Citation Nr: 1223618 Decision Date: 07/09/12 Archive Date: 07/18/12 DOCKET NO. 95-16 812 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in New Orleans, Louisiana THE ISSUE Whether the recoupment of special separation benefits (SSB) by withholding Department of Veterans Affairs (VA) disability compensation benefits in the adjusted amount of $39,066.84, was proper. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD J. Connolly, Counsel INTRODUCTION The Veteran served on active duty from November 1973 to November 1976 and from May 1980 to September 1992. According to the Veteran's DD Form 214, an SSB payment in the amount of $48,833.55 was authorized for the second period of active duty. This matter is before the Board of Veterans' Appeals (Board) on appeal from a December 1992 determination of the VA Regional Office (RO), in Atlanta, Georgia, which determined that the $48,833.55 SSB payment was subject to recoupment by VA. In August 2000, the Veteran's claims file was subsequently transferred to the VA RO in New Orleans, Louisiana. In December 2003, the Board remanded the appeal for further development. The Appeals Management Center (AMC) issued a letter decision in December 2006 in which it was determined that the SSB payments were to be recouped in the amount of $39,066.84, rather than $48,833.55, as originally determined. In September 2009, the Board remanded this case. The Board requested that the claimed be readjudicated and if a waiver of recoupment of the SSB payments was not granted in full, the Veteran was to be issued a supplemental statement of the case. The April 2011 supplemental statement of the case (SSOC) noted that that since SSB payments are required to be recouped by law from VA compensation benefits, there was no "debt" or erroneous overpayment of VA benefits for which a waiver could be considered. FINDINGS OF FACT 1. The Veteran received SSB pay after he was discharged from service in the amount of $48,833.55. 2. Subsequent to active service, the Veteran was awarded entitlement to VA compensation benefits in a January 1994 rating decision. 3. The RO subsequently recalculated the amount of SSB pay to be recouped as $39,066.84, which was the original amount less withheld Federal income taxes withheld. CONCLUSION OF LAW The recoupment of SSB pay by withholding disability compensation benefits in the adjusted amount of $39,066.8 was proper. 10 U.S.C.A. §§ 1174, 1212; 38 U.S.C.A. §§ 5107, 7104, 7104 (West 2002 & Supp. 2011); 38 C.F.R. § 3.700(a)(5)(iii) (2011). REASONS AND BASES FOR FINDINGS AND CONCLUSION Where the law is determinative of the issue on appeal, there is no further evidence to be developed. Accordingly, the Board finds that the provisions of the Veterans Claims Assistance Act (VCAA), 38 U.S.C.A. § 5100, et seq., are not applicable to this claim because the appeal turns on a matter of law and not on the underlying facts or development of the facts. See Manning v. Principi, 16 Vet. App. 534, 542 (2002). The Veteran's DD Form 214 showed that upon separation from service in September 1992, the Veteran was paid $48,833.55 in SSB pay. Where payment of SSB pay under 38 U.S.C. § 1174a was made on or before September 30, 1996, as is the case here, VA will recoup from disability compensation an amount equal to the total amount of SSB, less the amount of Federal income tax withheld from such pay. 38 C.F.R. § 3.700(a)(5) (as amended by the National Defense Authorization Act for Fiscal Year 1997, § 653, Pub. L. No. 104-201, 110 Stat. 2422 (1996), and by the Transportation Equity Act of the 21st Century, Pub. L. No. 105-178, § 8208, 112 Stat.107 (1998)). In a January 1994 rating decision, the Veteran was granted service connection for a lumbar spine disability, for a cervical spine disability, and for gout. In December 1994, pursuant to 38 C.F.R. § 3.700(a)(5), the RO proposed that effective March 1, 1995, VA would begin recouping the SSB benefits in the amount of $48,833.55 from the Veteran's VA disability compensation benefits. In February 1995, the RO determined that the recoupment of SSB in the amount of $48,833.55 was appropriate. In January 1995, the Veteran filed a notice of disagreement, asking that recoupment be waived on the basis of financial hardship and asking for a hearing before a hearing officer at the RO. Although a hearing was scheduled for May 1995, the Veteran failed to report to the hearing. In the March 1995 statement of the case (SOC), the RO determined that the Veteran's service-connected compensation had to be offset until there was recoupment of the total amount received by the Veteran as SSB. In his April 1995 substantive appeal, the Veteran repeated that he was experiencing financial hardship that had little likelihood of improving in the near future, so he asked that the recoupment of the SSB pay be cancelled. See also December 1998 Statement in Support of