[Federal Register Volume 86, Number 196 (Thursday, October 14, 2021)]
[Proposed Rules]
[Pages 57084-57094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21816]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Parts 3 and 21

RIN 2900-AP67


Apportionments

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
regulations to limit the circumstances in which benefits will be 
apportioned and to stop apportioning certain benefits. Currently, in 
limited situations, VA may pay a portion of a VA beneficiary's monetary 
benefits directly to the

[[Page 57085]]

beneficiary's dependents. This is referred to as apportionment of 
benefits. Most claims for apportionment involve complex issues of 
family law, issues that are best suited to the expertise and authority 
of state courts. VA claims adjudicators have limited ability to analyze 
these complex and fact-intensive claims, to include both technical 
expertise as well as an ability to compel participation in necessary 
accounting measures. When VA awards apportionments, decisions rendered 
can disturb state court support awards, requiring a state court to 
expend additional resources to revisit a prior determination. Finally, 
due to their intricacy, a significant amount of information is needed 
to properly adjudicate apportionment claims. While this information is 
typically already available to state courts, VA must attempt to gather 
this information from the VA beneficiary and beneficiary's dependent, 
which is unavoidably a time-consuming process and often cannot result 
in a comprehensive evidentiary picture. The additional time and effort 
needed to gather this information increases VA workloads and results in 
the potential for delays of all VA claims processes, to include 
apportionment awards. Because VA apportionment awards often conflict 
with the awards of better-situated state family courts and because VA 
lacks the authority and expertise to make fully-informed, accurate, and 
economically appropriate awards, VA is proposing to amend its 
regulations to discontinue making apportionment awards in most 
circumstances and to stop apportioning certain benefits.

DATES: Comments must be received on or before December 13, 2021.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov. Comments should indicate that they are submitted 
in response to ``RIN 2900-AP67--Apportionments''. Comments received 
will be available at regulations.gov for public viewing, inspection or 
copies.

FOR FURTHER INFORMATION CONTACT: Korrie Shivers, Policy Analyst, Part 3 
Regulations & Forms Staff (211D), Compensation Service (21C), Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Avenue NW, Washington, DC 20420, (202) 461-9700. (This is not a toll-
free telephone number.)

SUPPLEMENTARY INFORMATION:

General

    VA proposes to discontinue awarding apportionments of the 
compensation and pension benefits of veterans and surviving spouses in 
most circumstances by removing most of its apportionment-specific 
regulations and amending other regulations that have apportionment 
provisions. VA intends to continue making apportionment awards where a 
veteran or surviving spouse is incarcerated or where an incompetent 
veteran, who does not have a fiduciary, is institutionalized at 
government expense, without regard to financial contributions to the 
claimant. VA does not intend to discontinue as a result of this 
rulemaking any apportionments currently being paid.

Apportionment Authority

    Congress has provided VA broad discretionary authority under 
several statutes to pay apportionments out of a VA beneficiary's 
monetary benefits. In 38 U.S.C. 5307, Apportionment of benefits, 
Congress provided that VA may apportion compensation and pension 
benefits, including dependency and indemnity compensation (DIC) and 
rehabilitation subsistence allowances paid under 38 U.S.C. Chapter 31. 
This authority was at the discretion of the Secretary of Veterans 
Affairs. In 38 U.S.C. 5313(b)(1), Limitation on payment of compensation 
and dependency and indemnity compensation to persons incarcerated for 
conviction of a felony, Congress provided that the Secretary may 
apportion benefits. Similarly, in 38 U.S.C. 5502(d), Payment to and 
supervision of fiduciaries, and 38 U.S.C. 5503(a)(2), Hospitalized 
veterans and estates of incompetent institutionalized veterans, 
Congress provided that VA may apportion benefits. Notably, each 
apportionment authority in title 38 of the United States Code is 
permissive, but not required, as shown by the use of the word ``may'' 
or the phrase ``may be apportioned as prescribed by the Secretary''.
    The statutory authority shows that Congress has given VA 
significant discretion on whether to apportion VA benefits. After 
reviewing the apportionment procedures and the impact of apportionment 
on veterans and surviving spouses, VA has determined that some types of 
its apportionments undermine the processes established in state courts 
for distributing resources when an individual is not contributing to 
the support of his or her dependents. When viewed alongside the 
significant employee work-hours VA expends to process these requests, 
VA proposes to exercise the discretionary authority Congress gave it by 
discontinuing awarding new apportionments in most situations.

Current Procedure

    When VA receives a claim for an apportionment from a spouse, child, 
or dependent parent, VA must first determine if the apportionment 
claimant is a proper claimant. This requires VA to request evidence of 
the claimed relationship from the VA beneficiary and the apportionment 
claimant, unless the evidence is already in VA's possession or the 
dependent is already established on the beneficiary's award. 
Concurrently, VA must develop for evidence of the financial situation 
of both the VA beneficiary and the apportionment claimant. Developing 
for this evidence provides both the VA beneficiary and the 
apportionment claimant the opportunity to support their claims with 
financial records and data. In addition, developing for certain 
evidence provides the VA beneficiary with due process, as he or she has 
a property interest in the VA compensation benefit. VA requests this 
information from the beneficiary and the claimant, giving both 65 days 
to respond. Frequently, the information provided is not complete 
because either the claimant or the beneficiary does not submit all the 
requested information. Once financial information development is 
complete, or the 65-day development period has lapsed, VA then 
determines if the claimant needs the apportionment and if the 
beneficiary can afford an apportionment without undue hardship. As part 
of the determination of whether the claimant needs the apportionment, 
VA must determine if the VA beneficiary is currently reasonably 
contributing to the support of the claimant. If the beneficiary is 
already reasonably contributing to the support of the claimant, then 
there is no need to apportion the VA beneficiary's monetary award and 
the apportionment claim is denied. However, if the VA beneficiary is 
not reasonably contributing to the claimant's support, then an 
apportionment is justified if it does not cause undue hardship to the 
beneficiary. In the cases where an apportionment is justified, VA must 
determine the amount of apportionment to be taken from the VA 
beneficiary's award.
    To determine the amount of the apportionment, VA first compares the 
relative economic hardship of an apportionment on the beneficiary with 
the economic circumstances of the claimant. VA then considers factors 
such as the amount of compensation or pension the veteran or surviving 
spouse is paid; the number of dependents who would receive the 
apportionment; other

[[Page 57086]]

resources, income, and benefits available to the veteran or surviving 
spouse and apportionee; and any special needs of the veteran or 
surviving spouse and apportionee. All of these factors are weighed 
against the regulatory limit and consistency requirements found in 38 
CFR 3.451. This section provides that the amount apportioned ``should 
be generally consistent with the total number of dependents involved.'' 
In addition, Sec.  3.451 provides that, ordinarily, an apportionment of 
more than 50 percent of the veteran's or surviving spouse's 
compensation or pension would constitute undue hardship, while 
apportionment of less than 20 percent of the compensation or pension 
would not provide a reasonable amount for the apportionee.
    Once the amount of the apportionment is decided, the apportionment 
is processed and the beneficiary and apportionee are notified of the 
decision. Following notification, both the beneficiary and the 
apportionee have the opportunity to appeal the decision to award an 
apportionment, the amount of the apportionment, or the effective date 
of the apportionment.

State Judicial Systems

    When VA's apportionment system is compared to existing state 
courts, it highlights the inefficiencies of the VA apportionment system 
and shows why the VA system is redundant and unnecessary in most 
apportionment cases.
    State family courts already provide the same, and arguably better, 
avenues for claimants as the VA apportionment system. For example, each 
state's judicial system already has a procedure for determining the 
allocation of financial resources when a veteran and veteran's spouse 
are estranged; this is commonly termed ``spousal support.'' In 
addition, each state's judicial system also has a procedure for 
determining the allocation of financial resources when a veteran and 
veteran's child are not living in the same household; this is commonly 
termed ``child support.''
    We are aware that state courts do not have the authority to order 
VA to pay compensation directly to dependents. However, state courts 
can adequately take account of the interrelationship between veterans, 
their dependents, and VA benefits in other ways. In determining the 
level or monetary amount of support, the state court will examine the 
relative financial needs and abilities of the parties to determine the 
amount of child support or spousal support when the married couple 
separates or when the child resides with someone other than the veteran 
or surviving spouse. To do this, the judge or magistrate may compel the 
production of financial records which include information concerning 
the amount of compensation, pension, dependency and indemnity 
compensation (DIC), or vocational rehabilitation subsistence allowance 
the veteran or surviving spouse receives from VA. The judge or 
magistrate makes a decision based on more complete information of the 
available assets and the needs of the party than is realistically 
available to VA.
    Usually, by the time VA has received the information necessary to 
determine if an apportionment is appropriate, and if so, how much 
should be apportioned, the state court system has already determined an 
allocation of the primary beneficiary's assets and the apportionment 
claimant's assets. VA's subsequent apportionment determination, often 
based on less complete evidence than is available to the state court, 
may disturb the court's asset allocation by taking assets assumed by 
the state court to be for the benefit of the primary beneficiary and 
allocating those assets to the apportionment claimant. When this 
occurs, the parties must either go back to court to re-allocate the 
assets or appeal VA's apportionment determination. These conflicting 
systems typically result in inconvenient and unfair results to the 
primary beneficiary and the apportionment claimant and workload 
increases for both the state's court system and VA.
    Furthermore, 42 U.S.C. 666(f) requires that each state have in 
effect the Uniform Interstate Family Support Act (UIFSA), which 
establishes a ``one-order'' nationwide enforcement model to preclude 
conflicting orders in multiple jurisdictions. See Construction and 
Application of Uniform Interstate Family Support Act, 90 A.L.R. 5th 
1,2. UIFSA, adopted by each state, provides the mechanisms and 
procedures for modifying state support orders. See Unif. Interstate 
Fam. Support Act sections 205, 211, 613; https://www.acf.hhs.gov/css/parents.
    In comparing state family court support determinations to VA's 
apportionment system, the state court system provides for a far more 
accurate and complete determination. State courts already make 
determinations for the same kinds of claims that the VA apportionment 
system does, but state courts do so with more consistent and fair 
results.
    Furthermore, a state court's allocation of resources is enforceable 
across state lines. The Social Security Act, codified in pertinent part 
at 42 U.S.C. Chapter 7, subchapter IV, sections 651 through 669B, 
provides for enforcement of another state's child and spousal support 
payments either through direct levy of the assets held by a financial 
institution or levy through that state's enforcement organization 
(Title IV-D agencies, named after subchapter IV-D of the Social 
Security Act). See also Direct Imposition of Liens and Levies Across 
State Lines, PIQ-99-06, U.S. Department of Health and Human Service, 
Administration for Children and Families, Office of Child Support 
Enforcement, August 16, 1999, http://www.acf.hhs.gov/programs/css/resource/direct-imposition-of-liens-and-levies-across-state-lines, last 
viewed March 2, 2021. Specifically, 42 U.S.C. 666(f) requires all 
states to adopt the UIFSA. The UIFSA establishes a ``one-order'' 
nationwide enforcement model to preclude conflicting orders in multiple 
jurisdictions. See Construction and Application of Uniform Interstate 
Family Support Act, 90 A.L.R.5th 1, 2.
    Although 38 U.S.C. 5301(a)(1) generally exempts VA benefits from 
any legal or equitable process, such as garnishment, Congress created 
an exception to section 5301(a) for alimony and child support 
obligations by enacting the Child Support Enforcement Act under 42 
U.S.C. 659. Under section 659, VA disability compensation payable to a 
veteran who has waived a portion of his or her military retired pay to 
receive the VA benefit could be subject to garnishment for alimony or 
child support obligations. This means that section 659 authorizes VA, 
pursuant to proper service of a valid state court order, to withhold, 
or garnish, a portion of a veteran's disability compensation for 
alimony or child support when a veteran has waived a portion of his or 
her military retired or retainer pay to receive the VA benefit. 
Additionally, the United States Supreme Court in Rose v. Rose, 481 U.S. 
619 (1987), held that state courts may consider the availability of VA 
benefits in determining the amount of a veteran's child support 
obligation and, in fact, may set a support award in an amount that 
would necessarily require that part of the support award be paid out of 
VA benefits once they have been received by the veteran. See id. 
Further, the majority of courts considering the issue of spousal 
support have applied Rose to hold that ``veterans' disability benefits 
are not exempt from claims for alimony, spousal support and child 
support.'' Case v. Dubaj, C.A. No. 08-347 Erie, 2011 U.S. Dist. LEXIS 
96808 at *4 (W.D. Pa. Aug. 29, 2011) (citing 52 A.L.R.5th 221 section 
28[a] (``With few exceptions,

[[Page 57087]]

the cases hold that payments arising from service in the Armed Forces . 
. . , though exempt as to the claims of ordinary creditors, are not 
exempt from a claim for alimony, support, or maintenance . . .'').

Apportionment Expenditure

    As noted previously, many claims for apportionment involve complex 
issues of family law, and are often very fact-intensive. Due to the 
complex nature of these claims, they require significant adjudicative 
processing time. For example, in fiscal year (FY) 2013, the Veterans 
Benefits Administration completed 6,570 apportionment claims. VA's 
Automated Standardized Performance Elements Nationwide (ASPEN) work 
actions credit shows that it required 13 full-time equivalent (FTE) 
employees per year to process those claims (6,570 claims times 3.26 
hours per claim (per M21-4) divided by 1,645 hours, which VA estimates 
is the number of available work hours for a full-time employee in one 
year based on the Office of Personnel Management's total hours of 2,087 
for a general schedule employee (5 U.S.C. 5504(b)(1))).
    By discontinuing adjudication of most VA apportionment claims, VA 
would avoid possible conflict with state court determinations and free 
up existing employees to process other claim actions. By only 
processing apportionment claims for incarcerated veterans and 
incompetent veterans hospitalized at government expense, without 
consideration of financial contributions to the claimant, these 
proposed rules will reduce the number of FTE needed each year for 
apportionment claims from 13 to two. The time of the additional 11 FTEs 
could then be dedicated to processing other claims.

Alternatives Considered

    1. Maintain the current apportionment provisions unchanged.
    VA considered maintaining the current apportionment provisions 
without change. However, in VA's view, the expertise of state courts 
undercuts the need for a dual VA apportionment system, and, as 
discussed above, VA apportionment actions may create unnecessary 
disruption to the decisions made by state courts. Accordingly, VA 
believes that a change is needed in the 115-year old apportionment 
system.
    2. Set the apportionment amount to be equal to that additional 
amount which the veteran receives for the apportionee as a dependent.
    If a veteran furnishes VA with evidence showing that he/she has a 
dependent (spouse, child, or parent) and the veteran is in receipt of 
compensation at the 30-percent disabled level or above, the veteran may 
receive additional compensation for their dependents. The additional 
amount paid for a dependent is in recognition that a veteran with an 
impaired earning capacity, who also has dependents, needs additional 
money to make up the difference between what the veteran is earning and 
what the veteran could earn without the disability and still care for 
his or her dependents.
    By automatically limiting apportionments to the additional amount 
paid to the veteran because of the existence of a dependent, the 
veteran would still receive that amount which Congress intended the 
veteran to have. However, the dependent would receive that additional 
amount which was intended for the veteran to use for the dependent. For 
those veterans not in receipt of an additional allowance for 
dependent(s) (i.e., a veteran rated 0-, 10-, or 20-percent disabled), 
VA would deny any apportionment claim, as an apportionment would be 
considered an undue hardship on the veteran. The advantage of this 
option is that it would make VA apportionments simple and consistent.
    With this option, no consideration would be given to support orders 
that are currently in place in which the veteran or surviving spouse is 
making regular payments. As a result, it would still be possible for 
the apportionee to receive both an apportionment from the VA and the 
payments made as a result of the court order which already considered 
the benefits provided by VA in determining the amount of that court-
ordered payment.
    After considering this option, VA determined that this option also 
has the potential to disturb a state court's allocation of resources 
and also would require some expenditure of VA assets in processing the 
apportionment. An apportionee would generally receive a relatively low 
amount of benefits, set without regard to an apportionee's actual 
financial need. This option would still result in the problems 
presented by the current regulations, namely that VA will duplicate and 
potentially disturb state court efforts and unnecessarily occupy FTE 
that could be used to serve other claimants. For these reasons, VA 
chose not to propose this option.
    3. Eliminate all apportionments.
    VA considered eliminating all apportionments. Despite the 
advantages, if VA eliminated all apportionments there would be some 
inequitable results. Specifically, it would have negative consequences 
in two situations where VA currently pays benefits that are generally 
outside the scope of state courts. These two situations are 
incarcerated veterans and veterans institutionalized at government 
expense.
    VA beneficiaries who are incarcerated will have their payment 
amounts reduced beginning with the 61st day of imprisonment for a 
felony. Due to imprisonment, the VA beneficiary is often not able to 
continue to financially care for his or her family. VA currently allows 
for the family members of an incarcerated beneficiary to apply for an 
apportionment of the beneficiary's benefit, ensuring that the 
incarceration does not interfere with continuation of prior financial 
support. This means that although the incarcerated beneficiary will 
have his or her payments reduced or terminated while incarcerated, the 
family could apply to have the benefits paid to them instead. To 
eliminate this kind of apportionment would hurt the families of 
incarcerated beneficiaries. In addition, very few work-hours (e.g., two 
FTE per year) would be saved by not processing apportionments to an 
incarcerated veteran's or incarcerated surviving spouse's dependents.
    Additionally, if VA eliminated all apportionments, the amount of 
the benefit not paid to the administrator of the institution caring for 
an incompetent veteran who is institutionalized at government expense 
would be unavailable to assist in supporting the institution caring for 
the veteran or the institutionalized veteran's dependents. Since a 
fiduciary is appointed in almost all of these situations, the time 
expended in processing the few remaining claims would be minimal.
    After carefully considering all options, VA determined that 
elimination of all apportionments is not the best option and that 
apportionment of benefits to the dependents of an incarcerated 
beneficiary and to an incompetent veteran institutionalized at 
government expense should be continued, with slight modification. 
Specifically, VA determined it should remove consideration of financial 
need for an apportionment of an incarcerated beneficiary's award. In 
removing the financial need requirement for claims for apportionments 
of an incarcerated beneficiary's award, VA remains consistent with 
discontinuing needs-based apportionments for the same reasons set forth 
above. Additionally, this amendment to apportionments involving 
incarcerated beneficiaries better aligns with Congressional intent in 
establishing statutory authority for

[[Page 57088]]

VA to apportion certain benefits in 38 U.S.C. 5313(b)(1).
    These amendments ensure that the veteran's or surviving spouse's 
benefits are used to support the veteran's or surviving spouse's 
dependents in those two instances where the state court system does not 
provide a mechanism to support a veteran's or surviving spouse's 
beneficiaries.

Form for Requesting an Apportionment

    In conjunction with this rulemaking, VA also proposes amendments to 
current VA Form 21-0788, Information Regarding Apportionment of 
Beneficiary's Award. In accordance with 38 CFR 3.155, use of this 
standard form is required for all requests for an apportionment. While 
apportioned dollars are ``derivative benefits'' in the sense that they 
deal with the distribution of money VA already owes to a claimant 
rather than a separate assertion of entitlement to payment for, e.g., a 
service-connected disability, apportionment is also a ``claim'' in the 
sense that it is an assertion of entitlement to receive funds from the 
government. Further, 38 CFR 3.400(e) explicitly recognizes 
apportionment as a ``claim.'' Accordingly, the claim initiation 
structure of 38 CFR 3.155 applies to apportionments. VA proposes to 
amend the current form by removing all sections requesting information 
that pertain to income, net worth, or financial contributions, as this 
information will no longer be used to render a decision. VA also 
proposes to add a section allowing the claimant to identify which 
status qualifies him/her for an apportionment award. Finally, VA 
proposes non-substantive amendments to the form with regard to 
identifying the Veteran, claimant, and beneficiary.
    VA believes the proposed amendments to this form will assist 
beneficiaries in defining what information is necessary for VA to make 
its decision, improve VA's administrative efficiency in processing 
requests, and help provide timely decisions to those who request an 
apportionment of a beneficiary's award.

Mechanics of the Amendments

    On November 27, 2013, VA published in the Federal Register (78 FR 
71042) a proposed regulation titled ``VA Compensation and Pension 
Regulation Rewrite Project; Proposed Rule.'' Among other things, the 
rule proposed a rewritten and reorganized version of apportionment 
regulations. VA is using that proposed rule's reorganizational 
structure and much of the revised wording of those proposed regulations 
in this new proposed rule. The wording is changed to reflect the 
proposed policy to eliminate all need-based apportionments and to 
retain only apportionments where the primary beneficiary is 
incarcerated or where an incompetent veteran without a fiduciary is 
institutionalized at government expense.

Section 3.31 Commencement of the Period of Payment

    In 38 CFR 3.31(c)(3), VA proposes removing the words ``original or 
increased'' because with this amendment there are only original claims 
for apportionments. For the reasons discussed above, no increases in 
current or future apportionments will be allowed under the proposed 
regulatory change.

Section 3.210 Child's Relationship

    In 38 CFR 3.210(c)(1)(ii), VA proposes removing the last sentence 
of the paragraph. This amendment proposes to eliminate apportionment 
eligibility in the situation of a child adopted out of a veteran's 
family, so this reference to apportionment would no longer be correct.

Section 3.252 Annual Income; Pension; Mexican Border Period and Later 
War Periods

    In 38 CFR 3.252(d), VA proposes to remove the last sentence of 
3.252(d) to reflect the proposed change of the removal of 38 CFR 3.451.

