[Federal Register Volume 84, Number 76 (Friday, April 19, 2019)]
[Proposed Rules]
[Pages 16421-16426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07751]



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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AP86


Active Service Pay

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
adjudication regulations. One amendment would permit VA to suspend 
disability compensation payments upon receipt of notice from the 
Department of Defense (DoD) that the veteran has received, is 
receiving, or will begin to receive active service pay. This proposed 
change would reduce the financial impact on veterans associated with 
receipt of VA disability compensation and active service pay by 
allowing VA to make necessary adjustments as close in time to the 
receipt of active service pay as possible. VA also proposes an 
amendment to clarify how VA adjudicates benefit adjustments based on 
receipt of active service pay for certain types of service.

DATES: Comments must be received on or before June 18, 2019.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Office of 
Regulation Policy and Management (00REG), Department of Veterans 
Affairs, 810 Vermont Avenue NW, Room 1064, Washington, DC 20420; or by 
fax to (202) 273-9026. (This is not a toll-free telephone number.) 
Comments should indicate that they are submitted in response to RIN 
2900-AP86--Active Service Pay. Copies of comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1064, 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, comments 
may be viewed online through the Federal Docket Management System 
(FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Gabrielle Mancuso, Consultant, 
Regulations Staff (211D), Compensation Service, Department of Veterans 
Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 461-9700. 
(This is not a toll-free telephone number.)

SUPPLEMENTARY INFORMATION: Section 5304(c) of title 38, United States 
Code, provides that ``Pension, compensation, or retirement pay on 
account of any person's own service shall not be paid to such person 
for any period for which such person receives active service pay.'' 
``Active service pay'' is defined by VA at 38 CFR 3.654 as ``pay 
received for active duty, active duty for training or inactive duty 
training'' and therefore encompasses both active duty and training pay. 
VA implements the statutory prohibition on receiving concurrent VA 
benefits and active service pay in current 38 CFR 3.700(a)(1). In order 
to reduce hardships for veterans and improve processing of benefits, VA 
proposes to amend the current procedural requirements related to the 
60-day notice period and take immediate action to suspend compensation 
payments upon notice of receipt of active service pay from DoD when the 
veteran has received prior notice that the law prevents concurrent 
receipt of certain VA benefits and active service pay or VA has 
received a statement from the veteran indicating knowledge that 
concurrent receipt of VA benefits and active service pay is prohibited. 
This proposed change would only apply to compensation payments, not 
pension.

I. Current Regulation and Adjustment Process

    Current 38 CFR 3.103 generally establishes the procedures for 
notice of law in the VA benefits system. In particular, Sec.  
3.103(b)(2) establishes procedures that VA must follow before an 
``award of compensation, pension or dependency and indemnity 
compensation'' can be ``terminated, reduced or otherwise adversely 
affected.'' Importantly, VA must provide a veteran with notice of a 
proposed adverse action and 60 days to provide evidence showing why the 
adverse action should not be taken. VA continues to pay benefits during 
this 60-day period.
    Current regulations provide exceptions for when VA may dispense 
with the 60-day notice requirement and terminate or reduce benefits at 
the same time it notifies a veteran of such action. One exception is 
specific to veterans who inform VA when they return to active duty or 
participate in training duty. Under 38 CFR 3.103(b)(3)(v), VA may take 
immediate action to suspend payment of VA benefits when the decision is 
``based upon a written statement provided to VA by a veteran indicating 
that he or she has returned to active service, the nature of that 
service, and the date of reentry into service, with the knowledge or 
notice that receipt of active service pay precludes concurrent receipt 
of VA compensation or pension.'' In other words, when a veteran 
proactively notifies VA of his or her receipt of active service pay, VA 
may suspend benefits without waiting 60 days, thereby eliminating or 
reducing the overpayment that VA must collect from the veteran. VA 
proposes to expand this exception to include notice of receipt of 
active service pay from DoD. Not only would this proposal further 
eliminate or reduce overpayments VA must collect, it also reduces the 
reporting burden on veterans in cases where VA receives information 
directly from DoD.

