds the net worth limit, VA may decide the pension claim
before determining if the claimant meets other entitlement factors. VA
will notify the claimant of the entitlement factors that have not been
established.
(f) How net worth decreases. Net worth may decrease in three ways:
assets can decrease, annual income can decrease, or both assets and
annual income can decrease.
(1) How assets decrease. A veteran, surviving spouse, or child, or
someone acting on their behalf, may decrease assets by spending them on
the types of expenses provided in paragraph (f)(1)(i) and (ii) of this
section. The expenses must be those of the veteran, surviving spouse,
or child, or a relative of the veteran, surviving spouse, or child. The
relative must be a member or constructive member of the veteran's,
surviving spouse's, or child's household.
(i) Basic living expenses such as food, clothing, shelter, or
health care; or
(ii) Education or vocational rehabilitation.
(2) How annual income decreases. See Sec. Sec. 3.271 through
3.273.
(3) How VA treats payment amounts that can decrease either annual
income or assets. When expenses can be considered as either deductible
expenses for purposes of calculating annual income under Sec. 3.272 or
basic living expenses for purposes of decreasing assets under paragraph
(f)(1) of this section, VA will first apply the amounts paid to
decrease annual income, using remaining amounts paid to decrease assets
if necessary. VA will not deduct the same expenses from both annual
income and assets.
(4) Example 1. The net worth limit is $114,000 and the maximum
annual
[[Page 3859]]
pension rate (MAPR) is $12,000. A claimant has assets of $113,000 and
annual income of $8,000. Adding annual income to assets produces a net
worth of $121,000, which exceeds the net worth limit. The claimant pays
unreimbursed medical expenses of $9,000. Unreimbursed medical expenses
are deductible from annual income under Sec. 3.272(g) to the extent
that they exceed 5 percent of the applicable MAPR. They may also be
deducted from assets under paragraph (h)(1) of this section because
they are basic living expenses. VA applies the expenditures to annual
income first, which decreases annual income to zero. The claimant's net
worth is now $113,000; therefore, it is not necessary to apply the
expenses to assets.
(5) Example 2. The net worth limit is $114,000 and the MAPR is
$12,000. A claimant has assets of $113,000 and annual income of $9,500.
Adding annual income to assets produces a net worth of $122,500, which
exceeds the net worth limit. The claimant pays unreimbursed medical
expenses of $9,000. Unreimbursed medical expenses are deductible from
annual income under Sec. 3.272(g) to the extent that they exceed 5
percent of the applicable MAPR. In this case, medical expenses that
exceed $600 are deductible from income. Medical expenses may also be
deducted from assets under paragraph (f)(1) of this section. VA applies
the expenditures to annual income first, which decreases annual income
to $1,100. This decreases net worth to $114,100, which is still over
the limit. VA will then deduct the remaining $600 in medical expenses
from assets, bringing net worth to $113,500.
(g) Effective dates of pension entitlement or increased entitlement
after a denial, reduction, or discontinuance based on excessive net
worth. (1) Scope of paragraph. This paragraph (g) applies when VA has:
(i) Discontinued pension or denied pension entitlement for a
veteran, surviving spouse, or surviving child based on the veteran's,
surviving spouse's, or surviving child's excessive net worth; or
(ii) Reduced pension or denied increased pension entitlement for a
veteran or surviving spouse based on a dependent child's excessive net
worth.
(2) Effective date of entitlement or increased entitlement. The
effective date of entitlement or increased entitlement is the day net
worth ceases to exceed the limit. For this effective date to apply, the
claimant or beneficiary must submit a certified statement that net
worth has decreased and VA must receive the certified statement before
the pension claim has become finally adjudicated under Sec. 3.160.
This means that VA must receive the certified statement within 1 year
after its decision notice to the claimant concerning the denial,
reduction, or discontinuance unless the claimant appeals VA's decision.
Otherwise, the effective date is the date VA receives a new pension
claim. In accordance with Sec. 3.277(a), VA may require the claimant
or beneficiary to submit additional evidence as the individual
circumstances may require.