Section 3.400 General

    Section 3.400(e) contains effective date rules for beginning 
apportionments. In revised Sec.  3.400(e), VA proposes to update this 
paragraph by stating, in simpler terminology, the rules for effective 
dates for apportionments. VA intends no substantive changes from the 
current rules, only to reword the provisions to provide greater detail 
and clarity. VA proposes removing the terminology referencing original 
and other than original claims since the proposed rules only provide 
for original claims. In subparagraph (e)(1), VA proposes to provide the 
general rule that apportionments are effective the first day of the 
month after the month in which VA receives an apportionment claim. 
Subparagraph (e)(2) provides three exceptions to the general rule. 
Subparagraph (e)(2)(i) proposes to provide that where a primary 
beneficiary's claim for benefits is pending, the effective date of any 
apportionment will be either the date of the primary beneficiary's 
award or the date entitlement arose, whichever is later. In 
subparagraph (e)(2)(ii), VA proposes to provide that if the 
apportionment claimant has not yet been established as a primary 
beneficiary's dependent or as the veteran's dependent, the effective 
date will be the date of the primary beneficiary's award or the date 
entitlement arose, whichever is later. In subparagraph (e)(2)(iii), VA 
proposes to refer to Sec. Sec.  3.665 or 3.666 for the effective date 
rules for when the primary beneficiary is incarcerated.

Sections 3.450 to 3.461

    VA proposes to remove and replace 38 CFR 3.450 to 3.461 with 
revised sections that change the wording of the concepts that it 
intends to keep for processing apportionments and that eliminate the 
need-based apportionment provisions. In addition to replacing these 
sections, VA proposes to renumber the sections, leaving some regulation 
paragraph numbers reserved so as to be able to insert additional 
regulations at a later time, if needed. The renamed and renumbered 
regulations are as follows:

Sec.  3.450 General apportionment
Sec.  3.451 Apportionment claims
Sec.  3.452 Veteran's benefits apportionable
Sec.  3.453 Veterans benefits not apportionable
Sec.  3.454 Apportionment of pension
Sec.  3.455 Apportionment of a surviving spouse's dependency and 
indemnity compensation
Sec. Sec.  3.456-3.461 [Reserved]

    Section 3.450 is a new regulation, not derived from any current 
regulation. VA proposes titling this regulation, General apportionment. 
VA is proposing to include two new provisions and to restate a previous 
provision concerning submission of an application that was implied, but 
not specifically stated, in the proposed-to-be-replaced regulations. In 
the proposed first paragraph, titled (a) Applicability, VA states that 
these changes to the apportionment provisions are applicable to all 
claims for apportionment received on or after the effective date of the 
rule, i.e., 60 days after the date of publication in the Federal 
Register. In the proposed second paragraph, (b) Existing 
apportionments, VA states that apportionments being paid as of the 
effective date of the changes will continue until the circumstances 
providing entitlement to the apportionment no longer exist. In the 
third paragraph, (c) Apportionment application, VA states that claims 
for apportionment must be on a form prescribed by the Secretary.
    VA proposes removing current Sec.  3.451. This section contains 
provisions for determining relative hardship

[[Page 57089]]

between a primary beneficiary and an apportionment claimant. Because VA 
proposes to no longer apportion benefits in this manner, this section 
would no longer be applicable.
    VA proposes titling the new Sec.  3.451, Apportionment claims. In 
revised Sec.  3.451, VA proposes to state the basic provisions for when 
a veteran's pension or compensation or a surviving spouse's DIC or 
pension may be apportioned. Proposed Sec.  3.451 will explain that all 
or a portion of a pension or disability compensation award may be 
apportioned if the veteran is incompetent and hospitalized at 
government expense or is incarcerated and meets any of the conditions 
of Sec. Sec.  3.665 or 3.666. Similarly, proposed Sec.  3.451 explains 
that an award to a surviving spouse may be apportioned if the surviving 
spouse is incarcerated and meets the conditions of Sec.  3.665 or 
3.666. Furthermore, this proposed section will address when a child 
enters active duty and either claims or is in receipt of an 
apportionment, how certain death benefits will be apportioned amongst 
surviving children, and apportionment of death benefits for children 
not residing with a surviving spouse. While the concepts in this 
section are generally taken from current Sec. Sec.  3.450 and 3.452 
concerning what benefits may be apportioned, from whom, and to whom, VA 
proposes to remove those provisions relating to determining 
apportionments based on the relative need of the beneficiary and 
apportionment claimant and has rewritten the rest to improve clarity.
    VA proposes removing the provisions concerning apportionments from 
a surviving spouse's compensation. Paragraph (a)(2) of current Sec.  
3.450 refers to apportioning the ``compensation . . . payable to the 
surviving spouse.'' Paragraph (d) of current Sec.  3.450 states, ``Any 
amounts payable for children under Sec. Sec.  3.459, 3.460, and 3.461 
will be equally divided among the children.'' Given that Sec.  3.459 
explicitly governs death compensation, and the reference to 
``compensation . . . payable to the surviving spouse'' in Sec.  
3.450(a)(2) appears in a sentence that separately lists dependency and 
indemnity compensation, the reference to compensation in current Sec.  
3.450(a)(2) and the reference to the current Sec.  3.459 in Sec.  
3.450(d) both pertain to the apportionment of death compensation. VA is 
not referring to compensation payable to a surviving spouse in Sec.  
3.451. VA is also not including an equivalent to current Sec.  3.459 or 
any reference thereto. There are less than 300 beneficiaries currently 
receiving death compensation. Except for one small group of 
beneficiaries, death compensation is payable only if the veteran died 
prior to January 1, 1957. VA has not received a claim for death 
compensation in more than 10 years and does not expect to receive any 
claims for apportionment of death compensation. DIC is a much greater 
benefit than death compensation. Because of the small number of 
beneficiaries of death compensation and the unlikelihood of a claim for 
apportionment of such benefits, the provisions concerning apportionment 
of death compensation do not need to be carried forward.
    In revised Sec.  3.451(a), VA proposes retaining from the previous 
version of Sec.  3.450(a) the provision that all or part of a veteran's 
pension or compensation or all or part of a surviving spouse's DIC may 
be apportioned to the spouse, child, or dependent parents. VA is also 
proposing to specify the two situations where VA will, on receipt of an 
application, apportion a veteran's or surviving spouse's benefits.
    VA proposes retaining, in revised Sec.  3.451(b), the provision 
from current Sec.  3.450(b) that no apportionment will be made or 
changed solely because a child has entered active duty in the Armed 
Forces. VA proposes incorporating the provisions from current Sec.  
3.458(e) into this section to keep similar issues together.
    VA proposes removing the provision from Sec.  3.450(c) that no 
apportionment will be made when the veteran, veteran's spouse (when 
paid ``as wife'' or ``as husband''), surviving spouse, or fiduciary is 
providing for the dependents. Under this proposed rule, VA would no 
longer be basing apportionment determinations on whether the primary VA 
beneficiary is providing for the dependents.
    VA proposes retaining the provision from Sec.  3.450(d) and 
renumbering it as Sec.  3.451(c), concerning division of apportionments 
paid to children of the veteran, but rewording the provision for 
clarity and revising the cross-reference to reference the revised, 
applicable regulations.
    VA proposes revising the provisions from Sec.  3.450(e) and 
renumbering it as Sec.  3.451(a)(2). VA proposes removing the provision 
that provides that amounts payable to a surviving spouse for a child 
may be apportioned if the child or children are not residing with the 
surviving spouse and the surviving spouse is not reasonably 
contributing to the child's support. For reasons previously stated, 
state court processes are best suited to assess and address the 
surviving spouse's support obligations in such situations.
    VA proposes removing current Sec.  3.450(f) and not including it in 
these revised regulations. This section is redundant of provisions 
already found in the entirety of Sec.  3.250 and does not need to be 
repeated.
    VA proposes also removing the provisions of current Sec.  3.450(g), 
which provide for apportionment of death pension by reference, because 
this section is no longer needed. VA is removing all the death pension 
provisions for the reasons stated earlier.
    VA proposes renaming current Sec.  3.452 from ``Situations when 
benefits may be apportioned'' to ``Veteran's benefits apportionable.'' 
VA proposes rewording some of the provisions for clarity, removing 
paragraphs (a) and (d), and re-designating the remaining paragraphs. 
Current paragraph (a) provides for apportionment when the veteran is 
not residing with the spouse and children, or not residing with his or 
her children. Under this proposed rule, the only two situations where 
VA would apportion benefits are when the primary beneficiary is 
incarcerated or when an incompetent veteran without a fiduciary is 
institutionalized at government expense. Therefore, this paragraph 
would no longer be necessary. Section 3.452(d) concerns apportionments 
to a dependent parent or parents when the veteran does not contribute 
to the support of the dependent parent or parents. As discussed above, 
VA proposes no longer apportioning benefits in situations requiring a 
need-based determination, so this paragraph is also proposed to be 
removed.
    In Sec.  3.452(a), formerly Sec.  3.452(b), VA proposes restating 
without change that apportionment may be made pending appointment of a 
guardian or fiduciary.
    In Sec.  3.452(b), formerly Sec.  3.452(c), VA has rewritten the 
proposed provisions for clarity, but retained the principles of the 
previous provisions concerning apportionments when a veteran is 
receiving hospital, domiciliary, or nursing home care, and added a 
provision that if a veteran's dependent parents are the only relations 
eligible for the apportionment, the parent or parents may receive the 
apportionment. These provisions are derived from Sec.  3.454, which 
would be replaced.
    VA proposes removing current Sec.  3.453. This section referred the 
user to the previous Sec.  3.451, which is also proposed to be removed. 
VA proposes replacing Sec.  3.453 with a new Sec.  3.453 titled, 
``Veterans benefits not apportionable.'' The provisions in the proposed 
Sec.  3.453 are derived from current Sec.  3.458. In paragraph (a) VA 
proposes stating that no apportionment will be made unless an 
application for

[[Page 57090]]

an apportionment is received by VA. In Sec.  3.453(c), VA has included 
a cross reference to the provisions on forfeiture for fraud (Sec.  
3.901), treasonable acts (Sec.  3.902), and subversive activity (Sec.  
3.903). Those regulations contain the complete rules on forfeiture and 
apportionments when benefits have been forfeited. In Sec.  3.453(b) VA 
proposes combining the provisions contained in current Sec. Sec.  
3.458(f)(1), 3.901, and 3.902. Current Sec.  3.458(f)(1) prohibits an 
apportionment for forfeitures declared before September 2, 1959, if a 
veteran's dependent ``is determined by [VA] to have been guilty of 
mutiny, treason, sabotage, or rendering assistance to an enemy of the 
United States or its allies.'' Current Sec. Sec.  3.901 (forfeiture for 
fraud) and 3.902 (forfeiture for treason), both permit apportionments 
to a beneficiary's dependents under certain circumstances if the 
forfeiture was declared prior to September 2, 1959, but prohibit an 
apportionment to any dependent who themself was guilty of mutiny, 
treason, sabotage, or rendering assistance to an enemy of the United 
States or its allies. Accordingly, proposed Sec.  3.453(b) states that 
benefits will not be apportioned to any beneficiary's dependent who is 
determined by VA to have been guilty of mutiny, treason, sabotage, or 
rendering assistance to an enemy of the United States or its allies. In 
paragraph (c), VA proposes providing that after September 1, 1959, no 
apportionment will be made for any dependent of a veteran or surviving 
spouse where benefits were forfeited due to fraud or a treasonable act, 
or where there was a conviction for subversive activity after September 
1, 1959.
    VA proposes replacing Sec.  3.454 with a new section titled, 
``Apportionment of pension.'' The provisions of this section are 
derived from the current Sec.  3.454. Current Sec.  3.454(a) specifies 
that if an incompetent veteran is receiving care in a government 
institution and is entitled to pension, VA will pay $25 per month as an 
institutional award and pay the balance of the pension to the veteran's 
spouse or child or, if the veteran has no spouse or child but has a 
dependent parent, apportion pension to the dependent parent as a 
special apportionment. VA has not included this specific information in 
proposed Sec.  3.454 because it is outdated. To the extent that it 
provides that the balance of pension will be apportioned to a veteran's 
spouse or child, it is inconsistent with the approach VA would adopt 
through these proposed rules since it is based on a determination of 
hardship. VA is eliminating the hardship-based apportionments, so this 
provision is no longer needed. Because the amount of the institutional 
award is not fixed by regulation, VA determines the amount of the 
apportionment on a case-by-case basis.
    Finally, VA does not apportion a veteran's pension to a dependent 
parent. A parent may not be a dependent for disability pension. Whereas 
a veteran receiving disability compensation may receive an additional 
allowance for dependent parents, Congress authorizes an increased 
maximum annual pension rate only for a spouse or child, not for a 
dependent parent. See 38 U.S.C. 1542.
    VA would also not include Sec.  3.454(b)(2). To the extent that 
Sec.  3.454(b)(2) is based on a reduction under current Sec.  3.551(d) 
(reducing Improved Pension for veterans receiving care before February 
1, 1990), it is unnecessary. To the extent that Sec.  3.454(b)(2) is 
purportedly based on a reduction under Sec.  3.551(e), it is obsolete. 
VA no longer reduces Improved Pension to $60 under current Sec.  
3.551(e). The $60 amount was increased to $90, effective February 1, 
1990, by Public Law 101-237, section 111, 103 Stat. 2062, 2064-65 
(1989). VA proposes that Sec.  3.454, in paragraph (a), would provide 
that a veteran's disability pension will be apportioned to the 
veteran's spouse, child or children, or dependent parents. In paragraph 
(b), VA proposes providing for payment of an apportionment for the 
three types of death pension: Old Law Death Pension, Section 306 Death 
Pension, and Improved Death Pension. These types of death pension may 
be apportioned to the veteran's child or children.
    VA proposes adding Sec.  3.455, ``Apportionment of a surviving 
spouse's dependency and indemnity compensation.'' The provisions in 
this section are derived from current Sec.  3.461 but have been 
rewritten for clarity. In paragraph (a), VA proposes providing that the 
surviving spouse's DIC will only be apportioned if the surviving spouse 
is incarcerated and will only be apportioned for a child or children 
under 18 years of age, unless the child or children became permanently 
incapable of self-support before reaching the age of 18 years.
    In paragraph (b), VA proposes referring to Sec.  3.665 to determine 
the amount of DIC which may be apportioned.
    VA proposes removing and reserving Sec. Sec.  3.458-3.461 because 
these provisions are either not being carried forward after this 
proposed change or the provisions for those sections have been 
incorporated into other sections.
    Current Sec.  3.458 provides situations in which a veteran's 
benefits will not be apportioned by VA, to include provisions 
concerning not apportioning benefits where each of the apportionees 
would not receive a reasonable amount, where the spouse of the veteran 
had been found guilty of conjugal infidelity, where the spouse of the 
veteran lived with or held himself or herself out to be the spouse of 
another, and where the child of a veteran had been adopted, except for 
the additional amount the veteran was paid for the child.
    Current Sec.  3.458 also includes a provision concerning 
apportionment when a child enters active duty, which is included in 
proposed Sec.  3.451(b). Additionally, the provision concerning the 
prohibition of paying an apportionment to a claimant where the 
apportionment claimant was guilty of mutiny, treason, sabotage, or 
rendering assistance to an enemy of the United States or its allies has 
been included in proposed Sec.  3.453. Current Sec.  3.458 also 
includes the provision requiring a formal claim for apportionment 
before any apportionment may be paid, and this provision is included in 
proposed Sec.  3.450(c).
    Current Sec.  3.459 provides for apportionment of death 
compensation. As explained above, VA proposes not carrying the 
provisions for death compensation forward because there are fewer than 
300 beneficiaries and it does not anticipate receiving any more claims 
for this benefit.
    Current Sec.  3.460 provides for apportionment of death pension. VA 
proposes to incorporate these provisions into Sec.  3.454.
    Current Sec.  3.461 provides for apportionment of DIC. These 
provisions are proposed to be incorporated into Sec.  3.455.

Section 3.556 Adjustment on Discharge or Release

    In 38 CFR 3.556(a)(1), VA proposes removing the phrase at the end 
of the second sentence, ``unless it is determined that apportionment 
for a spouse should be continued.'' VA proposes to no longer apportion 
the veteran's benefits if the veteran is released from the hospital 
because the full amount of the benefit will be paid to the veteran. 
Once the veteran is released from the hospital, apportionments would 
only be made if the veteran is readmitted to the hospital or is 
incarcerated. Need-based apportionments would no longer be adjudicated.
    In Sec.  3.556(e), VA proposes amending the sentence providing for 
the possible continuation of an apportionment when

[[Page 57091]]

the veteran is discharged from the hospital. VA proposes no longer 
apportioning the veteran's benefits if the veteran is released from the 
hospital because the full amount of the benefit will be paid to the 
veteran. Once the veteran is released from the hospital, apportionments 
would only be made if the veteran is readmitted to the hospital or is 
incarcerated. Need-based apportionments would no longer be adjudicated.
    VA also proposes to amend the third sentence to remove the 
reference to a competent veteran and delete the fourth sentence of 
paragraph (e) as these refer to obsolete provisions of former 38 CFR 
3.551(b) (as in effect prior to December 27, 2001). See 38 CFR 
3.558(b). Finally, VA proposes to delete the reference to adjustments 
in the second-to-last sentence of paragraph (e) as this proposed rule 
would eliminate any adjustments.

Section 3.665 Incarcerated Beneficiaries and Fugitive Felons--
Compensation

    In Sec.  3.665(e)(1), VA proposes to remove the last part of the 
first sentence and to strike the remainder of the paragraph so the 
paragraph reads, ``Compensation. All of the compensation not paid to an 
incarcerated veteran may be apportioned to the veteran's surviving 
spouse, child or children (in equal shares), or dependent parent or 
parents (in equal shares).'' This will remove the requirement that the 
person in this situation requesting an apportionment demonstrate a need 
for the funds. In subparagraph (2), VA proposes amending the 
subparagraph to remove the wording that restricts the amount of 
apportionment that may be made based on the need of the surviving 
spouse or the veteran's child or children.
    In paragraph (h), VA proposes to remove the last sentence which 
provides for an apportionee to reapply for apportionment when the 
primary beneficiary is released from incarceration. VA would no longer 
apportion benefits in these situations. Similarly, in paragraph (i)(1) 
and (2), VA is proposing to remove the language which implies that 
apportionment may be continued in some situations where the primary 
beneficiary is released from incarceration. VA would no longer 
apportion benefits in these situations because the full amount of the 
benefit will be paid to the primary beneficiary. Once the veteran is 
released from incarceration, apportionments would only be made if the 
veteran is again incarcerated. Need-based apportionments will no longer 
be adjudicated.

Section 21.330 Apportionment

    Section 21.330 concerns the apportionment of a veteran's vocational 
rehabilitation subsistence allowance. This section provides that an 
apportionment will, if in order, be made in accordance with the 
provisions of part 3. Consistent with 38 U.S.C. 5307 and current 
regulations, apportionment of a veteran's vocational rehabilitation 
subsistence allowance is not authorized if a veteran is incarcerated 
and participating in a vocational rehabilitation program during 
incarceration. Because there are no longer any circumstances where a 
veteran's vocational rehabilitation subsistence allowance would be 
apportioned, VA is removing this entire section.
    VA proposes removing Sec.  21.330 and reserving the paragraph 
number. VA proposes to stop apportioning vocational rehabilitation 
subsistence allowances for the same reasons given above. Because VA is 
proposing to discontinue all apportionments except in situations 
specified in 38 U.S.C. 5307(a)(1) and 5313(b), VA is also proposing to 
discontinue apportionment of the vocational rehabilitation subsistence 
allowance. The current regulation prohibits apportioning the 
subsistence allowance when a veteran has been convicted of a felony and 
is incarcerated. Because VA is proposing to discontinue all vocational 
rehabilitation subsistence allowance apportionments, there will not be 
any exceptions.

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. 
The Office of Information and Regulatory Affairs has determined that 
this rule is not a significant regulatory action under Executive Order 
12866.
    The Regulatory Impact Analysis associated with this rulemaking can 
be found as a supporting document at www.regulations.gov.

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). Therefore, pursuant to 5 U.S.C. 605(b), the initial 
and final regulatory flexibility analysis requirements of 5 U.S.C. 603 
and 604 do not apply. The certification is based on the fact that no 
small entities or businesses determine entitlement to VA apportionment 
payments.''

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

    The Paperwork Reduction Act of 1995 (at 44 U.S.C. 3507) requires 
that VA consider the impact of paperwork and other information 
collection burdens imposed on the public. Under 44 U.S.C. 3507(a), an 
agency may not collect or sponsor the collection of information, nor 
may it impose an information collection requirement unless it displays 
a currently valid Office of Management and Budget (OMB) control number. 
See also 5 CFR 1320.8(b)(3)(vi).
    As required by the Paperwork Reduction Act of 1995 (at 44 U.S.C. 
3507(d)), VA has submitted these information collection amendments to 
OMB for its review. Notice of OMB approval for this information 
collection will be published in a future Federal Register document. 
This rule will impose the following amended information collection 
requirements:
    Description of respondents: The respondent population is composed 
of individuals who are requesting an apportionment of a beneficiary's 
award amount when that beneficiary is incarcerated or is deemed 
incompetent and hospitalized at government expense.
    Estimated frequency of responses: Most claimants will use this form 
one time. However, the frequency may vary slightly for apportionees of 
incarcerated veterans dependent on the number of times the primary 
beneficiary is incarcerated. For a veteran that is

[[Page 57092]]

incompetent and institutionalized at government expense, a fiduciary 
will be appointed. Therefore, apportionment claims other than the 
initial claim will not be needed.
    Estimated number of respondents: VA anticipates the annual 
estimated numbers of respondents for 2900-0666 (VA Form 21-0788) as 
follows:
    2900-0666 (VA Form 21-0788)--In FY 2014, VA processed just over 800 
hospital adjustments for veterans in receipt of benefits that were 
hospitalized or in a nursing home or in receipt of domiciliary care at 
VA expense, or whose payment rates were adjusted based on such care. 
Fewer than 800 of these veterans were incompetent and met the 
requirements for payment of an apportionment to a dependent. VA also 
completed 15 apportionments for incarcerated veterans. The 
approximately 815 claims completed each year is considerably fewer than 
was estimated in 2005 when VA Form 21-0788 was first approved, as 
published in the Federal Register, 70 FR 39866 on July 11, 2005. At 
that time it was estimated that VA would receive approximately 25,000 
apportionment claims per year.
    OMB Control Number 2900-0666 (VA Form 21-0788) is a collection of 
information for a particular apportionment of a benefit which is 
currently required by VA in order for these claims to be processed and 
adjudicated. Since VA requires these forms to be submitted when filing 
for an apportionment of a particular benefit, VA does not expect an 
increase in the annual number of respondents; VA anticipates a decrease 
in the number of claims. In addition, VA is reducing the substance of 
the collection of information on this OMB-approved collection of 
information and is not increasing the respondent burden.
    Estimated total annual reporting and recordkeeping burden: 2900-
0666 (VA Form 21-0788)--The annual burden is reduced from approximately 
12,500 hours per year (25,000 claims at 30 minutes per claim form) to 
about 203 hours per year (815 claims per year at 15 minutes per claim 
form). The total estimated cost to respondents is reduced to $4,843.58 
(203 hours x $23.86/hour). This submission does not involve any 
recordkeeping costs.
    This rulemaking is proposing to mandate the use of the VA form in 
the processing and adjudication of apportionment claims. The proposed 
amendment to Sec.  3.450 affects the estimated annual number of 
respondents and consequently, the estimated total annual reporting and 
recordkeeping burden, and reduces the effect of the existing collection 
of information that has already been approved by OMB. The proposed use 
of information and description of likely respondents will remain 
unchanged for this form. The frequency of responses is less than the 
previous number estimated. The estimated average burden per response is 
reduced from 30 minutes per response to 15 minutes per response. VA 
estimates the total incremental savings based on this revised 
information collection to be $293,656.42 ($298,500 under the current 
form--$4,834.58 for the revised form).

Methodology for Estimated Annual Number of Respondents for Affected 
Forms

    VA has formulated the estimated total number of annual responses 
for apportionment claims by using the total number of apportionment 
claims completed in FY 2014.

Catalog of Federal Domestic Assistance for 38 CFR Part 3

    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; 64.104, Pension for 
Non-Service-Connected Disability for Veterans; 64.105, Pension to 
Veterans Surviving Spouses, and Children; 64.109, Veterans Compensation 
for Service-Connected Disability; 64.110, Veterans Dependency and 
Indemnity Compensation for Service-Connected Death.

Catalog of Federal Domestic Assistance for 38 CFR Part 21

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs that will be affected by this proposed rule are 64.116, 
Vocational Rehabilitation for Disabled Veterans, and 64.128, Vocational 
Training and Rehabilitation for Vietnam Veterans' Children with Spina 
Bifida or Other Covered Defects.

List of Subjects

38 CFR Part 3

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

38 CFR Part 21

    Administrative practice and procedure, Claims, Veterans, Vocational 
education, Vocational rehabilitation.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved this 
document on September 30, 2021, 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.

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 parts 3 and 21 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.


Sec.  3.31  [Amended]

0
2. Amend Sec.  3.31(c)(3) introductory text by removing the words 
``original or increased''.


Sec.  3.210  [Amended]

0
3. Amend Sec.  3.210(c)(1)(ii) by:
0
a. Removing the word ``apportionee,'' from the first sentence; and
0
b. Removing the last sentence.


Sec.  3.252   [Amended]

0
4. Amend Sec.  3.252 by removing the last sentence of paragraph (d).
0
5. Revise Sec.  3.400(e) to read as follows:


Sec.  3.400  General.

* * * * *
    (e) Apportionment. (Sec. Sec.  3.450-3.455, 3.551). (1) General 
rule. Except as provided in paragraph (2) of this section, the 
effective date of an apportionment is the first day of the month after 
the month in which VA receives an apportionment claim.
    (2) Exceptions to general rule--(i) Claim for benefits is pending. 
If a veteran or surviving spouse (primary beneficiary) has a claim for 
benefits pending on the date that VA receives an apportionment claim, 
the effective date of the apportionment will be the effective date of 
the primary beneficiary's award, or the date the apportionment 
claimant's entitlement arose, whichever is later.
    (ii) Apportionment claimant not yet established as the 
beneficiary's dependent. If VA receives an apportionment claim within 1 
year of the award of benefits to the primary beneficiary and the 
apportionment claimant has not been established as a dependent on the 
primary beneficiary's

[[Page 57093]]

award, the effective date of the apportionment will be the effective 
date of the primary beneficiary's award, or the date the apportionment 
claimant's entitlement arose, whichever is later.
    (iii) The primary beneficiary is incarcerated. The effective date 
of an apportionment when the primary beneficiary is incarcerated is 
specified in Sec.  3.665 or 3.666.
* * * * *
0
6. Revise Sec.  3.450 to read as follows:


Sec.  3.450   General apportionment.

    (a) Applicability. Sections 3.450 through 3.459 apply to all claims 
for apportionment VA receives on or after [EFFECTIVE DATE OF THE FINAL 
RULE].
    (b) Existing apportionments. All apportionments being paid as of 
[EFFECTIVE DATE OF THE FINAL RULE] will continue to be paid until the 
circumstances which provided entitlement to the apportionment no longer 
exist, such as divorce of the veteran and spouse, death of the primary 
beneficiary, death of an apportionee, or other such circumstances which 
provided entitlement to the apportionment.
    (c) Apportionment application. Claims for apportionment must be 
submitted to VA on a form prescribed by the Secretary.

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

0
7. Revise Sec.  3.451 to read as follows:


Sec.  3.451  Apportionment claims.

    (a) General--(1) Veteran. All or part of the pension or disability 
compensation payable to any veteran may be apportioned if one of the 
following conditions exist:
    (i) For his or her spouse, child, or dependent parents if the 
veteran is incompetent and is being furnished hospital treatment, 
nursing home, or domiciliary care by the U.S., or any political 
subdivision thereof.
    (ii) The veteran is incarcerated and meets the conditions of Sec.  
3.665 or 3.666.
    (2) Surviving spouse. Where a child or children of a deceased 
veteran is not living with the veteran's surviving spouse because the 
surviving spouse is incarcerated and meets the conditions of Sec.  
3.665 or 3.666, the dependency and indemnity compensation (DIC) or 
pension otherwise payable to the surviving spouse may be apportioned to 
the child or children. No apportionment shall be payable to a child who 
did not reside with the surviving spouse prior to incarceration.
    (b) Apportionment to a child on active duty. No apportionment of 
disability or death benefits will be made or changed solely because a 
child has entered active duty. If an apportionment is claimed for a 
child on active duty on the date the apportionment claim is received by 
VA, no apportionment will be made. If an apportionment is being paid to 
the veteran's spouse and includes an amount for a child, and the child 
enters active duty, no change in the apportionment will be made.
    (c) Apportionment of death benefits. Any amounts payable for 
children under Sec. Sec.  3.456, Eligibility for apportionment of 
pension, and 3.458, Eligibility for apportionment of a surviving 
spouse's dependency and indemnity compensation, will be equally divided 
among the children.

    (Authority: 38 U.S.C. 5307, 5502(d))

0
8. Revise Sec.  3.452 to read as follows:


Sec.  3.452  Veteran's benefits apportionable.

    A veteran's benefits may be apportioned when the veteran is 
receiving hospital treatment, nursing home, or domiciliary care 
provided by the U.S. or a political subdivision, upon receipt by VA of 
an application:
    (a) Pending appointment of fiduciary. Pending the appointment of a 
guardian or other fiduciary.
    (b) Veteran receiving hospital, domiciliary, or nursing home care--
(1) Incompetent veteran--(i) Spouse or child. Where an incompetent 
veteran without a fiduciary is receiving hospital treatment, nursing 
home, or domiciliary care provided by the U.S. or a political 
subdivision, his or her benefit may be apportioned for a spouse or 
child.
    (ii) Dependent parent. Where an incompetent veteran without a 
fiduciary is receiving hospital treatment, nursing home, or domiciliary 
care provided by the U.S. or a political subdivision, his or her 
disability compensation may be apportioned for a dependent parent.
    (2) Competent veteran--(i) Section 306 Pension. Where the amount of 
Section 306 Pension payable to a married veteran is reduced to $50 
monthly under Sec.  3.551, Reduction because of hospitalization, while 
a veteran is receiving hospital, domiciliary, or nursing home care, an 
apportionment may be made to such veteran's spouse. The amount of the 
apportionment generally will be the difference between $50 and the 
total amount of pension payable on December 31, 1978.
    (ii) Improved Pension. Where the amount of Improved Pension payable 
to a married veteran under 38 U.S.C. 1521(b) is reduced to $90 monthly 
under Sec.  3.551, Reduction because of hospitalization, an 
apportionment may be made to such veteran's spouse. The amount of the 
apportionment generally will be the difference between $90 and the rate 
payable if pension were being paid under 38 U.S.C. 1521(c), including 
the additional amount payable under 38 U.S.C. 1521(e) if the veteran is 
so entitled.

    (Authority: 38 U.S.C. 501(a), 5307, 5502, 5503(a); Pub. L. 95-
588, section 306, 92 Stat. 2497)

0
9. Revise Sec.  3.453 to read as follows:


Sec.  3.453  Benefits not apportionable.

    VA will not apportion benefits:
    (a) Unless the spouse of a veteran files a claim for an 
apportionment. If there is a child of the veteran, an apportionment 
will not be authorized unless a claim for an apportionment is filed by 
or for the child.
    (b) To any beneficiary's dependent who is determined by VA to have 
been guilty of mutiny, treason, sabotage, or rendering assistance to an 
enemy of the U.S. or its allies.
    (c) After September 1, 1959, if a veteran, spouse, child, or 
dependent parent: or other primary beneficiary:
    (1) Forfeited benefits due to fraud or a treasonable act; or
    (2) Was convicted of subversive activity.
    CROSS REFERENCE: Sec. Sec.  3.900, General, 3.901, Fraud, 3.902, 
Treasonable acts, and 3.903, Subversive activity.

    (Authority: 38 U.S.C. 5307, 6103(b), 6104(c), 6105(a))

0
10. Revise Sec.  3.454 to read as follows:


Sec.  3.454  Apportionment of pension.

    (a) Disability pension. Disability pension will be apportioned to 
the veteran's spouse, or child or children, or dependent parents.
    (b) Death pension. Old-Law Death Pension, Section 306 Death Pension 
and Improved Pension will be apportioned to the veteran's child or 
children.

    (Authority: 38 U.S.C. 5307)

0
11. Add Sec.  3.455 to read as follows:


Sec.  3.455  Apportionment of a surviving spouse's dependency and 
indemnity compensation.

    (a) Conditions under which apportionment may be made. The surviving 
spouse's award of dependency and indemnity compensation (DIC) will be 
apportioned where there is a child under 18 years of age and the 
surviving spouse is incarcerated and meets the provisions of Sec.  
3.665. DIC will not be apportioned under this paragraph (a) for a child 
over age 18 years unless the child is permanently incapable of self-
support in accordance with the provisions of Sec.  3.57.

[[Page 57094]]

    (b) Rates payable. The amount of apportionment of DIC will be 
determined in accordance with the provisions of Sec.  3.665.

    (Authority: 101(4)(A), 104(a), 5307)


Sec. Sec.  3.456 and 3.457  [Added and Reserved]

0
12. Add and reserve Sec. Sec.  3.456 and 3.457.


Sec.  3.456  Reserved.


Sec.  3.457   Reserved.


Sec. Sec.  3.458 through 3.461  [Removed and Reserved]

0
13. Remove and reserve Sec. Sec.  3.458 through 3.461.


Sec. Sec.  3.458-3.461   [Reserved]

0
14. Amend Sec.  3.556 as follows:
0
a. In paragraph (a)(1), remove the words ``unless it is determined that 
apportionment for a spouse should be continued''; and
0
b. In paragraph (e):
0
1. Remove the words ``in the case of a competent veteran'' from the 
second sentence, and remove the third sentence; and
0
2. Revise the fifth sentence.
    The revision reads as follows:


Sec.  3.556  Adjustment on discharge or release.

* * * * *
    (e) Regular discharge. * * * Where an apportionment was made under 
Sec.  3.551(c), the apportionment will be discontinued effective the 
day preceding the date of the veteran's release from the hospital, 
unless an overpayment would result. In the excepted cases, the awards 
to the veteran and apportionee will be adjusted as of date of last 
payment. * * *
    (Authority: 38 U.S.C. 5503)
* * * * *
0
15. Amend Sec.  3.665 by revising paragraphs (e), (h) and (i) to read 
as follows:


Sec.  3.665   Incarcerated beneficiaries and fugitive felons--
compensation.

* * * * *
    (e) Apportionment--(1) Compensation. All of the compensation not 
paid to an incarcerated veteran may be apportioned to the veteran's 
spouse, child or children (in equal shares), or dependent parent or 
parents (in equal shares).
    (2) DIC. All of the DIC not paid to an incarcerated surviving 
spouse or other children not in the surviving spouse's custody may be 
apportioned to another child or children. All of the DIC not paid to an 
incarcerated child may be apportioned to the surviving spouse or other 
children (in equal shares).
* * * * *
    (h) Notice to dependent for whom apportionment granted. A dependent 
for whom an apportionment is granted under this section shall be 
informed that the apportionment is subject to immediate discontinuance 
upon the incarcerated person's release or participation in a work 
release or halfway house program.
    (i) Resumption upon release--(1) No apportionment. If there was no 
apportionment at the time of release from incarceration, the released 
person's award shall be resumed the date of release from incarceration 
if the Department of Veterans Affairs receives notice of release within 
1 year following release; otherwise the award shall be resumed the date 
of receipt of notice of release. If there was an apportionment award 
during incarceration, it shall be discontinued date of last payment to 
the apportionee upon receipt of notice of release of the incarcerated 
person. Payment to the released person shall then be resumed at the 
full rate from date of last payment to the apportionee. Payment to the 
released person from date of release to date of last payment to the 
apportionee shall be made at the rate which is the difference between 
the released person's full rate and the sum of:
    (i) The rate that was payable to the apportionee; and
    (ii) The rate payable during incarceration.
    (2) Apportionment to a dependent parent. An apportionment made to a 
dependent parent under this section cannot be continued beyond the 
veteran's release from incarceration unless the veteran is incompetent 
and the provisions of Sec.  3.452(b)(1) are for application. When a 
competent veteran is released from incarceration, an apportionment made 
to a dependent parent shall be discontinued and the veteran's award 
resumed as provided in paragraph (i)(1) of this section.
* * * * *
    (Authority: 38 U.S.C. 501(a), 5313, 5313B; Sec. 506, Pub. L. 
107-103, 115 Stat. 996-997)

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

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

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

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


Sec.  21.330  [Removed and Reserved]

0
17. Remove and reserve Sec.  21.330.


Sec.  21.330   [Reserved]

[FR Doc. 2021-21816 Filed 10-13-21; 8:45 am]
BILLING CODE 8320-01-P