A. Overpayments

    ``[T]he Secretary generally is required to recover erroneous VA 
payments,'' including the overpayment of benefits. Edwards v. Peake, 22 
Vet. App. 57, 59 (2008) (citing 38 U.S.C. 5314); see also VAOPGCPREC 1-
2010 (Jan. 4, 2010). Section 5304(c) of title 38, United States Code, 
precludes concurrent receipt of VA compensation and active service pay. 
If VA pays benefits to a veteran for a period in which he or she is not 
entitled to receive them, including during the 60-day notice period, VA 
must generally recover these overpayments. At present, the only way for 
VA to avoid the overpayment and resulting recoupment action is if the 
veteran provides VA a statement prior to the receipt of active service 
pay, which allows VA to immediately suspend benefit payments. See 38 
CFR 3.103(b)(3)(v). Otherwise VA must provide a 60-day response period 
prior to suspending benefits. Only upon expiration of the response 
period or a timely response from a veteran, whichever is sooner, may VA 
create an overpayment and initiate recoupment action. As discussed 
further in section II below, this process has created financial 
hardships for veterans, who must repay the duplicate benefits they 
received, as well as burdensome inefficiencies in processing 
overpayments, further amplifying the impact on veterans.
    VA processes two basic types of benefit adjustments based on 
concurrent receipt of active service pay: Training pay offsets, which 
can be performed either prospectively or retrospectively, and active 
duty suspensions. The respective processes for adjusting benefits 
differ. For training pay, DoD, until recently, transmitted an annual 
notice to VA with the number of days for which a veteran received 
training pay. Training pay is characteristically periodic and 
recurring, and of shorter duration than active duty pay. However, 
active duty pay, which DoD previously transmitted information about to 
VA quarterly, is typically of indeterminate

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duration that could extend months, or even years, particularly for 
members of the Reserves and National Guard returning to active duty. 
Because there are significant systemic differences in the processes for 
adjusting VA benefits based on receipt of either active duty or 
training pay, the processes for adjusting benefits will be discussed 
separately to assist the reader with understanding the unique hardships 
created by each type.

B. Training Pay

    Training pay is the monetary benefit a reservist or member of the 
National Guard receives for performing periodic active duty for 
training, as discussed in more detail below, or inactive duty training. 
See 38 CFR 3.6(c) (active duty for training) and 3.6(d) (inactive duty 
training). During a single fiscal year, reservists and members of the 
National Guard commonly receive training pay for a total of 63 days, 
which consists of 48 drill periods (a drill period is defined as four 
hours), and 15 days of active duty training. Previously, at the end of 
each fiscal year, DoD's Defense Manpower Data Center (DMDC) sent VA an 
electronic file identifying veterans who received both training pay and 
VA disability compensation benefits during that fiscal year (ending in 
September). For data matches after the fiscal year (FY) 2017 match, VA 
will use the Reserve military pay data in the VA-DoD Identity 
Repository (VADIR) to match against VA recipients of VA disability 
compensation or pension. DMDC sends Reserve military pay data to VADIR 
monthly. DoD's provision, and VA's use of, DMDC data is based upon 
terms set forth in a computer matching agreement between DoD and VA. 
See Notice of a New Matching Program, 83 FR 51673 (Oct. 12, 2018).
    VA may not learn of a veteran's receipt of training pay until the 
annual data match is received from DMDC. VA then sends each affected 
veteran VA Form 21-8951, Notice of Waiver of VA Compensation or Pension 
to Receive Military Pay and Allowances, notifying the veteran that 
concurrent receipt of VA disability compensation or pension benefits 
and active service pay is prohibited, and that the veteran may use the 
form to elect to keep the training pay in lieu of VA compensation. If 
the veteran elects to keep the training pay, he or she must use the 
form to waive VA benefits for the number of days equal to the number of 
training days for which he or she received payment. Occasionally, a 
veteran will proactively notify VA of receipt (or anticipated receipt) 
of training pay by submitting VA Form 21-8951-2, Notice of Waiver of VA 
Compensation or Pension to Receive Military Pay and Allowances. Similar 
to VA Form 21-8951, this form allows a veteran to waive VA benefits or 
training pay. VA typically requires the signature of the veteran's 
military unit commander to ensure the number of days reported is 
accurate.
    Both forms notify the veteran that if he or she elects to waive VA 
benefits in order to receive training pay, VA will adjust VA benefit 
payments for the total number of days waived. Generally, VA calculates 
the withholding at the monthly benefit rate in effect at the end of the 
fiscal year for which the veteran received training pay. Historically, 
VA withheld future compensation payments in lieu of creating an 
overpayment as an alternative mechanism of collecting the erroneous 
concurrent payments of training pay and VA compensation. However, 
adjustments by future withholding did not provide repayment options, 
leaving the veteran with no means to mitigate the adverse effect of 
losing the withheld benefits.
    Consequently, starting in June 2016, VA began automating the annual 
process for training days completed in FY 2015. The new process is no 
longer dependent on employees initiating the adverse actions, which 
were previously delayed due to conflicting workload priorities. The 
automated process releases the notice letter upon receipt of notice 
from DMDC. After the veteran responds or the response period expires, 
VA issues a decision. If the decision results in an overpayment in the 
veteran's account, VA provides the veteran an opportunity to request a 
waiver of the overpayment or develop a payment plan to resolve the 
resulting debt. Subsequent data indicates that automation has increased 
the number of training pay adjustments processed by almost 62.9 percent 
from FY 2015 to FY 2016 while also reducing the number of days it takes 
to process the proposed compensation adjustment from 232 to 181 days, 
respectively. The average days to process the proposed compensation 
adjustment will continue to improve once the older training pay 
notices, received prior to the June 2016 automation process, are 
adjudicated. However, as discussed below, further improvement is 
possible.

C. Active Duty Pay

    A veteran may receive active duty pay as a result of returning to 
active duty in the United States Armed Forces. Additionally, VA treats 
some active duty for training in the same manner as active duty for 
purposes of processing VA benefit adjustments on the grounds that 
individuals performing such duty earn leave and time towards retirement 
on par to a servicemember on active duty status. Moreover, like active 
duty, some active duty for training can be of a longer duration and may 
not necessarily have an ascertainable end date. Therefore, active 
service pay for active duty for training described in 38 CFR 3.6(c), 
with the exception of annual active duty for training (typically 
performed 15 days each year by reservists and members of the National 
Guard) and Active Duty for Special Work to receive training, is 
generally processed as active duty pay for purposes of the cessation of 
VA compensation payments. Pay received for annual active duty for 
training and Active Duty for Special Work to receive training is 
processed as training pay. VA is proposing to amend 38 CFR 3.654(b) to 
accurately account for all instances in which VA discontinues an award, 
in the same manner as return to active duty, based on receipt of active 
service pay for active duty for training. See 38 U.S.C. 101(22) and 38 
CFR 3.6(c).
    VA's processing of concurrent VA benefits and active duty payments 
is generally different from processing of concurrent VA benefits and 
training pay. VA typically receives notice of a veteran's return to 
active duty or full-time duty in one of two ways: Either written notice 
from a veteran or through a DMDC active duty, and on some occasions 
training pay, data match. While veterans returning to active duty or 
full-time duty can notify VA of their status, due to the fast-paced 
nature of some military deployments, or the fact that the veteran may 
be stationed in areas with limited mail service, VA frequently learns 
of a veteran's return to active duty through the DMDC active duty data 
match. The DMDC active duty data match differs from the data match 
described for training pay, as VA and DMDC previously conducted the 
active duty data match quarterly (i.e., approximately every 3 months). 
VA is in the process of developing a new computer matching agreement 
with DoD that may change the frequency with which VA receives this 
information.
    When the data match shows that a veteran has returned to active or 
full-time duty, VA will confirm the date of return by reviewing 
electronic VA and DoD shared databases, such as the Defense Personnel 
Records Image Retrieval System (DPRIS) or the Veterans Information 
Solution. After confirming a veteran's return to active or full-time 
duty, VA must, under current requirements, notify the veteran of VA's 
proposal to discontinue the payment of compensation or pension. VA 
sometimes encounters difficulties when trying to locate and contact

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veterans who have returned to active duty. As VA must notify a veteran 
of its intent to suspend disability payments, this becomes problematic 
when some veterans on active duty serve in remote locations, such as a 
combat zone or similarly austere environments, with infrequent mail 
service, and have no reasonable method for dealing with financial 
difficulties. VA's current regulations allow the veteran 60 days to 
respond to the proposed decision, submit evidence, and request a 
hearing before VA may suspend benefits. 38 CFR 3.103(b)(2). Following 
the end of the 60-day period, and provision of a hearing if requested, 
VA considers any relevant evidence, and, if warranted, discontinues the 
award of benefits effective the day preceding return to active or full-
time duty. See 38 CFR 3.501(a) and 3.654(b).

II. Undue Burdens to Veterans and Administrative Inefficiencies

    Under current Sec.  3.103(b), which we propose to amend, VA cannot 
suspend compensation benefit payments before the veteran responds to 
the proposed benefit adjustment or the expiration of the prescribed 60-
day response period. During this period, a veteran who has returned to 
active duty continues to receive benefits that VA will be required to 
recoup. As such, in the case of a veteran who returned to active duty, 
the 60-day delay potentially harms the veteran by increasing the amount 
of the overpayment that VA must ultimately recover. Additionally, when 
a veteran is overpaid, VA is required to take ``aggressive collection 
action . . . to collect all claims for money or property arising from 
its activities.'' See 38 CFR 1.910(a). This action can include 
disclosure of debt information to consumer reporting agencies. See 38 
CFR 1.916. Collection and reporting of debt can negatively impact a 
veteran's credit rating, ability to borrow money, or ability to qualify 
for a security clearance or a job.
    As discussed below, VA believes that processing benefits 
adjustments on a more frequent basis will be beneficial to veterans. 
However, under current 38 CFR 3.103, depending on the frequency with 
which DMDC sends the electronic file to VA (see section III below), VA 
could potentially send multiple notice letters (up to 12 or more 
letters per year in the case of a veteran who regularly drills and 
multiple letters referring to the same period of service in the case of 
a veteran returning to active duty). This could result in overlapping 
notice periods and would create administrative inefficiencies 
associated with tracking and promulgating each action. For veterans who 
returned to active duty, it may be confusing to receive multiple notice 
letters related to the same period of service. VA also encourages 
veterans to respond promptly to each letter to minimize the 
overpayment; however, a prompt response may be difficult, at best, and 
create an undue burden to those who may have returned to active duty 
and are in remote locations with infrequent mail service. The multiple 
notice letters could also create unnecessary distractions for veterans 
who may already be experiencing stressful situations in hostile areas 
and would likely create an influx of calls to VA's National Call 
Centers from veterans or their family members seeking assistance, 
clarification, or guidance.
    Moreover, once VA issues a decision, the veteran receives one post-
determination letter from the Veterans Benefits Administration (VBA) 
and, if an overpayment is created, a collections letter from VA's Debt 
Management Center. The first letter, from VBA, provides VA's decision, 
the summary of the evidence, and the veteran's appellate rights. The 
second letter is a collections letter from VA's Debt Management Center, 
which notifies the veteran of his or her rights and obligations, 
explains why the debt was created, and provides repayment options and 
waiver rights. In total, the veteran receives up to two post-
determination notices for each adverse action. This indicates that even 
with the proposed removal of the response period and pre-determination 
letter, the veteran would still receive sufficient notice of VA's 
decision and the veteran's appellate rights, repayment options, and 
waiver rights.

III. Future State of VA's Administrative Process

    As discussed above, active service pay creates large compensation 
overpayments and burdensome reporting requirements for veterans. The 
data for FY 2016 indicates that the average overpayment was $1,309.00 
for training pay and $5,545.00 for return to active duty. VA and DoD 
are presently discussing changes to the way VA receives notification 
that a veteran has received active service pay. VA would like to 
leverage technological advancements, such as the DMDC data discussed 
above, to process benefits adjustments based upon receipt of active 
service pay on a frequent and reoccurring basis. This would reduce 
large overpayments in cases of return to active duty. Additionally, VA 
believes that processing adjustments based on receipt of active service 
pay more frequently will minimize stress and financial impact on 
veterans by making adjustments as close in time to the receipt of the 
active service pay as possible. Veterans will also be able to more 
clearly associate the benefit adjustment with the receipt of training 
pay when it occurs closer in time, rather than having to recall the 
number of training days performed in the previous fiscal year. 
Moreover, processing adjustments more frequently helps VA identify 
veterans who may have returned to active duty or full-time duty, which 
is indicated, for example, when data shows a veteran performed more 
than 15 training days in a month. VA's current regulations, however, 
would remain an impediment to reducing or ending overpayments and 
bureaucratic inefficiencies because we must currently notify the 
veteran of VA's intent to suspend payments upon receipt of the DMDC 
data and wait 60 days for the veteran to respond before taking action.
    Information received directly from DoD regarding a veteran's 
receipt of active service pay is sufficiently reliable for VA to 
initiate suspension of VA disability compensation to avoid or minimize 
overpayments. The data sent to DMDC is based on information from the 
Defense Finance and Accounting Service, which pays all DoD military 
personnel, providing the most current and accurate payment information. 
Amending 38 CFR 3.103(b)(3) to permit VA to suspend disability 
compensation payments upon receipt of notice from DoD that the veteran 
has received, is receiving, or will begin to receive active service pay 
would allow VA to take action immediately and with little likelihood of 
error, thus reducing or eliminating these overpayments. Additionally, 
the proposed rule reduces the number of notices a veteran receives, 
thus simplifying the process while still providing sufficient notice 
and appellate rights. This proposed regulatory amendment would provide 
better service to our veterans by eliminating the 60-day notice period 
(for veterans who received prior notice that the law prevents 
concurrent receipt of VA benefits and active service pay or from whom 
VA has received a statement indicating knowledge that concurrent 
receipt of VA benefits and active service pay is prohibited), thereby 
reducing potential overpayments and minimizing the financial impact on 
the veteran.

IV. Due Process Concerns and Mitigating Risks

    As relevant here, the Fifth Amendment generally requires that an 
individual receive due process of law

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before being finally deprived of a property interest. See Mathews v. 
Eldridge, 424 U.S. 319, 332-33 (1976). In the context of receipt of 
monetary government benefits, the Supreme Court has held that a pre-
termination hearing is necessary before subsistence payments, such as 
welfare benefits, may be terminated. See Goldberg v. Kelly, 397 U.S. 
254, 260-264 (1970). While the changes we propose here deal with 
suspension of monthly compensation payments rather than final 
termination, and with disability compensation rather than welfare 
payments, it is clear that suspending the payment implicates a valid 
property interest in continued receipt of the award.
    However, the fact that due process of law applies does not mean 
that VA's current cumbersome procedures are constitutionally required. 
See Morrissey v. Brewer, 408 U.S. 471, 481 (1972) (``Once it is 
determined that due process applies, the question remains what process 
is due.''). Rather, the Supreme Court has made clear that `` `due 
process' is a flexible concept [and] the processes required by the [Due 
Process] Clause with respect to the termination of a protected interest 
will vary depending upon the importance attached to the interest and 
the particular circumstances under which the deprivation may occur.'' 
Walters v. Nat'l Ass'n of Radiation Survivors, 473 U.S. 305, 320 
(1985).
    VA believes that in the limited circumstance of temporary 
suspension of compensation payments based upon DoD notification that a 
veteran is in receipt of active service pay, constitutionally 
sufficient due process may be provided in a manner that does not unduly 
delay payment adjustments. To begin with, the inquiry that determines 
whether benefits must be suspended is straightforward: There is a clear 
statutory prohibition on receipt of compensation while a veteran is in 
receipt of active service pay. Further, this prohibition is only 
triggered by factual information that is relatively clear, 
straightforward, and reliable, such as notice from DoD indicating a 
veteran has received active service pay. On its face, the risk of 
erroneous suspension in this context is low and would be mitigated, as 
is currently done by VA, by cross referencing identifiers (e.g., 
service number, social security number, date of birth).
    Although VA is able to minimize the possibility of erroneous 
suspension of benefits, it has identified one primary scenario where 
benefits might be erroneously suspended due to the application of 10 
U.S.C. 12316. This statute provides that a reservist called to active 
duty for a period of more than 30 days is precluded from receiving 
disability compensation ``[u]nless the payments because of his earlier 
military service are greater than the compensation [payable for his 
current service].'' See 10 U.S.C. 12316(b). Accordingly, it is 
theoretically possible that VA's suspension of VA benefits, which 
exceeded the veteran's active service pay, could adversely impact the 
veteran.
    While this scenario is theoretically possible, VA views the 
probability of this occurring as extremely low. Nevertheless, VA has 
structured this proposed rule to include a safeguard to address the 
unlikely scenario by cross referencing VA disability compensation pay 
to DMDC pay to identify veterans who may be impacted. In the proposed 
rule, VA would specify that it will continue to require a statement 
directly from the veteran in order to suspend payment of compensation 
without advance notice and opportunity for a hearing ``[w]hen notice 
provided by the Department of Defense contains information indicating 
that the monthly level of disability compensation for a veteran exceeds 
the veteran's monthly active service pay rate.'' Further, we note that 
portions of 38 CFR 3.103 unaltered by this proposed rule would still 
provide the veteran with significant procedural protection that would 
allow VA to correct any errors. The amended regulation will still 
require VA to send a written notice to the veteran of the suspension at 
the time it takes the adverse action. See 38 CFR 3.103(b)(3). That 
notice must advise the veteran of the reasons for the decision and his 
or her right to appeal. See 38 CFR 3.103(f).
    In sum, VA believes that the current 60-day waiting period, 
required by 38 CFR 3.103, when applied to the unique context of a 
veteran receiving active service pay, places unnecessary burdens on 
both the veteran and VA. Further, in this narrow situation, the 60-day 
waiting period protects against only a minimal risk of minor errors 
that can be mitigated or retrospectively corrected. The proposed 
amendments are beneficial to veterans and consistent with due process 
requirements.

V. Proposed Regulatory Amendments

    For the reasons stated above, VA proposes to amend 38 CFR 3.103 to 
expand the existing exception in paragraph (b)(3)(v) so as to allow VA 
to suspend compensation benefits upon receipt of DoD notice that a 
veteran has received, is receiving, or will receive active service pay. 
The proposed amendment is intended to widen the exception created by 
paragraph (b)(3)(v) for suspension of compensation payments only and 
does not affect the process for suspending pension payments. VA's 
experience shows that the vast majority of recoupment cases involve the 
overpayment of compensation, not pension, benefits. Additionally, VA 
does not foresee that significant numbers of pension recipients will 
return to active service.
    Therefore, this rule proposes to add the clause ``or, in the case 
of compensation, written or electronic notice from the Department of 
Defense'' in Sec.  3.103(b)(3)(v), to dispense with tailored notice of 
VA's proposed suspension of benefits and the 60 days traditionally 
provided to respond before VA makes the required adjustment. The 
proposed rule would reference receipt of active service pay, rather 
than return to active service, to account for the possibility that in 
certain circumstances, see 10 U.S.C. 12316, a veteran may return to 
service and still receive VA compensation. The proposed rule would 
require that the notice from the Department of Defense include the date 
on which the service resulting in receipt of active service pay began 
or is expected to begin or, in the case of training pay, the number of 
training days performed during a specified period of time. 
Additionally, the rule would note that the exception created by 
paragraph (b)(3)(v) can only be triggered when the veteran has received 
prior notice, or has submitted a statement to VA indicating knowledge, 
that receipt of active service pay precludes concurrent receipt of VA 
benefits.
    We note that the fourth and final sentence of paragraph (b)(3)(v), 
as we propose to revise it, would ensure that VA continues to account 
for information indicating a veteran's rate of disability compensation 
exceeds his or her rate of active duty pay. This sentence is designed 
to provide a procedural safeguard to minimize the possibility of 
erroneous suspension of benefits for any veterans who return to active 
duty but their monthly disability compensation exceeds their monthly 
active service pay. The sentence would ensure that this rare 
classification of veteran has the opportunity to elect to receive 
disability compensation in lieu of active duty pay.
    The amended regulation would include cross-references to 38 CFR 
3.654, which includes VA's definition of active service pay and an 
explanation of how benefit adjustments based on receipt of active 
service pay are adjudicated, and 38 CFR 3.700(a)(1), which implements 
the statutory prohibition on receiving concurrent VA benefits and 
active service pay. As

[[Page 16425]]

noted above, ``active service pay means pay received for active duty, 
active duty for training or inactive duty training.'' See 38 CFR 
3.654(a). Cross-referencing Sec.  3.654 in amended 3.103(b)(3)(v) would 
ensure clarity with regard to the limited population to whom the 
exception to the notice response period applies. The amended language 
would also include a cross-reference to Sec.  3.217(a), VA's policy 
regarding submission of statements or information affecting entitlement 
to benefits. Cross referencing Sec.  3.217(a) would clarify that 
information affecting entitlement to benefits may be received by email, 
facsimile, or other written electronic means to satisfy the requirement 
that the statement or information be submitted in writing.
    VA proposes to amend 38 CFR 3.654(b) to include all circumstances 
in which VA processes benefit adjustments for pay received for active 
duty for training in the same manner as active duty pay in 3.654(b). 
This is due to certain types of active duty for training being on par 
with full-time active duty due to that duty being of longer duration 
and not necessarily having an ascertainable end date. Therefore, an 
award will be discontinued effective the day preceding reentrance into 
active duty or active duty for training and payments, if otherwise in 
order, will be resumed as described in 38 CFR 3.654(b)(2). The types of 
active duty for training included are those described in Sec.  3.6(c), 
with the exception of annual active duty for training typically 
performed 15 days each year by reservists and members of the National 
Guard and Active Duty for Special Work to receive training, which are 
processed as training pay. VA proposes a corresponding amendment to 38 
CFR 3.654(c) to clarify the types of active duty for training that are 
processed as training pay.
    VA also proposes to amend the first sentence of 38 CFR 3.654(b) to 
replace the reference to return to active duty status with a reference 
to receipt of active service pay to account for the possibility that in 
certain circumstances, see 10 U.S.C. 12316, a veteran may return to 
service and still receive VA compensation. VA additionally proposes to 
amend the final sentence of 38 CFR 3.654(b)(1) for clarity. The revised 
sentence will clarify that when the exact date of reentrance to active 
duty is not known, payments will be discontinued effective date of last 
payment, and the effective date of discontinuance will be adjusted to 
the day preceding reentrance when the date of reentrance has been 
ascertained from the service department. Finally, VA proposes to add an 
authority citation at the end of 38 CFR 3.654 because the section does 
not currently have an authority citation.

Executive Orders (E.O.) 12866, 13563, and 13771

    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'' which requires review by the Office 
of Management and Budget (OMB), as ``any regulatory action that is 
likely to result in a rule that may: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined and it has 
been determined not to be a significant regulatory action under E.O. 
12866. 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 this 
rulemaking and its impact analysis are available on VA's website at 
http://www.va.gov/orpm/, by following the link for VA Regulations 
Published From FY 2004 Through Fiscal Year to Date.
    This proposed rule is not expected to be an E.O. 13771 regulatory 
action because this proposed rule is not significant under E.O. 12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (5 
U.S.C. 601-612). This proposed rule will 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.

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 will have no such effect 
on State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

    This action contains provisions constituting a collection of 
information, at 38 CFR 3.151, under the provisions of the Paperwork 
Reduction Act (44 U.S.C. 3501-3521). There are no new collections of 
information associated with this proposed rule, but there will be a 
reduction in the number of respondents associated with an approved 
Office of Management and Budget (OMB) control number. The information 
requirement for 38 CFR 3.103 is currently approved by the Office of 
Management and Budget (OMB) and has been assigned control numbers 2900-
0747 and 2900-0463. This proposed rule would reduce the number of 
respondents from the existing information collection requirements 
associated with this action at 38 CFR 3.654, Active service pay. Under 
the provisions of the Paperwork Reduction Act (44 U.S.C. 3501-3521), 
while the actual OMB control number will remain in existence due to 
other information collections on the same OMB control number that are 
approved and active, it reduces the respondent burden for the approved 
OMB control number, 2900-0463. As a result of this proposed rule, there 
would be a reduction in the information collection burden that is 
associated with it. For 38 CFR 3.654, Active service pay, which is 
included on OMB control number 2900-0463, this would result in a 
reduction of 3,465 estimated annual burden hours and an annual cost 
savings of $84,338.10. As required by the Paperwork Reduction

[[Page 16426]]

Act of 1995 (at 44 U.S.C. 3507(d)), VA will submit this information 
collection amendment to OMB for its review. Notice of OMB approval for 
this information collection will be published in a future Federal 
Register document.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.102, Compensation for 
Service-Connected Deaths for Veterans' Dependents; 64.105, Pension to 
Veterans, Surviving Spouses, and Children; 64.109, Veterans 
Compensation for Service-Connected Disability; and 64.110, Veterans 
Dependency and Indemnity Compensation for Service-Connected Death.