Claim (requesting a waiver and suspension of collection action during appeal). In December 2003, the Board reviewed the Veteran's appeal and remanded the appeal for further development. When all the development was completed the Board instructed the RO/AMC to: (1) consider whether $48,833.55 was the proper amount for recoupment in light of any evidence showing the amount of Federal income tax withheld from the payment of SSB; and (2) address the Veteran's contention that he was entitled to a waiver from recoupment of any special separation benefits based on his financial hardship. The Board directed that if the benefit sought was not granted to the Veteran's satisfaction, the RO/AMC should issue an SSOC and return the case to the Board for further appellate review. In December 2006, the AMC issued a letter decision in which the amount of SSB pay to be recouped was determined to be $39, 066.84, rather than the gross amount ($48,833.55) of SSB, which did not subtract the amount of withheld Federal income taxes. The new amount reflected the subtraction of the taxes. That decision did not address the Veteran's contention that he was entitled to a waiver from recoupment based on financial hardship. In February 2009, the Board remanded this case for the AMC/RO to readjudicate the appeal. The Board indicated that if a waiver of recoupment of SSB pay was not granted in full, the Veteran was to be issued an SSOC which addressed the Veteran's contention that he is entitled to a waiver from recoupment of special separation benefits based on his financial hardship. Thereafter, the RO determined that consideration of a waiver was not warranted. In the April 2011 SSOC, the RO stated the following: There is no provision under any applicable law which authorizes a waiver of the requirements to recover SSB from a veteran who is entitled to and receiving VA compensation. The law requires repayments of the amount of after tax benefits when VA compensation is authorized until the corresponding amount is recovered. Waivers are normally processed when an overpayment is assessed against a payee. The instant case does not concern an overpayment as no overpayment (an erroneous authorization of VA benefits) occurred. There is no indebtedness to VA. The Veteran is required by law to repay an amount equal to the after tax amount he received as a SSB only after he was authorized VA compensation payments. If he had not established entitlement to VA compensation he would not be required to repay any SSB that he received. Since there is no actual debt owed to VA, waiver is not for application. Also, as there is no authority to waive this recovery of previously received DOD payments, consideration of financial hardship is moot. Military members are authorized to receive an SSB payment under the authority of 10 U.S.C.A. § 1174a (West 2002). Such payments are governed by 10 U.S.C.A. § 1174(h)(2) (West 2002). See 10 U.S.C.A. § 1174(g) (West 2002). Under 10 U.S.C.A. § 1174(h)(2), a member who has received separation pay under this section, or severance pay or readjustment pay under any other provision of law, based on service in the armed forces shall not be deprived, by reason of his receipt of such separation pay, severance pay, or readjustment pay, of any disability compensation to which he is entitled under the laws administered by VA, but there shall be deducted from that disability compensation an amount equal to the total amount of separation pay, severance pay, and readjustment pay received, less the amount of Federal income tax withheld from such pay. See also 38 C.F.R. § 3.700(a)(5); VAOPGCPREC 14-92; VAOPGCPREC 12-96. Further, section 1212(d) of title 10, United States Code Annotated, specifically requires VA to deduct the amount of military disability severance pay a Veteran receives from any disability compensation for the same disability which VA may award the Veteran. 10 U.S.C.A. § 1212(d) provides that: (1) The amount of disability severance pay received under this section shall be deducted from any compensation for the same disability to which the former member of the armed forces or his dependents become entitled under any law administered by the Department of Veterans Affairs. (2) No deduction may be made under paragraph (1) in the case of disability severance pay received by a member for a disability incurred in line of duty in a combat zone or incurred during performance of duty in combat-related operations as designated by the Secretary of Defense. (3) No deduction may be made under paragraph (1) from any death compensation to which a member's dependents become entitled after the member's death. See 10 U.S.C.A. 1212(d). The VA regulation pertaining to concurrent benefits and elections, 38 C.F.R. § 3.700, was amended. See 74 Fed. Reg. 26,956 (June 5, 2009). Specifically, the regulation was amended so that VA would recoup