(h) Reduction or discontinuance of beneficiary's pension
entitlement based on excessive net worth. (1) Effective date of
reduction or discontinuance. When an increase in a beneficiary's or
dependent child's net worth results in a pension reduction or
discontinuance because net worth exceeds the limit, the effective date
of reduction or discontinuance is the last day of the calendar year in
which net worth exceeds the limit.
(2) Net worth decreases before the effective date. If net worth
decreases to the limit or below the limit before the effective date
provided in paragraph (h)(1) of this section, VA will not reduce or
discontinue the pension award on the basis of excessive net worth.
(i) Additional effective-date provisions for dependent children.
(1) Establishing a dependent child on veteran's or surviving spouse's
pension award results in increased pension entitlement. When
establishing a dependent child on a veteran's or surviving spouse's
pension award results in increased pension entitlement for the veteran
or surviving spouse, VA will apply the effective-date provisions in
paragraphs (g) and (h) of this section.
(2) Establishing a dependent child on veteran's or surviving
spouse's pension award results in decreased pension entitlement. (i)
When a dependent child's non-excessive net worth results in decreased
pension entitlement for the veteran or surviving spouse, the effective
date of the decreased pension entitlement rate (i.e., VA action to add
the child to the award) is the end of the year that the child's net
worth decreases.
(ii) When a dependent child's excessive net worth results in
increased pension entitlement for the veteran or surviving spouse, the
effective date of the increased pension entitlement rate (i.e., VA
action to remove the child from the award) is the date that VA receives
a claim for an increased rate based on the child's net worth increase.
(Authority: 38 U.S.C. 1522, 1543, 5110, 5112)
0
9. Revise Sec. 3.275 to read as follows:
Sec. 3.275 How VA determines the asset amount for pension net worth
determinations.
(a) Definitions pertaining to assets. (1) The term assets means the
fair market value of all property that an individual owns, including
all real and personal property, unless excluded under paragraph (b) of
this section, less the amount of mortgages or other encumbrances
specific to the mortgaged or encumbered property. VA will consider the
terms of the recorded deed or other evidence of title to be proof of
ownership of a particular asset. See also Sec. 3.276(a)(4), which
defines ``fair market value.''
(2) Claimant. (i) Except as provided in paragraph (a)(2)(ii) of
this section, for the purposes of this section and Sec. 3.276,
claimant means a pension beneficiary, a dependent spouse, or a
dependent or potential dependent child as described in Sec. 3.274(d),
as well as a veteran, surviving spouse, or surviving child pension
applicant.
(ii) For the purpose of paragraph (b)(1) of this section, claimant
means a pension beneficiary or applicant who is a veteran, a surviving
spouse, or a surviving child.
(3) Residential lot area. For purposes of this section, residential
lot area means the lot on which a residence sits that is similar in
size to other residential lots in the vicinity of the residence, but
not to exceed 2 acres (87,120 square feet), unless the additional
acreage is not marketable.
(b) Exclusions from assets. Assets do not include the following:
(1) The value of a claimant's primary residence (single-family
unit), including the residential lot area, in which the claimant has an
ownership interest. VA recognizes one primary residence per claimant.
If the residence is sold, any proceeds from the sale is an asset except
to the extent the proceeds are used to purchase another residence
within the same calendar year as the year in which the sale occurred.
(i) Personal mortgage not deductible. VA will not subtract from a
claimant's assets the amount of any mortgages or encumbrances on a
claimant's primary residence.
(ii) Claimant not residing in primary residence. Although rental
income counts as annual income as provided in Sec. 3.271(d), VA will
not include a claimant's primary residence as an asset even if the
claimant resides in any of the following as defined in Sec. 3.278(b):
(A) A nursing home or medical foster home;
(B) An assisted living or similar residential facility that
provides custodial care; or
[[Page 3860]]
(C) The home of a family member for custodial care.
(2) Value of personal effects suitable to and consistent with a
reasonable mode of life, such as appliances and family transportation
vehicles.
(3) Radiation Exposure Compensation Act payments. Payments made
under section 6 of the Radiation Exposure Compensation Act of 1990.
(Authority: 42 U.S.C. 2210 (note))
(4) Ricky Ray Hemophilia Relief Fund payments. Payments made under
section 103(c) and excluded under section 103(h)(2) of the Ricky Ray
Hemophilia Relief Fund Act of 1998.
(Authority: 42 U.S.C. 300c-22 (note))
(5) Energy Employees Occupational Illness Compensation Program
payments. Payments made under the Energy Employees Occupational Illness
Compensation Program.
(Authority: 42 U.S.C. 7385e(2))
(6) Payments to Aleuts. Payments made to certain Aleuts under 50
U.S.C. App. 1989c-5.
(Authority: 50 U.S.C. App. 1989c-5(d)(2))
(7) Other payments. Other payments excluded from net worth listed
in Sec. 3.279, which lists statutory exclusions from income and net
worth for all VA needs-based benefits.
(Authority: 38 U.S.C. 1522, 1543)
0
10. Revise Sec. 3.276 to read as follows:
Sec. 3.276 Asset transfers and penalty periods.
(a) Asset transfer definitions. For purposes of this section--
(1) Claimant has the same meaning as defined in Sec.
3.275(a)(2)(i).
(2) Covered asset means an asset that--
(i) Was part of a claimant's net worth,
(ii) Was transferred for less than fair market value, and
(iii) If not transferred, would have caused or partially caused the
claimant's net worth to exceed the net worth limit under Sec.
3.274(a).
(3) Covered asset amount means the monetary amount by which a
claimant's net worth would have exceeded the limit due to the covered
asset alone if the uncompensated value of the covered asset had been
included in net worth.
(i) Example 1. The net worth limit under Sec. 3.274(a) is
$115,920. A claimant's assets total $113,000 and his annual income is
zero. However, the claimant transferred $30,000 by giving it to a
friend. If the claimant had not transferred the $30,000, his net worth
would have been $143,000, which exceeds the net worth limit. The
claimant's covered asset amount is $27,080, because this is the amount
by which the claimant's net worth would have exceeded the limit due to
the covered asset.
(ii) Example 2. The net worth limit under Sec. 3.274(a) is
$115,920. A claimant's annual income is zero and her total assets are
$117,000, which exceeds the net worth limit. In addition, the claimant
transferred $30,000 by giving $20,000 to her married son and giving
$10,000 to a friend. The claimant's covered asset amount is $30,000
because this is the amount by which the claimant's net worth would have
exceeded the limit due to the covered assets alone.
(4) Fair market value means the price at which an asset would
change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable
knowledge of relevant facts. VA will use the best available information
to determine fair market value, such as inspections, appraisals, public
records, and the market value of similar property if applicable.
(5) Transfer for less than fair market value means--
(i) Selling, conveying, gifting, or exchanging an asset for an
amount less than the fair market value of the asset, or
(ii) An asset transfer to, or purchase of, any financial instrument
or investment that reduces net worth and would not be in the claimant's
financial interest but for the claimant's attempt to qualify for VA
pension by transferring the asset to, or purchasing, the instrument or
investment. Examples of such instruments or investments include--
(A) Annuities. Annuity means a financial instrument that provides
income over a defined period of time for an initial payment of
principal.
(B) Trusts. Trust means a legal arrangement by which an individual
(the grantor) transfers property to an individual or an entity (the
trustee), who manages the property according to the terms of the trust,
whether for the grantor's own benefit or for the benefit of another
individual.
(6) Uncompensated value means the difference between the fair
market value of an asset and the amount of compensation an individual
receives for it. In the case of a trust, annuity, or other financial
instrument or investment described in paragraph (a)(5)(ii) of this
section, uncompensated value means the amount of money or the monetary
value of any other type of asset transferred to such a trust, annuity,
or other financial instrument or investment.
(7) Look-back period means the 36-month period immediately
preceding the date on which VA receives either an original pension
claim or a new pension claim after a period of non-entitlement.
(8) Penalty period means a period of non-entitlement, calculated
under paragraph (e) of this section, due to transfer of a covered
asset.
(b) General statement of policy pertaining to pension and covered
assets. VA pension is a needs-based benefit and is not intended to
preserve the estates of individuals who have the means to support
themselves. Accordingly, a claimant may not create pension entitlement
by transferring covered assets. VA will review the terms and conditions
of asset transfers made during the 36-month look-back period to
determine whether the transfer constituted transfer of a covered asset.
In accordance with Sec. 3.277(b), for any asset transfer, VA may
require a claimant to provide evidence such as a Federal income tax
return transcript, the terms of a gift, trust, or annuity, or the terms
of a recorded deed or other evidence of title.
(c) Presumption and exception pertaining to covered assets. In the
absence of clear and convincing evidence showing otherwise, VA presumes
that an asset transfer made during the look-back period was for the
purpose of decreasing net worth to establish pension entitlement and
will consider such an asset to be a covered asset. However, VA will not
consider such an asset to be a covered asset if the claimant
establishes through clear and convincing evidence that he or she
transferred the asset as the result of fraud, misrepresentation, or
unfair business practice related to the sale or marketing of financial
products or services for purposes of establishing entitlement to VA
pension. Evidence substantiating the application of this exception may
include a complaint contemporaneously filed with state, local, or
Federal authorities reporting the incident.
(d) Exception for transfers to certain trusts. VA will not consider
as a covered asset an asset that a veteran, a veteran's spouse, or a
veteran's surviving spouse transfers to a trust established on behalf
of a child of the veteran if:
(1) VA rates or has rated the child incapable of self-support under
Sec. 3.356; and
(2) There is no circumstance under which distributions from the
trust can be used to benefit the veteran, the veteran's spouse, or the
veteran's surviving spouse.
[[Page 3861]]
(e) Penalty periods and calculations. When a claimant transfers a
covered asset during the look-back period, VA will assess a penalty
period not to exceed 10 years. VA will calculate the length of the
penalty period by dividing the total covered asset amount by the
monthly penalty rate described in paragraph (e)(1) of this section and
rounding the quotient down to the nearest whole number. The result is
the number of months for which VA will not pay pension.
(1) Monthly penalty rate. The monthly penalty rate is the
applicable maximum annual pension rate (MAPR) under 38 U.S.C. 1521(d),
1542(d), or 1543 described in this paragraph (e)(1) that is in effect
as of the date of the pension claim, divided by 12, and rounded down to
the nearest whole dollar. The MAPRs are located on VA's Web site at
http://www.benefits.va.gov/pension/.
(i) If the claimant is a veteran or a surviving spouse, the annual
rate is the MAPR at the aid and attendance level for a veteran or a
surviving spouse with the applicable number of dependents.
(ii) If the claimant is a child, the annual rate is the child alone
MAPR.
(2) Beginning date of penalty period. When a claimant transfers a
covered asset or assets during the look-back period, the penalty period
begins on the first day of the month that follows the date of the
transfer. If there was more than one transfer, the penalty period will
begin on the first day of the month that follows the date of the last
transfer.
(3) Entitlement upon ending of penalty period. VA will consider
that the claimant, if otherwise qualified, is entitled to benefits
effective the last day of the last month of the penalty period, with a
payment date as of the first day of the following month in accordance
with Sec. 3.31.
(4) Example of penalty period calculation: VA receives a pension
claim in November 2014 The claimant's net worth is equal to the net
worth limit. However, the claimant transferred covered assets totaling
$10,000 on August 20, 2014, and September 23, 2014. Therefore, the
total covered asset amount is $10,000, and the penalty period begins on
October 1, 2014. The claimant is a surviving spouse with no dependents,
so the applicable MAPR is $13,563, and the monthly penalty rate is
$1,130. The penalty period is $10,000/$1,130 per month = 8 months. The
eighth month of the penalty period is May 2015. The surviving spouse
may be entitled to pension effective May 31, 2015, with a payment date
of June 1, 2015, if other entitlement requirements are met.
(5) Penalty period recalculations. VA will not recalculate a
penalty period under this section unless--
(i) The original calculation is shown to be erroneous; or
(ii) VA receives evidence showing that all covered assets were
returned to the claimant before the date of claim or within 30 days
after the date of claim. If all covered assets were returned to the
claimant, VA will not assess a penalty period. For this exception to
apply, VA must receive the evidence not later than 60 days after the
date of VA's notice to the claimant of VA's decision concerning the
penalty period. Once covered assets are returned, a claimant may reduce
net worth under the provisions of Sec. 3.274(f).
(Authority: 38 U.S.C. 1522, 1543, 1506(1))
(The Office of Management and Budget has approved the information
collection requirement in this section under control numbers 2900-
0001, 2900-0002, 2900-0004, and 2900-0002.)
Sec. 3.277 [Amended]
0
11. Amend Sec. 3.277(c)(2) by removing ``shall'' and adding in its
place ``may''.
0
12. Add Sec. 3.278 to read as follows:
Sec. 3.278 Deductible medical expenses.
(a) Scope. This section identifies medical expenses that VA may
deduct from countable income for purposes of three of its needs-based
programs: Pension, section 306 pension, and parents' dependency and
indemnity compensation (DIC). Payments for such medical expenses must
be unreimbursed to be deductible from income.
(b) Definitions. For the purposes of this section--
(1) Health care provider means:
(i) An individual licensed by a state or country to provide health
care in the state or country in which the individual provides the
health care. The term includes, but is not limited to, a physician,
physician assistant, psychologist, chiropractor, registered nurse,
licensed vocational nurse, licensed practical nurse, and physical or
occupational therapist; and
(ii) A nursing assistant or home health aide who is supervised by a
licensed health care provider as defined in paragraph (b)(1)(i) of this
section.
(2) Activities of daily living (ADL) mean basic self-care
activities and consist of bathing or showering, dressing, eating,
toileting, and transferring. Transferring means an individual's moving
himself or herself from one position to another, such as getting in and
out of bed.
(3) Instrumental activities of daily living (IADL) mean independent
living activities, such as shopping, food preparation, housekeeping,
laundering, managing finances, handling medications, using the
telephone, and transportation for non-medical purposes. Managing
finances does not include services rendered by a VA-appointed
fiduciary.
(4) Custodial care means regular:
(i) Assistance with two or more ADLs, or
(ii) Supervision because an individual with a mental disorder is
unsafe if left alone due to the mental disorder.
(5) Qualified relative means a veteran's dependent spouse, a
veteran's dependent or surviving child, and other relatives of the
claimant who are members or constructive members of the claimant's
household whose medical expenses are deductible under Sec. Sec.
3.262(l) or 3.272(g). A ``constructive member'' of a household is an
individual who would be a member of the household if the individual
were not in a nursing home, away at school, or a similar situation.
Qualified relatives do not include claimants who are veterans,
surviving spouses, or parents.
(6) Nursing home means a facility defined in Sec. 3.1(z)(1) or
(2). If the facility is not located in a state, the facility must be
licensed in the country in which it is located.
(7) Medical foster home means a privately owned residence,
recognized and approved by VA under 38 CFR 17.73(d), that offers a non-
institutional alternative to nursing home care for veterans who are
unable to live alone safely due to chronic or terminal illness.
(8) Assisted living, adult day care, or similar facility means a
facility that provides individuals with custodial care. The facility
may contract with a third-party provider for this purpose. A facility
that is residential must be staffed 24 hours per day with custodial
care providers. To be included in this definition, a facility must be
licensed if such facilities are required to be licensed in the state or
country in which the facility is located.
(c) Medical expenses for VA purposes. Generally, medical expenses
for VA needs-based benefit purposes are payments for items or services
that are medically necessary or that improve a disabled individual's
functioning. Medical expenses may include, but are not limited to, the
payments specified in paragraphs (c)(1) through (7) of this section.
(1) Care by a health care provider. Payments to a health care
provider for services performed within the scope of the provider's
professional capacity are medical expenses. Cosmetic procedures that a
health care provider performs to
[[Page 3862]]
improve a congenital or accidental deformity or related to treatment
for a diagnosed medical condition are medical expenses.
(2) Medications, medical supplies, medical equipment, and medical
food, vitamins, and supplements. Payments for prescription and non-
prescription medication procured lawfully under Federal law, as well as
payments for medical supplies or medical equipment are medical
expenses. Medically necessary food, vitamins, and supplements as
prescribed or directed by a health care provider authorized to write
prescriptions are medical expenses.
(3) Adaptive equipment. Payments for adaptive devices or service
animals, including veterinary care, used to assist a person with an
ongoing disability are medical expenses. Medical expenses do not
include non-prescription food, boarding, grooming, or other routine
expenses of owning an animal.
(4) Transportation expenses. Payments for transportation for
medical purposes, such as the cost of transportation to and from a
health care provider's office by taxi, bus, or other form of public
transportation are medical expenses. The cost of transportation for
medical purposes by privately owned vehicle (POV), including mileage,
parking, and tolls, is a medical expense. For transportation in a POV,
VA limits the deductible mileage rate to the current POV mileage
reimbursement rate specified by the United States General Services
Administration (GSA). The current amount can be obtained from
www.gsa.gov or on VA's Web site at [location to be determined]. Amounts
by which transportation expenses set forth in this paragraph (c)(4)
exceed the amounts of other VA or non-VA reimbursements for the expense
are medical expenses.
(i) Example. In February 2013, a veteran drives 60 miles round trip
to a VA medical center and back. The veteran is reimbursed $24.90 from
the Veterans Health Administration. The POV mileage reimbursement rate
specified by GSA is $0.565 per mile, so the transportation expense is
$0.565/mile * 60 miles = $33.90. For VA needs-based benefits purposes,
the unreimbursed amount, here, the difference between $33.90 and $24.90
is a medical expense.
(ii) [Reserved]
(5) Health insurance premiums. Payments for health, medical,
hospitalization, and long-term care insurance premiums are medical
expenses. Premiums for Medicare Parts B and D and for long-term care
insurance are medical expenses.
(6) Smoking cessation products. Payments for items and services
specifically related to smoking cessation are medical expenses.
(7) Institutional forms of care and in-home care. As provided in
paragraph (d) of this section.
(d) Institutional forms of care and in-home care. (1) Hospitals,
nursing homes, medical foster homes, and inpatient treatment centers.
Payments to hospitals, nursing homes, medical foster homes, and
inpatient treatment centers (including inpatient treatment centers for
drug or alcohol addiction), including the cost of meals and lodging
charged by such facilities are medical expenses.
(2) In-home care. Payments for services provided by an in-home
attendant are medical expenses. Payments must be commensurate with the
number of hours that the provider attends to the disabled person, and
the attendant's hourly rate may not exceed the average hourly rate for
home health aides published annually by the MetLife Mature Market
Institute in its Market Survey of Long-Term Care Costs. VA will publish
the in-home care hourly rate limit on its Web site at [location to be
determined].
(i) Except as provided in paragraphs (d)(2)(ii) and (iii) of this
section, the attendant must be a health care provider, and only
payments for assistance with ADLs or health care services are medical
expenses.
(ii) If a veteran or surviving spouse (or parent, for parents' DIC
purposes) meets the criteria in Sec. 3.351 for needing regular aid and
attendance or being housebound, then--
(A) The attendant does not need to be a health care provider, and
(B) Payments for assistance with IADLs are medical expenses only if
the primary responsibility of the attendant is to provide health care
services or custodial care. Otherwise, only payments for assistance
with health care or custodial care are medical expenses.
(iii) Paragraph (d)(2)(ii) of this section also applies to a
qualified relative if a physician or physician assistant states in
writing that, due to physical or mental disability, the qualified
relative requires the health care services or custodial care that the
in-home attendant provides.
(3) Assisted living, adult day care, and similar facilities.
Certain payments to assisted living, adult day care, and similar
facilities are medical expenses. Except as provided in paragraphs
(d)(3)(i) and (ii) of this section, only payments for health care
services or assistance with ADLs provided by a health care provider are
medical expenses.
(i) If a veteran or surviving spouse (or parent for parents' DIC
purposes) meets the criteria in Sec. 3.351 for needing regular aid and
attendance or being housebound, then--
(A) The care does not need to be provided by a health care
provider, and
(B) Medical expenses include all payments to the facility, to
include meals and lodging, if the primary reason for the veteran or
surviving spouse to be in the facility is to receive health care
services or custodial care that the facility provides. Otherwise, only
payments for assistance with health care or custodial care are medical
expenses.
(ii) Paragraph (d)(3)(i) of this section also applies to a
qualified relative if a physician or physician assistant states in
writing that, due to mental or physical disability, the qualified
relative requires the health care services or custodial care that the
facility provides.
(e) Non-medical expenses for VA purposes. Payments for items and
services listed in paragraphs (e)(1) through (5) of this section are
not medical expenses for VA needs-based benefit purposes. The list is
not all-inclusive.
(1) Maintenance of general health. Payments for items or services
that benefit or maintain general health, such as vacations and dance
classes, are not medical expenses.
(2) Cosmetic procedures. Except as provided in paragraph (c)(1) of
this section, cosmetic procedures are not medical expenses.
(3) Meals and lodging. Except as provided in paragraph (d) of this
section, payments for meals and lodging are not medical expenses. This
category includes payments to facilities such as independent living
facilities that do not provide health care services or custodial care.
(4) Assistance with IADLs. Except as provided in paragraph (d) of
this section, payments for assistance with IADLs are not medical
expenses.
(5) VA fiduciary fees. Fees for VA-appointed fiduciary services are
not medical expenses.
CROSS REFERENCES: For the rules governing how medical expenses are
deducted, see Sec. 3.272(g) (regarding pension) and Sec. 3.262(l)
(regarding section 306 pension and parents' DIC).
(Authority: 38 U.S.C. 501(a), 1315(f)(3), 1503(a)(8), 1506(1))
(The Office of Management and Budget has approved the information
collection requirement in this section under control numbers 2900-
0001, 2900-0002, 2900-0004, 2900-0161, and 2900-0002.)
[[Page 3863]]
0
13. Add Sec. 3.279 to read as follows:
Sec. 3.279 Statutory exclusions from income or assets (net worth or
corpus of the estate).
(a) Scope of section. This section sets forth payments that Federal
statutes exclude from income for the purpose of determining entitlement
to any VA-administered benefit that is based on financial need. Some of
the exclusions also apply to assets (pension), aka, net worth or the
corpus of the estate (section 306 pension and parents as dependents for
compensation).
----------------------------------------------------------------------------------------------------------------
Assets (corpus of the
Program or payment Income estate) Authority
----------------------------------------------------------------------------------------------------------------
(b) COMPENSATION OR RESTITUTION
PAYMENTS
(1) Relocation payments. Payments to Excluded............... Included............... 42 U.S.C. 4636.
individuals 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, as
amended.
(2) Crime victim compensation. Excluded............... Excluded............... 42 U.S.C. 10602(c).
Amounts 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 Public Law 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............... 42 U.S.C. 1437a note.
Payments made to individuals because
of their status as victims of Nazi
persecution.
(5) Agent Orange settlement payments. Excluded............... Excluded............... Sec. 1, Public Law 101-
Payments made from the Agent Orange 201.
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.
(7) Flood mitigation activities. Excluded............... Excluded............... 42 U.S.C. 4031.
Assistance provided under the
National Flood Insurance Act of
1968, as amended.
(c) PAYMENTS TO NATIVE AMERICANS
(1) Indian Tribal Judgment Fund Excluded............... Excluded............... 25 U.S.C. 1407.
distributions. All Indian Tribal
Judgment Fund distributions excluded
from income and net worth while such
funds are held in trust. First
$2,000 per year of income received
by individual Indians under the
Indian Tribal Judgment Funds Use or
Distribution Act in satisfaction of
a judgment of the United States
Court of Federal Claims excluded
from income.
(2) Interests of individual Indians Excluded............... Excluded............... 25 U.S.C. 1408.
in trust or restricted lands.
Interests of individual Indians in
trust or restricted lands excluded
from net worth. First $2,000 per
year of income received by
individual Indians that is derived
from interests in trust or
restricted lands excluded from
income.
(3) Per Capita Distributions Act. Excluded............... Excluded............... 25 U.S.C. 117b,
First $2,000 per year of per capita 25 U.S.C. 1407.
distributions to members of a tribe
from funds held in trust by the
Secretary of the Interior for an
Indian tribe. All funds excluded
from income and net worth while
funds are held in trust.
(4) 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.
(5) Old Age Assistance Claims Excluded............... Excluded............... 25 U.S.C. 2307.
Settlement Act. Up to $2,000 per
year of per capita distributions
under the Old Age Assistance Claims
Settlement Act.
(6) 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..
(7) Maine Indian Claims Settlement Excluded............... Excluded............... 25 U.S.C. 1728.
Act. Payments received under the
Maine Indian Claims Settlement Act
of 1980.
(8) Cobell Settlement. Payments Excluded for one year.. Excluded for one year.. Sec. 101, Public Law
received under Cobell v. Salazar, 111-291.
Civil Action No. 96-1285 (TFH)
(D.D.C.).
(d) WORK-RELATED PAYMENTS
(1) 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).
(2) 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 3864]]
(3) 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 that under the Fair
Labor Standards Act of 1938 (29
U.S.C. 201 et seq.) or that under
the law of the state where the
volunteers are serving, whichever is
greater.
(e) MISCELLANEOUS PAYMENTS
(1) Food stamps. Value of the Excluded............... Excluded............... 7 U.S.C. 2017(b).
allotment provided to an eligible
household under the Food Stamp
Program.
(2) 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.
(3) Child care. Value of any child Excluded............... Included............... 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.
(4) Services for housing recipients. Excluded............... Included............... 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.
(5) 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 of 1981.
(6) 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. 3001.
(7) Student financial aid. Amounts of Excluded............... Excluded............... 20 U.S.C. 1087uu,
student financial assistance 2414(a).
received under Title IV of the
Higher Education Act of 1965,
including Federal work-study
programs, Bureau of Indian Affairs
student assistance programs, or
vocational training under the Carl
D. Perkins Vocational and Technical
Education Act of 1998.
(8) 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.
----------------------------------------------------------------------------------------------------------------
(Authority: 38 U.S.C. 501(a))
0
14. Amend Sec. 3.503 by adding paragraph (c) to read as follows:
Sec. 3.503 Children.
* * * * *
(c) Medicaid-covered nursing home care (Sec. 3.551(i)). (1) Last
day of the calendar month in which Medicaid payments begin, last day of
the month following 60 days after issuance of a prereduction notice
required under Sec. 3.103(b)(2), or the earliest date on which payment
may be reduced without creating an overpayment, whichever date is
later; or
(2) If the child or the child's custodian willfully conceals
information necessary to make the reduction, the last day of the month
in which that willful concealment occurred.
(Authority: 38 U.S.C. 501, 1832, 5112(b), 5503(d))
0
15. Amend Sec. 3.551 by revising paragraph (i) to read as follows:
Sec. 3.551 Reduction because of hospitalization.
* * * * *
(i) Certain beneficiaries receiving Medicaid-covered nursing home
care. This paragraph (i) applies to a veteran without a spouse or
child, to a surviving spouse without a child, and to a surviving child.
Effective November 5, 1990, and terminating on the date provided in 38
U.S.C. 5503(d)(7), if such a beneficiary is receiving Medicaid-covered
nursing home care, no pension or survivors pension in excess of $90 per
month will be paid to or for the beneficiary for any period after the
month in which the Medicaid payments begin. A beneficiary is not liable
for any pension paid in excess of the $90 per month by reason of the
Secretary's inability or failure to reduce payments, unless that
inability or failure is the result of willful concealment by the
beneficiary of information necessary to make that reduction.
* * * * *
Sec. 3.660 [Amended]
0
16. Amend Sec. 3.660(d) by removing ``Sec. Sec. 3.263 or 3.274'' and
adding in its place ``Sec. 3.263''.
[FR Doc. 2015-00297 Filed 1-22-15; 8:45 am]
BILLING CODE 8320-01-P