List of Subjects in 38 CFR Part 3

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

Signing Authority

    The Secretary of Veterans Affairs approved this document and 
authorized the undersigned to sign and submit the document to the 
Office of the Federal Register for publication electronically as an 
official document of the Department of Veterans Affairs. Robert L. 
Wilkie, Secretary, Department of Veterans Affairs, approved this 
document on April 10, 2019, for publication.

    Dated: April 12, 2019.
Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of 
the Secretary, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs proposes to amend 38 CFR part 3 as set forth below:

PART 3--ADJUDICATION

Subpart A--Pension, Compensation, and Dependency and Indemnity 
Compensation

0
1. The authority citation for part 3, subpart A continues to read as 
follows:

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

0
2. Amend Sec.  3.103 by revising paragraph (b)(3)(v) and adding a cross 
references paragraph to the end of the section to read as follows:


Sec.  3.103  Procedural due process and other rights.

* * * * *
    (b) * * *
    (3) * * *
    (v) An adverse action based upon a written or electronic statement 
provided to VA by a veteran, or, in the case of compensation, written 
or electronic notice from the Department of Defense, which indicates 
that the veteran has received, is in receipt of, or will receive active 
service pay as defined by Sec.  3.654(a). The statement from the 
veteran or notice from the Department of Defense must include the date 
on which the service resulting in receipt of active service pay began 
or is expected to begin or, in the case of training duty, the number of 
training days performed during a specified period of time (e.g., last 
month, last quarter, last year, etc.). In order for this paragraph to 
apply, the veteran must have received prior notice that receipt of 
active service pay precludes concurrent receipt of VA benefits or VA 
must have received a statement from the veteran which indicates 
knowledge of such preclusion. When notice provided by the Department of 
Defense contains information indicating that the monthly level of 
disability compensation for a veteran exceeds the veteran's monthly 
active service pay rate, the exception contained in this paragraph will 
only apply to a written or electronic notice provided to VA by the 
veteran.
* * * * *
    CROSS REFERENCES: Submission of statements or information affecting 
entitlement to benefits. See Sec.  3.217(a). Active Service Pay. See 
Sec.  3.654. General. See Sec.  3.700(a)(1).
0
3. Amend Sec.  3.654 by revising paragraphs (b) and (c) and adding an 
authority citation to the end of the section to read as follows:


Sec.  3.654  Active service pay.

* * * * *
    (b) Active duty or active duty for training. (1) Where the veteran 
receives active service pay as a result of returning to active duty 
status or active duty for training as described in Sec.  3.6(c), with 
the exception of annual active duty for training typically performed 15 
days each year by reservists and members of the National Guard and 
Active Duty for Special Work to receive training (see paragraph (c) of 
this section), the award will be discontinued effective the day 
preceding reentrance into active duty or active duty for training 
status. If the exact date is not known, payments will be discontinued 
effective date of last payment, and the effective date of 
discontinuance will be adjusted to the day preceding reentrance when 
the date of reentrance has been ascertained from the service 
department.
    (2) Payments, if otherwise in order, will be resumed effective the 
day following release from active duty or active duty for training if 
claim for recommencement of payments is received within 1 year from the 
date of such release; otherwise payments will be resumed effective 1 
year prior to the date of receipt of a new claim. Prior determinations 
of service connection will not be disturbed except as provided in Sec.  
3.105. Compensation will be authorized based on the degree of 
disability found to exist at the time the award is resumed. Disability 
will be evaluated on the basis of all facts, including records from the 
service department relating to the most recent period of active 
service. If a disability is incurred or aggravated in the second period 
of service, compensation for that disability cannot be paid unless a 
claim therefor is filed.
    (c) Training duty. Prospective adjustment of awards may be made 
where the veteran waives his or her Department of Veterans Affairs 
benefit covering anticipated receipt of active service pay because of 
expected periods of active duty for training (annual active duty for 
training typically performed 15 days each year by reservists and 
members of the National Guard or Active Duty for Special Work to 
receive training) or inactive duty training. Where readjustment is in 
order because service pay was not received for expected training duty, 
retroactive payments may be authorized if a claim for readjustment is 
received within 1 year after the end of the fiscal year for which 
payments were waived.

(Authority: 38 U.S.C. 501(a) and 5304(c))


[FR Doc. 2019-07751 Filed 4-18-19; 8:45 am]
 BILLING CODE 8320-01-P