from disability compensation an amount equal to the total amount of SSB pay less the amount of Federal income tax withheld from such pay when special separation benefits were paid on or after December 5, 1991 (as opposed to VA recouping the entire amount of the SSB pay regardless of Federal income tax withheld, as it does when benefits were paid prior to that date). The previous version of 38 C.F.R. § 3.700 only allowed a deduction of the amount of Federal income tax withheld from SSB pay when the payments were made on or after September 30, 1996. See 38 C.F.R. § 3.700 (2008). The regulatory change is particularly important in this case as the Veteran received payment of SSB in October 1993, which is after the December 5, 1991 date. For this reason, an adjustment was made to the original amount of SSB to be recouped, $48,833.55, which resulted in the amount being reduced to o$39,066.84, which is the original amount less the amount of Federal income tax withheld from such pay. Thus, the amount to be recouped was adjusted to be less than the original amount. The Veteran's representative has submitted a copy of the updated pertinent regulation. The relevant definitions were provided with regard to retirement benefits. The regulation provides that recoupment of voluntary separation pay may be subject to a waiver, but the Veteran did not receive this benefit. He received SSB. Likewise, waivers may apply to separation pay, severance pay, or readjustment pay, based on hardship. However, the Veteran did not receive one of these three benefits. The Board notes that SSB, which has since been replaced voluntary separation pay (VSP), offered members a one-time lump sum equal to 15 percent of basic pay times years of service. It was an incentive program that the Veteran participated in. The Veteran has not disputed that he received this benefit or that the amount of SSB which is subject to recoupment (the reduced amount). Rather, he asserts that the amount of the recoupment should be waived due to financial hardship. The Board finds that the law, as written by Congress and implemented by VA regulation, has been correctly applied in this case. The recoupment of his after tax SSB pay by withholding in monthly allotments payments of disability compensation benefits is required by law. 38 U.S.C.A. §§ 1174(h)(2), 1212(c); 38 U.S.C.A. §§ 5107(a), 7104(c); 38 C.F.R. § 3.700(a)(5)(iii). Therefore, since service connection was established and disability compensation was awarded, withholding is proper in order to recoup the amount of his Armed Forces SSB pay. The Board agrees with the April 2011 SSOC that the Veteran was not erroneously paid or overpaid benefits to which he was not entitled. Rather, he accepted a separation incentive and he was entitled to that incentive. The only reason that it needs to be repaid is because he applied for and received VA compensation benefits. There was no "overpayment." There is no provision for a waiver of this recoupment based on hardship or other reason. Accordingly, there is no basis for the consideration of waiver based on hardship. The Board is bound in its decisions by the regulations of the Department, instructions of the Secretary and precedent opinions of the General Counsel of VA. 38 U.S.C.A. § 7104(c); 38 C.F.R. § 20.101(a). The Board notes that both the VA General Counsel and the Court have addressed the issue of recoupment of military severance pay. See VAOPGCPREC 14-92 (holding that section 1174 clearly and unambiguously requires that the severance payment shall be recouped from VA disability compensation for a disability incurred prior to the date of receipt of the payment.) While it is unfortunate that recoupment of the amount in question may have created a financial hardship for the Veteran, the Board is bound by the law, and this decision is dictated by the applicable statutes and regulations. Moreover, the Board is without authority to grant benefits or, in this particular case, preclude withholding them] as a matter of law. See 38 U.S.C.A. § 7104; Harvey v. Brown, 6 Vet. App. 416, 425 (1994). The Board further observes that "no equities, no matter how compelling, can create a right to payment out of the United States Treasury which has not been provided for by Congress." Smith v. Derwinski, 2 Vet. App. 429, 432-33 (1992). As VA does not have any discretion in the recoupment of the SSB pay, the Board finds that Veteran has failed to state a claim upon which relief may be granted, and that the claim must be denied for lack of legal merit. See Sabonis v. Brown, 6 Vet. App. 426 (1994). The claim must therefore be denied by operation of law. ORDER The recoupment of SSB) by withholding VA disability compensation benefits in the adjusted amount of $39,066.84, was proper. ____________________________________________ JOHN H. NILON Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs